Accounting Glossary PDF

# ACCOUNTING (I.COM. PART-I) ## GLOSSARY - which - allled - orded - on, - is - alled - is - ding - rued - the - ear - ice. - IS - Dunt - of - om - m - e - e - f - Dunt - of - om - m - e - e - f - C - RT-1 - GLOSS - RT-1) - GLOSS ## CHAPTER # 3 - Double_Entry_System: The system under which both the...

# ACCOUNTING (I.COM. PART-I) ## GLOSSARY - which - allled - orded - on, - is - alled - is - ding - rued - the - ear - ice. - IS - Dunt - of - om - m - e - e - f - Dunt - of - om - m - e - e - f - C - RT-1 - GLOSS - RT-1) - GLOSS ## CHAPTER # 3 - Double_Entry_System: The system under which both the changes in a transaction are recorded-one change is debited, while the other change is credited with an equal amount. - Single_Entry_System: A system in which sometimes both aspects of a transaction are recorded, sometimes only one aspect of a transaction is recorded and sometimes no aspects of a transaction is receded is called single entry system. - Account: Account is the individual record of an asset, liability, revenue, an expense or capital in a summarized manner. - Nominal_Accounts: Accounts which are related with expenses, losses and gains are known as nominal accounts e.g. Carriage in. Loss by theft etc. (Profit/Gains) - Real_or_Property_Accounts: Accounts which are related with properties or things owned by a business are known as real or property accounts e.g. Land, building, office equipment etc. (Assets) - Personal_Accounts: Accounts which are related with persons or institutions are known as personal accounts e.g. Habib Bank, Debtor's account. Creditors account etc. (Persons) - Impersonal_Accounts: Accounts which are not related with persons or firms are called impersonal accounts. e.g., Salaries account, building account, furniture account etc. ## CHAPTER # 4 - Journal: The book in which transactions are first of all recorded chronologically together with its short description is called "Journal". It is also called "Book of Original. Entry" or "Prime Entry" or "Primary Entry" or "Preliminary Entry" or "First Entry". - Journalising: Recording of a transaction in Journal is called "Journalising" or "Journal Entry". - Entry: Recording a transaction in the appropriate place of the concerned book of account is called entry. - Simple_Entry: An entry in which one account is debited and another account is credited is called "Simple Entry". - Compound_Entry: An entry in which more than one account is debited or more than one account is credited is called "Compound entry". - Narration: A short explanation of each transaction which is written under each entry is called "Narration". - Ledger_Folio_Ledger_Reference: The page number of the ledger where the two concerned accounts have been posted, are mentioned in this column. This will help in locating the entry in the ledger easily. It is used in journal. ## CHAPTER # 5 - Ledger: The book in which all the transactions of a business concern are finally recorded in the concerned accounts in a summarised and classified form, is called ledger. - Posting: The process of transferring information, debits and credits, from journal to ledger is known as Posting. - Classification: The debit and crédit aspects of transactions are transferred from journal to concerned accounts in leger is known as classification. - Balancing: The process of equalizing two sides of an account is known as Balancing. - Debit_Balance: If the debit side of an account is heavier, it's balance is known as Debit balance. - Credit_Balance: If the credit side of an account is heavier, it's balance is known as Credit Balance. - Zero_Balance: If the two sides of an account are equal, that account will show Zero Balance. - Stages_of_Accounting_Cycle: Following stages are included in accounting cycle: - Transaction → Journal → Ledger - Trial Balance → Final Accounts - Balance: The difference between the two sides of an account is it's balance. - Trial_Balance: An informal accounting schedule or statement that lists the ledger account balances at a point in time and compares the total of debit balances with the total of credit balances is called "Trial Balance". - Debtors_Ledger: Debtors ledger contains the account of all the customers to whom goods have been sold on credit. - Creditors_Ledger: Creditors ledger contains the accounts of all the suppliers from whom goods have been purchased on credit. - Journal_Folio/Journal_Reference: The page number of the journal from where the transaction has been posted, is mentioned in this column. This will help in locating the entry in the journal easily. It is used in ledger. - Folioing: The process in which the page number of the ledger is recorded in ledger folio column of journal and page number of the journal is recorded in journal folio column