Skip to main content

Business Cycle

      In business, transactions are inter-related and dependent of one to another. Transactions are occurred in a cyclic nature as one by another. The cycle transactions are collectively called as Business Cycle.
       Proprietor gives capital to business. Business gets its cash source of capital from its proprietor. Business invests the cash to buy goods for business purpose and pays expenses to run the business and to aid the purchase of goods and use of goods in business to sell. Incomes are earned by selling the goods to customers and by some other ways. Cash are received from customers and other incomes. Incomes are matched with expenses and profits or losses are estimated. The profit is again invested in business by adding it with owner’s capital.

       So it is a cycle where Capital becomes purchase and expenses, purchase and expenses becomes sales and other incomes, sales and other incomes matched  with purchase and expense by which profit is estimated, again profit becomes capital. When profit is reinvested, one business cycle is over.

Comments

Post a Comment

Popular posts from this blog

Concepts and principles of accoutancy

PRINCIPLES OF ACCOUNTING Principles of Accountancy      The principles which are used in accountancy can be divided into two elements. The accounting concepts and conventions are treated as the basic two elements of principles of accountancy. Nearly eight major concepts are adopted in accountancy. Three major conventions are used in accountancy.      While recording the business transactions in books of accounts, the concepts are to be considered at appropriate situation, Concepts are first and foremost in accountancy. In English, alphabets are important. Accounting concepts are foremost in accountancy. Business Entry Concept      Business is separated from its owner. Owner is treated as a principle creditor of the business. Business owes to the owner for the amount of capital invested in business by him. Even though business is owned by the proprietor, it is a separate entity. All accounting processes are done in the point of view of ...
Post a Comment
Read more

Basis of Accounting

There are two basis of accounting. One is accrued basis and another one is cash basis. They are otherwise called merchandise basis and cash basis of accounting. Accrual Basis      Revenue, expenses, and transactions are recorded in books of accounts, when they arise or accrue under accrual basis. It follows accrual concept to record transactions in books of accounts. The payment or receipt of cash may have done or not but revenue, expenses, and transactions are recorded in the books of accounts, when it becomes due. “Time never waits for human” as like the sentence revenue, expenses, transactions never wait for its cash consideration. When they become due, it is recorded in the books of accounts. Outstanding expenses, prepaid expenses, accrued income, income received in advance accounts are maintained in accrual basis of accounting only.      Under Companies Act, 1956, all companies must prepare its accounts under accrual basis of accounti...
Post a Comment
Read more

Illustrations of single entry system

Illustration 1       Mr. Pradeep has a business of selling garments. His final extracts of all accounts are stated below.       Particulars                                                    1.04.2011                     31.03.2012 Sundry Debtors                                                  30000       ...
Post a Comment
Read more