Accounting terms and Concepts

Question 1

Transactions

Answer 1

Flow of inflow or outflow, goods, services or money for value or consideration.

Question 2

Type of transaction. i) Cash and Credit

Answer 2

Cash - settlement made immediately and Credit - Settlement not made immediately

Question 3

Event

Answer 3

Result of transaction

Question 4

Capital

Answer 4

Liability for the business to the owner. With which the business started Cash, Stock or furniture

Question 5

Capital may increase and decrease due to

Answer 5

Increase - Additional capital and Profit
Decrease - Loss and Drawings

Question 6

owner of the business

Answer 6

Sole trader - Proprietor
partnership firm - partners
Company - Shareholders
Joint Ventures - Co Ventures

Question 7

Asset

Answer 7

What business owns

Question 8

Qualities of assets

Answer 8

1. Cost shall have future financial benefit
2. Cost shall be measured reliably

Question 9

Types of assets
Current assets
Non- Current assets

Answer 9

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

Question 10

Liability

Answer 10

What business owes
Owner owing to business - Capital
Outsider owing to business - Loan

Question 11

Purchases

Answer 11

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

Question 12

Types of Purchases
1. Cash
2. Credit

Answer 12

Cash Purchases - Goods purchased and settlement made immediately
Credit Purchases - Goods Purchased and settlement not made Immediately

Total Purchase - Cash Purchase + Credit Purchase

Question 13

Creditor

Answer 13

From whom goods were purchased for credit. it is liability to the business.

Question 14

Purchase return

Answer 14

Goods returned to the supplier for reasons like
damage
Inferior quality
Excess

other name return outwards

Net Purchase = Gross Purchase - Purchase return

Question 15

Sale

Answer 15

Goods sold which were brought for resale or Produced for sale

Question 16

Type of Sale
cash and credit

Answer 16

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

Question 17

Debtors

Answer 17

To Whom goods are sold on credit. It is Asset for an entity. [Credit customer]

Question 18

Sale return

Answer 18

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

Question 19

Stock

Answer 19

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.

Question 20

Drawings

Answer 20

Goods/Cash withdrawn for personal use

Question 21

Depreciation

Answer 21

Reduction in value of assets

Reasons:
1. Wear and tear
2. Lapse of time
3. Obsolete
4. Technological changes

it is a loss.

Question 22

bad debts

Answer 22

Debt becomes irrecoverable
it is loss to the entity

[Debtor becomes insolvent]

Question 23

Bad Debts recovered

Answer 23

Debts which is written off as bad debts during previous year recovered in current year

It is gain to the entity

Question 24

Revenue

Answer 24

Gross collection from sale of goods or rendering services

Question 25

Expenses

Answer 25

Cost incurred for generating income

Question 26

Profit

Answer 26

Revenue - expenses