PPT comprising with the meanings of basic accounting terms. It is prepared to serve the interest of Class XI Commerce Students as per CBSE syllabus.

1. BASIC ACCOUNTING
TERMS
ACCOUNTANCY
Class-XI
Pankaj Saikia
Modern English School
Kahilipara, Guwahati-19
Pankaj Saikia. 2020

2. BUSINESS TRANSACTION
• An event involving some exchange of
something having monetary value
between two or more entities. Such
transaction is capable of change in
the financial position of both the
parties involve in transaction.
Pankaj Saikia. 2021

3. FEATURES OF TRANSACTION
• Concerned with money or moneys worth.
• Arise out of transfer or exchange of goods
or services.
• Capable of change in the financial state.
• It has effect on accounting equation.
• All transactions has got duel aspects.
Pankaj Saikia. 2020

4. CAPITAL
• It is the amount of money or
moneys worth invested by the
owner of a business in the firm.
The capital is a part of liability of
a business/firm towards its
owner.
Pankaj Saikia. 2020

5. DRAWING
• Any type of withdrawal i.e. in Cash or
in kind by owner from business for
his or her personal use is known as
drawing.
Example:-
*School fees for the owner’s son paid
from business account.
*Goods used for household requirement.
Pankaj Saikia. 2020

6. LIABILITIES
• Liabilities are the obligations or
debts or loans a business is obliged
to pay in future.
Example:-
Bank loan,
Creditor for purchase of goods on credit.
Salary payable to staff.
Pankaj Saikia. 2020

7. Pankaj Saikia. 2020
TYPES OF LIABILITY
ON THE BASIS OF
RELATION WITH BUSINESS
INTERNAL
LIABILITY
EXTERNAL
LIABILITY
ON THE BASIS OF
DURATION OF REPAYMENT
CURRENT
LIABILITIES
NON CURRENT
LIABILITIES

8. ASSET
• Assets are the resources owned by
an enterprise which have some
economic value and measurable in
terms of money.
• Example:
Furniture, Stock of goods, Building,
Deposit with Bank, Receivables, Etc.
Pankaj Saikia. 2020

9. Pankaj Saikia. 2020
TYPES OF ASSETS
ON THE BASIS OF
PHYSICAL EXISTENCE
TANGIBLE
ASSETS
INTANGIBLE
ASSETS
ON THE BASIS OF
DURATION OF LIFE
CURRENT
ASSETS
NON CURRENT
ASSETS

10. NON CURRENT ASSET
• It includes the assets that remains
for a period longer than a year and
have repeated use in production of
goods or services.
• Example:
Building, Furniture, Long term
Investment, etc.
Pankaj Saikia. 2020

11. CURRENT ASSET
• It Includes the assets that are usually
held for a period not longer then one
year and have one time use in production
of goods or services. Such assets are
acquired for the purpose of resale or to
convert in to cash in near future.
• Example:
Debtor, Stock, Cash in hand, Deposit in Bank,
etc.
Pankaj Saikia. 2020

12. TANGIBLE ASSET
• These are the asset that has real
or physical existence and can be
seen and touched.
• Example:-
Machinery, Land, Motor vehicle,
stock, furniture, etc.
Pankaj Saikia. 2020

13. INTANGIBLE ASSET
• The Asset which can not be seen
or touched but there existence
can be feel or realized through
the contribution to business.
Example:-
Goodwill, Trademark, Patent, Copyright,
etc.
Pankaj Saikia. 2020

14. EXPENDITURE
• The money spent or liability
incurred in purchasing goods or
services for production or sell or in
acquiring property.
Example:-
Payment wages, payment of telephone
bill, purchase of Machinery etc.
Pankaj Saikia. 2020

15. TYPES OF EXPENDITURE
CAPITAL EXPENDITURE
• Expenditure that are
incurred for getting
long term benefit or
in acquiring fixed
assets are capital
expenditure.
Example:
Money spent on
construction of Building,
purchase of Machinery etc.
REVENUE EXPENDITURE
• Expenditure incurred in a
year and return from
which is expected within
one financial year are
expense or revenue
expenditure.
Example:
Payment for salary, purchase
of raw-material etc.
Pankaj Saikia. 2020