of ledger is known as folioing. ## CHAPTER # 6 - Bill_of_Exchange: "An unconditional instrument in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to the bearer". - Drawer: "A. person who draws a bill of exchange is known as drawer". - Drawee: "A person to whom a bill of exchange is drawn is known as drawee". ## CHAPTER # 7 - Subsidiary_Book: Under double entry system transactions are first of all recorded in journal and thereafter posted to the ledger. The book which gives additional help to the ledger is called subsidiary book. - Cash_Book/Cash_Journal: A book in which all the transactions in which cash is involved, (whether the business has paid cash or received cash) are recorded is called cash book or cash Journal. - Purchases_Book/Purchases_Journal: A book in which only all credit purchases of goods are recorded is called purchases book or purchases journal. It is also called purchase Day Book, Bought Book / Bought Journal, Inward Invoice Book or Invoice Book. - Sales_Book/Sales_Journal: A book in which only all credit sales of goods are recorded is called sales book or sales journal. It is also called Sales Day Book, Outward Invoice Book or only Day Book. - Sales_Returns_Journal/Sales_Returns_Book: The goods we have sold on credit if subsequently returned by the customers to us for some solid reasons are recorded in this book. This book is also known as Returns Inwards Book." - Purchases_Returns_Journal/Purchases_Returns_Book: The goods we have bought on Credit if subsequently returned by us to the suppliers for some solid reasons are recorded in this book. This book is also known as Returns Outward Book". - Bills_Receivable_Book: Sometimes debtors pay by means of accepting a bill of exchange instead of cash. All the bills (acceptances) received from the debtors are recorded in this book. - Bills_Payable_Book: Sometimes creditors are paid by means of accepting the bills drawn by them instead of paying them cash. All the bills (acceptances) given to the creditors are recorded in this book. - Special_Journal: By special Journal we mean, a journal in which transactions relating to a certain special group are recorded. Special journal is again subdivided into eight journals e.g. cash journal. Sales journal, purchases journal etc. - General_Journal: The transactions which do not fall within the scope of special journal are recorded in this journal e.g., Purchase of an asset on credit, depreciation on asset etc. It is also known as journal proper, modern journal or principal journal. Some authors call it only 'journal'. - Debit_Note: If goods bought on credit are returned to the seller for any solid reason, the buyer debit the seller account and informs the seller through a note. This note is called "Debit note". - Credit_Note: If goods sold on credit are returned by the buyer, the seller credit the buyer account and informs the buyer through a note. This note is called "Credit note". ## CHAPTER # 8 - Bank: An institution, which purchases and sells money and transacts other financial business of like nature, is known as Bank. - Types_of_Bank: There are three types of bank accounts: - Current account - Saving bank account or PLS saving account - Fixed deposit account. - Current_Account: In current account a customer is allowed to deposit or withdraw the money from the bank according to his own will. Generally, bank allows no interest on current account. - Fixed_Account: In Fixed account, the amount can be withdrawn from bank after fixed determinable period of time. The bank allows interest on fixed account. - Saving_Bank_Account: An account in which deposits can be made only up to certain limit and the customer is not allowed to withdraw the amount from such account twice or thrice a week is called PLS saving account. It is also known as saving account or Profit or Loss saving account - Bank_Overdraft: The amount, which a bank allowed to a customer to withdraw in excess of his deposits for the sake of depositor's goodwill, is known as Bank overdraft. - Cash_Account: Cash account is an account in a ledger in which posting of only cash transactions are made from journal. - Voucher: Any written evidence in support of a business transaction is known as voucher. - Bank_Pass_Book: Passbook is a copy of the depositor's account in the bank's ledger, which is provided to the depositor. This book is prepared by bank but kept with the depositor. - Pay-in-Slip: Pay-in-slip is used to deposit the amount in the bank. - Cheque_Book: Cheque book is used to withdraw the amount from the bank. - Endorsement_of_the_Cheque: The holder of the cheque may transfer the cheque in favour of his creditor for the clearance of his debts. This process is known as "Endorsement of the cheque". - Dishonour_of_Cheque: Sometimes there may be a