Basic Accounting Terms

In order to understand the subject matter clearly, one must grasp the concept of common expressions always used in business accounting.  
                      You may note that these terms can be applied to any business activity with the same connotation. 

BASIC  ACCOUNTING  TERMS 

1. Transactions:- It means an event or a business activity which involves exchange of money or money's worth between parties. Transactions could be a cash transaction or credit transaction .when the parties settle the transaction immediately by making payment in cash or by cheque, it is called a cash transaction . In credit transaction ,the payment is settled at a future date as per agreement between the parties. 
2. Goods and services :- These are tangible article or commodity in which a business deals .These articles or commodities are either bought and sold or produced and sold. Services are intangible in nature which are rendered with or without the object of earning profits. 
3. Profit :- The excess of Revenue income over expenses is called profit. It could be calculated for each transaction or for business as a whole. 
4. Loss :- The excess of expenses over income is called loss. It could be calculated for each transaction or for business as a whole. 
5. Assets :- These are the properties belonging to the business and which are ment for the use in the course of business activity. Assets can be Tangible and Intangible. Tangible assets are the Capital assets which have some physical existence. Eg: Plant, Machinery, Furniture and Fitting, Land and Building ect. The capital assets which have no physical existence and whose value is limited by the rights and anticipated benefits upon the owner are known as Intangible assets. Eg: Goodwill, patents, Trademark, copyrights etc. 
6. Liabilities :- These are the amount owned by the business to the outsiders and these are repayable to them by the business. It is an obligation of financial nature to be settled at a future date. It represents amount of money that the business owes to the other parties.Eg : when a loan is taken from bank or when goods are bought on credit, the firm will create an obligation to pay to the suppliers on a agreed future date. 
7. Trading Account :- Trading account is a part of Final account which shows the trading results or profitability in purchase or sale. 
8. Final Account :- The account which shows the trading results of a business is called a Final account. 
9. Profit and Loss account / Income Statement :- This account is also a part of Final account which Shows the net results of a business organization. This account is prepared usually for a particular accounting period of time ,which could be a month ,half year or a year. 
10. Marshalling :- The sequence of assets and liabilities shown in the Blance sheet is termed as Marshalling. 
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12. Accounting cycle :- A period consisting of 12 months called as Accounting cycle. It starts from recording the business transactions and ends with preparations of Balance sheet.
13. .Financial statements :- These are the statement which shows the profitability position and financial position of the business .It is of two types.:-a. Income statement  b. Position statement 
14. Debtors :- Debtors are those persons from whom a business has to recover Money on account of goods sold or service rendered on credit. These debtors classified as under 
15. 1. Good debts : The debts which are sure tobbe realized are called good debts. 
16. 2.Doubtful Debts :- The debts which may or may not be realized are called Doubts Debts. 
17. 3.Baddebts :-The debts which cannot be realized at all are called Baddebts. 
18. creditor:- A creditor is a person to whom the business owes money or money's worth .
19. Capital :- It is the amount invested in the business by its owners.It may be in the form of cash, goods, or any other assets which the proprietor or partners of the business invest in the business activity. 
20. Balance sheet:- It is a statement which shows the financial position of the business entity on a particular date. It lists all assets, liabilities and capital .
21. This is not  the end  ,there a lot of basic accounting terms which i left  but these are mere usefull and important. 
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    1. 1. What is accounting ?Meaning and definition 
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