Accounting terminology

Question 1

Account

Answer 1

account is a statement in which all the transactions for a definite period relating to a particular person,particular asset or particular item of income and expenditure are recorded in one place. it has a t form. it has two sides-debit and credit.

Question 2

Asset

Answer 2

all those valuable things which are owned or controlled by business and are helpful in the smooth functioning of the firm are called assets.

Question 3

fixed assets

Answer 3

those assets which are purchased by the business for long term use and are not meant for resale.

Question 4

current assets

Answer 4

those assets which are converted into cash within a year or which are meant for sale.

Question 5

tangible assets

Answer 5

those assets which have a physical existence and can be seen and touched.

Question 6

intangible assets

Answer 6

those assets which donot have any physical existence and cannot be touched or seen. they increase the profit earning capacity of business

Question 7

liquid assets

Answer 7

These can be converted into cash within no time.

Question 8

fictitious assets

Answer 8

those assets which have no real value but are treated as assets on technical ground. these are shown in balance sheets until completely written off in p&l account

Question 9

wasting assets

Answer 9

those assets whose value decreases with their use or with passage of time.

Question 10

liabilities

Answer 10

these are the obligations of the business. this is the amount that is to be paid by the business in future.

Question 11

fixed liabilities

Answer 11

these are known as long term liabilities. these are to be paid after a long period {more than 1 year}

Question 12

current liabilities

Answer 12

these are short term liabilities and are to be paid within a year.

Question 13

contingent liabilities

Answer 13

liabilities which are not liabilities in the present but on happening of a special contingency they may arise. these are not added to the total liabilities but are shown in the foot note.

Question 14

capital

Answer 14

the amount invested by the proprietor in the business in the form of cash , goods or in any other form is called capital.with its help assets and goods are purchased. it is also called owner’s equity or net worth. the profit increases the capital and losses incurred decreases the capital.

Question 15

fixed capital

Answer 15

capital invested in fixed assets is called fixed capital.

Question 16

floating or circulating capital

Answer 16

the capital invested in current assets is called floating capital

Question 17

working capital

Answer 17

the part of capital which is used in the daily operation of the business is called working capital. current assets - current liabilities = working capital

Question 18

drawings

Answer 18

cash or goods withdrawn by the proprietor from the business for his own personal use is called drawing. the expenses incurred on the personal use of an asset is also drawing. drawings are against the possible profit of the year. they decrease the capital.

Question 19

revenue

Answer 19

in accounting revenue means the income which arises as a result of business transaction and which increases the owner’s capital.

Question 20

expenses

Answer 20

cost of goods and services utilised to earn revenue is called expense