16. GAIN
• The incidental or accidental profit or
income generated by a business are
called gain. Gains are not resulted by
an intended action of a business. Such
profit are non recurring in nature.
• Example:
Profit on sale of old fixed asset,
Winning from lottery. Etc.
Pankaj Saikia. 2020

17. INCOME
• The gross revenue earned by a
business during a period of time is
called income. It is the
consideration received against
goods or services sold by a business.
• Example:
Proceeds from sale of goods.
Royalty received. Etc.
Pankaj Saikia. 2020

18. ACCRUED INCOME
• The revenue generated during a an
accounting year but the amount of
revenue/income earned (money) is
yet to realise or receive.
• Example:
Commission earned but not received.
Interest receivable on investment.
Pankaj Saikia. 2020

19. INCOME RECEIVED IN ADVANCE
• The amount of revenue (money)
already realized or received as
income but not earned till the end of
an accounting year or the obligation
for that income is yet to discharge.
Example:
• Commission received in advance.
Pankaj Saikia. 2021

20. PROFIT
• Excess of revenue generated or
income over related expenses
incurred to earn the revenue over
a period of time is called profit. It
is a reward for the owner for
taking risk of business.
(Profit= Income- Expenditure)
Pankaj Saikia. 2020

21. GROSS PROFIT
The excess of revenue after deducting all
direct expenses incurred to earn such revenue
is called Gross Profit. It is ascertained by
preparing trading account.
(Gross Profit = Sales/revenue – Direct expenses)
or
{Gross Profit = Revenue from operation or
Net sales – (Opening stock + Purchases +
Other direct expenses – Closing Stock)}
Pankaj Saikia. 2020

22. NET PROFIT
The excess of revenue after deducting all
expenses (direct and indirect) incurred in
generating such revenue is called Net Profit.
It is derived by preparing Profit and Loss
Account.
(Net Profit = Gross profit – Indirect expense.)
{Net Profit = Gross Profit – ( administrative
expenses + selling and distribution expenses + other
expenses)}
Pankaj Saikia. 2020

23. COST
• It is the monetary value of resources
used in producing or in acquiring
some good or service.
It include all the expenses incurred in
purchasing raw materials and other
inputs, wages to the workers, storing
cost, power cost, depreciation and
maintenance cost of fixed assets,
transportation cost, etc.
Pankaj Saikia. 2020

24. LOSS
• It is the excess of expenses over the
revenue generated by a business
during a particular period. It
reduces owners capital/ equity in the
business. It includes incidental loss
like loss by fire, theft, accident, etc.
{Loss= (Expanses+ Incidental loss) – Revenue}
Pankaj Saikia. 2020

25. PURCHASE
• Purchase refers to the value of goods
purchased for resale or the raw
materials purchased to produce some
other good for the purpose of sale. It
does not include purchase of anything
for the purpose of use by the business.
• For example- Stationary purchased by a
stationary shop is purchase but furniture
purchased by it is not purchase.
Pankaj Saikia. 2020

26. PURCHASE RETURN/RETURN OUTWARD
• It refers to the value of goods or
services returned to the seller after
buying due to different reason like
substandard quality, damaged in
transit, un-matching specification
or information, expiry of time,
decreasing demand, etc.
Pankaj Saikia. 2020

27. SALES
• Sales refers to the value of goods or
services sold as a part of regular
course of business. It does not
include sale of anything which are
neither produced nor purchased for
any purpose other than resale.
• For example- Pencil or pen sold by
a stationary shop is sale, but old
furniture sold by it is not a sale.
Pankaj Saikia. 2020

28. SALES RETURN / RETURN INWARD
• It refers to the value of sold
goods returned by the customer
due to different reasons like
substandard quality, damaged in
transit, un-matching
specification or information etc.
Pankaj Saikia. 2020

