1.

Accounting: The process of recording, classifying, summarizes the business

transactions.

2. Types of Accounting: Financial accounting, Cost accounting, Management

accounting.

3. Financial accounting- objective of this accounting is to find out the profit and loss
of the company and know the clear picture of the financial position of the company.

4. Cost accounting- objective of this accounting is to find out the cost of goods
produced and service rendered by the business. it helps to estimating the cost in
future.

5. Management accounting- this accounting object is to provide all relevant

information to the management and it helps to the management to take the decisions.

6. Account: It is a summary of business transactions.

7. Accountancy: It’s a subject which deals with accounting.

8. Accounting cycle: Journalizing > ledger posting> trial balance.

9. Book keeping: Maintaining a record of day to day business transactions in a

systematic manner.

10. Golden Rules of Accounting:

 Personal A/c: Personal accounts are accounts of natural persons and artificial
persons. Rule is credit the giver and debits the receiver.
 Real A/c: this account relate to the tangible and intangible asset. Rule is debit
what comes in and credit what goes out.
 Nominal A/c: this account relates to expenses, losses, profits and gains. Rule is
debit all expenses and losses. Credit all incomes and profits.

11. Double entry system: Recording the transactions in two accounts (that is debit and
credit) is know as double entry system.

12. Single entry system: it does not follow any principle like double entry system. In
single entry system any one of the two aspects of the transaction is recorded.

13. Journal: Journal is a book where we record all business transactions in a

chronological order.(it is also called as primary book).

14. Ledger: Ledger is a book in which various accounts are maintained. ( it is also called
as final book).

15. Ledger posting: Process of transferring debit and credit items from journal to
classified accounts in the ledger is called ledger posting.
16. Advantages of ledger: Overall picture of each account is available and transactions
relating to each account recorded at one place.

17. Subsidiary Books: Subdivision of journal in to various books is called subsidiary

books. Subsidiary books are purchase book, sales book, cash book, purchase returns,
sales returns, bills receivable book, bills payable book, journal proper.

18. SalesBook: It’s a book to record all credit sales. it will have the list of all customer
names to whom the goods have been sold on credit.

19. Sales Returns: return inwards. (goods received from the customers).

20. Purchase Book: It’s a book to record all credit purchases. it will have the list of all
supplier names from whom we bought the goods on credit.

21. Purchase Returns: Return outwards.( goods returned to the supplier).

22. Debit Note: At the time of purchase returns debit note will be issued by the purchaser
to his seller. Debit note contains date of returning and reason for returning and
supplier name.

23. CreditNote: At the time of Sales return credit note will be received from the
customer. Credit note contains date of returning the goods and customer name from
whom we have received.

24. Journal proper: It’s a book where all adjustment entries will be recorded.

25. Bill:Bill is an order given by a creditor to his debtor to pay a sum of money on a
specified date to a specified person for purchasing of goods.

26. Bills
of Exchange: Written promise given by the purchaser to his seller for paying the
money on a future date.

27. Bills
Receivable: Written promise given by the other trader for selling of the goods is
known as bills receivable.

28. Bills Payable: Written promise issued to other trader for purchase of goods is known
as bills payable.

29. Business: it is an activity which involves exchange of goods or services with the
intension of earning income and profit.

30. Bad Debts: The amount which is not recovered from the debtors is called bad debt.

31. Provision for bad debts: It is created to cover the debts which are not expected to be
paid.

32. Provision for doubtful debts: Some amount will be kept a side to meet the future
bad debts loss.
33. Provision:Provision is created to cover a loss in the value of an assets or
expenditure.

34. Reserve: Some amount will be kept aside out of the profit and the same amount will
be used to provide the funds for modernization and expansion of existing plant.

35. Capital: it is the amount invested by the proprietor in the business.

36. Working capital: The capital of a business that can be used in its day to day trading.
Working capital=Current Assets-Current Liabilities.
WC Ratio=CA/CL, WC turnover ratio= Net sales/Beg+endging wc/2

37. Drawings: Cash or goods withdrawn for personal use from the business.

38. Debtors: He is the person who has to pay the money to the business.

39. Creditor: He is the person to whom the business has to pay money.

40. Revenue: It refers to earnings of the business (Sale of an asset, interest on

investments).

41. Expense: It is the amount spent in conducting business activities. (Salaries, rent…).

42. Expenditure: Acquisition of an asset is called expenditure. Purchase of furniture and

plant and machinery.

