ACCOUNTING TERMINOLOGY

Ø  ACCOUNTING TERMINOLOGY
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Ø  BRANCHES OF ACCOUNTING

1.       FINANCIAL ACCOUNTING: IS CONCERNED WITH RECORDING,CLASSIFYING AND SUMMARIZING OF FINANCIAL TRANSACTION FOR AN ACCOUNTING PERIOD  TO KNOW PROFIT AND LOSS AND FINANCIAL POSITION

2.       COST ACCOUNTING:-IS CONCERNED WITH IDENTIFICATION,CLASSIFICATION MEASUREMENT,RECORDING AND SUMMARISATION OF COST OF PRODUCING GOODS /SERVICES FOR THE PURPOSE OF COST ASCERTAINMENT AND COST CONTROL

3.       MGMT ACCOUNTING:-WHEN THE ACCOUNTING INFORMATION,REPORTS AND RESULTS ARE USED FOR THE PURPOSE OF TAKING DECISIONS.

·  ACCOUNTING TERMINIOLOGY

1. PROPRIETOR/OWNER:-THE PERSON WHO TAKE THE INITIATIVE TO SET UP BUSINESS AND ALSO BEAR THE RISK. HE INVEST MONEY AND IN KIND. IN SOLE PROPRIETOR HE IS THE OWNER AND IN PARTNERSHIP ALL THE PARTNERS ARE THE OWNERS. AND IN THE COMPANY FORM THE OWNER AND MANAGEMENT AND OWNERSHIP IS IN SEPARATE HANDS.
2. BUSINESS TRANSACTION:-TRANSFER OF GOODS AND SERVICES ON THE BASIS OF CASH OR ON THE BASIS OF CREDIT. IT COULD ALSO MEAN ANY TRANSFER OF BENEFIT BETWEEN THE BUSINESS AND THE OUTSIDERS.
3. CAPITAL :- AN AMOUNT INVESTED BY THE OWNER IS KNOWN AS CAPITAL AND THAT IS LIABILITY OF THE BUSINESS. CAPITAL CAN BE BROUGHT IN THE FORM OF CASH OR IN KIND OR BOTH.
4. DRAWING:- AN AMOUNT OF CASH OR GOODS WITHDRAWN BY THE OWNER FOR PERSONAL USE IS CALLED DRAWING.
5. GOODS/MERCHANDISE:-GOODS INCLUDE ONLY THOSE ARTICLE IN WHICH HE DEALS. IF FURNITURE DEALER DEALS IN SELLING AND BUYING OF FURNITURE. THEN FURNITURE WILL BE GOODS
6. PURCHASES: REFERS TO THE TOTAL AMOUNT OF GOODS OBTAINED BY AN ORGANIZATION FOR THE PURPOSE OF RESALE OR FOR USE IN THE PRODUCTION. IT CAN BE CASH OR ON CREDIT. BUT IT DOES NOT INCLUDE FIXED ASSETS FURNITURE,BUILDINGS ETC
7. SALES: REFERS TO THE TOTAL AMOUNT OF GOODS SOLD BY AN ORGANIZATION ON CASH OR CREDIT... BUT IT DOES NOT INCLUDE  SALE OF FIXED ASSETS FURNITURE,BUILDINGS
8. PURCHASE RETURN/ RETURN OUTWARD:_GOODS PURCHASED WHICH ARE NOT UP TO MARK DEFECTIVE ETC ARE RETURNED BACK TO SUPPLIER. A DEBIT NOTE IS PREPARED
9. SALES RETURN/RETURN INWARDS- WHICH ARE RETURNED BY THE BUYER TO US BEING DEFECTIVE.
10. SUNDRY DEBTORS:-THE PERSON WHO MONEY TO THE BUSINESS
11. SUNDRY CREDITORS:-TO WHOM THE BUSINESS OWES
12. STOCK :-GOODS ARE THE PURCHASED FOR RESALE BUT AT THE END OF THE YEAR SOME GOODS REMAIN UNSOLD. UNSOLD GOODS ARE CALLED STOCK. STOCK OF RAW MATERIAL,STOCK OF WORK IN PROGRESS AND STOCK OF FINISHED GOODS
13. ASSETS:-IMPLIES THE ITEMS OF PROPERTY OWNED BY THE BUSINESS.

