Basic Accounting Terminology

Basic   Accounting Terminology
  1. Transaction: It is transfer of money or goods or service from one person or account to another person or account.
  2. Cash   transactions:   cash is paid or received immediately.
  3. Credit   transactions:   is one where there is a promise to pay/receive cash at a future date. assets etc.),

  4. Capital: Funds brought in to start business, by the owner/s. In the case of a company, capital is collected by issue of shares.

  5. Share: A share in a company is one of the units into which the total capital of the company is divided.

  6. Assets: An asset is a resource legally owned by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise. Eg: Land and buildings, plant and machinery, furniture and fixtures, cash in hand and at bank, debtors and stock etc., are regarded as assets.

Assets are classified based on the purpose for which an asset is held in the hands of the user. Assets may be fixed, current, liquid or fictitious.
  7.   Fixed assets are those which are held for use in the production or supply of goods and services and not for resale in the normal course of business.   Eg. Land, Plant and Machinery are fixed assets. The exception to it is, for a land developer, land is considered as current asset because he is involved in buying and selling of land.

  8. Current assets are those which are held or receivable within a year or within the operating cycle of the business. They are intended to be converted into cash within a short period of time. Ex:   Stock in trade, debtors, bills receivable, cash at bank etc.

  9. Liquid assets are those which can be easily converted into cash and for instance, cash in hand, cash at bank, marketable investments etc.

  10. Fictitious assets are in the form of such expenses which could not be written off during the period of their incidence. For example, promotional expenses of a company which...