basicaccountingterms

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ACCOUNTING TERMINOLOGY

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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basicaccountingterms

business sale of goods

current assets

accounting period

intangible assets

creditors equity

fixed assets

business deals computers

bank overdraft

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