Basic terminologies of accounting

1.Business:- A business is an organization or entity that sells goods or services for a profit. The important part
is that a business is something that operates in order to make a profit. Not all businesses actually are successful
enough make a profit, but their main purpose is to generate profits.

2. Goods:- The things which are bought and sold by businesses are called goods. Goods may be raw material
work in progress of finished goods. In accounting, when goods are purchased it is written as purchases. When
goods are sold it is written as sales. It is written as stock if remains unsold at the end of the year. However, the
items that are purchased for use in the business are not called goods. For example, for a furniture dealer
purchase of chairs and tables is termed as goods, while for others it is furniture and is treated as an asset.

3. Revenue:- Revenue is the amount a company receives from selling goods and/or providing services to its
customers and clients. A company's revenue, which is reported on the first line of its income statement, is often
described as sales or service revenues. Hence, revenue is the amount earned from customers and clients before
subtracting the company's expenses

4.Profit:- Is also called as bookkepping profit .It is net income that is earned after subtracting expense and
liability from total revenue.

5. Capital :- in accounting is the amount that a person has with himself for investing. When a person invests
capital in a business, then that person wants to provide profit in return for capital investment. A person uses his
capital to earn more capital.

6. Debtors: (Who give money back to business) Debtors in accounting are amounts which are owed to a
business by customers, they are sometimes referred to as accounts receivable. When a business allows a
customer credit terms and invoices them for a product or service and receives payment at a later date 30 days 60
days etc, then while the customer owes the business the amount outstanding they are classified as a debtor in the
bookkeeping records.

7. A creditor could be a bank, supplier or person that has provided money, goods, or services to a company and
expects to be paid at a later date. In other words, the company owes money to its creditors and the amounts
should be reported on the company's balance sheet as either a current liability or a non-current (or long-term)
liability.

8. liability in financial accounting is a business’s financial responsibilities. A common liability for small
businesses are accounts payable, or money owed to suppliers .Liabilities are found on a company’s balance
sheet, a common financial statement generated through financial accounting software. They are also referred to
as “payables” in accounting. All businesses have liabilities, except those who operate solely operate with cash.
By operating with cash, you’d need to both pay with and accept it—either with physical cash or through your
business checking account.

9. Drawing account is an accounting record maintained to track money and other assets withdrawn from a
business by its owners. A drawing account is used primarily for businesses that are taxed as sole
proprietorships or partnerships. Owner withdrawals from businesses that are taxed as separate entities must be
accounted for generally as either compensation or dividends.

10.Outstanding expense:- The outstanding expense is a type of personal account which have a credit balance
and is this is treated as a liability for the business firm. The Outstanding Expense is represented on the liability
side of the balance sheet of a business. To perform accounting with accuracy, these expenses are required need
to be realized whether they are paid or not.An Outstanding Expense is a type of expense that is due but has not
been paid. This expense becomes outstanding to the company when, this has taken the benefit, but the related
payment has not been made simultaneously. Examples for Outstanding Expenses - Rent due but not yet paid.

11. Outstanding Income:- Outstanding income means that amount of income which is due and receivable but not
yet received. There is a legal right to receive it immediately form the other party.
12.Accrued income means that amount which has been earned is not get due. The accrued income is calculated
on day-to-day basis and there is no legal right to force the other party to pay it immediately.
12.Accounts:- Accounting is the process of recording financial transactions pertaining to a business. The
accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies,
regulators, and tax collection entities. The financial statements used in accounting are a concise summary of
financial transactions over an accounting period, summarizing a company's operations, financial position,
and cash flows. 
13.Accounting:- process or work of keeping financial accounts. It is measurement, processing and
communication of financial and non financial information about economic entities such as businesses and
corporations

14.Accountancy:-

15 Openiong stock:- is the initial quantity of any produvts/goods held by an organization during the start of any
financial year or accounting period

16. Closing stock:- unsold goods.

Why accounting?

1. Company profitability
2. How much debt does the company have?
3. How does the company’s

Why Is Accounting Important?

Accounting plays a vital role in running a business because it helps you track income and
expenditures, ensure statutory compliance, and provide investors, management, and government
with quantitative financial information which can be used in making business decisions.

There are three key financial statements generated by your records.

The income statement provides you with information about the profit and loss
The balance sheet gives you a clear picture on the financial position of your business on a particular
date.
The cash flow statement is a bridge between the income statement and balance sheet and reports the
cash generated and spent during a specific period of time.

It is critical you keep your financial records clean and up to date if you want to keep your business
afloat.

It Helps in Evaluating the Performance of Business

Your financial records reflect the results of operations as well as the financial position of your small
business or corporation. In other words, they help you understand what’s going on with your
business financially. Not only will clean and up to date records help you keep track of expenses,
gross margin, and possible debt, but it will help you compare your current data with the previous
accounting records and allocate your budget appropriately.

It Ensures Statutory Compliance

Laws and regulations vary from state to state, but proper accounting systems and processes will help
you ensure statutory compliance when it comes to your business.

The accounting function will ensure that liabilities such as sales tax, VAT, income tax, and pension
funds, to name a few, are appropriately addressed.

It Helps to Create Budget and Future Projections

Budgeting and future projections can make or break a business, and your financial records will play a
crucial role when it comes to it.
Business trends and projections are based on historical financial data to keep your operations
profitable. This financial data is most appropriate when provided by well-structured accounting
processes.

It Helps in Filing Financial Statements

Businesses are required to file their financial statements with the Registrar of Companies. Listed
entities are required to file them with stock exchanges, as well as for direct and indirect tax filing
purposes. Needless to say, accounting plays a critical role in all these scenarios.