Entity: An entity means an economic unit that performs economic activities like National Trading Ltd., UK Foods Pvt Ltd, etc.
Event: An event is a happening of consequence to an entity. All the items recorded in the balance sheet are called events. For example; Use of raw materials for production.
Transactions: A transition is the performance of an act or contract in which each participant receives a value. For example; goods sold to Charle for Rs10000.
Entry: Entry is the record made in the books of account in respect of transactions or events. An entry is passed on the basis of vouchers.
Voucher: Voucher is a document that serves as evidence of transactions.
Capital: Capital is the amount invested by the owner or proprietor of the business. It is also known as the owner’s equity or net assets or net worth.
Drawing: Drawing is the total amount of cash or goods or any other assets withdrawn by the proprietor or partner for personal use.
Debtors: Amount to be received from the customers due to the credit sales are called debtors. It is also called book debt.
Creditors: Persons or organizations to whom the amounts are due for goods purchased or services rendered on credit are called creditors. The amount payable to a number of suppliers is termed as sundry creditors.
Expenditures: The amount paid or payable for generating income in a long or short period of time is called expenditure. It is separated into two groups; Capital Expenditure (which includes the purchase of fixed assets) and Revenue Expenditure ( which includes the payment of wages, salaries, etc.)
Income/Revenue: The amount received and receivable from regular business activities is called income.
Debit: Left-hand side of the ledger is called a debit. Assets, expenses, and losses are debited for accounting records.
Credit: Right-hand side of the ledger is called credit. Capital, liabilities, incomes, and gains are credited for accounting records.
Account/ledger: Classification of financial transactions for recording on the basis of the name of persons, assets, expenses, and losses is called account/ledger. Accounts are mainly divided into three groups; a) Personal Account b) Real Account c) Nominal Account
Goodwill: Goodwill is the good market reputation or image of the business. Extra saleable value of the business due to extra earning capacity of goodwill.
Patents: Patent is an exclusive right granted by the Government to manufacture, use, and sale of a particular product.
Net Profit: Net profit is the excess of revenue or income over the expenses.
Net Loss: Net loss is the excess of expenses over the incomes.
Bank Overdraft: Excess of cash withdrawn from the bank over the deposit is bank overdraft.
Investment: The amount invested by the organization to generate income within a short or long period of time is called Investment. In this sense, fixed assets are long term investment and current assets are short term investments
Stock/Inventory: Goods purchased or produced during the year but are lying unsold at the end of a given period of time stock. Stocks are divided into two parts as opening stocks and closing stocks.
Current Assets: Current assets are those assets, which can be converted into cash within a short period of time or less than one year. For example; cash and bank, debtors, bills receivable, etc.
Current Liabilities: Current liabilities refer to those obligations which are payable in a short period of time.
Long Term Liabilities: Liabilities payable after a long period of time are called long-term liabilities. For example; long-term loans, debentures, mortgages, loans, etc.
Financial Transactions: Those human economic activities which can be measured in terms of monetary value are financial transactions.
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