BASIC ACCOUNTING TERMS ASSETS: The Valuable things owned by the business are known as assets.

. These are the properties owned by the business. CLASSIFICATION OF ASSETS: 1. Fixed Assets: -Acquire for long ter use !use till the life of asset." - #ot eant for sale. - $ncrease the profit earning capacity. - %.g. &and' (uilding' )lant * +achine' Furniture' Vehicles. ,. -urrent Assets: - Acquired with the intension of con.erting the into cash during nor al business operations. - Value changes constantly. - For exa ple / (01' 2ebtors' 3tock' -ash in hand' -ash in (ank' )repaid %xpenses etc. 4. Fictitious Assets: -2o not ha.e physical for . - 2o not ha.e real .alue. - -alled assets on legal * technical ground. - %.g. preli inary expenses' 1egistration %xp. 5. $ntangible Assets:- -an6t touched and seen. - 2o not purchased and sold in open arket nor ally. - e.g 7oodwill' Trade ark' )atents' -opyrights Capital $t eans the a ount in.ested by the proprietor !3hareholders" in the business enterprise. $t can be increased or decreased according to need. $t is also called owner6s equity or net worth. $t will always be equal to Assets less outside liabilities. )rofit of business increases the capital and loss of business decreases the capital. -apital 8 Assets / %xternal &iabilities Classification of Capital Fixed capital- Assets are purchase without the intention of sale. Floating -apital- assets are purchase with the intention of sale. 9orking capital- capital you require for day to day acti.ity. LIABILITY: :bligation of an organi;ation to its .arious pro.iders. $t is the proprietor and creditors clai the assets of the business. against

Classification of liability: Fixed or long ter liability: )ayable after a long period usually after a period of one year. For exa ple -apital' &ong ter loans' 2ebentures etc. -urrent or short ter liability: )ayable with in a period of one year. for exa ple -reditors' (0)' outstanding expenses etc. -ontingent &iability: #ot real liability because of ele ent of uncertainty treated as liability ! ay or ay not be there".for exa ple-guarntees undertaken' cases pending in court etc. -ontingent liability are not shown in the balance sheet. +ention as a note inside or outside the balance sheet. P op i!to o O"n! An indi.idual or group of persons who undertake the risk of the business for aking profit are known as proprietor. The funds in.ested by proprietor in to the business is known as -apital. Goo#s$M! c%an#is! Articles purchased for sale at profit or processing by the business or for use in the certain other goods as raw aterial are known as goods. 7oods are the co odities' in which the business deals. anufacture of

 E&'ity %quity eans owner6s clai s against the assets of the business. $t is also known as proprietorship fund' shareholders fund etc. %quity 8 -apital < 1etained earning <)rofit <$nterest on capital / drawing. PURC(ASE: A ount of goods obtained for production. )urchase of assets is not purchase. -ash )urchase -redit )urchase )urchase 1eturn: That part of purchase which is return to seller. #et )urchase8 )urchase / purchase return SALE A ount for which the finish goods are sold. 3elling of assets are not sales. cash sales -redit sales 3ales 1eturn: that part of sales with is actually returned by custo ers. #et sales8 3ales / sales 1eturn )!bto s o R!c!i*abl!s )ersons or parties who ha.e purchased goods on credit fro us and ha.e not paid for the goods sold to the . 2ebtors are the assets for the business' because business will get oney fro debtors after a ti e. C !#ito s o Payabl!s 9ho pro.ide goods or cash to business on credit is called the creditors for the business. -reditors are the liabilities for the business' because business will pay oney to creditors after definite ti e. Stoc+ : = The goods a.ailable with the business for sale on a particular date are ter ed as stock. = 3tock is always .alued at cost price or arket price' whiche.er is lower. = -losing 3tock and :pening 3tock. -lassification of 3tock 3tock of 1aw +aterial 3tock of work in progress 3tock of finished goods

R!*!n'! A ount reali;ed or recei.able fro the sale of goods or ser.ices. 1e.enue is an inflow of assets which result in an increase in owner6s equity. E,p!ns! %xpenses are cost incurred by the business in the process of earning re.enues P ofit o Inco-! %xcess of re.enue o.er expense is ter ed as profit. )rofit 8 #et 3ales / -ost of goods sold or )rofit 8 1e.enues / %xpenses for earning re.enues Loss The ter loss is the opposite of inco e i.e.' excess of expenses o.er re.enue is called &oss. &oss 8 %xpenses - 1e.enues ) a"in. A ount or goods withdrawn by the proprietor fro ter ed as drawing the business for his pri.ate or personal use is