Accounts Notes: BASIC TERMS IN ACCOUNTING

Saturday 19 March 2011

BASIC TERMS IN ACCOUNTING

• Entity: Entity has a definite individual existence. Business Entity is an identifiable business enterprise such as Super Bazaar, etc.
• Transaction: Transaction is an event involving some value between two or more entities
• Assets: Assets are economic resources of an enterprise that can be expressed in monetary terms.

"Fixed Assets" are assets held on a long term basis such as land, buildings, etc.
"Current Assets" are assets held on a short term basis such as debtors, bills receivables, etc.

• Profit: Profit is the excess of the revenues of a period over its related expenses during an accounting year. Profit increases the investment of the owners.
• Gain: Gain is a profit that arises from events or transactions which are incidental to business such as sale of fixed assets, winning a court case, appreciation in the value of an asset.
• Loss: The excess of expenses of a period over its related revenues is termed as Loss.
• Discount: Discount is the deduction in the price of goods on sale.
• Voucher: The documentary evidence in support of a transaction is known as Voucher.
• Goods: Goods refer to the products which a business unit produces and sells, or by and sells.
• Drawings: Withdrawal of money and/ or goods by the owner from the business for personal use is known as drawings. Drawings reduce the investment of owners.
• Purchases: Purchases are a total amount of goods procured by business on credit and cash, for use or sale.
• Stock: Stock (inventory) is a measure of something on hand - goods, spares and other items in a business. It is called 'Stock in hand.'
• Debtors: Debtor's persons and / or other entities who owe enterprise money, having bought goods and services on credit.
• Creditors: Creditors are persons and / or other entities who have to be paid by an enterprise for providing goods and services on credit.