Accounting Terminology

1.Definition of accounting:  “The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least of a financial character and interpreting the results there of”.

2. Book keeping: It is mainly concerned with recording of financial data relating to the business operations in a significant and orderly manner.

3. Concepts of accounting:

A. separate entity concept

B. going concern concept

C. money measurement concept

D. cost concept

E. dual aspect concept

F. accounting period concept

G. periodic matching of costs and revenue concept

H. realization concept.

4 Conventions of accounting

A. conservatism

B. full disclosure

C. consistency

D  materiality.

5. Systems of book keeping:

A. single entry system

B. double entry system

6. Systems of accounting

A. cash system accounting

B. mercantile system of accounting.

7. Principles of accounting

a. personal a/c :   Debit is the receiver and Credit is the giver

b. real a/c        : Debit what comes in credit what goes out

c. nominal a/c   : Debit all expenses and losses  credit all gains and incomes

8. Meaning of journal: Journal means chronological record of transactions.

9. Meaning of ledger: Ledger is a set of accounts. It contains all accounts of the business        enterprise whether real, nominal, personal.

10. Posting: It means transferring the debit and credit items from the journal to their respective accounts in the ledger.

11. Trial balance: Trial balance is a statement containing the various ledger balances on a particular date.

12. Credit note: The customer when returns the goods get credit for the value of the goods   returned. A credit note is sent to him intimating that his a/c has been credited with the value of the goods returned.

13. Debit note: When the goods are returned to the supplier, a debit note is sent to him            indicating that his a/c has been debited with the amount mentioned in the debit note.