Terminology Flashcards
What is accounting
The process or recording all business transactions. All the financial information is processed and summarised so that businessmen or women can make informed decisions
What is owners equity
The value of the owners investment in the business.
What is an assets
These are possessions or items that belong to a business. Assets can be classified into current and non-current assets
What are non-current assets
These are assets that have a long life span(more than a year) and are used to generate income.
What are some examples of non-current assets
Buildings, vehicles, fixed deposits and equipment
What are current assets
These are assets that have a short life span(less than a year) and can be converted into cash within a year. Current assets are also known as working capital
What are some examples of current assets (5)
Trading stock, debtors, bank, cash float and petty cash
What is trading stock
These are good or products bought by a business which are then sold to customers.
What are debtors
People who owe the business money
What is cash float
Money kept in tills to give change to customers
What is petty cash
Small amounts of money kept by the business to buy certain items like toilet paper, small amounts stationary or tea
What is capital
The amount of money the owner invests in a business
What is drawings
Money withdrawn by the owner from the business for personal use. The owner can also take stock for personal use
What is income
The money that is received by the business through its daily operations
What is an expense
The money that is paid out daily, weekly or monthly in order to ensure the business runs smoothly
What are examples of incomes
Current income, sales, interest income, rent income and commission income
What are examples of expenses
Stationary, wages, salaries, cost of sales, rent expense, interest expense, material costs etc
What are liabilities
They are debts owed by the business. There are current and non-current liabilities
What are current liabilities
Debts that need to be payed within a year (short term debts)
Give examples of current liabilities
Bank overdraft and creditors
What are non-current liabilities
Debts that need to be related after 12 months (long term debts)
What are creditors
When the business buys on credit, money is owed to suppliers. These suppliers are called creditors. A Business must pay their creditors within 60-90 days
What is sales
Money received by the business from goods sold
What is current income
Money received by the business from services rendered
What is rent income
Money received from the tenant when renting out premises
What is commission income
Money received by the business for the sale of goods on behalf of suppliers
What is interest income
Money received by the business from banks or other financial institutions. Interest is earned on favourable bank balances and when investing in fixed deposits
What is cost of sales
The cost price of goods sold
What he rent expense
The monthly rent payed by the business
What are salaries
Cost of labour which is payed monthly
What are wages
Cost of labour which is payed weekly or daily
What are material costs
The cost of items needed when rendering a service
What is stationary
Cost of stationary items used by the business eg. Pens, ink cartridges, printing paper etc
What is interest expense
The cost of borrowing funds from banks eg. Using an overdraft facility
What are source documents
Slips of paper where all the transactions that happen in the business are recorded
What are journals
Where all the information written in source documents is recorded
What is crj for
For recording money received by the business
What is cpj for
For recording money paid out by the business
What is debtors journal for
For when the business sells good on credit
What is general ledger
Where the information from the journals is totalled and transferred. There are two general ledger sections, balance sheet and nominal account section
Which accounts are part of owners equity
Incomes, expenses, capital and drawings