mistake in writing a cheque or the amount of deposit in Bank account may be less than the amount of cheque drawn. In such a case the bank will refuse to honour the cheque and the cheque is called Dishonoured cheque. - Single_Column_Cash_Book: It is a cash book in which only cash transactions are recorded. - Double_Column_Cash_Book: In double column cash book, two columns of amount are provided on each side of cash book. One for cash and other for Bank. - Treble_Column_Cash_Book: In treble column cash book, three columns of amount are provided on each side of cash book i.e. Cash, bank, & Discount. - Contra_Entry: An entry in which Cash account and Bank account are involved and it is recorded on both sides of cash book is called Contra entry. - Bank_Reconciliation_Statement: If there is any discrepancy arises between the balance of the Cash book and that of Pass book, the depositor prepares a statement to explain the causes of discrepancies and to reconcile the two balances. This statement of explanation is called Bank reconciliation statement. - Petty_Cash_Book: The book in which small payments, which are not convenient to record in the main Cash book (like Postage, traveling expenses, purchase of stationery etc.) are recorded is called Petty cash book. - Imprest_System: A systern in which a fixed sum of money is given to cashier to cover the petty expenses for the month is called Imprest system. - Unpresented_Cheques: All those cheques, which are issued by the customer for payment, but not presented for payment in the bank, are called unpresented cheques or cheques issued but not presented for payment. - Uncredited_Cheques: All those cheques which are deposited in the bank by the customer but the bank has not credited the amount of these cheques to the customer's bank account are called uncredited cheques or uncollected cheques or cheques deposited but not collected by the bank. - Omitted_Cheques: Cheques which are recorded in cash book but ommitted to be sent to the bank. ## CHAPTER # 9 - Opening_Entries: At the beginning of every year, new books of accounts are opened. The closing balances of all the accounts (Assets A/c, Liabilities A/c and capital A/c) will be the opening balances of the new year. Entries are necessary to bring these balances in the books of accounts of the new year. These entries are known as opening entries, and are passed in Proper Journal. - Closing_Entries: At the end of every accounting period, all accounts relating to Expenses and Revenues are closed by transferring their balances to Trading and Profit and Loss Account. Entries are necessary for such transfer, which are known as 'Closing Entries'. - Adjustment_Entries: At the end of the accounting period, when Final Accounts are prepared, some items of Revenue and expenses require adjustments e.g. outstanding expenses, prepaid expenses, Accrued Revenue, depreciation etc. Entries are necessary to record these adjustments and are known as 'Adjustment Entries'. - Rectifying_Entries: If there is any error in the books of account, it must be rectified. But errors are not rectified by erasing the wrong figures. All errors are rectified by passing fresh Journal entries. These entries are known as Rectification Entries. ## CHAPTER # 10 - Transfer_Entries: Any transfer of amounts from one account to another account is done through Journal Entry. Such entry is known as 'Transfer Entry'. - Rare_Transactions_or_Residuary_Entries: All the remaining transactions except those mentioned above, which cannot be recorded in any special journal are known as 'Residuary Transactions', and are recorded in Journal Proper e.g. Credit Sale or purchase of assets, depreciation on assets, Goods given away as free samples etc. - Accounting_Cycle: - Transaction - Journal - Ledger - Trial Balance - Final accounts. - Trading_Account: Trading account shows the gross result (Gross profit or Gross loss) of the business. - Gross_Profit: It is calculated by deducting cost of goods sold (all direct expenses like purchases, carriage, custom duty, ectori duty etc.) from sales. - Gross profit = Total sales - All direct expenses or cost of goods sold - Profit&Loss_Account: Profit & loss account shows the net result (net profit or net loss) of the business. - Net_Profit: It is calculated by deducting all indirect expenses (the expenses incurred for running the business and selling the goods) from the gross profit. - Net profit = Gross profit - All indirect expenses - Balance_Sheet: It is a statement of assets, Liabilities and Owner's equity, which shows the financial position of the business on a particular date. It is also called Position statement, and statement of financial condition. - Fixed_Assets: Assets which have long life and which are bought for use in business for long