BASIC ELEMENTS OF

ACCOUNTING
Author: Davinder Kaur Sohi
ACCOUNTING
TERMS
Author: Davinder Kaur Sohi
 ACCOUNTING TERMS : ASSETS
Assets -Those valuable items which are owned by the business are called Assets.

Fixed Assets – Assets which are acquired for long period for carrying on business of the enterprise. Example- Land &
Building
Assets Categories

Current Assets – Assets are held for a short period and they are meant for converting into cash. Example – Cash, Stock

Tangible Assets - Assets which can be touched and seen. Example - Machinery

Intangible Assets - Assets which cannot be touched and seen. Example - Goodwill

Fictious Assets – Assets which have no real value but are shown in the books of accounts only for technical reason. Preliminary expenses
incurred in connection with establishment of business

Wasting Assets - Assets which are exhausted with or which lose themselves in the goods they produce. Example - Mines

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 ACCOUNTING TERMS:
LIABILITIES & CAPITAL
• Fixed or Long -Term Liabilities - Liabilities against which
Liabilities – Any payments are to be made after at least one year. Example –
Long Term Loans
amount payable to • Current or Short - Term Liabilities - Liabilities against
outsider is called a which payments are to be made in a period of less than one
liability. year. Example - Creditors

Capital -The term capital is • Fixed Capital - It is the capital invested in or

used to denote the owner’s represented by fixed assets.
equity in the business. It is a • Circulating Capital – It is the capital in the form
residual claim against the of current or floating assets.
assets of the business after the • Working Capital - It is the excess of current assets
total liabilities are deducted. over current liabilities.

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 ACCOUNTING TERMS:
EXPENDITURE & REVENUE
Expenditure - The term • Capital Expenditure - Incurred for obtaining a long-term advantage for
the business
includes incurring a
Expenditure - Where benefits expire within a year or which has
liability disbursement of • Revenue
been incurred to maintain the business or keep the assets in good working
cases or transfer of condition.
property for the purpose • Deferred Expenditure - An expenditure or liability for which payment
of obtaining assets goods has been made or incurred but which is carried forward on the
or services. presumption that it will be of benefit over a subsequent period or periods.

• The source of Revenue may be sale of goods, performance

Revenue - Means income of a of services for a customer or a client, the rental of a property,
recurring nature from any source. lending of money and any other business or professional
activity carried on for the purpose of earning income.

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 ANNEXURE Basic Terminologies

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1.Proprietor – Is the person
who makes an investment
and bears the risks relating
to business. Owner of the
business is called proprietor.
5. Sales – Sold commodities
are included in sales.
Commodities may also be
sold either in cash or credit.
If these are sold in cash, it is
called cash sales otherwise
credit sales.
ACCOUNTING TERMS: BASIC
TERMINOLOGIES
5/13/2020
2. Debtors – A person, firm
or company who owes
something to the business is
called debtor.
6. Purchase return –
Sometimes purchased goods
is not according to the
sample or order, so it is
returned to the seller. It is
called purchase return or
return outward.
4. Purchase – If the goods
are purchased to sell it
3. Creditor – A person, firm
again, is called purchases. It
or company to whom
may be cash or credit
something is owing by the
purchase, the person who
business is called creditor.
makes purchases is called
purchaser.
7. Sales return – From the
8. Entry – The record made
point of view of seller , the
in the books of account in
return goods is known as
respect of a transaction is
sales return or return
called entry.
inward.
AUTHOR: DAVINDER KAUR SOHI 7
 9. ACCOUNT – AN 10. STOCK - GOODS 11. DISCOUNT - 12. CASH DISCOUNT - 13. TRADE DISCOUNT -
ACCOUNT IS A RECORD OF REMAINING UNSOLD OR SOMETIMES A THOSE CUSTOMERS, WHO THE SELLER ALLOWS
THE TRANSACTIONS UNUSED WITH THE BUSINESSMAN DOES NOT PAY THE PRICE OF GOODS CONCESSION TO HIS
AFFECTING A PERSON OR TRADER AT THE END OF CHARGE FULL PRICE AT BEFORE THE EXPIRY OF CUSTOMERS AT THE TIME
A KIND OF PROPERTY. AN ACCOUNTING YEAR THE TIME OF SALE. HE PERIOD OR WITHIN THE OF PURCHASE OF GOODS.
ARE KNOWN AS STOCK. IN ALLOWS SOME PERIOD GRANTED TO IT IS CALLED TRADE
THE END OF ACCOUNTING CONCESSION. IT IS THEM, GET SOME DISCOUNT. IT IS
YEAR, IT IS CALLED KNOWN AS DISCOUNT. CONCESSION. IT IS CALCULATED SOME
CLOSING STOCK AND IN CALLED CASH DISCOUNT. PERCENTAGE ON LIST
NEXT YEAR IN THE THE ENTRY OF CASH PRICE. THE OBJECT OF
BEGINNING IT IS CALLED DISCOUNT IS DONE IN THE THIS DISCOUNT IS TO
OPENING STOCK. BOOKS. PROMOTE SALES AND TO
AVOID THE CUSTOMERS
FROM LOSS WHEN THEY
SELL THE COMMODITIES
ON LIST PRICE.

ACCOUNTING TERMS: BASIC

TERMINOLOGIES (CONT.)
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ACCOUNTIN
G TERMS: 14. Drawings - The amount
of money or value of goods
which is withdrawn by the
15. Bad Debts - The amount
lost from a debtor on account
of his inability to pay his
16. Solvent - A person who is
in a position to pay his debts
as they become due.

BASIC proprietor from the firm for

his private use is called
drawings.
debts.

TERMINOLO
GIES (CONT.)
17. Gross Profit - It is the
excess of the selling price
over the cost of goods sold
(without deducting any
expenses incurred in selling
the goods).
18. Net profit - It is the profit
left after deducting all
business expenses from the
gross profit made by the
business.
19. Accounting Year - Entire
life of a business is divided
into time intervals consisting
of 12 months .

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 THANK YOU

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