BASIC ACCOUNTING TERMINOLOGY

Basic Accounting Terminology (Class 11)

No.	Term	Meaning / Definition	Example
1	Accounting	The process of recording, classifying, summarizing, and interpreting financial transactions.	Recording sales, purchases, and expenses of a business.
2	Bookkeeping	The part of accounting that involves recording of financial transactions in books.	Recording sales in the sales book.
3	Transaction	Any event that involves exchange of money or money’s worth between two parties.	Buying goods for ₹10,000.
4	Event	Any happening that may or may not be financial in nature.	Opening a new branch (non-financial) or selling goods (financial).
5	Assets	Valuable things owned by a business.	Cash, building, machinery, furniture.
6	Liabilities	Amounts which the business owes to others.	Loan from bank, creditors.
7	Capital	Money or goods invested by the owner into the business.	Owner invests ₹1,00,000 to start a shop.
8	Drawings	Money or goods taken by the owner for personal use.	Taking ₹5,000 cash for personal use.
9	Debtor	A person who owes money to the business.	A customer who bought goods on credit.
10	Creditor	A person to whom the business owes money.	A supplier from whom goods were bought on credit.
11	Goods	Items bought or produced for resale or trade.	Clothes in a garment shop.
12	Purchases	Buying of goods for resale or use in business.	Buying stock worth ₹20,000.
13	Sales	Selling of goods for cash or credit.	Selling goods worth ₹5,000.
14	Revenue	Income earned from business activities.	Sales, commission, rent received.
15	Expenses	Cost incurred to earn revenue.	Rent, salaries, electricity.
16	Profit	Excess of revenue over expenses.	Income ₹50,000; Expenses ₹30,000 → Profit ₹20,000.
17	Loss	Excess of expenses over revenue.	Income ₹10,000; Expenses ₹12,000 → Loss ₹2,000.
18	Voucher	Documentary evidence of a business transaction.	Cash memo, invoice, receipt.
19	Journal	Book of original entry where transactions are first recorded.	Debit and credit entries.
20	Ledger	Book of final entry containing accounts of all items.	Cash A/c, Sales A/c, Purchases A/c.
21	Trial Balance	A statement showing debit and credit balances of all accounts to check arithmetical accuracy.	Prepared before final accounts.
22	Balance Sheet	A statement showing assets and liabilities of a business on a specific date.	Shows financial position on 31st March.
23	Accounting Equation	Assets = Liabilities + Capital	e.g., ₹1,00,000 = ₹20,000 + ₹80,000
24	Receipts	Amounts received by business in cash or through bank.	Rent received, sale proceeds.
25	Payments	Amounts paid by business in cash or through bank.	Payment for rent, salaries.
26	Cash Book	Book that records all cash and bank transactions.	Cash receipts and payments.
27	Outstanding Expenses	Expenses that are due but not yet paid.	Salary due ₹2,000.
28	Prepaid Expenses	Expenses paid in advance.	Rent paid for next month ₹1,000.
29	Accrued Income	Income earned but not yet received.	Interest due ₹500.
30	Depreciation	Decrease in value of a fixed asset due to use or time.	Machinery depreciates by ₹10,000 per year.