period of time are called Fixed assets. e.g. Land, Building, Furniture etc. - Fixed_Liabilities: Fixed liabilities, which are repayable after a long period of time e.g. Debentures, Loan on mortgage, capital etc. - Real_Assets: Assets, which have some market value, are called Real assets e.g. Building, Machinery, Stock, Debtors, Cash, Goodwill etc. - Tangible_Assets: Assets which have physical existence and which can be seen, touched or felt are called tangible assets e.g. land, building, machinery etc. - Intangible_Assets: Assets which have no physical existence and which cannot be seen, touched or felt are called Intangible assets e.g. Goodwill, patent Right, Trade mark etc. - Current_Assets: Assets which have short life and which can be converted into cash quickly to meet the short-term liabilities are called Current assets. e.g. stock, Debtors, Cash etc. These are also called Circulatory or Floating assets. ## CHAPTER # 11 - Adjustment: An adjustment means to make a correct record of a transaction which has not been entered or which has been entered but in an incomplete or wrong way. - Adjusting_Entries: Adjusting entries are made at the end of an accounting period to update and correct the information shown in the accounts. - Cash_System_of_Accounting: Under this system of accounting, transactions are recorded only when cash is received or paid, whether they are related to current year or not. - Accrual_System_of_Accounting: The system under which all items of revenue and expenses relating to the current accounting period whether received/paid in cash or not are taken into consideration while determining the profit or loss of the business, is called Accrual or Mercantile system of accounting. - Outstanding_Expenses: The expenses which have been incurred during the current year but have not been paid till the end of the current year, are called outstanding expenses or accrued expenses or expenses payable. e.g. wages payable, accrued salaries etc. - Adjusting_entry_for_outstanding_expenses: - Expense Account - Dr. - XXX - Outstanding Expense Account - XXX - Prepaid_Expenses: The expenses, which have been paid during current year but the services or benefit against them, have not been received till the end of the current year are known as Prepaid expenses or Unexpired expenses or expenses paid in advance. e.g. prepaid rent etc. - Adjusting_entry_for_prepaid_expense: - Initially recorded as an expense: - Prepaid Expense Account - Dr. - XXX - Expense Account - XXX - Initially recorded as an asset: - Expense Account - Dr. - XXX - Prepaid Expense Account - XXX - Accrued_Revenue: The revenue, which we have been earned in the current year but has not been received in cash within the current year' it will be received in next year, is known as accrued revenue or Revenue receivable. e.g. accrued commission(Cr.), Rent receivable etc. - Adjusting_entry_for_accrued_revenue: - Accrued Revenue Account - Dr. - XXX - Revenue Account - XXX - Unearned_Revenue: Revenue, which has not become due but has received in advance. e.g. Unearned commission. Rent received in advance etc. - Adjusting_entry_for_unearned_revenue: - initially recorded as a revenue: - Revenue Account - Dr. - XXX - Unearned Revenue Account - XXX - Initially recorded as a liability: - Unearned Revenue Account - Dr. - XXX - Revenue Account - XXX - Depreciation: Gradual decrease in the monetary value of an asset due to usage in business is known as depreciation. Depreciation is a loss to the business. - Adjusting_entry_for_depreciation: - Depreciation Account - Dr. - XXX - Assets Account - XXX - Accumulated_Depreciation: The sum or total of the depreciation expense in the different accounting years is called Accumulated depreciation. - Debts: Amount receivable by the business from its debtors is known as Debts. - Bad_Debts: The debts, which are irrecoverable from the debtors, are called bad debts and the concerned debtors are called Bad debtors. - Doubtful_Debts: The debts, the recovery of which is doubtful or uncertain are known a Doubtful debts. It is expected loss of the business. - Bad_Debts_Recovered: The debts, which are written off as bad, if recovered in future ar called Bad debts recovered. - Allowances_for_Uncollectable/Provision_of_Doubtful_Debts: The provision, which is maintained for doubtful debts in future, is known as Provision for doubtful debts or Allowances for uncollectable. - Provision_for_Discount_on_Debtors: Provision, which is created for those debtors, wh pay their debts within the discount period, is known as Provision for Discount on Debtors. It is possible loss of the business. - Adjusting_entry_for_discount_on_debtors: - Discount on Debtors Account - Dr. - XXX - Debtors Account - XXX - Provision_for_Discount_on_Creditors: Provision, which