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Notes - 1 Accounting Terminology

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Notes - 1 Accounting Terminology

Uploaded by

valoansh19
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting Terminology

Account: - An account is a statement which shows all the transactions relating to a


particular item during a period of time.
Accounting Equation:- Assets = Equities = Liabilities + capital
Accounting period:- The period for which books of accounts are usually maintained.
Generally, it is a period of twelve months. At the end of this period, summary
statements are prepared to know the performance and health of business.
Accrued Income:- Income due but not received.
Assets:- The resources of an enterprise, things, properties and rights owned are called
assets.
Bad debt:- The debt which is irrecoverable.
Balance sheet:- A statement of assets and liabilities as on a particular date.
Balancing:- Process of finding out and recording the difference between the two sides of
an account.
Bill:- A written document signed by the seller which contains an unconditional order to
pay a fixed sum of money.
Business:- Any activity carried on with profit motive.
Capital:- Money or money’s worth invested by the proprietors in the business.
Cash book:- A book to record all cash receipts and cash payments.
Cash discount:- Discount allowed for prompt payment by debtors.
Cheque:- it is a bill of exchange drawn on a specified banker and payable on demand.
Concepts:- Concepts are Generally Accounting principles also called as guideline for
accounts by many others.
Conventions:- some authors defined conventions as traditions which guide the
accountants while preparing the accounting statements.
Cost:- The price paid to acquire an asset.
Credit:- Credit means right side of an account.
Credit transactions:- The purchase and sale transactions without immediate payment
against it.
Debit:- Debit means left side of an account.
Debit balance:- Excess pf debit total over the credit total of an account.
Depreciation:- Decrease in the value of fixed assets such as building, machinery and
furniture due to wear and tear or other reasons.
Dishonor:- It refers to non payment of a cheque or bill of exchange on the due date.
Double entry system:- A system of recording business transactions where the two
aspects of each transactions are recorded.
Draft:- It is a promissory note issued by a banker on payment, promising to pay the
amount on demand.
Drawings:- Money or money’s worth withdrawn by the proprietor from the business.
Endorsement:- The process of writing the name of a person inn whose favor an
instrument is transferred.
Event:- A happening, as a consequence of transactions or a result.
Expense:- An expenditure incurred for receiving some benefit or service.
Financial position:- Position of assets and liabilities of business at a given date.
Financial statement:- Summary of accounting information such as profit and loss
account and balance sheet prepared at the end of an accounting year.
Income:- Amount earned through business operations.
Journal:- A book for chronological record of daily transactions.
Journalizing:- it is the process of recording transactions in the journal.
Ledger:- Ledger is a book containing all the accounts of a business organizations in a
summarized and classified norm.
Liabilities:- the amount owed by the business to the outsiders.
Loss: - the excess of expenses over incomes.
Opening entry:- The journal entry passed at the beginning of every accounting year to
record the opening balance of assets and liabilities.
Overdraft:- It is an arrangement with the bank by which an account holder is allowed to
overdraw his account up to certain limit.
Posting:- Process of transferring entries from journal to ledger.
Prepaid expenses:- Expenses paid in advance. It is also known as unexpired expense.
Profit:- The excess of income over expenses.
Profit and loss account:- A summary statement showing the profit or loss of the
business during an accounting period.

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