27 December 2017

History and how concept of accounting developed?

December 27, 2017

History and how concept of accounting developed?

Accounting has a remarkable heritage. The history of accounting is as old as civilization. The seeds of accounting were most likely first sown in Babylonia and Egypt around 4000 B.C. who recorded transactions of payment of wages and taxes on clay tablets.

Historical evidences reveal that Egyptians used some form of accounting for their treasuries where gold and other valuables were kept. The incharge of treasuries had to send day wise reports to their superiors known as Wazirs (the prime minister) and from there month wise reports were sent to kings. Babylonia, known as the city of commerce, used accounting for business to uncover losses taken place due to frauds and lack of efficiency.

In Greece, accounting was used for apportioning the revenues received among treasuries, maintaining total receipts, total payments and balance of government financial transactions. Romans used memorandum or daybook where in receipts and payments were recorded and wherefrom they were posted to ledgers on monthly basis. (700 B.C to 400 A.D).

China used sophisticated form of government accounting as early as 2000 B.C. Accounting practices in India could be traced back to a period when twenty three centuries ago, Kautilya, a minister in Chandragupta’s kingdom wrote a book named Arthashasthra, which also described how accounting records had to be maintained. Luca Pacioli’s, a Franciscan friar (merchant class), book Summa de Arithmetica, Geometria, Proportion at Proportionality (Review of Arithmetic and Geometric proportions) in Venice (1494) is considered as the first book on double entry bookkeeping.

Debit comes from the Italian debito, Credit comes from the Italian credito

A portion of this book contains knowledge of business and book-keeping. However, Pacioli did not claim that he was the inventor of double entry book-keeping but spread the knowledge of it. It shows that he probably relied on then–current book-keeping manuals as the basis for his masterpiece. In his book, he used the present day popular terms of accounting Debit (Dr.) and Credit (Cr.). These were the concepts used in Italian terminology. Debit comes from the Italian debito which comes from the Latin debita and debeo which means owed to the proprietor. Credit comes from the Italian credito which comes from the Latin ‘credo’ which means trust or belief (in the proprietor or owed by the proprietor. In explaining double entry system, Pacioli wrote that ‘All entries… have to be double entries, that is if you make one creditor, you must make some debtor’. He also stated that a merchants responsibility include to give glory to God in their enterprises, to be ethical in all business activities and to earn a profit. He discussed the details of memorandum, journal, ledger and specialised accounting procedures.

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25 December 2017

What is a Contract Note in Share trading?

December 25, 2017

What is a Contract Note in Share trading?

Contract Note is a confirmation of trades done on a particular day on behalf of the client by a trading member. It imposes a legally enforceable relationship between the client and the trading member with respect to purchase/sale and settlement of trades. It also helps to settle disputes/claims between the investor and the trading member. It is a prerequisite for filing a complaint or arbitration proceeding against the trading member in case of a dispute. A valid contract note should be in the prescribed form, contain the details of trades, stamped with requisite value and duly signed by the authorized signatory. Contract notes are kept in duplicate, the trading member and the client should keep one copy each. After verifying the details contained therein, the client keeps one copy and returns the second copy to the trading member duly acknowledged by him.

22 December 2017

What is a Stock Swap?

December 22, 2017

What is a Stock Swap?

First it is need to be known Who is an acquiree and acquirer.

Acquiree is the company that is being acquired or purchased in a merger or acquisition process.

Acquirer is the company that is purchasing another company in a process of merger or acquisition.

Acquiring a business or company may be paid in various forms, such as cash, securities or by taking over the liabilities of the acquiree. When the share-holders in the acquiree company are given shares of the acquirer company as part of the acquisition, it is called a stock swap.

A benefit of stock swap is that the cash outflow for the acquirer company is minimized. Higher the value of the acquirer company’s shares, the fewer the shares it needs to issue for the acquisition. However, the share issue does cause dilution of promoter’s stake in the acquirer company. Further, even earnings per share (EPS) of the acquirer company may be diluted, if the earnings of the acquiree company are not adequate.

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21 December 2017

Why do companies need to issue shares to the public?

December 21, 2017

Why do companies need to issue shares to the public?

Stock Markets are important financial hub in modern world. Thousands of companies are established through stock exchanges. But why companies issue shares and use stock market to raise money.

Most companies are usually started privately by their promoter(s). However, the promoters’ capital and the borrowings from banks and financial institutions may not be sufficient for setting up or running the business over a long term. So, companies invite the public to contribute towards the equity and issue shares to individual investors. The way to invite share capital from the public is through a ‘Public Issue’.

Simply stated, a public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI.

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What is Systematic Investment Plan (SIP)?

