Everyone has no opportunity to study financial accounting. But as a Financial Accountant or CEO, you need to know the basic accounting terms to process further bookkeeping terminology. Here are 14 Basic Terms of Accounting that help you to run a successful business.
Definition of accounting terms
1.Business Transaction
Exchange of goods and services among two or more persons is called Business Transaction
2. Purchases
Anything brought in the business for reselling purpose.
3. Sales
When goods are sold at a specific price in the market. It is known as Sales
4. Discount
The concessions, detections, and allowances gave by one trader to another are called Discount. There are two types of discount
Cash Discount:
Cash discount is given on the credit sale
Trade Discount
Trade discount is given at the time of sale or purchase
5. Drawing
Goods are taken away by the business owner from his business for his personal use
6. Debtors
A debtor is a person that own money to the other person or party. Debtors are the assets for any business owner
7. Creditors
A creditor is a person to whom money is owing. or " Creditor can be Individual or Company that lends Money or Services under repayment Agreement." So, Credit is a liability on any business owner. Creditors can be divided into two types
Personal
Personal creditors can be friends and family member and there is no need for any agreement.
Real
Real creditors can be Bank or Financial entities and there needs an agreement.
8. Bad Debtor
The amount which is not recoverable from our debtors is known as bad debts
9. Depreciation
The gradual and the Permanent decrease in the value of Assets due to any cause
10. Assets
Things of value possessed by an owner in the business are called Assets. or Assets are economic resources owned by a business and are expected to give benefits in future.
Fixed Assets
The assets which are purchased for long-term use and are not easy to convert into cash. e.g Land, Building, Machine, Furniture, Equipment,
Current Assets
The assets which are easily convertible into cash. e.g. Cash in Hand, Debtor, Bill receivable, goods, prepaid expenses. etc.
11. Expense and Cost
Cost
Cost take place when assets or services are acquired
Expense
Expired portion if the cost is known as Expense
12. Liabilities
All the debts due by business to its proprietors or other people
13. Income
The amount receive or to be received on account of good soled or service randed
14. Capital
The amount invested in the business by the owner.
These are Basic Accounting terms in Financial Accounting which are necessary to know. In the next tutorial, We will try to cover Accounting Concept and Principles.
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