a)       FIXED ASSETS: WHICH ARE OF PERMANENT NATURE AND WHICH ARE NOT FOR THE PURPOSE OF RESALE.TANGIBLE ASSETS ARE THOSE ASSETS WHICH HAVE PHYSICAL EXISTENCE LIKE LAND AND BUILDING,MACHINERY ETC AND INTANGIBLE WHICH IS NOT PHYSICAL IN NATURE LIKE GOODWILL ETC

b)       CURRENT ASSETS:-WHICH ARE PURCHASED FOR THE PURPOSE OF RESALE AND COULD BE CONVERTED INTO CASH LESS THAN ONE YEAR.LIKE CASH,STOCK,BILL RECEIVABLE,PREPAID EXPENSES ETC

c)        FICTITIOUS ASSETS:-WHICH DO NOT HAVE PHYSICAL FORM AND ALSO DO NOT HAVE REAL VALUE. KNOWN AS DEFERRED REVENUE EXPENDITURE. ALSO INCLUDE PRELIMINARY EXPENSES,ADVERTISEMENT SUSPENSE,LOSS ON THE ISSUE OF SHARE ETC

14. LIABILITIES:-WHICH BUSINESS OWES TO SOMEBODY.

1. LONG TERM LIABILITY:-WHICH IS DUE FOR MORE THAN ONE YEAR. EXAMPLES ARE LONG TERM DEBT,DEBENTURES ETC
2. CURRENT LIABILITIES:-ARE TO BE PAID IN LESS THAN ONE YEAR. FOR EXAMPLE TRADE CREDITORS,BILLS PAYABLE,OUTSTANDING EXPENSES ETC
3. CONTINGENT LIABILITIES: WHICH MAY BECOME LIABILITY ON THE HAPPENING OF CERTAIN EVENT

15. ACCOUNTING EQUATION

• ASSETS = CAPITAL PLUS LIABILITIES

16. EXPENSE:-COST RELATING TO PARTICULAR ACCOUNTING PERIOD THE BENEFIT OF WHICH WILL NOT EXTEND BEYOND THAT PERIOD .EXAMPLE ARE SALARIES,RENT ETC
17. EXPENDITURE:-AN EXPENDITURE TAKE PLACE WHEN AN ASSET OR SERVICES IS ACQUIRED. IT MAY BE ON THE CASH/CREDIT/BY EXCHANGE OF THE ASSET

• CLASSIFICATION OF EXPENDITURE:-

a)       CAPITAL EXPENDITURE:-NON RECURRING IN NATURE AND BENEFIT OF WHICH IS TAKEN FOR MANY YEARS.

b)       REVENUE EXPENDITURE:- IT IS RECURRING IN NATURE AND BENEFIT IS TAKEN IN THAT ACCOUNTING YEAR IN WHICH THEY ARE PURCHASED. SALARY,RENT ,INSURANCE ETC

c)        DEFERRED REVENUE EXPENDITURE:-A HEAVY EXPENDITURE OF REVENUE NATURE THE BENEFIT OF WHICH IS LIKELY TO EXTEND BEYOND CURRENT YEAR. LIKE ADVERTISEMENT

18. LOSS:-UNWANTED BURDEN ON THE BUSINESS WHICH DOES NOT GENERATE ANY REVENUE

a)       NORMAL LOSS

b)       ABNORMAL LOSS: RESULT IS MISHAPPENING OR CARELESSNESS

c)        LOSS WHEN REVENUE IS LESS THAN COST

19.    REVENUE:-RECEIPT FROM THE SALE OF GOODS OR SERVICES .