Sunday, October 7, 2012

Basic Accounting System Terms

Creditor : A person to whom money is  owing or payable is called a creditor.

Debtor: A debtor is a person who owes money. The amount due from him is called debt. The amount due from a person as per the books of accounts is called a book debt.

Drawing: Any amount of goods withdrawn by the owner of a business for personal used is called drawings.  

Business transaction: Any exchange of money or money’s worth as goods and services between two parties is called business transaction. It may relate to purchase and sale of goods, receipt and payment of cash and rendering of service by one party to another.

Goods : This includes all articles, commodities or merchandise in which the business deals. Thus, cloth would be a good for a dealer in cloth, furniture would be a good for a dealer in furniture and so on. 

Capital : This is the owner financial interest or holding in the business and is represented by the value of net assets.

Assets : Any physical thing or right owned that has a money value is an assets. In other words,’ an asset is that expenditure which result in acquiring of some property or benefit of a lasting nature.

Income : it is favorable change in owner’s equity which result from business operations. In other words, income is an inflow of assets which result in an increase in the owner’s equity.

Loss: A loss is an expenditure without any benefit to the concern. On the other hand, expense is included to result in some benefits.

Expense: It means an expenditure whose benefit is finished or enjoyed immediately such as salaries, rent      etc. The purpose of goods is an expenditure where as cost of goods sold is an expenses. Similarly, if an assets is acquired during the year, it is an expenditure, if it is consumed during the same year, it is an expenses of the year.

Expenditure : An expenditure takes place when assets or services is acquired. 

Voucher : Any written document in support of a business transaction is called a voucher.

Turnover: it means total trading income from cash sales and credit sale.

Equity : A claim which can be enforced against the assets of the firm is called equity. In other words the rights to properties are called equities. Equities are two kinds The right of creditors and second is right of owners.

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