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Basic Accounting Terms Ppt - Jahnvi Gupta 11-c

The document provides an overview of basic accounting terms and concepts, emphasizing their importance in tracking finances and forming financial statements. It outlines types of business transactions, definitions of capital, assets, liabilities, and various expenditures, along with examples of current and non-current assets and liabilities. Additionally, it discusses expenses, income, revenue, gain, and discounts, concluding that accounting serves as a vital information system for businesses.

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jahnavigupta2009
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1K views19 pages

Basic Accounting Terms Ppt - Jahnvi Gupta 11-c

The document provides an overview of basic accounting terms and concepts, emphasizing their importance in tracking finances and forming financial statements. It outlines types of business transactions, definitions of capital, assets, liabilities, and various expenditures, along with examples of current and non-current assets and liabilities. Additionally, it discusses expenses, income, revenue, gain, and discounts, concluding that accounting serves as a vital information system for businesses.

Uploaded by

jahnavigupta2009
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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BASIC ACCOUNTING TERMS

Name: Jahnvi Gupta


Class: XI-C
Roll No: 18
MPORTANCE OF BASIC
ACCOUNTING TERMS
It helps us to keep track of
our finances, taxes and
maintain records

It is necessary for
businesses to form detailed
financial statements

Helps us to understand
value of money and assess
risk while investing money
BUSINESS TRANSACTIONS AND
ITS TYPES

A business transaction is an economic event expressed in terms of money


which brings in a change in the financial position of an enterprise. It
involves transfer and exchange of goods or services such as purchase/sale
of goods and services, wages paid to workers, rent paid, dividend received,
lending and borrowing money. Various types of business transactions are
given below:
1. Cash Transaction - When a transaction is labelled as a cash transaction,
it signifies that the payment was made or received in cash at the time of
the transaction.
2. Credit Transaction - A credit transaction is a delayed payment method
where goods or services are received upfront, and the payment occurs at
a later date.
BASIC TERMS IN ACCOUNTING
EQUATION
CAPITAL
Capital is the amount introduced in a business by the owner (in case of
sole proprietorship) or by partners (in case of partnership and
business). It may be in the form of money or assets having monitory
value.
It is a liability because under ‘Business Entity Concept’ both Owner
and Business are separate legal entities. Transactions are recorded in
the books of accounts from the point of view of Business. Capital is
also known as Owner’s Equity or Net Worth.

CAPITAL = ASSETS-LIABILITIES
ASSETS

Assets are economic resources of an enterprise that can be expressed in monetary terms. Assets
are items of value used by the business in its operations. Assets can be broadly classified into
two types

NON-CURRENT ASSETS CURRENT ASSETS

Non-current assets are those assets which last Current assets are those assets which get
for a long period of time or the benefit of converted into cash within an operating cycle,
these assets are availed for a long period i.e., generally one year. In this way, current assets
more than a year. In this way, fixed assets are are assets held on a short-term basis.
assets held on a long-term basis.
LIABILITIES

Liability means amount owed (payable) by the business which has to


be paid sometime in the future.
 Liabilities towards the owner of the business is termed as internal
liabilities, i.e. Capital.
 Liabilities towards the outsiders is termed as External liabilities.
 Loan from bank, Creditors, Bills Payables, Bank Overdraft,
Outstanding Salaries are the examples of liabilities.

LIABILITIES = ASSETS-CAPITAL
BASIC TERMS : ASSETS
EXAMPLES OF CURRENT ASSETS

 Cash In Hand
 Cash At Bank
 Stock - Stock (inventory) is a measure of something on hand-goods, spares and other items in
a business.
 Debtors - Debtors are persons and/or other entities who owe to an enterprise an amount for
buying goods and services on credit.
 Goods - It refers to the products in which the business unit is dealing, i.e. in terms of which it
is buying and selling.
EXAMPLES OF NON-CURRENT
ASSETS

 Machinery
 Land
 Vehicles
 Building
 Patent
 Trademark
 Copyright
BASIC TERMS : LIABILITIES
CURRENT LIABILITIES

Current liabilities are an enterprise’s obligations or debts that are due within a year.

 Creditors - Creditors are persons and/or other entities who have to be paid by an
enterprise an amount for providing the enterprise goods and services on credit.
 Bad Debts - A debt which is irrecoverable from debtors or customers.
 Accrued Expenses
 Bank Overdraft
 Short Term Loans
 Interest Payable
NON-CURRENT LIABILITIES

Non current liabilities are referred to as the long term debts or financial obligations that
are listed on the balance sheet of a company. These are also known as long term
liabilities. These obligations are not due within twelve months or accounting period.

 Long – Term Loans


 Pension Benefit Obligations
OTHER BASIC TERMS
EXPENDITURE

Money spent or liabilities incurred for acquiring goods or services or assets is


called expenditure. Expenditure may be classified in three categories:
1. Capital Expenditure - All those expenditures incurred to buy fixed assets
or adding to their value are called capital expenditure.
2. Revenue Expenditure - All those expenditures which are incurred
repeatedly within a certain period during a year. They are expenditures
incurred by carrying on the normal course of business.
3. Deferred Revenue Expenditure - Those expenditures whose usefulness
extends over more than one accounting period i.e. large amount of money
spent on advertisement for launching a new product.
EXPENSES,INCOME,REVENUE
AND GAIN

 Expenses - Costs incurred by a business in the process of earning revenue.

 Income - The difference between Revenue and Expenses is called Income.

 Revenue - These are the amounts of the business earned by selling its products or providing
services to customers.

 Gain - A profit that arises from events or transactions which are incidental to business.
DISCOUNT

Discount is the deduction in the price of the goods sold. It is


offered in two ways.

1. Trade Discount - Offering deduction of agreed percentage of


list price at the time of selling goods is trade discount.
2. Cash Discount – The deduction is given at the time of payment
on the amount payable.
CONCLUSION

Accounting is not an end in itself. It is a means to an end. It plays the role of a:


 Language of business
 Historical record
 Current economic reality
 Information system
 Service to users
THANK
YOU!

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