ACCOUNTING

TERMINOLOGY
It means recording of business transactions in books of
account.

A transaction when it takes place is immediately

recorded in a book in the form of entry.
It is exchange/transfer of goods or services for
money between 2 or more person

TRANSACTION
Even cash is exchanged between 2 person is a transaction. It is an event which gives rise to entry
to be made in books of account
These are the property of every type owned by the
business. These properties help to run the business
and have some monetary value.

ASSETS ( Tangible, Intangible, Fixed, Current, Wasting)

It is an amount payable by organisation to others on a
particular date.

LIABILITIES
(It could be goods purchased, loan taken, payment for services rendered,
creditors, bank overdraft, bills payable)

There are two types: Current and Non-current

It is the total amount invested in the business by the
owner

it is considered liability for the business. Not only cash but owner can bring
furniture, goods etc. he may also bring additional capital in the future
whenever needed.
 It is the total amount of cash or goods or assets
withdrawn by the proprietor from his business for
incurring his personal expense.

DRAWINGS
 A person who owes certain amount to
business.

DEBTORS
If goods are sold to a person on credit, or we have given any services to a person for
which he has not made payment, or we have lent money to a person then he is a
debtor.
A person to whom we owe something, generally
a certain sum of money.

In other words creditor is a person to whom we have to pay something.

If out of the amount receivable, some amount is
not received, then it is loss to business.

BAD DEBT
a person who owes debt to business is a debtor. The loss is known as Bad
debts. It reduces the profit of business.
It refers to amount of unsold goods lying with the
business men on any particular date.

STOCK

Balance of goods on the last of day of the year is closing stock. Closing stock of one
year becomes opening stock of the next year.
It is a concession or allowance given by the seller to the buyer.

DISCOUNT

If the businessman or the seller agrees to receive some amount less than its actual
price or printed price, the difference is discount.

Generally there are two types of discount- Trade discount and Cash discount.
It can be received as well as allowed.
A person or an organisation whose assets are equal to or
more than its liabilities.

He will be able to pay his debts to the third parties in full, as he has more
assets.
When the liabilities of the organisation or a person are more than its
assets indicating its inability to pay for its total liabilities, then the
situation of the organisation or person is

Legally such a person or company is called insolvent only when he is declared

insolvent by a competent court.
 The amount spent on various types of activities
done for conducting a business.

Activities such as administration, financing, selling & distribution etc are

conducted in the process of earning revenue or profit.

There are 3 types of expenses- Capital, Revenue and Deferred Revenue

Expenses.
 Money received due to consequences of
business transactions.

These receipts are classified on the basis of their nature i.e. regularly received
during the year and not regularly received.

They are categorized into Revenue and Capital

An accounting method of allocating the cost of a tangible
asset over its useful life and is used to account for declines
in value over time

It is a non-cash expenditure.