Accounting Terms & Definition

Question 1

Assets

Answer 1

Resources owned by business to generate revenue e.g. cash in hand

Question 2

Current Assets

Answer 2

Short term resources owned by business to generate revenue e.g. inventory

Question 3

Liabilities

Answer 3

Obligations or debts owed by a business e.g. trade payables

Question 4

Current Liabilities

Answer 4

Obligations which need to be repaid within the next accounting year / 12 months

Question 5

Non-Current Liabilities

Answer 5

Obligations which need to be repaid only after the next accounting year e.g. 5 year loan

Question 6

Non-Current Assets

Answer 6

Long term resources owned by a business to generate revenue. e.g. furniture

Question 7

Equity

Answer 7

Owner’s claim on the business assets

Question 8

Capital

Answer 8

Contributions made by owner to the business

Question 9

Drawings

Answer 9

Withdrawal of business resources for owner’s personal use.

Question 10

Gross Profit

Answer 10

Earnings from the sale of inventory, after accounting for the cost of the inventory sold.

Question 11

Sales revenue

Answer 11

Income earned from the selling of goods

Question 12

Cost of Sales

Answer 12

Cost price of the inventory sold to customers

Question 13

Credit sales

Answer 13

Goods sold to customers who pay only in the future.

Question 14

Credit transactions

Answer 14

Events where payment for the item is made only in the future.

Question 15

Cash transactions

Answer 15

Events where payment is made immediately for the event.

Question 16

Sole proprietorship

Answer 16

A form of business where there is only one owner.

Question 17

Working capital

Answer 17

Short term resources available for daily operation after short term debts are settled.

Question 18

Depreciation

Answer 18

Allocation of the cost of a non-current asset over its useful life

Question 19

Accumulated depreciation

Answer 19

Sum of depreciation on non-current asset over the years

Question 20

Trade receivables

Answer 20

Debts owed by customers due to credit sale of goods

Question 21

Trade payables

Answer 21

Debts owed to credit suppliers of goods.

Question 22

Bank statement

Answer 22

A document from the bank showing the deposits and withdrawals of funds from the bank account.

Question 23

Invoice

Answer 23

A document showing credit supply of items or services

Question 24

Credit note

Answer 24

A document informing a reduction in debt owed

Question 25

Debit note

Answer 25

A document informing an increase in debt owed

Question 26

Receipt

Answer 26

A document informing money is received.

Question 27

Expense

Answer 27

Operating cost or overheads