43. Capital
expenditure: These are the long term expenditures and non recurring.
Appears in B/Sheet.( purchase of land and buildings furniture).

44. Revenue Expenditure: These are the short term expenditures and recurring. Appears
in P&L.( salaries, rent, wages).

45. Capital Receipt: Selling the fixed asset is known as capital receipt.

46. Revenue Receipt: Interest received, dividend received.

47. Assets: Properties of the business (land and building, machinery).

48. Fixed Asset:It is long term property which is held for the purpose of producing the
goods and services. And it’s not held for resale.

49. Current Asset: It is an asset which is easily convertible in to cash with in a short
period.

50. Inventory:It is also called as stock. Stock has 3 types’ Raw material, Work in
progress and finished goods.

51. Liquid Asset: Assetswhich are already in cash form or which can be readily
converted into cash(govt.securities).
52. Intangible Asset: It’s a fixed asset which can not be touched and seen (goodwill,
patents, trade marks) good will- it’s the value of reputation.

53. Fictitious Asset: Preliminary expenses (company formation expenses).

Liability: Financial obligation of a business. One party has to pay the money to other
party either for money borrowed or for goods purchased on credit basis).Bank loan,
overdraft, creditor.

54. Current Liability: C.liability which is repayable within one year.

55. ContingentLiability: It is a future liability depends on the future event. It may or

may not occur.

56. Book Debt: The amount due from a debtor is called Debt. Book debt is nothing but
debt. Why it is called book debt means it is the amount due from debtor as per the
books of account.

57. Account Payable: The amount which has to pay to suppliers for purchasing the
goods on credit.

1) To record a Purchase on a/c from supplier a/c

Purchase a/c..Dr
To A/C Payable a/c.

2) To record cash payment to supplier a/c

A/c payable a/c…Dr
To cash a/c

3) To record debit note issued on a/c to supplier a/c.

A/c payable a/c…Dr
To Purchase a/c

58. Account Receivable: The amount which has to receive from customers for selling
the goods on credit.

1) To record a sale to a/c customer:

A/c Rev a/c…Dr
To Revenue a/c

2) To record cash payment from a/c customer:

Cash a/c….Dr
To A/C Receivable a/c

3) To record credit note issue from a/c customer:

Revenue a/c…Dr
To A/C receivable a/c.
59. Appreciation: An increase in the value of an asset is known appreciation.

60. Depreciation: Reduction in the value of an asset is known as depreciation.

61. Equity: All claims against the assets of business are called equity.

62. Financial
Statements: It shows detailed information about financial position and
performance of the business. Under FS balance sheet and Trading& P&L account
comes.

63. Balance sheet: It is one of the financial statements which shows the financial
position of the company. Balance sheet is a statement so there will not be any debit
and credit. It shows left side liabilities and right side assets.

64. Trade& P&L account: It is one of the financial statements shows the results of the
business operations during an accounting period.

65. Trading Account: It shows the results of buying and selling of goods during an
accounting period.

66. P&L account: It shows the net profit or loss of the company.

67. Trialbalance: It is the statement shows ledger account balances. Debit total and
credit total should be equal. In trial balance all expenses and assets appears on the
debit side and all incomes and liabilities appears on the credit side.

68. BRS: Bank reconciliation statement. Reconciliation means finding the reasons for the
difference of cash book and pass book.

69. Accrual:An accrual is a journal entry that is used to recognize revenues and expenses
that have been earned or consumed, respectively, and for which the related cash
amounts have not yet been received or paid out. Accruals are needed to ensure that all
revenues and expenses are recognized within the correct reporting period, irrespective
of the timing of the related cash flows. Without accruals, the amount of revenue,
expense, and profit or loss in a period will not necessarily reflect the actual level of
economic activity within a business.
Accured expense is an expenses which has been incurred but not yet paid.

Expenses a/c…..Dr
To Expense payable a/c.

Income receivable a/c dr

To Income a/c

70. Consignment: The transaction of sending goods by one person to another.

71. Consigner: who sends the goods.

72. Consignee: to whom we send the goods.

73. Amortization:The paying off debt with a fixed repayment schedule in regular installments
over a period of time. The spreading out of capital expenses for intangible assets over a
specific period of time.

Process of allocating the cost of an intangible assests over a period of time.

Ex.Patent rights.

74. Petty cash: Small amount of cash kept in hand for making immediate payments for small
expenses. Ex- Postage, Stamp, Stationery, Fare etc..

