Accountancy · Ch 1 — Introduction to Accounting
Basic Accounting Terms
Basic Accounting Terms
A small, precise vocabulary is used throughout accounting — using the wrong term (e.g. confusing "debtor" with "creditor") changes the meaning of an entire entry. The key terms are defined below; the …
An economic activity that changes the financial position of a business and can be measured in money, e.g. purchase of g …
The amount invested by the owner in the business; from the business's point of view it is a liability …
Cash or goods withdrawn by the owner from the business for personal use; it re …
Economic resources owned by a business that have money value and are expected to bring future benefit, e.g. cash, stock, lan …
Amounts owed by a business to outsiders, e.g. creditors, loans, ban …
A person or entity who owes money to the business, usually because goods were sold to …
A person or entity to whom the business owes money, usually because goods were bought from …
Articles purchased by a business for resale, or materials purchased for use in …
The amount earned by a business from the sale of goods/services or from other sources such as interest, commissi …
The cost incurred by a business in the process of earning revenue, e.g. rent, sa …
The total amount of goods bought for resale or for use in production, whether for cas …
The total amount of goods sold, whether for cash or …
Goods lying unsold with the business at a given date — opening stock (at the start of the period) and closing …
A documentary evidence (cash memo, invoice, receipt) that supports and confirms that a transact …
A deduction from the list price/invoice amount — Trade Discount (given to encourage bulk buying, never recorded in the books) and Cash Discount (given for prompt pa …