Basic Accounting Terms

1. Capital: money or money valued items invested by the owner into business.

2. Drawings: money or money value items withdraw by the proprietor from business for personal use.

3. Proprietor: person who invest capital and bears all the risks connected with investment.
4. Liability: amount which business owes to outsiders.
a. Long Term Liability: Responsibility of payment for more than 1 Year.
b. Short Term Liability: Responsibility of payment for less than 1 Year.
5. Assets: resources of business which runs business.
a. Tangible Assets: Assets which are Touchable, Shape & Size.
i. Fixed Asset: Asset which give money/benefit for more than 1 year.
ii. Current Asset: Asset which give money/benefit for less than 1 year.
b. Intangible Assets: Assets which are Untouchable, no shape & size.
i. Goodwill, Trademark, Copyright, Patents.
6. Expense: amount spent for benefit
a. Direct Expense: Expense paid at the time of Manufacturing of product / Factory expense.
b. Indirect Expense: Expense paid after Manufacturing of Product/ Office expense.
7. Income: amount received in regular basis.
a. Direct Income: Amount received on regular basis. Full time income.
b. Indirect Income: Amount received on irregular basis. Part time income.
8. Goods: physical items of trade. Ex : 1 Pcs of biscuit.
9. Stock: collection of goods, in a carton or box. Ex: 1 box with 150pcs of biscuit.
a. Opening Stock: Goods company have at the beginning of year. 1-Apr
b. Closing Stock: Goods company have at the end of year. 31-Mar
10. Debtor: person who owe us amount on account of credit sales of goods or services.
11. Creditor: person whom we owe amount on account of credit purchase of goods or services.
12. Expenditure: revenue expenditure, capital expenditure, payment of liability.
a. RE: Expense- Short term benefit
b. CE: Asset expense- Long term benefit
c. PL: payment of loan
13. Investment: amount deposit to shares.
14. Outstanding expense: expense due but not paid.
15. Prepaid expense: expense paid in advance.
16. Accrued income: income earned but not received.
17. Income received in advance: income of future received without working for it.
18. Discount: when businessman allow reduction in price of product.
19. Provision: provision is the recording of future unexpected
expense/loss in today’s books of accounts.
20. Reserve: reserve is the appropriation of profit for specific purpose.

BY AAKASH KULIYAL