BOOK KEEPING & ACCOUNTANCY

1. Goods - Commodities in which the trader deals are known are goods. Ex.
Cloth, Furniture, Computers, Steel, Grains, etc.
2. Drawings – It is the amount withdrawn by the trader from his business for his
personal use. It may be in cash, goods or services.
3. Creditor – A person/institution to whom we owe something, to whom we have
to pay some amount for goods/services purchased/rendered from/by him.
4. Debtor - A person/institution who is to pay other person, who owes
something another person, from whom we have to receive some amount for
goods/services sold/rendered to him.
5. Bad debt – Debt, the amount, which is irrecoverable. This occurs when a
debtor does not pay for some reason or becomes insolvent.
6. Capital – It is the wealth, but in business it is the total amount investment in
business. Total amount includes investment in cash, goods, furniture, etc. The
capital of business is the amount receivable by the owner from the business.
In other words it is a liability of the business towards the owner.
7. Assets – Properties of every description owned by a person. Ex – Land,
Building, Plant, Machinery, Furniture, Cash, Fixed Deposits, Gold,
Investments, loans given, etc.
8. Fixed Assets – The assets which are acquired for long term use in the
business and not for resale. Ex – Land, Building, Plant, Machinery, Furniture,
etc.
9. Current Assets - The assets which are acquired not for long term use in the
business and/or are for resale and which are converted into cash within one
accounting period. Ex – Debtors, Closing stock, Cash, Temporary (Short term)
Deposits, Advances given, etc.
10. Fictitious assets – The assets which can not be sold and are valueless.
11. Tangible assets – The assets which have physical existence and which can be
touches (seen).
12. Intangible assets - The assets which have no physical existence but can sold.
13. Liabilities – Debts owed by a person. Payment to be made for goods/services
purchases/received, loans taken, payment to be made for facilities used, such
as telephone, electricity, etc. Long term liabilities – The liabilities which are to
be repaid over a long period of time (say over 10 or 15 years, etc.) Ex – long
term loans, debentures, capital, etc.
14. Current liabilities – The liabilities which are to be repaid within one accounting
period. Ex – Creditors, expenses payable, taxes payable, dividends payable,
etc.
15. Opening stock – It is the total quantity of unsold goods on the first day of the
accounting period before starting transacting on that day.
16. Closing stock - It is the total quantity of unsold goods on the last day of the
accounting period after all the transactions on that day.
17. Account – It is summarized record of all transactions related to particular
title. ‘A/c’ is short form of account.
18. Transaction – It is the change in ownership.
19. Cash transaction – Exchange of goods or services for cash. Due to this cash
balance of receiver of cash increases and that of giver decreases.
20. Credit transaction – Exchange of goods or services, but cash is not given or
received at the time of such exchange but is given or received on a any other
day.
21. Exchange of goods for goods – Ownership of goods transferred which are
exchanged. Ex. – One machine is given and another purchases as exchange.
22. Entry – It is recording of transaction, which can be measured in moneys
worth, in accounting book.
23. Turnover – Total sales during a particular period.
24. Trade discount – It is not recorded in the book of account. It is given by the
seller to the buyer at the time of sale. It can be given in the form of cash or
goods.
25. Cash discount – It is given only if the payment is received on or before time
scheduled for payment. It is recorded in the book of account. Discount
allowed is a loss while discount earned is gain to the business.
26. Discount given (allowed) – Allowance/concession/rebate etc., given by the
seller to his customer, debtor.
27. Discount received - Allowance/concession/rebate etc., received by the
purchaser from his supplier, creditor, etc.
28. Journal – It is a book of account in which the transaction is recorded
first. It is known as a Book for Prime Entry of transaction. The method of
recording the transaction in th Journal is known as ‘Journalizing’.
29. Ledger – It is book of account in which complete set of accounts is recorded.
It contains secondary entry of the transaction. The method of recording the
transaction from Journal to Ledger is known a ‘Ledger Posting’.
30. Income (Revenue) – Amount received/receivable for goods sold or
services rendered. Ex – Sales, Professional fees/charges, interest, rent,
commission, dividend, discount, etc., received/receivable.
31. Expenses – The efforts made, costs incurred by business to earn revenue
which are paid or payable. Ex – Purchases, Fees/charges, interest, rent,
commission, dividend, discount, etc., paid/payable.
32. Depreciation – Fall/decrease/reduction/shrinkage in the value of fixed assed
due to wear & tear, passage of time, etc.
33. Goodwill – It is an intangible fixed asset which represents reputation of the
business having a realizable value.
34. Invoice – A statement sent by the seller to buyer giving the details of goods
sold on credit. In view of the buyer it is called as inward invoice and in view of
seller it is outward invoice.
35. Cash Memo - A statement issued by the seller to buyer on cash sales.
36. Voucher – Documentary evidence in support of a transaction.
37. Trial Balance – A list of debit and credit balances of ledger of accounts. (The
total of amounts of debit side tallies with the total of amounts of credit side of
the trial balance).
38. Balance – The difference between the totals of credit side and debit side of an
account.
39. Debit balance – Amount by which the total of debit side is in excess of the
total of credit side of an account.
40. Credit balance - Amount by which the total of credit side is in excess of the
total of debit side of an account.
41. Balance Sheet – A statement showing financial position of the business on a
particular day.
42. Gross Profit - Excess of sales income over cost of goods sold.
43. Outstanding expenses – The expenses due for payment but not paid till the
last date of the accounting period.
44. Outstanding income – The income due receivable but not received till the last
date of the accounting period.
45. Pre-paid expenses – The expenses not due but paid in advance.
46. Carriage in – The transport charges paid/payable for bringing the goods
purchased.
47. Carriage out - The transport charges paid/payable for sending the goods sold.
48. Contra entry – The entry which appears on both the sides of cash book.
49. Overdraft – The facility allowed by the bank to withdraw excess amount over
the balance in current account as short term loan.
50. Net Profit – Amount of profit earned by the firm after meeting all business
expenses.
51. Profit & Loss Account – An account to which all general expenses are debited
and other incomes are credited, which gives net profit(loss) for the
accounting period.

Real Account Debit what comes in

Credit what goes out
Nominal Account Debit all expenses, losses
Credit all incomes, gains, profits
Personal Account Debit the receiver
Credit the giver