Sub:-F.

Topic: - Basic Accounting Terms

 
Submitted By –

Name Roll No

Raju Panjabi 71413

Aparna 71414
Dayal 71415
Sujit Sudhir Joshi 71416
 
 
Submitted to – Kiran Madam
ACKNOWLEDGEMENT
 
We thanks to Kiran madam for giving this
project to us. This project helps to increase
knowledge about accounting terms.
I also thanks to my parents because they
gave me additional knowledge about this
topic.
I thanks to my group, because they help me
for searching information.
 index
Sr Particulars Pag Re
no
1. Introduction e no mar
1
k
2. Acknowledgement 2

3. Meaning 3

4. Explanation about basic Accounting Terms 4

5. Conclusion 16

6. Bibliography 17
 Meaning:

Accountancy is a systemic approach to keep accounts of a business which

indicates information about the financial affairs of the business.
 
Basic Accounting Terms;
Assets: Assets refers to property owned by business. Assets
would include plant, machinery, land, buildings, bank
balance, automobiles, bills receivables, and cash and so on.
Assets include all kinds of property owned by a person or a
business. Assets are valuable resources. Assets are bought for
use e.g. fittings and furniture are an asset for an office. In
case of a household, refrigerator is an asset. Assets have the
following features:
 
Assets are transferable.
It must be of utility.
It must provide service in the future.
It needs to be sanctioned.
It must provide for exchange value.
It is seen as having cash value.
It is owned by a business organization.
Assets increase with the passing of time indicating growth and expansion
of business.

2. Liability: Liability refers to the amount payable by a business.

Liability includes dues arising out of money borrowed or for goods or
assets purchased on credit. When a business receives service for which
immediate payment is not made, it is also called liability. Liability must
cleared by the business sooner or later. Liability can take several forms
like loan obtained from the bank, bills payable, and taxes payable &
creditors etc. Liability has the following features:
(a) Liability is legally enforceable.
(b) It is specific and certain.
(c) It must have the feature of getting calculated.
(d) It is created due to earlier transactions.
(e) It is not created due to transactions to take place.
(f) It is an unpaid amount from the owners of the business.
(g) It must be shown in tangible form
 3. Capital: In accountancy, capital means excess of assets
over liabilities e.g. a business has total assets of Rs. 9,00,000;
thus the capital would be Rs. 1,00,000. Hence, capital =
Assets – Liabilities. Capital includes every financial
investment can take place in the form of cash, assets or
goods. Capital is expected to bring increased return in future.
4. Expenses: Broadly speaking, expenses refer to the amount
spent in doing a job. In accountancy expenses refer to the
amount paid for the services received by a business e.g.
salary to staff, payment for utility services etc.
 
 
 
 
5. Income: Income refers to money received during a certain
period generally in a year as interest on investments,
dividend received, and sale of scrap and so on.
6. Expenditure: Expenditure refers to spending of money by a business. Expenditure can be of
following types:
(a) Capital Expenditure: Capital expenditure refers to the benefits enjoyed by a business over
many years. It relates to the purchase of assets and properties which will remain in use for many
years. Such a decision will enable the business to improve its earning capacity over period of next
many years. Capital expenditure is undertaken:
(1) To acquire fixed assets;
(2) To utilize new assets, and
(3) To extend or improve the assets.
Capital expenditure is shown in the Balance sheet on assets side and this expenditure is
non-recurring e.g. a machine is bought for Rs. 2,00,000 which can be used for next many years to
earn further profits.
(b) Revenue expenditure: Revenue expenditure refers to that expenditure which is incurred to
operate day- to-day business e.g. payment of wages, purchase of raw materials and goods, interest on
loans, office expenses etc. Revenue expenditure helps to main the fixed assets in working condition
to improve overall efficiency. Such expenditure is beneficial for a short period generally one year.
Revenue expenditure is used to meet depreciation of fixed assets & to maintain fixed assets.
(c) Deferred Revenue Expenditure: Deferred revenue
expenditure refers to those expenses the benefit from which
is not used during the year in which it is undertaken. The
writing of off such expenditure is deferred to more than one
year. Common examples of deferred revenue expenditure are
expenditure for registration of business, expenditure for
introduction a new product, expenditure on advertising
campaign, white washing the old building, meeting legal
expenses, repair of assets etc.
(7) Debtors: debtors are persons who owe money to other
persons. Debtors received goods and services on credit from
the business. E.g. Alfa Engineering has sold goods worth Rs.
25,000 to Mr. Dinesh Pradhan on credit. In this case Mr.
Dinesh Pradhan is the debtor who has to pay the debt (Rs.25,
000) to Alfa Engineering.
 
