BASIC

ACCOUNTING
TERMS
Let’s start a business
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1. CAPITAL : The amount invested in business by its
owners ( partners ,members) at a particular time is
known as CAPITAL of business. It is also known as
OWNER’S EQUILTY or NET WORTH.
2. LIABILITIES : The amount which a business owes
( payable ) to outsiders of business is called
liabilities. It is a financial burden (debt) on business.
 It is of two types

i) Current liabilities : Liability which we have to pay within

a year is called current liability. It is also known as short
term borrowings. For examples,

ii) Non-current liabilities : Liability which we can pay

after a year is called non-current liability or also known as
long term borrowings. For examples ,
 3. ASSETS : Assets are the properties (tangible assets
and intangible assets) owned by business. They are the
economic resources of the business. In other words,
anything which will enable the firm to get economic
benefit in the future, is an asset. Examples of assets are
land, building, machinery, furniture, stock, debtors, cash
and bank balances.
 Types of Assets

Non current Assets: Non-current Assets are those

assets which are held by an entity or enterprise not
with the purpose to resell but are held either as
investment or to facilitate business operations. In
other words, those assets are held by the business
from a long term point of view
 Types of Non current Assets

Tangible Assets : Tangible assets are those assets

which have physical existence, i.e, they can be seen
and touched. Examples of tangible assets are land,
building, Machinery, computer, furniture etc.

Intangible Assets: Intangible assets are those assets

which do not have physical existence, i.e, they
cannot be seen and touched. Examples of intangible
assets are patents, goodwill, trademarks, computer
software.
2. Current Assets : Current assets are those assets
which are held by an entity or enterprise with the
purpose of converting them into cash within a short
period, i.e, one year. For example, goods are
purchased with a purpose to resell and earn profit,
debtors exist to convert them into cash, i.e, receive
the amount from them.
 4 . DRAWINGS : The amount/goods withdrawn by
owner for his/her personal use is called drawings . It
is always deducted from CAPITAL.

5. GOODS : Goods are the physical items of trade

that are purchased or manufactured to be sold. For an
enterprise dealing in home appliances such as TV,
Fridge, AC etc. are goods
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