Basic Terms of Accounting

Business : In general term any activity undertaken for purpose of earning profit


Capital : Capital represents cash and resources introduced by the owner(s) of the business to set up or to run the business


Drawing : Drawing represents cash and resources withdrawn by the owner of business for personal use


Owner : The person who starts a business by introducing capital


Assets : Assets are the tangible or intangible resources controlled or owned by the business to get future economic benefits


Liabilities : These are the obligations of business arisen by past transaction or event


Transaction : Any dealing between two persons that can be measured in money. For example sale of good by business is a transaction


Account : A record or log used to record the transactions of business


Voucher : Any written evidence of occurrence of a transaction like invoice for purchase of goods on credit


Trade discount : A discount given by seller to buyer on listed price of good


Cash discount : A discount for quick or prompt payment of credit. For example a company has purchased goods on credit and if it makes payment of credit within specific period time, the seller would give the company cash discount on quick payment


Stock : Goods or commodities remaining unsold at the end of accounting period (Generally 1 year)


Creditor or Account payable : A person, business or an organization from which the business has purchased goods or services on credit


Debtor or Account receivable : A person, business or an organization to which the business has sold goods or services on credit

Accounting heads or type of accounts


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