75. Debenture: It’s a long term loan taken by a company from the public.

76. Bond: It is a debt issued by the govt to raise the money.

77. Stock: Capital raised by a company or corporation through the issue and
subscription of shares.

78. Dividend: Dividend is a part of the profit which is distributed to the share holders.

79. Mutual funds: it pools the savings from the public and invests in the govt securities and
corporate securities like in bonds, stocks.

80. Types of funds: Bond funds-It provides fixed rate of return. These are very safety for
investors.

81. Special funds-Invests only in specialized channels like gold and silver, a specific
country, a specific category of companies.

82. Domestic Mutual funds: These are the saving schemes within in the country it
mobilizes the savings.

83. Offshore Mutual funds: These schemes are opened to attract foreign capital.

84. Derivatives: It is a financial instrument which is derived from the underline asset.
Underline asset means stock, bonds, commodities. It is used to mitigate the risk.

85. 4types in derivatives: Forward contract: In this contract one party agrees to buy
and one party agrees to sell at future date for agreed price (in this contract agreements
are made in present but deliveries and payments are made in future. Future
Contract: Options: Swaps:

86. Invoice: It’s a document prepared by the seller. It has details of quantity and price of
the products.

87. Purchase order: It is a document issued by a purchaser to seller indicating types,

quantity and agreed price of products. After final payment a PO can closed. Accounts
payable process starts with PO and ends with vendor.

88. Two way matching: it’s the matching of price and quantity between PO and invoice.
89. Three way matching: It’s the matching of price and quantity between PO, Invoice
and GRN (GRN means goods receipt number given at time of receiving the goods).
 90. PO based processing: in po based we process the invoice with PO number.

91. Non PO based processing: in non PO based we process the invoice with GL and
Cost centre.

92. Investment banking:Investment banking is a banking which deals with corporate

financing, Primarily by offering advice or financing on mergers, acquisitions and
other financial transactions.

An investment banker offers information on the best times for a company to

acquire financing, whether it is through stock offerings or through the bond
market

93. EFT: An ETF, or exchange traded fund, pools investors’ money together
to purchase a diverse collection of stocks or bonds. It is similar to a
mutual fund except shares are obtained through a brokerage, just like shares
of individual stocks, instead of directly from a fund company.

90.Return on investment(ROI): Return on investment (ROI) is the most widely-

used profitability ratio for determining the profitability and financial
consequences of investments and financial decisions. As a cash flow statistic,
return on investment compares the losses and gains associated with an investment
against the costs of making the investment.

Return on investment allows an investor or firm to analyze the performance of

an investment. It is calculated by dividing the net return or benefit from a given
investment by the cost of the investment. The return on investment is expressed as
a ratio or percentage.

IRR, or internal rate of return, refers to the discount rate that, when used, results in a
zero net present value of existing cash flows from an investment or project. It is used
in capital budgeting to rank prospective investments or business projects with a
higher IRR
Outstanding expense journal entry:

Expenses A/c…..Dr
To Outstanding expense A/c.
Being amount due from company which are yet to be paid.

Expense is (Dr all expense and losses)

Increase in an asset(Expense should be credited)

Prepaid expense journal entry:

Prepaid expenses A/c….Dr

To Expenses A/c

Bad debts entry

Bad debts a/c….Dr

To Debtors a/c..

For writing

P&l a/c….Dr
To Bad debts a/c.

For bad debts recovered

Cash/bank a/c…Dr
To bad debts recovered a/c cr.

Entry for recording actual bad debt which did not record in books of business

1. Bad debts account Dr. xxxxx

To Sundry Debtors Account xxxxxx

Entry for transferring bad debts to provision for bad debts Account

2. Provision for bad debts account Dr. xxxxxx

To Bad Debts account xxxxx

Transfer of provision for bad debts account to profit and loss account

3. Profit and loss account Dr. xxxxxx

To Provision for bad debts account xxxxx
Stock a/c..Dr
To trading a/c

opening stock is the stock at the end of previous year which is being carried
forward to next year.
so it is treated as opening balance (asset) n the following journal entry will b
passed

opening stock Dr.

to liabilities

Depreciation – Journal entry:

Depreciation a/c....Dr
To Accumulated Depreciation a/c.....Cr

Depreciation debited to P&L a/c and Accumulated dep should deduct from
asset a/c from balance sheet respective asset