ACCOUNTING TERMS

ACCOUNTING TERMS

These are some common and important accounting term

Business transaction:- Transactions of cash, goods, services and etc between two parties in a business is called business transaction.

Account:- A statement of transaction affecting any particular asset, liability, expense, or income.

Capital:- Amount which is invested by the owner in business is called capital.

Drawings:- when businessman withdraws cash or gods from his business for personal use then it is called drawings. Drawings decrease the capital of the owner.

Assets:- “Assets are the future economic benefits, the rights, which are owned or controlled by an organisation or individual.”

Assets can be broadly classified as

(a)           Non-current assets:- Assets which were purchased for the production of goods or service and held by the business for the long term is called non-current assets. Example:- building, machinery etc.

(b)           Current assets:- Assets which can be converted into cash easily and in a short period is called current assets. Example: Bank, debtor, bills receivable etc.

(c)            Tangible assets:- Assets whom we can touch and see is called tangible assets. Example: machinery, computer etc

(d)           Intangible assets:- Assets whom we can’t see and touch is called intangible assets example: goodwill, trademark etc.

(e)           Wasting assets:- wasting assets are those assets which will be extinguish in future due to it’s regular use for example: oil well, coal mils etc.

Liabilities:- financial obligation of a business is called liabilities for example: creditors, loan etc.

Liabilities can be broadly classified as(a)           Current liability:- Liability which an organization have to pay off within a year is called current liabilities for example: creditors etc.

(b)           Non-current liabilities: Liabilities which has to pay off after one year is called non-current assets for example: long-term loans etc.

Receipts:- Amount which is received by selling the goods or services is called receipts.

Expenditure:- Payments for buying assets or services are called expenditure.

Profit:- excess of revenues over expenses during an accounting period is called profit.

Loss:- Excess of expenses over revenue during an accounting period is called loss.

Purchase:- purchase refers the goods procured by the business for use or sale.

Sales:- Goods sold by an organisation after manufacturing or purchase is called sales.

Purchased return:- Due to any reason if we return the goods which was purchased by us is called purchased return.

Sales return:- If our customer whom we had sold the goods in future returns the goods to us due to any reason is called sales return.

Stock or inventory:- Goods and merchandise kept in the premise of a shop or warehouse and offered for sale or distribution is called stock or inventory.

Debtors:- Person or entity who owe the amount of our business id called our debtor.

Creditor:- creditors are those whom a business has to pay some amount for providing goods or service on credit or providing loan.

Receivables:- Receivables are the assets of a concern in the form of debt or monetary obligations owned to it from debtor.

Payables:- Payable refers to the debts owed by a business concern to its creditors or suppliers.

Depreciation:- “Depreciation is the diminution in the intrinsic value of the asset due to use and/or lapse of time.”

Bad debt:- Bad debt are those debtors who are not going to pay us the amount which they owes from our organisation.