When the owner of the business withdraws goods or cash from the business for his personal use, a Drawing Account is opened in the books for the same.
This account is called Personal Account.
Stock account
The thing in which the trader trades is called goods. This is a real (material) account.
Discount
When a trader charges less than the full price of that item from his customers. So it is called exemption or deduction.
Trade Discount
The discount given by the trader increases his sales.
It is called a trade discount. Its rate is different for different traders.
This discount is given at the rate of a certain percentage of the selling price.
It is not accounted for in the books. This reduces the number of sales.
Example- Sold goods worth Rs.5000 to Saddam and gave him 10% business discount, in this transaction Rs.500 will be deducted from Rs.5000. And Rs 4500 will be accounted for in the books.
Cash Discount
This discount is given by the trader to get early payment from the debtors. Its account is written in books.
Similarly, if a merchant pays his creditors in full on time, he receives a cash discount.
If the trader receives a cash discount then there is profit for the business and if he gives a cash discount then there is a loss for the business.
This is a nominal account only.
Bad Debts
When the debtor of a merchant becomes insolvent and the amount not received is called bad debt.
This is a loss for the merchant.
The amount which is not received will debit from the bad debt account with the same amount and credited to the personal account of the debtor.
Bad debts account is a nominal account.
Drawings
When the owner of the business takes out goods or money from the business to meet his personal needs, it is called drawing.
Raw Material
When goods are bought in business to produce a particular item, it is called raw material.
Opening Stock
The goods remaining unsold at the end of the previous financial year are called opening stock.
Closing Stock
The goods that remain unsold at the end of a financial year are called closing stock.
Debtors
Those to whom we sell goods on credit are called trade debtors.
Creditors
Those from whom we buy goods on credit are called trade creditors.
