21K British Senior School Grade IX Bridge Programme

Why choose Commerce Subject Group at 21K School?

❑ The discipline of commerce includes various business-related subjects such

as but not limited to: accounting, business economics, entrepreneurship,
finance etc.
❑ Business and related subjects (such as the FAME group – finance,
accounting, management and economics) are among the most popular
fields of study at universities worldwide.
❑ It focuses on building important and practical skills that are very helpful in
real life.
❑ At 21K School, Commerce Department caters to subjects like Business
Studies, Economics and Accounting.

Cambridge Accounting

Cambridge Accounting is accepted by universities and employers as proof of an

understanding of the theory and concepts of accounting, and the ways in which accounting
is used in a variety of modern economic and business contexts.

Learners focus on the skills of recording, reporting, presenting and interpreting

financial information; these form an ideal foundation for further study, and for a future
career within the profession.
The syllabus is structured so that learners attain both practical skills and theoretical
knowledge.

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21K British Senior School Grade IX Bridge Programme

Career Opportunities with

Accounting
You can be –

Chief Financial Officer (CFO)

Investment Banker

Tax Consultant

Banker

Finance Manager

Auditor

Certified Management Accountant

(CMA)

Financial Analyst

Investment Analyst

International Fund Manager

And much more..

Chapter 1 : Introduction to Accounting and Important

Terminologies

What will we be learning in this chapter?

• Accounting terminologies i.e. transaction , business , capital, drawings, assets,
liabilities etc.
• Classification of Accounts
• Types of discounts and how they are calculated in day to day life.
• Golden Rules of Accounting/ Modern Rules of Accounting

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21K British Senior School Grade IX Bridge Programme

• Accounting helps the learners focus on the skills of recording, reporting,

presenting and interpreting financial information; these form an ideal
foundation for further study, and for a future career within the profession.
• It helps the learners attain both practical skills and theoretical knowledge.
• It helps improved skills of numeracy, literacy, communication, enquiry,
presentation and interpretation along ability to think logically.

Let us understand this with an example

Mr. Carl started a business. He

invested some money of personal
savings to start the company's
operations.

After a month, he wants to know

how much the business made. He
also wants to know what happened
to his money.

Without a way of recording the activities of the business, we will not be able to answer his
questions. Surely, we can tell him, "Mr. Carl, we made a lot this month!", but we need
proof! And he needs the figures! So let us introduce him to the concept of Book-keeping
and Accounting.

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21K British Senior School Grade IX Bridge Programme

Reading the above example, we can clearly say

‘Accounting’ is a term associated with numbers, facts and also the way we represent the
data in a simple and easier manner which can be understood by anyone.

It is commonly known as the "language of business".

It is how your business records, organizes, and understands its financial information.

It is how you get a clear picture of your financial position.

So, before we dive into the world of accounting, let’s get familiar with few Accounting
terminologies that we will be using regularly.

Accounting Concepts and Terminologies:

1. Transaction

An exchange between two or more people is known as a transaction. There are two types
of transaction i.e., Monetary Transactions & Non-Monetary Transactions

In Business we consider transaction in terms of money.

Earlier the transaction in the olden period of time were done using Barter Transaction
during which goods would be traded for goods.

Now in modern times we use money as medium of exchange.

A transaction can be done immediately i.e. by paying Cash or can be paid for later by
making into a Credit transaction.

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Cash Transaction

It refers to making or receiving payment immediately in the form of cash, cheque or digital
payments.

For example –

Scene 1 - Chris wants to eat an ice cream; he goes to shop pays immediately to the
shopkeeper $ 5 in cash will be considered as a cash transaction.

Scene 2 - Rosy pays rent of her house every month by using a cheque, there is no delay in
payment and hence it is also considered as a cash transaction.

Credit Transaction

It refers to making or receiving payment later over a period of time.

For example –

Scene 1 - Sam buys new clothes from Amby Clothes Limited; he says that he will pay after
3 months. The Shop keeper agrees to this, it will be considered as a credit transaction.

Scene 2 - Wilson buys new laptop on terms that he will make the payment at the end of
the year. This is also an example of credit transaction where the payment will be done later
whereas the product is taken by him now.

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Activity 1.1

Joseph shares some of the events which took place with him in the last few days.
Identify whether the given transactions are Cash or Credit.