29. GOODS
• Goods refers to the goods or services
(products) with which a business deal
(buy / sale / produce) as its regular course
of business.
• For Example; For a chemist shop the medicine
are the goods but the computer they used is
not good. Similarly, for a computer producer
computers are goods but the machines or
tools they use to produce the computers are
not good.
Pankaj Saikia. 2020

30. STOCK / STOCK IN HAND
• Stock refers to the sum of the value of
unsold finished goods, goods under
process of production and the stock of
raw material at a particular point of
time. Usually the stock is valued either
in market price or in cost whichever is
lower. Stock is usually valued at the end
of every accounting year.
Pankaj Saikia. 2020

31. DEBTORS / SUNDRY DEBTORS
• The person or institution who owes
money to a firm generally on account
of credit sale is called a Debtor. The
total amount receivable by a firm
from different parties on a certain
date is termed as Sundry Debtors. It is
an asset of a business.
• Example: X sold goods to Y on credit.
Y is a debtor for X
Pankaj Saikia. 2020

32. CREDITORS / SUNDRY CREDITORS
• The person or institution to whom an
individual or firm owes money on
account of credit purchase is called a
Creditor. The total amount payable by a
firm to different parties on a certain date
is termed as Sundry Creditors. It is a
liability of a business.
• Example: X sold goods to Y on credit. X is
a creditor for Y
Pankaj Saikia. 2020

33. VOUCHER
• It refers to the
documentary
evidence of a
transaction.
Accounting
transactions are
recorded with the
help of voucher.
Pankaj Saikia. 2020

34. DISCOUNT
• It is the deduction on list
price or written price of a
product. The difference
between the list price or
printed price and the
actual selling price is
called discount.
• Discount =
(List price – Selling price)
Pankaj Saikia. 2020

35. TRADE DISCOUNT
• Offering any
deduction on the
list price or printed
price at the time of
sale is called Trade
discount. Discount
rate is not
dependent on
mode and time of
payment.
Pankaj Saikia. 2020

36. CASH DISCOUNT
• Deduction on price of a
good or service allowed
by a seller to the buyer
at the time of payment
is called Cash Discount.
Cash discount is
allowed in addition to
trade discount to
induce early payment
depending on the time
and mode of payment. Cash payment- 10%
Within one month-5%
Pankaj Saikia. 2020

37. ACCOUNT (A/C)
• Account is summarised record
of business transactions relating
to an entity or a person or an
item.
• Example:
Mr Sarma’s A/C
Purchases A/C
Machinary A/C
Pankaj Saikia. 2020

38. ENTRY
• The process of recording a business
transaction is called entry. Transactions
are initially recorded in Journal,
Cashbook, Sales Book, Purchase Book,
Purchase Return Book and Sales
Return Book, based on nature of
transaction and policy of book keeping.
These books are popularly known as
books of primary entry.
Pankaj Saikia. 2020

39. CREDIT (CR.)
• The word Credit is derived from an
Italian word ‘Credito’.
• It refers to one accounting aspect
of a transaction as per Double
Entry System of accounting and
usually appeared in the right side
of a ledger account. It arises
mostly with income or profit,
decrease in asset and for giver.
Pankaj Saikia. 2020

40. DEBIT (DR.)
• The word Debit is derived from an
Latin word ‘DEBITUM’.
• It refers to one accounting aspect
of a transaction as per rule of
Double Entry System and usually
appeared in the left side of a
ledger account. It arises mostly
with expenses or loss, increase in
asset and for receiver.
Pankaj Saikia. 2020

41. PROPRIETOR / OWNER
• The person or group of person
who invest in a business and
bear the risk of loss and entitled
to get the profit from the
business is called proprietor or
owner. A business is considered
as a separate entity from is
owner in Accounting.
Pankaj Saikia. 2020

