Accounting terms and Concepts Flashcards
Transactions
Flow of inflow or outflow, goods, services or money for value or consideration.
Type of transaction. i) Cash and Credit
Cash - settlement made immediately and Credit - Settlement not made immediately
Event
Result of transaction
Capital
Liability for the business to the owner. With which the business started Cash, Stock or furniture
Capital may increase and decrease due to
Increase - Additional capital and Profit
Decrease - Loss and Drawings
owner of the business
Sole trader - Proprietor
partnership firm - partners
Company - Shareholders
Joint Ventures - Co Ventures
Asset
What business owns
Qualities of assets
- Cost shall have future financial benefit
- Cost shall be measured reliably
Types of assets
Current assets
Non- Current assets
Current Assets - Easily convertible into cash
Intention to hold for short period usually one year.
Non-Current Assets - Tangible and Intangible assets
Tangible assets - Touch , See and feel
Intangible assets - No touch , No see but Yes Feel
Liability
What business owes
Owner owing to business - Capital
Outsider owing to business - Loan
Purchases
Goods purchased for
1. Resale [Finished goods]
2. Further production [ Raw material]
Asset purchased for resale - Purchases
Pen, pencil - purchased for Office use
Asset Purchased for future use - Asset
Types of Purchases
1. Cash
2. Credit
Cash Purchases - Goods purchased and settlement made immediately
Credit Purchases - Goods Purchased and settlement not made Immediately
Total Purchase - Cash Purchase + Credit Purchase
Creditor
From whom goods were purchased for credit. it is liability to the business.
Purchase return
Goods returned to the supplier for reasons like
damage
Inferior quality
Excess
other name return outwards
Net Purchase = Gross Purchase - Purchase return
Sale
Goods sold which were brought for resale or Produced for sale
Type of Sale
cash and credit
Cash Sale - Goods sold and amount received in cash immediately
Credit Sale - Goods sold and amount not received immediately
Total Sale - Cash Sale + credit Sale
Debtors
To Whom goods are sold on credit. It is Asset for an entity. [Credit customer]
Sale return
Goods returned by consumer
due to
1. Damages
2. Inferior quality
3. Excess
Other wise known as return inwards
Net Sales = Gross Sales - Sales return
Stock
Goods lying unsold on a particular date
at the end of the period - closing stock
at the beginning of the period - opening stock
Closing stock of the current period is the opening stock for next period.
It is an asset for the entity.
Drawings
Goods/Cash withdrawn for personal use
Depreciation
Reduction in value of assets
Reasons:
1. Wear and tear
2. Lapse of time
3. Obsolete
4. Technological changes
it is a loss.
bad debts
Debt becomes irrecoverable
it is loss to the entity
[Debtor becomes insolvent]
Bad Debts recovered
Debts which is written off as bad debts during previous year recovered in current year
It is gain to the entity
Revenue
Gross collection from sale of goods or rendering services
Expenses
Cost incurred for generating income
Profit
Revenue - expenses