December 21, 2017

What is Systematic Investment Plan (SIP)?

Through an SIP, an investor commits to invest a constant amount periodically. For instance, 5,000 per month. The investment is normally made in a mutual fund scheme or a gold fund of fund. As the market fluctuates, the scheme’s Net Asset Value (NAV) too will fluctuate. For the same investment of 5,000, when the NAV is higher, investor will receive fewer units; more units will be allotted when the NAV is lower.
In the example below, investor received the units at an average NAV of 11.375 per unit, during the period that NAV fluctuated between 11.25 and 11.50. Therefore, this investment approach is also called Rupee Cost Averaging.


Investment (₹)

NAV (₹)

Number of Units





























SIP creates a habit of investment among an individual. It helps in long term wealth creation, while keeping the client away from the dangerous investment style of timing the market. It is important to note that SIP offers some downside protection, by averaging the cost at which the units are acquired. But SIP cannot prevent losses, if the market keeps falling. Investor can do SIP through post-dated cheques, Electronic Clearing service (ECS) facility offered by banks, or standing instructions given to the bank.

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Golden Rules of Accounting

December 21, 2017


Accounts is all about understanding the Golden rules. From a journal entry the process of accounting starts and for this, it is basic necessary to understand the golden which is a handy formula for you. The rule is as follows:


           Debit - The receiver

           Credit - The giver
2. Real

          Debit - What comes in

          Credit - What goes out
3. Nominal

          Debit - All expenses and losses

          Credit - All incomes and gains

I. Personal Accounts is the accounts which relate to persons. Personal accounts include the following.
a) Natural Persons : Accounts which relate to individuals. For example, Vijay’s A/c, Dawood’s A/c etc.
b) Artificial persons : Accounts which relate to a group of persons or firms or institutions. For example, Reliance Ltd., IDBI Bank, Jamal Mohamed College, etc.

c) Representative Persons: Accounts which represent a particular person or group of persons. For example, outstanding salary account, prepaid insurance account, etc. The business concern may keep business relations with all the above personal accounts, because of buying goods from them or selling goods to them or borrowing from them or lending to them. Thus they become either Debtors or Creditors. The proprietor being an individual his capital account and his drawings account are also personal accounts.

II. Real Accounts is relating to properties and assets which are owned by the business concern. Real accounts include tangible and intangible accounts. For example, Advertisement, Land, Building, Goodwill, Purchases, Sales, etc.

III . Nominal Accounts do not have any existence, form or shape. They relate to incomes and expenses and gains and losses of a business concern. For example, Salary Account, Dividend Account, Rent, etc.

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16 December 2017

Some Basic Accounting Terms

December 16, 2017

Some Basic Accounting Terms

One need to grasp the following common expressions always used in business accounting.
Transaction: It means an event or a business activity which involves exchange of money or money's worth between parties.

Goods/Services: These are tangible article or commodity in which a business deals. These articles or commodities are either bought and sold or produced and sold.

Profit: The excess of Revenue Income over expense is called profit. It could be calculated for each transaction or for business as a whole.

Loss: The excess of expense over income is called loss. It could be calculated for each transaction or for business as a whole.

Asset: Asset is a resource owned by the business with the purpose of using it for generating future profits. Assets can be tangible and intangible. Tangible Assets are the Capital assets which have some physical existence. The capital assets which have no physical existence and whose value is limited by the rights and anticipated benefits that possession confers upon the owner are known as intangible Assets. They cannot be seen or felt although they help to generate revenue in future.

Liability: It is an obligation of financial nature to be settled at a future date. It represents amount of money that the business owes to the other parties.

Contingent Liability: It represents a potential obligation that could be created depending on the outcome of an event.

Capital: It is amount invested in the business by its owners. It may be in the form of cash, goods, or any other asset which the proprietor or partners of business invest in the business activity. From business point of view, capital of owners is a liability which is to be settled only in the event of closure or transfer of the business. Hence, it is not classified as a normal liability.

Drawings: It represents an amount of cash, goods or any other assets which the owner withdraws from business for his or her personal use.

Debtor : The sum total or aggregate of the amounts which the customer owe to the business for purchasing goods on credit or services rendered or in respect of other contractual obligations, is known as Sundry Debtors or Trade Debtors, or Trade Payable, or Book-Debts or Debtors.

Creditor: A creditor is a person to whom the business owes money or money's worth. E.g. money payable to supplier of goods or provider of service. Creditors are generally classified as Current Liabilities.

Trade Discount: It is the discount usually allowed by the wholesaler to the retailer computed on the list price or invoice price.

Cash Discount: This is allowed to encourage prompt payment by the debtor. This has to be recorded in the books of accounts. This is calculated after deducting the trade discount.

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