Before understanding the accounting one should also know about Accounting terms being used in accounts. A brief description is stated below. There a lot of terms but here we are giving some most important list. You may contact us for any information.Here are some Accounting Terminologies as mention below.
Business: an activity taken for the purpose of profit is call business. Organization made for making the profit with have going concern concept.
Voucher: A proof of transaction being occurred between two people or unit (Company to company, or firm etc.) for example when you purchased something from shop, you get a bill, memo, an evidence of transaction.
Transaction: Exchange of anything (having monetary value) between two units is call transaction. It should be purely for the purpose of business instead of any personal. It is the first step of bookkeeping.
Ledgers or Account: Also called T-Account, are the individual account of specific account. Its shows the complete information of transactions being posted in Journal/Daybook.
Proprietor: Proprietor is the owners of the business, who invest money or thing, have monetary value into the business. Other than Sole proprietorship it may be two or more than two people.
Drawing: As per business entity concept, Proprietor all personal transactions are not part of business and so they will be treated via separate accounts. If he invest which increase Company assets or worth it will be treated as Capital, on the other hand if he withdrawal cash or take something which decrease the assets or worth of business then it will be posted into Drawing Account. That means Goods, or cash taken away by the proprietor for personal use is calling Drawing.
Purchase Definition in the accounting: buying goods for carrying out the business is called purchases. Relate to inventory, for creating the finished goods. Here running types items will not be included like supplies. Purchased may be on cash or credit basis.
Purchase return: When goods are returned to the same supplier from where they were bought
Sale: Selling goods for getting profit is called Sale to the customer. Here should note that sale in accounting term is selling for trade, Like selling of assets are not called sales.
Return inward Or Sale Return, when customer returns the goods purchased from the business.
Trade Discount, Giving discount over list price is called trade discount. Usually these type of head of account is not maintained, But its recommended to be update in books for auditing and decision making purpose.
Cash Discount, if debtors paid amount in less than given time he is allowed a % of discount as mutually agreed at the time of transaction.
Commission: Commission giving to the agent for purchasing or dealing on behalf of company.
Debtors are the parties from which company have Account receivable amounts. These are the assets of the company, Closing balance are shown in the balance Sheet. It may be against the sale of Goods or assets sold to them.
Creditors: To whom business entity is responsible to pay the amount of debt; these are mention in account payable head. It may against loan or purchase of anything.
Assets: Economic resources having value is called assets. It may be in shape of land, building, plant and machinery etc. There are two types of assets, one is tangible asset and second one is in-tangible assets.
Profit and loss account is a financial statement, describing the net result of business of prescribed period about profit and loss of the entity.
Balance Sheet, indicating the ending balances of ledgers, of the business entity for specific accounting period. This is a statement showing the summarized financial information of organization.
Good Will is the worth of the business other than assets, like a brand name is itself have a value. This is earned over years after giving quality output to the users. You can also say the value of Good repute.
Accounting Period, the period for that financial statements are prepared, it may be for one month, Quarter or one year. Mostly accounting period is of twelve month, from Jan to December or July to June is in general practice.
Above mentioned are most common accounting Terminologies and concept used in Accounting.