is created at the year end for ne estimated amount of discount receivable from creditors, is known as Provision for discount on creditors. It is possible revenue of the business. - Adjusting_entry_for_discount_on_creditors: - Creditors Account - Dr. - XXX - Discount on Creditors Account - XXX - Adjusting_entry_for_interest_on_capital: - Interest on Capital Account - Dr. - XXX - Capital Account - XXX - Adjusting_entry_for_interest_on_drawings: - Drawings Account - Dr. - XXX - Interest on Drawings Account - XXX - Normal_Loss: Loss which arises due to handling of goods, breakage, shrinkage is known as Normal loss. It is not recorded in the books of accounts. - Abnormal_Loss: Loss, which arises due to fire, flood or some other abnormal reasons, is known as abnormal loss. It is recorded in the books of accounts. ## CHAPTER # 12 - Work_Sheet: A work sheet is a large columnar sheet of paper, especially designed to arrange in a convenient systematic form, all the accounting data, required at the end of the period. It is not a permanent record but it is a working paper of accountant. - Income_Statement: A statement, which is prepared to ascertain the net income or net loss of the business for a specific accounting period, is known as income statement. ## CHAPTER # 13 - Financial_Statement: Statement prepared to show the financial position of the business is known as financial statement. - Operating_Expenses: The expenses which incurred for the generation of revenues from the sales of goods are called operating expenses. - Selling_Expenses: All expenses regarding sale of goods and sending goods to the buyer are called selling expenses. e.g. carriage outward, advertisement, salesmen's salaries etc. - Administative_Expenses: All expenses connected with the office and its administration are called Administrative expenses. e.g. office salaries, office rent, printing & stationery etc. - Cost_of_Goods_Sold: It represents the sum of the cost of all goods, which have been sold during the accounting period. - Cost of goods sold = Opening stock + purchases - Closing stock. ## CHAPTER # 14 - Capital_Expenditure: An expenditure, which results in the acquisition of permanent asset in the business for the purpose of earning revenue, is known as Capital expenditure. - Revenue_Expenditures: All those expenditures which are incurred in the day-to-day conduct and administration of a business and the effect of which is completely exhausted within the current accounting year are known as Revenue expenditures. These are also known as Expenses or Expired cost. - Deferred_Revenue_Expenditures: Revenue expenditures, the benefit of which are not confined to one accounting year' they extend to future accounting year or years are known as Deferred revenue expenditures. - Capitalized_Expenditures: Some expenditures although of revenue nature basically, are directly connected with fixed assets and spent directly on the acquisition of fixed assets. Such expenditures are added to the cost of the assets and are called capitalized expenditures. e.g. installation of an asset. - Revenue_Receipts: Receipts which are recurring (received again and again) by the nature and which are available for meeting all day-to-day expenses of the business concern are known as Revenue receipts. e.g. sale proceeds of goods, interest received, commission received etc. - Capital_Receipts: Receipts which are non-recurring (not received again and again) by nature and whose benefit is enjoyed over a long period are called Capital receipts e.g. money brought into business by the owner, loan from bank, sale proceeds of fixed assets. - Capital_Profit: Capital profit is a profit, which is earned on the sale of a fixed asset, or profit earned on raising capital for a company (by issuing shares at premium) is known as Capital profit. e.g. machinery having book value of Rs.50000 is sold for Rs 60000, the profit of Rs.10000 will be capital profit. - Capital_Loss: Loss suffered by a business on the sale of a fixed asset or it is incurred on raising capital for a company (by issuing shares at discount) is known as Capital loss.. e.g. Machinery having book value of Rs.50000 is sold for Rs.45000, the loss of Rs.5000 will be capital loss. - Revenue_Loss: Loss suffered by a business in the ordinary course or day-to-day conduct of a business is known as Revenue loss. e.g. Loss on sale of goods. - Capital_Payment: The amount, which is actually paid on account of capital expenditure, is known as Capital payment. e.g. Machinery purchased for Rs.50000 from Saleem &Co., Rs.30000 paid to them in cash, agreeing to pay Rs.20000 after one month. In this Rs.30000 is a capital payment. - Revenue_Payment: The amount, which is actually paid on account of revenue expenditure, is known as Revenue