Transaction 1 : Went to watch movie with his friends , paid for the movie
tickets using cash - …………………………………………..

Transaction 2 : Ordered a Pizza from a restaurant and told the owner he will
make the payment on last day of the month - …………………………………..

Transaction 3 : Visited a book store and purchased stationery by paying

amount immediately - ………………………………………..

Transaction 4 : Purchased grocery for his house by agreeing to make the

payment within a week. - ……………………………………………….

2. Book - Keeping

Book-keeping is related with recording of business transactions. In simple words, the

‘Book-keeping’ means recording of the business transactions in the books of accounts in a
systematic way. All the monetary transactions are recorded date wise for accurate business
results from such records at the end of a particular period of time.

3. Accounting

Accounting is means of communicating the results of business operations to various parties

interested in or connected with the business viz., the owners, creditors, investors, banks
and financial institutions, Government and other agencies.

Book-keeping and Accountancy is an art of recording, classifying and summarizing

transactions of business in a systematic manner.

4. Business

It can be defined as any activity which is done with an anticipation of return i.e., profit by
taking risk.

Business can be in the form preparing things i.e., manufacturing or providing service e.g.,
Hotel, Manufacturing of Shirt etc.

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Activity 2.2

List few businesses which have evolved in the past few years e.g. Paytm

……………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………

5. Assets:

Any physical items of value or right owned that has a monetary value and are owned by a
business are called as an asset. E.g. Land, Office Building, Machinery

6. Liabilities:

Any amount payable by the business to others is known as liabilities. E.g. Loans,
Creditors

7. Capital :

The total amount invested into the business by the owner is called capital. Excess of assets
over the liabilities is also called as capital. Capital is a liability of the business as this
amount is payable by the business enterprise to the owner at the time of closure of the
business.

E.g. Nick wants to start the business of ice cream parlour; he introduced some money in
the business by opening a bank account and also bought a refrigerator in the business.

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8. Drawings

The amount i.e., money or object which is withdrawn from business for personal use is
called drawings. This is an expense to the business. E.g. Matthew who is the owner of the
business, withdrew $ 200 to watch a movie along with family members.

9. Trade Receivables

In business there are customers to whom goods/ service is given first and money is
recovered from them in future. They are known as trade receivables. They are asset to the
business. E.g. Arnold sold Micheal bicycle on credit. In this case, Micheal is the trade
receivable to Arnold.

10. Trade Payables

A business sometimes buys goods or avails service first and pays later to the supplier or
the provider of service. They are known as trade payables. They are liabilities to the
business. E.g. Alexa purchased a dress on credit from Nicky. In this case Alexa is trade
payable for Nicky.

11. Revenue

It is income that a business has from its normal business activities usually from the sale of
goods and services to customer.

12. Income

It is earnings arising as a result of business transactions. For example a business earns

through sales revenue, any other investments made by the business.

13. Expenses

The amount spent by the business. For example a business incurs expenses in form of
wages paid to workers, payment to suppliers, electricity bills etc.

Activity 1.3

Write down few expenses and income in day-to-day life

………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………

…………………………………………………

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14. Accounting Period

It is generally a year. It is also known as the financial year. In most countries accounting
period considered is 1st April to 31st March.

15. Debit

A debit is an accounting entry that creates a decrease in liabilities or an increase in

assets.

16. Credit

A debit is an accounting entry that creates a increase in liabilities or an decrease in

assets.

These are generally used in recording of the business transactions.

17. Trade Discount

Trade discount is referred to as the discount that is offered by a seller to the buyer of the
product in the form of reduction in the price of the item.

Trade discounts are offered to increase the sales of the product and make the customers
feel that they are getting the best offer.

No accounts are maintained for keeping track of the discounts that are offered.

18. Cash Discount

Cash discount is referred to as the discount that is offered by the seller of a product to the
buyer at the time of payment for the purchase. Cash discount is offered to make the
customer or the buyer pay for the product promptly, it helps the business in reducing or
avoiding the credit risk completely.

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Types of Accounts

Personal Account

These accounts types are related to persons. These persons may be natural persons or
can also be artificial persons created by law. E.g. Mark Account, ABC Company Ltd.

Real Account

These account types are related to assets or properties. It can be things which have a
physical existence and can be touched or things that can be measured in terms of money
and have value.

