Accounting Terminology

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ACCOUNTING TERMINOLOGY

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ENTITYIt is the basic unit for which

accounting records are to be prepared.


CAPITAL Anything invested by the proprietor in his business.


LIABILITY It is the amount owed by the business to

the outsiders. (Loans, creditors, bank overdraft, outstanding expenses, Income

received in advance)


ASSET It is the property of the business. (Cash,

bank, stock, debtors, bills receivable, land, plant and machinery, building, furniture, computer, transport vehicles, go-down)


EQUITYEquity It means claim on

something. It can be owner's equity or creditor's equity.


FIXED ASSETS Fixed assets are kept for doing the

business and not for re-sale. (Land &building, plant& machinery, furniture)


CURRENT ASSETS

Current assets are kept for running day to day activities of the business. (cash,

bank, stock, debtors, bills receivable, prepaid expenses)


TANGIBLE ASSETS

Tangible assets are assets with physical existence. (Land & building, plant& machinery,

furniture)


INTANGIBLE ASSETS

Intangible assets are assets without physical existence. (Goodwill, copyrights,

trademarks, patents.


CURRENT LIABILITIES

Current liabilities are the liabilities to be paid within a period of one year.(bank

overdraft, outstanding expenses, creditors, bills payable)


NON-CURRENT LIABILITIES

Non-Current liabilities, popularly known as long term liabilities are to be

paid after one year. (Loans for long term, debentures issued)


LOSS Loss is reduction in owner's equity

or capital due to any reason (loss of furniture by fire).


INCOME Income is increase in the capital

due to any reason.


PROFITProfit is the excess of revenues

over costs for the same accounting period.


GAINGain is profit of irregular and non-

recurrent nature.


REVENUESRevenues are the total receipts out of

sale of goods and/or services by the business (sale of goods and services

sold).


EXPENSES Expenses are the total costs incurred by the

business to generate Revenues (salaries, wages, rent, electricity charges, water charges, audit

fees, stationery, conveyance charges, etc).


PURCHASESPurchases are purchase of goods

for use or for resale.


ACCOUNTING PERIOD

Accounting period is the normal period of twelve months for which

accounting records are to be prepared.


GOODS Goods are the articles in which the

business deals (computers for computer dealer).


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Accounting Terminology