payment. e.g. Goods purchased for Rs.30000, this is a revenue expenditure but if we pay Rs.20000 out of this sum then Rs.20000 will be revenue payment. - Revenue_Profit: This is a profit which is earned during the ordinary course of business ⚫e.g., Profit on sale of goods, rent received, interest received etc. ## CHAPTER # 15 - Error_of_Ommission: An error in which a transaction has been completely omitted from the original books of accounts is known as error of omission. e.g., Goods sold to Shakeel have been omitted to record in the sales journal. - Error_of_Commission: An error in which a transaction instead of being recorded in the right account, has been recorded in a wrong account of the same class, is known as Error of commission. e.g., Sale of goods to Amir wrongly debited to Anwar account. - Compensating_Errors: It means that some errors in amount have occurred on the opposite sides of two or more accounts and have cancelled themselves in the net result are called compensating errors. - Error_of_Posting: An error in which amount is posted to the wrong side of the sens account is known as error of posting. e.g., Goods sold to Arshad wrongtueserted to his account. - Error_of_Casting: An errer due to which total of an account is more or less recorded is known as error of casting. e.g., Sales book has been under casted by Rs. 500. - Errors_of_Principle: Errors which arises out of the ignorance of the fundamental principles of accounting. e.g., Repair of furniture has been wrongly debited to furniture account. - Errors_of_Book-keeping: Errors which are made in the original documents (Journal anu Ledger) are called Book-keeping errors. - Errors_of_Trial_Balance: Errors, which are made in the preparation of trial balance, are called Trial balance errors. - Suspense_Account: A suspense account is an account in which those transactions are entered which cannot be placed to their proper accounts. ## CHAPTER #1 - Single_entry_system: - Single entry system consists of the following book - keeping records. - A day book or general journal - A cash book - Ledger accounts for individual customers and creditors. - OR - Under single entry system sometimes both aspects of a transaction are recorded, sometimes only one aspect of a transaction is recorded and sometimes no aspect of a transaction is recorded. - Double_entry_system: - A system in which two sides of every transaction are recorded. - Statement_of_affairs: - Statement of affairs is a sort of balance sheet having assets on left side and liabilities and capital on the right side under single entry system. - Increased_net_worth_method: - The method in which adjusted capital at the end and capital in the beginning are compared to ascertain the profit or loss under single entry system. - Drawings: - Cash or goods taken away by the owner from the business for personal use is known as drawings. - Fresh_capital: - Amount of capital which is introduced during the year in the business is known as fresh capital or additional capital. - Opening_statement_of_affairs: - It is prepared to find out the opening capital under single entry system. - Statement_of_profit_or_loss: - It is prepared to find out the profit or loss under single entry system. ## CHAPTER # 2 - Non-profit_making_organizations: - Non-profit making organizations are those, which do not buy/manufacture and sell goods and whose primary object is not to earn profit. Their object is to do goods to the society through welfare activities; e.g. clubs, schools, colleges, hospitals, libraries etc. ## CHAPTER # 3 - Consignment: - Consignment is an act of sending the goods by the owner (manufacturer or whole seller) to his agent, who agrees to collect, store and sell them on the risk and behalf of the owner on commission basis. - Consignor: - The manufacturer or wholesaler who sends his goods for sale purpose to his agent is known as consignor. - Consignee: - The person to whom the goods are sent for sale purpose is known as consignee. - Consignment_outward: - When goods are dispatched by the consignor to the consignee, it will be a consignment outward from consignor's view point. - Consignment_inward: - When goods are dispatched by the consignor to the consignee, it will be a consignment inward from consignee's view point. - Consignment_outward_book_or_journal: - A consignor may have a number of agents in different parts of the country or abroad to whom he sends goods for sale. So, it will be very useful for him to maintain a separate subsidiary register (Journal) with a view to keep full record of the goods consigned. This special register is named as consignment outward book or journal. - Consignment_inward_book_or_journal: - A consignee may have a number of consignors from whom he receives goods for sale, so it will be very