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ACCOUNTING TERMINOLOGY

In the accounting terminology, following terms are used in business concern as in the day to day life.

a) Assets

a) Assets – It means anything purchased & gives benefit for long period of time are known as assets.

e.g - Land & building, plant & machinery, furniture & fixture

b) Liability

b) Liability – It means the amount which is payable to outsiders are known as liability.

e.g- Sundry Creditors, Bills payable, Loan etc

c) Capital

c) Capital – It is otherwise known as owners equity, it means the money or money worth invest by the businessman in order to start a business.

d) Purchase

d) Purchase – when the goods are purchase by the businessman either sale or any kind of manufacturing processing is known as purchase.

e) Sales

e) Sales – When the business houses sold any goods to outsiders then it is termed as sales.

f) Expenses

f) Expenses – The amount which is paid by the business or business man in day to day life is known as expenses or expenditure incurred to earn revenue is also known as expenses.

e.g - salary, wages, rent, telephone , electricity, carriage etc. It is also divided in to two parts as

  • Direct Expenses – expenses which is directly related to production or factory is known as direct expenses.
  • e.g - Factory electricity, factory rent, carriage inward. Etc

  • Indirect expenses – The expenses which is incurred during goods delivered from factory to sale known as indirect expenses.
  • e.g - carriage outwards, office rent, telephone office , office electricity exp. etc

g) Losses

g) Losses – There are various meaning of losses ,but in simple terms when sale or sale worth not collected by business concern it is known as sales. In another, when expenses excess over revenue it’s also losses.

h) Income

h) Income – similarly when sale or sale of money worth received by business concern known as income.

i) Direct income

i) Direct income –It is also otherwise known as turnover of the business. The income which is received from sale of goods or service known as sales.

e.g. When physical goods sold it is known as sales of goods, when a CA provide service it is also known as also sale service.

j) Indirect income

j) Indirect income –It means those income earned from indirect process is known as indirect income.

e.g.- Interest from Bank, etc.

k) Debtor

k) Debtor – when the goods sold to customer in credit basis is known as Debtor, it is assets for the business concern.

l) Creditor

l) Creditor - The person from whom the goods purchased on credit basis is known as creditor/supplier.

m) Purchase return

m) Purchase return – When the goods return to the creditor due to any reason is known as purchase return.

n) Sales return

n) Sales return – Similarly when debtors return the goods due to any reason known as sales return.

o) Drawing

o) Drawing – The money or money worth taken by proprietor for personal use known as drawing.

p) Outstanding exp

p) Outstanding exp.- The expenses incurred but not paid during an accounting period is known as out sanding expenses.

e.g- In the year ending of march, salary will be paid in April which is next financial year.

q) Prepaid exp

q) Prepaid exp.- The exp. not incurred but paid in advance is known as prepaid exp.

e.g-It means next financial year exp. paid in advance in the current year known as prepaid expenses. like Lease expenses.

r) Accrued income

r) Accrued income – The income which is earned but not received due any reason is known as accrued income.

s) Income received in advance

s) Income received in advance –when income not earned but received in advance is known as income received in advance.

t) Bad debt

t) Bad debt - The debt which is not recoverable by the business man and remains debt for the business is known as bad debt. It is a loss for the business.

u) Depreciation

u) Depreciation – Due to usefulness of fixed asset , the value of the asset must be reduced in every financial year which known as depreciation.

v) Fixed asset

v) Fixed asset – The asset which is purchase & give benefit for long period known as fixed assts. It is also known as tangible assets.

e.g - Land & building, plant & machinery, furniture & fixture.

w) Current Assets

w) Current Assets – The assets which is easily converted in to cash in one accounting period known as current assets.

e.g- Cash, bank , Sundry debtors etc.

x) Fictitious Assets

x) Fictitious Assets –These assets are fictitious in nature. Actually these are not actually assets but shown in financial statement.

e.g– Advertise expenses, preliminary expenses etc.

y) Intangible assets

y) Intangible assets –Those assets which is not seen & touched knownas intangible assets.

e.g – Good will, patents, Trade mark, copy right etc.

z) Fixed Liability

z) Fixed Liability – The liability which are payable over a term exceeding one year known as fixed liabilities.e.g-bonds,mortgages or loans.These debts are better known as non-current liabilities or long term liabilities.

  • aa) Current liability – The amount which is payble in one accounting period is known as current liability.
  • e.g - I.T payable, GST payable, Sundry creditors etc.

  • ab) Contingent Liability - Here another thing arise which known as Contingent liability which may occurred due to abnormal condition of the business concern, A contingent liability is recorded in the accounting records if the contingency is probable and the amount of the liability can be reasonably estimated.
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