Scribd
Upload
109 views6 pages

Basic Accounting Terms & Rules

This document defines key accounting terms and concepts, and explains basic accounting rules. It outlines 18 important accounting terms like assets, liabilities, expenses, incomes, purchases and sales. It also describes the golden rule of debit and credit, where debit refers to recording amounts on the left side of accounts and credit refers to the right side. Examples are provided to illustrate applying debit and credit entries for common business transactions like purchases, cash payments, sales and machinery purchases. The modern rule of accounting is also mentioned, focusing on accurately recording financial data.

Uploaded by

niraj jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
109 views6 pages

Basic Accounting Terms & Rules

This document defines key accounting terms and concepts, and explains basic accounting rules. It outlines 18 important accounting terms like assets, liabilities, expenses, incomes, purchases and sales. It also describes the golden rule of debit and credit, where debit refers to recording amounts on the left side of accounts and credit refers to the right side. Examples are provided to illustrate applying debit and credit entries for common business transactions like purchases, cash payments, sales and machinery purchases. The modern rule of accounting is also mentioned, focusing on accurately recording financial data.

Uploaded by

niraj jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 6

ASIAN INTERNATIONAL SCHOOL

ACCOUNTANCY BASIC CONCEPT


ACCOUNTING TERMS AND RULES

ACCOUNTING TERMS
1. ACCOUNTING:
It is the process of collecting, recording , classifying and summarizing of financial business transaction.
Accounting is the process of identifying, measuring, and communicating economic information to
make decisions.
2. CAPITAL:
Any amount or anything introduced by the owner in to the business. Example : cash, Furniture, land &
Building, Stock.
3. DRAWINGS:
4. Any amount or anything withdrawn or taken away by the owner from the business. Example : cash,
Furniture, land & Building, Stock.
5. ASSETS:
Anything over which business has right or ownership and used by business in its operations. It must have
realizable value.
FIXED ASSETS
Assets which can be used for a long period (more than a year) are known as fixed assets. Land, Building,
Machinery, Furniture, Goodwill, Patent, Copyright, Trademark etc
CURRENT ASSETS
Assets which are used for a short period(less than a year) keep on changing with the transactions of the
business, hence, they are known as current assets. Stock of goods, cash balance, Bank Balance, tools etc

6. LIABILITIES:
Any amount payable or service to be provided by the business to any outsider (other then owner) is known
as liability.
LONG TERM LIABILITIES
Amount payable after 1 year. Example :Bank Loan etc.
Current liability
Amount payable within 1 Year. Example: creditors, bills payable etc.
7. EXPENSES:
Cost incurred by business for earning the revenue. Rent paid, salary paid, commission paid, interest paid,
purchases of Raw Material, purchases of Stock of finished goods etc.
8. INCOMES:
Receipt of money occurring from business transaction. Sale of goods, Rent received, interest received etc.

9. GOODS/STOCK:
Product or service in which business is dealing in i.e product /service which business is buying and selling.
10. PURCHASES:
Goods procured or brought in by the business for resale purpose.

11. SALES:
Total revenue generated by selling the goods to customer.
ASIAN INTERNATIONAL SCHOOL
ACCOUNTANCY BASIC CONCEPT
ACCOUNTING TERMS AND RULES
12. DEBTORS:
Person/business from whom your business has right to receive money against sale of goods /services. The
person to whom business has sold goods /services on credit basis. It is a current asset.

13. CREDITORS:
14. Person/business to whom your business has duty or obligation to pay money against purchases of goods
/services. The person from whom business has purchased goods /services on credit basis. It is a current
liabilities

15. PURCHASE RETURN/RETURN OUTWARD:


Goods previously purchased now returned back to supplier

16. SALES RETURN / RETURN INWARDS:


Goods sold previously now returned back by buyer
17. DEBIT(DR)
debit means recording an amount on the debit side (Left-hand side) of a ledger account. The name of
account credited should be written in the column of particulars.

18. CREDIT(CR):
credit means recording an amount on the credit side (Right hand side) of a ledger account. The name of
account debited should be written in the column of particulars.

ACCOUNTING RULES:

GOLDEN RULE
ASIAN INTERNATIONAL SCHOOL
ACCOUNTANCY BASIC CONCEPT
ACCOUNTING TERMS AND RULES

MODERN RULE:
ASIAN INTERNATIONAL SCHOOL
ACCOUNTANCY BASIC CONCEPT
ACCOUNTING TERMS AND RULES
EXAMPLES OF DR/CR AS PER GOLDEN RULES:

ILLUSTRATION 1

The above three golden rules can be better decoded with the help of some illustrative accounting transactions like:

 Goods amounted to Rs. 15000 purchased from Mr. Mohan on Credit


 Cash paid to Mr. Mohan for credit purchases
 Goods sold to Mr. Rehman for Rs. 20000
 Rs. 10000 withdrawn from the bank
 The machinery of Rs. 50000 purchased from M/s Bharti Traders and paid Rs. 25000 in
cash and remaining to be paid on the future date.
 Balance amount of Rs. 25000 to M/s Bharti Traders is paid in full
 Machinery is sold to John for Rs. 55000.
ASIAN INTERNATIONAL SCHOOL
ACCOUNTANCY BASIC CONCEPT
ACCOUNTING TERMS AND RULES
ASIAN INTERNATIONAL SCHOOL
ACCOUNTANCY BASIC CONCEPT
ACCOUNTING TERMS AND RULES

You might also like