convenient for him to maintain a separate subsidiary register (Journal) named as "consignment inward book or journal". - Account_Sales: - It is a report prepared by consignee and sent to the consignor, periodically, which shows the details about the sale of goods; the price at which goods are sold; expenses paid by the consignee on behalf of consignor; agent's commission and the net balance for which he is liable. - Proforma_invoice: - It is a forwarding letter sent by consignor to consignee along with the goods containing particulars as to the name of the item; number (quantity or weight or measurement) and the price. - Commission: - In connection with the consignment, the remuneration of the consignee for selling the goods of the consignor is called commission. ## CHAPTER # 4 - Joint_stock_company: - A joint stock company may be defined as an artificial person recognized by law, with a distinctive name, a common seal, a common capital comprising transferable shares carrying limited liability and having a perpetual succession. - Separate_legal_entity_of_company: - It means the company is distinct from the persons forming it. It enjoys many of the rights of artificial person, e.g. it can sue or be sued in its name. It can own and transfer the title of property. - Perpetual_existence_of_a_company: - It means a joint stock company has a continuous life. The shareholders can come or go, but the existence of a company cannot effected. It can be winded up through compliance with the provision of companies ordinance 1984.- 2017 - Common_seal_of_a_company: - Common seal is used as a substitute of signature because company is an artificial person and cannot sign itself. It is also called official signature of company. - Company_limited_by_shares: - In a company limited by shares, the capital is divided into a number of shares. The shares can be freely transferred and sold. The liability of the members is limited to the amount if any, unpaid on shares held by them. - Private_limited_company: - According to the companies ordinance 1984 it can be formed. - At least by two persons and its total membership cannot exceed 50. - The company by its articles restricts the right to transfer it shares. - It prohibits any invitation to the public to invest their money in shares or debentures of the company. - Public_limited_company: - It can be formed by at least seven members and there is no limit to maximum members. - It can invite applications from investors through advertisement in the news paper. - Company_limited_by_guarantee: - A company in which liability of its members is limited to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. - Unlimited_company: - A company in which liability of its members is unlimited. Every member of the company is personally liable to the full extent of his personal assets for the full debts of the company. - Association_not_for_profit: - It enjoys all the privileges of a limited company without using the word limited or private limited. It is mainly formed for the promotion of commerce, art, religion, charity etc. - Memorandum_of_association: - It is the basic document of the company. It contains the fundamental conditions upon which alone a company can be incorporated. It sets out the limits outside which the action of the company cannot go. - Article_of_association: - It is second important document in the incorporation of a company. It contains the rules and regulations for the internal management of the company. - Prospectus: - It is a valuable document issued by the company for raising of the capital. - Directors: - Those shareholders who control the management of the company are called directors. - Underwriter: - A person who takes the risk of shares offered to the public to earn underwriting commission. - Par_value_of_share: - The value which is assigned to a unit of share is called par value of share. It is also known as nominal value or face value. - Book_value_of_share: - The value of share according to the books of the company is called book value of share. - Market_value_of_share: - The price at which buyer is willing to purchase and seller is willing to sell is called market value of share. - Issue_of_shares_at_premium: - When a share having face value of Rs.10 is issued by the company for an amount more than Rs.10, the share is said to have been issued at a premium. - Issue_of_shares_at_discount: - When a share of Rs.10 is issued for an amount less than Rs.10 the share is said to have been issued at a discount. - Over_subscription: - In over subscription a company may receive applications for a large number of shares than offered by it to the public. - Under_subscription: - In under subscription a company may not receive applications for all the shares offered by it to the public.