42. RECEIVABLES
• Receivables refers to the amount due
by outsiders to a business at a certain
points of time. It include trade
debtors, bills receivable, etc.
• It is an asset for a business as it
stands for the economic resources of
the firm remaining with others.
Pankaj Saikia. 2020

43. RECEIPTS
• The amount of money received or
receivable for selling goods or assets
or services is termed as receipt. It is
the inflow of cash and debtor.
• Receipt may be of two types-
• Revenue Receipt- Ex-Proceed from sale.
• Capital receipt- Ex-Proceed from sale of
old Asset.
Pankaj Saikia. 2020

44. OUTSTANDING EXPENSES
• It refers to those expense
incurred during an accounting
year but not paid till the date of
closing the book of accounts.
• Example:- Rent for the month of
March become payable but not
paid till 31st March.
Pankaj Saikia. 2020

45. PREPAID EXPENSES
• It refers to those payment the
consideration for which is not
received till the end of the
accounting year is called prepaid
expenses.
• Example:- Rent paid in advance for
the month of April and May on or
before 31st March of the year.
Pankaj Saikia. 2020

46. BAD DEBTS
• The amount of money receivable from
any debtors become irrecoverable due
to due to any circumstance is called
Bad Debts. Bad debts may arise due to
Death, Insanity or Insolvency of the
debtor. Sometimes it arises due to
dishonesty or poor creditworthiness
of the debtor also. It is a loss for
business.
Pankaj Saikia. 2020

47. SOLVENT AND INSOLVENT
• The person or organization who has
sufficient financial resources to pay off all
his or her all dues or liability is called
solvent.
(Value of Asset > Value of Liability).
• The person or organization who is unable
to pay off its liabilities even by selling all
financial resources hold by it is called
insolvent.
(Value of Asset < Value of Liability).
Pankaj Saikia. 2020

48. JOURNAL
• Journal is the book of account in which
the transactions are recorded for the
first time. Here all types of transections
are recorded as and when they
occurred. The recording a transaction in
journal is called passing entry. It is one
of the major book of primary entry.
Pankaj Saikia. 2020
Date Particulars Ledger
Folio
Debit (Rs) Credit (Rs)

49. LEDGER
Date Particulars JF Debit (Rs) Date Particulars JF Credit (Rs
A ledger is a summary statement of all
transactions relating to a particular account of a
person or an asset or an expanse or an income
or a liability. It provides a ready information
about the balance of an account as and when
required.
Pankaj Saikia. 2020

50. TRIAL BALANCE
Particulars Amount (Dr) Particulars Amount (Cr)
This is a summarised list of balances of all
ledger accounts of a business on a particular
date. All debit balance of ledger accounts are
recorded in debit side of and all credit balances
are recorded in the credit side of trial balance.
It is the base to prepare financial statement a
tool to assess accounting errors or mistakes.
Pankaj Saikia. 2020

51. TRADING ACCOUNT
Particulars Debit (Rs) Particulars Credit (Rs)
This is a part of final account which is prepared
to ascertain the gross profit for a period of time
( accounting year). All direct income and
expanses are recorded in this account. All
expanses are recorded in the debit side and all
incomes are recorded in the credit side.
Pankaj Saikia. 2020

52. PROFIT AND LOSS ACCOUNT
Particulars Debit (Rs) Particulars Credit (Rs)
This is a part of final account which is prepared
to ascertain the net-profit or net-loss earned
during a certain period of time usually for one
accounting year. It is prepared after Trading
Account with adjustment for all indirect income
and expense.
Pankaj Saikia. 2020

53. BALANCE SHEET
Liabilities Amount (Rs) Assets Amount (Rs)
The statement that is prepared as a part of Final
Account that express the financial position of a
business on a particular date. It has two sides,
the left side presents the capital and liabilities
and the right side presents the receivables and
assets in hand.
Pankaj Saikia. 2020

54. THANKS
PANKAJ SAIKIA
PGT. COMMERCE
MODERN ENGLISH SCHOOL
Pankaj Saikia. 2020