
Concept explainers
Concept Introduction
Cash: It includes Cash in Hand & Deposits with Bank.
Cash Equivalents: It includes those investments which are short term investment and highly liquid i.e. maturity period is of three months or less.
Operating Activities: Operating Activities are the principal revenue generating activities of enterprise. In other words activities that are not financing and investing activities.
Sales: Sales includes the amount received from customer by selling the goods and services in the normal course of business.
Purchases: It is the amount spent for purchasing the goods meant to be resold.
Accounts Payable: The amount paid against purchase of goods and services in normal course of business. It is normally classified as Current Liabilities.
Rules for T-Shape Account: As described above, the Amount received/paid can be calculated by preparing the T-Shape Account. The Rules for preparing the T-Shape Accounts is mentioned below:
Nature of Account | Debit Side | Credit Side |
Asset Account | Increases | Decrease |
Liabilities Account | Decreases | Increase |
Revenue Account | Decreases | Increase |
Expenses Account | Increases | Decrease |
Capital Account | Decreases | Increase |
To Calculate:
- Cash Received from Customer
- Cash Paid for Rent
- Cash Paid for Inventory

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