E.g. Machinery, Motor Vehicle, Goodwill

Nominal Account

These accounts types are related to income or gains and expenses or losses. For
example: – Rent A/c, commission received A/c, salary A/c, wages A/c

The Golden Rules of Accounting

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Activity 1.4

Suzzane started a business of cakes. She started the business with introducing
her house microwave in the business. She purchased some necessary ingredients
on credit from Sam Foods. She hired an assistant named Hazel for working with
her who was given salary at the end of the month in Cash. She sold 100 cakes
during the month at $ 50 each . She had to pay the following expenses

Rent 800

Salary to Assistant 1000

Materials for Cake 500

Answer the Following

a) The microwave introduced in the business is known as _______

b) Sam Foods is _______for the business

c) What is the income earned by Suzzane

d) Calculate the profit/loss made by Suzzane during the month.

End of Chapter Questions

I. Define the Following

a. Transaction
b. Capital
c. Trade Receivables
d. Trade Payables
II. Choose the Correct Word
1. Neil sold laptop on credit to Sam, Neil is __________ (trade receivable / trade
payable) to Sam.
2. 10% Cash back is a kind of _________(Trade / Cash ) Discount.
3. London School of Commerce is an example of _______ ( Real / Personal) account.
4. ________ (Asset/Liabilities) is owned by the business.
5. Salary paid to an employee is an example of ________ ( Income/Expenses)

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III. Calculate the following

David started a business of selling shoes. A pair of shoes was sold by him for $ 300 each.
He sold 500 such pair of shoes during the year. He had employed Darren and Shaun to
help him in this business by paying $ 10000 to each one of them. He also paid for the
showroom a rent of $ 5000 during the month.

1. Calculate the Revenue earned during the year

2. Calculate the Expenses earned during the year

3. Calculate and state whether it was profit or loss made during the year.

Chapter 2: Recording & Posting of Transaction – Journal

& Ledger

What will we be learning in this chapter?

• The process of recording a transaction in Journal
• The process of posting the transaction in Ledger Accounts.
• How to Balance the ledger Accounts

In the olden days, the bookkeeping for small businesses usually began by writing entries
into books which is called as journal Every business organization carries various transactions
throughout the day. Some transactions are similar, many are different. Hence, it is not
possible to keep all the journalising process in mind without recording it. All these transactions
are important and therefore can’t be avoided or omitted. So, to avoid any mistake or omission,
all these transactions are recorded in books. Journalising is the traditional form of keeping
track of happenings in the organization.

According to Double Entry Book-keeping System, one account is to be debited and another
account is to be credited with equal amount

Every debit has an equal and corresponding credit of the same amount is the basic
principle of Double Entry System

Journal

The word “Journal” is derived from the French word “JOUR” which means a “Day”.

Therefore, journal means a “daily record”.

A journal records transaction in the chronological order i.e. In the order of their occurrence
(taking place).

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Each general journal entry lists the date, the account title(s) to be debited and the
corresponding amount(s) followed by the account title(s) to be credited and the
corresponding amount(s).

A journal entry has these components:

• The date of the transaction

• The names of the accounts impacted plus the account number, where relevant

• The amounts to be credited and debited

• A reference number that serves as a unique identifier for the transaction

• A description of the transaction

Double Entry Book-keeping

The double-entry accounting method requires every transaction to be recorded in at least

two accounts.

To understand double entry book-keeping there is a need to understand the accounting

equation Assets = Capital + Liabilities

Generally, when we use the accounting equation, the following effect can be seen on

While recording the transaction we follow the golden rules of accounting seen in the
previous chapter.

Let’s see few examples -

1. Machinery purchased for Cash

In this statement, Machinery purchased for Cash, these two words are used to record the
transaction

Machinery – it is coming in the business – (Real Account Rule we have to follow)

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21K British Senior School Grade IX Bridge Programme

Cash – it is going out of the business - (Real Account Rule we have to follow)

Machinery – Debit

Cash – Credit

2. Cash received from Shaun

In this statement, Cash received from Shaun, these two words are used to record the
transaction

Cash – it is coming in the business – ( Real Account Rule we have to follow)

Shaun – this is the person who is the giver – ( Personal Account Rule we have to follow)