 
 
 
(8) Creditors: Creditors are persons to whom money is
owned. In the example given above Alfa Engineering is the
creditor and Mr. Dinesh Pradhan is the debtor who owes
money to Alfa Engineering.
(9) Goods: Goods are moveable property and articles of trade
in which businessmen deal. Goods are bought to be sold at a
higher and to earn profit e.g. music system is goods to a
dealer of music store, pens are goods to a dealer of stationary,
shirts are goods to a dealer of readymade garments etc. They
all sell these goods and earn profit. Goods are meant for
resale.
 
 
 
 
(10) Stock: Stock refers to the total of goods kept by a trader.
Stock is a potential supply. It is meant for future use. Capital
gets blocked till such time that stock is maintained. Stock can
be converted into the cash by selling it.
(11) Vouchers: Vouchers refers to document issues in token
of payment made. It is a receipt for a payment Separate
vouchers are made for cash and cheque payment. Every
monetary transaction must be supported by documentary
evidence in the form of vouchers.
(12) Transaction: Transaction refers to exchange money or money’s worth between
two parties. Such a transaction gets entry in accounting records. In accountancy,
exchange has a specific meaning i.e. giving and receiving of equal values. Hence,
business transaction relates to buying and selling in values e.g. goods sold on credit,
goods purchase in cash, cash paid, cash received, commission received, etc.

A transaction has the following features:-

(a) Transaction involves money or money’s worth.
(b) It develops duo to exchanges of goods or services.
(c) It involves two parties viz. giving and receiving.
(d) It is compulsory to prepare voucher for every transaction.
(e) It affects financial position of the business either favourably or unfavorably.
(f) It indicates clear picture about the financial position of the firm.
Transactions are the foundation of accountancy. Transactions can be of three
types, viz. cash transactions, credit transactions and barter transactions. Cash
transactions relates to exchange of goods against cash. Any receipt or payment done
is included as cash transactions e.g. salary paid to staff, payment made to plumber,
office furniture purchased etc.
Credit transactions relate to the sale of goods now and
payment will be made at a future date. Hence, goods are
supplied without payment but with one promise to pay at a
later date e.g. purchase computer worth Rs. 1,00,000 from
Balaji Electronics on credit. Barter transactions relates to
exchange of goods for goods e.g. old furniture exchanged for
new furniture of equivalent amount.
(13) Drawings: Drawings refer to amount withdrawn by
a proprietor form the business for his personal use. Such a
drawing may also be in kind. Drawings result in reduction of
capital. Drawings are not expenses of business. An increase
in drawings is a debit entry. It is necessary to open drawings
account separately.
CONCLUSION
 
We understood by this project that, about basic
accounting terms.
We understood that Assets, liabilities vouchers,
transactions, debtors, creditors, expenses, capital,
income, expenditure, etc are basic accounting terms.
As well as these are very important terms in
accountancy. These terms are used by allover the
world & every business firms or non business firms.
These terms are very useful to run business
smoothly.
BIBLIOGRAPHY
 
Meaning of Basic Accounting Term –
(F.Y.A.F. Book, Sub- Foundation Course,
and Author- N.G.KALE & M.AHMED).
 
Basic Accounting Terms (information about
that) – (F.Y.A.F. Book, Sub- F.C, writer- N.G.
KALE & M.HMED).