Tamil Nadu HSE First Year Commerce cheat sheet

Journal is the book of original entry; format is Date, Particulars, L.F., Debit, Credit, with a narration explaining each entry.

Compound entry: one entry with more than one debit or more than one credit, used where a single transaction affects three or more accounts.

Ledger is the principal book containing all accounts; posting transfers journal debits and credits to the respective account sides, and the balance is struck at period end.

Trial balance lists debit and credit balances; it agrees when total debits equal total credits, but it cannot detect errors of principle, complete omission, compensating errors or wrong amounts entered on both sides.

Subsidiary books: purchases book (credit purchases of goods only), sales book (credit sales of goods only), purchases return and sales return books, cash book, and journal proper for opening, closing, adjustment and credit-note-free entries.

Three-column cash book has discount, cash and bank columns; contra entry arises when cash is deposited into or withdrawn from bank, and both bank and cash columns are used.

Bank reconciliation statement starts with the cash book bank balance (or pass book balance) and adjusts for cheques deposited but not credited, cheques issued but not presented, bank charges and interest, direct deposits and standing orders, and errors.

Overdraft: when the cash book shows a credit balance in bank, treat it as an overdraft, so the starting point and direction of adjustments reverse.

Trading account computes gross profit = Net sales − Cost of goods sold, where Cost of goods sold = Opening stock + Net purchases + Direct expenses − Closing stock.

Profit and loss account starts with gross profit and deducts indirect expenses and losses, adding indirect incomes, to arrive at net profit.

Balance sheet is a statement of assets, liabilities and capital on a given date; it is not an account and has no debit or credit balance.

Closing stock appears on the credit side of the trading account and as a current asset in the balance sheet; the adjustment entry is Closing Stock A/c Dr. to Trading A/c.

Outstanding expenses are added to the related expense in the trading or P&L account and shown as a current liability.

Prepaid expenses are deducted from the related expense and shown as a current asset.

Accrued income is added to the related income and shown as a current asset; income received in advance is deducted from the income and shown as a current liability.

Depreciation is charged to the P&L account and deducted from the asset in the balance sheet; interest on capital is an expense and is added to capital.

Drawings are deducted from capital; goods taken by the owner for personal use are deducted from purchases and from capital.

Law of demand: other things being equal, quantity demanded rises as price falls and falls as price rises, giving a downward-sloping demand curve.

Elasticity of demand (price) = Percentage change in quantity demanded ÷ Percentage change in price; demand is elastic when the value exceeds 1 and inelastic when below 1.

Law of supply: other things being equal, quantity supplied rises with price, giving an upward-sloping supply curve; equilibrium price equates quantity demanded and quantity supplied.

Factors of production: land (rent), labour (wages), capital (interest) and organisation or enterprise (profit).

Forms of business organisation: sole proprietorship, partnership (Indian Partnership Act 1932), Hindu undivided family, cooperative society and joint stock company (Companies Act 2013).

Partnership features: minimum two and maximum fifty partners, lawful business, sharing of profits, mutual agency, and registration optional but advisable.

A company is a separate legal entity with perpetual succession, limited liability, common seal, and transferability of shares; minimum members seven for a public company and two for a private company.

Cooperative society is registered under the Cooperative Societies Act, works on one member one vote, and distributes surplus as dividend based on transactions.

Public sector forms: departmental undertaking, statutory corporation and government company (at least 51 per cent government holding).

Business environment is the sum of internal and external factors that influence business decisions; it is dynamic, complex, uncertain and relative.

Internal environment: values, vision, objectives, management structure, human and physical resources, all largely controllable by the firm.

External environment components: economic, social, technological, political, legal, natural and demographic, generally beyond the firm's control.

Micro environment includes suppliers, customers, competitors, intermediaries and the public; macro environment is the wider societal and national setting.

Economic environment covers inflation, interest rates, national income, industrial policy, fiscal and monetary policy, and balance of payments.

Liberalisation, privatisation and globalisation (LPG, 1991) removed licensing, opened sectors to private and foreign investment, and integrated India with world markets.

SWOT analysis maps internal strengths and weaknesses against external opportunities and threats to guide strategy.

Social responsibility of business covers economic, legal, ethical and discretionary responsibilities; environmental protection and consumer welfare are statutory expectations.

Entrepreneur is a person who identifies an opportunity, arranges resources, bears risk and earns profit; entrepreneurship is the process of creating and running an enterprise.

Functions of an entrepreneur: idea generation, feasibility study, arranging finance, organising resources, decision making, risk bearing and innovation.

Characteristics include initiative, risk bearing, innovation, self-confidence, hard work, leadership and adaptability; motives include profit, independence and service.

Types of entrepreneurs: innovative, imitative, fabian and drone (Clarence Danhof); business, trading, industrial and agricultural by nature.

Startup stages: ideation, validation, prototype or minimum viable product, funding, launch, growth and scaling; seed, venture and angel capital are common funding routes.

Modern practices: e-commerce and digital payments, digital marketing, cloud computing, business process outsourcing, and enterprise resource planning.

E-governance and digital India, GST and online filing reduce compliance cost and widen market access for small firms.

Business ethics, corporate governance and consumer protection are modern expectations; quality certification such as ISO 9001 signals process reliability.

Intellectual property protection through patents, trademarks, copyrights and designs safeguards an entrepreneur's innovation.