Cash – Debit

Shaun – Credit

3. Rent paid in Cheque

In this statement, Rent paid in Cheque, these two words are used to record the
transaction

Rent – it is an expense – (Nominal Account Rule we have to follow)

Cheque (Bank) - it is going out of the business - (Real Account Rule we have to follow)

Rent – Debit

Bank - Credit

Activity 2.1

Applying the Accounting Rules, identify the debit and credit for the
following

Debit Credit

Motor Car purchased

from Ryan

Salaries paid in Cash

Cash paid to Sean

Goods sold to Victor

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21K British Senior School Grade IX Bridge Programme

Ledger

The next step after journal i.e., recording the transaction is to post it in respective
accounts. This method of posting is known as Ledger.

The word ‘LEDGER’ is derived from Latin word ‘Ledger’ which means ‘to contain’

Ledger Account is a journal in which a business maintains the data of all the transactions
and financial statement.

Ledger Account is made for each of the following – Income, Expenses, Assets and Liabilities

Ledger is a bound book which contains several pages.

Each page of a ledger is serially numbered. For each account separate page is allotted.

The page number of the ledger is called as ' Folio' . Each ledger account is divided into two
sides. The left side is known as debit side and the right side is known as credit side.

Format of a Ledger Account

_______Account

Date Details Folio $ Date Details Folio $

The following steps are followed to maintain a ledger

1. Recording the Journal Entries

2. Posting the journal entry in the respective account maintained in the journal.

3. If the opening balance of ledger account is given, it should be posted first, this is
written as ‘Balance b/d’ in either the debit or credit side depending on the nature of
the account.

4. At the end of the period, we have to balance the ledger account by seeing the higher
amount on debit or credit side whichever is higher.
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Let’s see this process in action.

We will be preparing the Ledgers for following transactions.

1. Cash paid into the bank $ 3000

Bank – Debit the Receiver is the Rule followed in this case. (Personal Account)

Cash – Credit What Goes Out is the Rule followed in this case (Real Account)

2. Cash received from Josh $ 300

Cash – Debit What Comes is the Rule followed in this case (Real Account)

Josh - Credit the Receiver is the Rule followed in this case. (Personal Account)

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Bank Account

Date Details Folio $ Date Details Folio $

1 Cash Account 3000

Cash Account

Date Details Folio $ Date Details Folio $

2 Josh 300 1 Bank 3000

Accounts

Balancing the Ledger

Bank Account

Date Details Folio $ Date Details Folio $

1 Cash 3000 30 Balance 3000

c/d

3000 3000

1 Balance b/d 3000

Josh Account

Date Details Folio $ Date Details Folio $

30 Balance c/d 300 2 Cash 300

300 300

1 Balance 300
b/d

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Cash Account

Date Details Folio $ Date Details Folio $

2 Josh 300 1 Bank 3000

31 Balance 2700
c/d

3000 3000

1 Balance 2700
b/d

Activity 2.2

Record the transactions and prepare the ledger for the following with
balancing the accounts

April 1 : Cash paid in the bank $ 3000

5 : Motor Vehicle purchased for $ 1000 by cheque

12 : Received a cheque from Anthony $ 1300

25 : Paid Travelling Expenses of $ 50 by cash

End of chapter questions

I. Choose the Right Word

1. The left-hand side of the ledger is known as _________ (debit / credit)

2. _____ (Expenses / Assets) = Capital + Liabilities
3. The double-entry accounting method requires every transaction to be recorded in at
least ________(One/ Two accounts.
4. In Journal Entries, in case of Assets, Debit will be _________( Increase / Decrease)

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II. Complete the table

Journal Entries Debit/Credit

Debits Credit

Equity

Income

Liability

III. Record the following transaction

Jan 1 : Sold mobile phone to Tom $ 300

Jan 5 : Purchased stationery for $ 20 in cash

Jan 13 : Paid Allen $ 100 in cheque

Jan 20 : Received $ 350 from Annie in cheque

Jan 25 : Sold laptop for $ 500 to Jeff on credit

IV. Prepare the ledger of Bank for the following transaction

May 1 : Deposited Cash in the Bank $ 1000

May 5 : Paid Rent by Cheque $ 200

May 13 : Received Commission by Cheque $ 250

May 28 : Paid $ 200 in cheque to Tom

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