BASIC TERMINOLOGY OF ACCOUNTS

Goods:

Goods are the Products which a business unit produces and sells in an aim of getting profit. The items that are purchased, used in the business are not termed as Goods for example Furniture dealer purchase Chairs and tables for sale are termed as goods but the same chairs and tables are used for business are termed as fixed assets.

Discount:

Discount is the deduction amount on sale or purchase price. It happened on two ways

Trade Discount

Cash Discount

The discount that offered in percentage on the list price at the time of sale of goods is called Trade Discount. It is generally given to wholesalers by manufacturers and wholesalers to retailers.

The Discount that happen after the credit sales, debtors may given certain amount of deduction in the amount of due if they pay the stipulated period or before. This deduction is given at the time of payment on the amount payable so, t is termed asCash Discount.

Voucher:

The documentary evidence in support to the transaction is called Voucher. For example if we buy goods for cash we get cash memo, at the same time if we buy goods on credit we will recve an invoice , in payment of the credit we will receive Receipt, and so on.

Drawings:

Drawings are the Utilization of Business goods or money for the personal use of owner. This reduces the investment of the Owners.

Purchase:

The total amount of Goods produced by a business on credit and cash for use or sale is called Purchases.

In trading concern Merchandise is purchased for resale with or without processing.

In manufacturing concern raw materials are purchased and convert them to finished goods and then sold

Purchases are made either Credit or Cash.

Sale:

The change of Ownership rights of the finished good is called sale . For example if A sells a car to B for certain amount than B will become the Owner to the Car as A might be the Manufacturer of the Cars.

Stock:

The Finished good that need to dispatched but remain in the business at the end of the period is called stock (or) Stock in hand.

Debtors:

Debtors are the persons or other entities who owe certain enterprise money having bought goods and services on credit basis. The total amounts against such entities or persons are shown on Asset side of the balance sheet at the end of the accounting period.

Creditors:

Creditors are the persons or the other entities whom the money has to pay by the enterprise in making of credit Purchases. The total amounts against such entities or persons are Shown Liabilities side of the balance sheet at the end of the Accounting period.

Working Capital:

The difference in between Current assets and current liabilities is termed as Working Capital