Basic Accounting Terms | Part-2

Basic Accounting Terms | Part-2

(1) Profit:It is excess of total revenues over total expenses of a business enterprise for an accounting period,Profit increases the investment of the owner.

(2) Gain:It is a monetary benefit,profit or advantage resulting from events or transactions which are incidental to business such as sale of fixed assets,winning a court case or apperecation in the value of an asset.

(3) Loss:The term conveys two different meanings.First,it conveys the result of the business for a period when total expenses exceed the total revenues.For example,if revenues are 2,00,000 and expenses are 2,40,000,the loss will be 40,000,Second,it refers to some fact or activity against which firm receives no benifit.For example,loss due to fire,theft,accident etc.It may be noted that losses differ from expenses.

(4) Purchases:The term purchases is used only for the purchase of goods in which the business deals.In case of manufacturing concern 'goods' means acquiring of raw materials for the purpose of conversion into finished product and then sale.In trading concern 'goods' are those things which are purchased for resale.

(5) Sales:Sales means transfer of ownership of goods or service to customers for a price.For example,If tarun sells a computer to varun,the ownership will be transferred from tarun to varun to recieved the agreed price of computer from varun.

(6) Stock:The term 'stock' includes the value of those goods which are purchased for reselling and which are lying unsold at the end of accounting period.

(7) Trade Receivables:Trade receivables refer to amount receivable on account of sale of goods or services rendered by the company in the normal course of business.

(8) Trade Payables:Trade payables is the amount payable on account of goods purchased or services rendered in normal course of business.

(9) Goods:Goods include all these things which are purchased for resale or which are used for producing the finished products which are also meant to be sold.Thus,for a furniture dealer purchase of chairs and tables is termed as goods,while for others it is furniture and it is termed as an assets.

(10) Cost:Cost can be termed as the amount o resources given up in exchange for some goods or services.The resources given up are money or money's equivalent expressed in terms of money.

(11) Voucher:A voucher is a document which provides the authorisation to pay and on the basis of which the business transactions are,first of all,recorded in the books of accounts.A  separate voucher is prepared for each transaction and it specifies the accounts to be debited or credited.The form of a voucher varies from firm to firm since vouchers are printed separately by different firms in their own names.Vouchers are prepared by accountant and each voucher is numbered and countersigned by an authorised person of the firm. 

(12) Discount:It is a rebate or an allowance given by the seller to the buyer.

Thanks For Reading!!!
-Sujal Juneja
(Juneja Technology)

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