Hotel Accounting Skills - Easy Notes (Under NCHM
Guidelines)
Q1. SHORT NOTES (Any Three)
Transaction:
A transaction is any activity or event that has a financial impact on a business and can be recorded
in books of accounts. It involves the exchange of goods, services, or money between parties.
Transactions can be cash or credit based on the payment method. They are the base for
accounting records. Every transaction affects two accounts due to the double-entry system.
Assets:
Assets are valuable resources owned by a business that provide future benefits. They include cash,
buildings, machinery, furniture, and stock. Assets are classified as fixed assets (long-term) and
current assets (short-term). These resources help businesses run operations smoothly. They
represent what the company owns.
Drawings:
Drawings are withdrawals made by the owner from the business for personal use. They can be in
the form of cash, goods, or services taken from business stock. Drawings reduce the owner’s
capital and are recorded separately. This ensures business and personal accounts remain distinct.
It is important in maintaining accurate books.
Additional Capital:
Additional capital is extra money or resources invested by the owner into the business after its start.
This increases the total capital and strengthens the financial position of the firm. It may be added to
expand business operations. Recording it is essential for showing true owner investment. It
improves liquidity and growth prospects.
Discount:
A discount is a reduction in the selling price offered to customers. It can be a trade discount given
on bulk purchases or a cash discount for early payment. Discounts encourage customers to buy
more and settle dues promptly. They are shown separately in books. This helps maintain accurate
profit figures.
Revenue:
Revenue is the total income earned by a business from sales of goods, services, or other sources.
It includes all inflows of money generated through normal operations. Revenue is the main indicator
of a business’s performance. It helps in calculating profit and loss. It is recorded regularly for
financial reporting.
Q2. JOURNAL AND ITS IMPORTANCE
A journal is a book of original entry used to record all financial transactions in chronological order. It
is the first step in the accounting process and ensures accuracy before posting to the ledger. The
journal provides a detailed explanation of every entry. It is important because it maintains a
permanent record, prevents errors, and simplifies tracking of business activities. It also helps in
preparing final accounts accurately.
Q3. ACCOUNTANCY, ACCOUNTING & BOOKKEEPING
Bookkeeping:
Bookkeeping is the basic step in the accounting process where all financial transactions are
recorded daily. It involves writing down sales, purchases, payments, and receipts systematically.
Bookkeeping ensures every rupee that goes in or out of a business is noted correctly. It uses
journals and ledgers to maintain proper records. This process gives raw data for preparing
accounts and avoids confusion in finances.
Accounting:
Accounting is the wider process of organizing, summarizing, and interpreting all the data collected
through bookkeeping. It involves preparing trial balances, profit and loss statements, and balance
sheets. Accounting helps in analyzing business performance, understanding financial status, and
making decisions. It also ensures legal compliance and accurate tax filing. Accounting turns
numbers into useful information for managers and owners.
Accountancy:
Accountancy is the theory or body of knowledge that defines the rules and principles of accounting.
It provides guidelines on how to record, classify, and present transactions in financial statements.
Accountancy ensures that businesses follow standard procedures, making accounts trustworthy
and comparable. It also sets frameworks like accounting standards and principles. In short,
accountancy is the science, accounting is the process, and bookkeeping is the starting point.
Q4. TYPES OF ASSETS
Assets are valuable items or rights owned by a business that bring economic benefits. They are
divided into four main types:
1. Fixed Assets:
Fixed assets are long-term resources used for business operations and not for resale. Examples
include land, buildings, machinery, and furniture. They help generate income over many years.
Fixed assets are shown on the balance sheet at cost minus depreciation. They are essential for
running and expanding a business.
2. Current Assets:
Current assets are resources that can be easily converted into cash within one year. Examples are
cash, stock, debtors, and bank balances. They are used for day-to-day business activities. Current
assets show the company’s liquidity and ability to pay short-term obligations. They keep the
business running smoothly.
3. Intangible Assets:
Intangible assets are valuable rights or advantages owned by a business but have no physical form.
Examples are goodwill, patents, trademarks, and copyrights. They provide long-term benefits and
help create brand value. Intangible assets increase a company’s market reputation. They are
shown separately in financial statements.
4. Fictitious Assets:
Fictitious assets are not real assets but represent expenses or losses not yet written off. Examples
include preliminary expenses and discount on issue of shares. They do not generate income but
are shown in books until they are cleared. Fictitious assets are gradually reduced over time.
These asset types together show the financial strength and value of a business clearly.
Q5. BUSINESS ENTITY CONCEPT
The Business Entity Concept states that a business is treated as a separate entity from its owner.
This means business transactions are recorded separately from personal transactions. It helps in
accurate financial reporting and ensures transparency. The owner’s personal expenses or income
are not mixed with business accounts. This principle builds clarity, accountability, and trust in
financial statements.
