Learn the Meaning of Various Accounting Terms

                     In order to understand accounting and it's concepts in a better manner one should be aware of the basic terminologies that are used in accounting and its meaning. So let us try to understand them in this article.

Accounting Terms      

              Various accounting Terms used in accounting are as follows,

§  Debit : Debit represent increase in value of asset and expense but  decrease in the income, liability and equity.

§  Credit: Credit represents increase in liability, equity and income but decrease in asset and income.

§  Customer: The person who purchase goods or services from business.

§  Vendor: The person  who supplies goods and services required for business in order to carry out the our business.

§  Vouchers: It is any written document that supports the financial  transactions.

§  Journal: This is the book of first entry. In journal all kinds of entries in a business are recorded in one book.

§  Ledger: It is a book of final entry. It is a book where every separate account are kept.

§  Purchases: Purchase means goods brought by business. There can be two types of purchases. They are
         o   Cash Purchase: Goods brought by making immediate payment through cash or other means.
       o   Credit Purchase: Goods brought by business whom payment will be made in future.

§  Sales: The selling of goods and services by the business is called Sales. Sales can take place in two ways.
        o   Cash Sales: Goods or Service  which are sold by accepting immediate payments.
        o   Credit Sales: Goods or Services sold to customers on the basis of accepting future payments for the goods or service provided now.

§  Purchase Return: It is also known as return outwards. It is the process where the goods or services which were brought from supplier will be return for defectiveness.

§  Sales Return: It is the process where goods or services which were sold to customers are being returned by customers back to business.

§  Accounting Year or Period: A period of 12 months. There are two Accounting periods. They are
          o   Calendar Year: 1st Jan  – 31st Dec
          o   Financial Year : 1st April-  31st March

§  Folio: It is a page of the book.

§  Posting: It is a process or art of transferring an entry from journal to ledger.

§  Assets: The properties or machines acquired by business in order to carry out the business and which has a resalable value. There are two types of assets. They are
         o   Fixed Assets: It means the asset which cannot be moved easily from one place to another place and also cannot be converted into cash easily.
         o   Current Assets: It means the goods which can be easily moved and can be easily converted into cash.

§  Liabilities: It is the claim of others against the business or amount due by a business or amount payable to other business.

§  Stocks: Unsold goods, raw materials, semi finished goods in the business.

§  Capital: It means that money or money worth introduced by owner in order to start the business.

§  Drawings:  Cash withdrawal from proprietor for his personal use from the business.

§  Solvent: When a business is able to pay the debt and advances received from the investors back to them.

§  Insolvent: When a business is not able to pay the debt and advances received from the investors back to them.

§  Narration: It is a brief explanation written below the journal entry for future references.

§  System of Book Keeping: There are two types of book keeping. They are 
    o   Single Entry: It is an unscientific system of book keeping. Under this system only  one aspect of transaction is recorded.
        o   Double Entry: It is a scientific complete  and satisfactory method of keeping amount. It records both the aspects of transaction and it is also easily to verify the books of accounts.

                               I hope you have understood about the various accounting terms that are used in accounting.