20 Basic and Popular Accounting Terminologies

Today Bs-commerce site writes about accounting terminologies. These are  the basic and popular terms of accounting.

#1) What is Accounting?

Accounting is the art of recording, classifying, and summarizing the business transactions and finally to prepare Financial Statements, i-e, Income statement and balance sheet.

#2) What is Business?

Any lawful activity undertaken for the purpose of earning profit is called business. For example fruit and vegetables market, Saloon shop, car mechanic work shop etc.

#3) What is Transaction?

Any dealing between two persons for goods and services which affects the financial position of the business and which can be measured in monetary terms is called transaction.

#4) Proprietor:

The person who invests money in business and is responsible for the affairs of the business is called proprietor.

#5) What is Assets?

Monetary resources owned and controlled by business for business operations are called assets.

#6) What is Liabilities?

The claim of outsiders against the business are called liabilities. E.g loan from bank, etc 

#7) What is Revenue?

Monetary value of goods and services which a business transfer to his customers during normal course of business is called Revenue.

 #8) What is Expenses?

Cost of goods and services used up in the process of earning Revenue is called Expense.

#9) What is Profit?

The excess of revenue over expenses is called profit.

#10) Who is Account Receivable?

The person to whom business sale merchandise on credit is called Account Receivable.

#11) Who is Account Payable?

The person from whom business purchase merchandise on credit is called Accounts Payable.

#12) What is Merchandise?

Any thing of monetary value which business acquire for resale purpose is called merchandise.

#13) What is Capital?

Money or things of monetary value Invested by owner in his business is called capital.

#14) What is Equities?

The claims of outsiders (liabilities) plus  the claims of owner ( capital) is called equities.

#15) What is Purchase?

Cost of merchandise purchased is called purchases.

#16) What is Sale?

The cost  of merchandise sold in business is called sales.

#17) What is Inventory?

The Unsold merchandise during financial period is called inventory.

#18) What is Drawings?

Cash, merchandise or asset taken away by proprietor from business for his personals use is called Drawings.

Double Entry system of Accounting:

According to this system, each transaction has a two side effects.

11)      Assets:-

current assets:

Those assets in business which are converted into cash during one accounting period.

Ø  Cash

Ø  Accounts Receivable

Ø  Merchandise inventory

Ø  Supplies

fixed assets:

Those assets which are not for resale purpose in business are called fixed assets.

Ø  Furniture

Ø  Equipment

Ø  Machinery

22)      Liabilities:

Ø  Accounts Payable

33)      Capital:

Ø  Owners Equity

34)      Revenue:

Ø  Revenue from Sale of merchandise

Ø  Revenue from sale of services

35)      Expenses:

Ø  Salary

Ø  Rent

Ø  Wages

Ø  Supplies expense

Ø  Carnage

66)      Drawings:

Ø  In form of cash

Ø  In form of merchandise

Ø  In form of assets

#19) Financial Statements:

A statement which shows the financial position of the company.
Financial Statement includes income
statement and balance sheet.

#20) Accounting cycle:

The phase-wise/step-wise record of business transactions is called accounting cycle or accounting process.

accounting cycle 9 steps with examples and its diagram|bs|

Edited by : Abdus Samad Shah