basicaccountingterms
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ACCOUNTING TERMINOLOGY
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ENTITYIt is the basic unit for which accounting records are to be prepared.
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CAPITAL Anything invested by the proprietor in his business.
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LIABILITY It is the amount owed by the business to the outsiders. (Loans, creditors, bank overdraft, outstanding expenses, Income received in advance)
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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)
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EQUITYEquity It means claim on something. It can be owner's equity or creditor's equity.
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FIXED ASSETS Fixed assets are kept for doing the business and not for re-sale. (Land &building, plant& machinery, furniture)
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CURRENT ASSETS
Current assets are kept for running day to day activities of the business. (cash, bank, stock, debtors, bills receivable, prepaid expenses)
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TANGIBLE ASSETS
Tangible assets are assets with physical existence. (Land & building, plant& machinery, furniture)
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INTANGIBLE ASSETS
Intangible assets are assets without physical existence. (Goodwill, copyrights, trademarks, patents.
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CURRENT LIABILITIES
Current liabilities are the liabilities to be paid within a period of one year.(bank overdraft, outstanding expenses, creditors, bills payable)
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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)
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LOSS Loss is reduction in owner's equity or capital due to any reason (loss of furniture by fire).
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INCOME Income is increase in the capital due to any reason.
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PROFITProfit is the excess of revenues over costs for the same accounting period.
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GAINGain is profit of irregular and non-recurrent nature.
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REVENUESRevenues are the total receipts out of sale of goods and/or services by the business (sale of goods and services sold).
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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).
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PURCHASESPurchases are purchase of goods for use or for resale.
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ACCOUNTING PERIOD
Accounting period is the normal period of twelve months for which accounting records are to be prepared.
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GOODS Goods are the articles in which the business deals (computers for computer dealer).
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