Glossary

Financial Accounting
 Financial : Transactions which can be expressed in terms of Money
 Accounting: Keeping a track of Financial Transactions
 AS: Accounting Standards: Set of rules used to make financial
accounting
 Ind AS: Indian Accounting Standards, made by ICAI
 ICAI: Institute of Chartered Accountant of India
 IFRS: International Financial Reporting System
 Companies Act 2013: Important amendments are given in the act
regarding accounting
 Financial Statements: The statements showing the financial status of
the organization like position of Profit / Loss during the year, position
of Assets and Liabilities on the last day of Accounting year i.e 31st
March
 Financial Statements comprise of Statement of Profit and Loss,
Link to Accounting Standards

• https://www.caclub.in/list-of-accounting-standards-of-icai-as/
• https://resource.cdn.icai.org/55939asb45327.pdf
• https://resource.cdn.icai.org/56169asb45450.pdf

• ASB: Accounting Standard Board (agency of ICAI responsible for

forming Accounting Standards)
• Business Organization: An entity engaged in selling a product or
service for profit
• Economic transactions: exchange of goods or service with return
associated with it
• Capital: The money invested in the business for long term
• Investors: People or organization investing money in the business
• Internal Investors / Owners: Investors who are investing capital
in the organization and also have the decision making rights
• External Investors: Investors who are investing capital in the
organization and have the capacity of influencing the decision
making.
• Share Capital: Capital invested is divided in smaller portions and
each portion is named as Share
• Liability: With the obligation of repaying back
• Asset: The items owned by the organization which help in the
process of revenue generation: Machinery, Factory Building,
Inventory of Raw material
• Types of Assets:
• Current Assets: the assets which are useful in the normal course
of business, maintained in the form or cash, or can be convertible
in cash within a time period of one year
• Cash, Inventory, Debtors, Bills Receivables etc
• Non Current Assets: earlier also known as fixed assets, usefulness
is for longer period of time and not purchased with the purpose of
resale
• Machinery, Plant, vehicles, Furniture
• Non Current Assets can be Tangible or Intangible
• Tangible Fixed Assets: Assets which have a Physical existence eg:
Machinery
• Intangible Fixed Assets: Assets which do not have a Physical
existence eg: Goodwill, Patent, Copy Right
• Fictitious Assets: which are not written off during the current
accounting period eg: Accumulated losses, Deferred Revenue
Expenditure
• Purchases: Good obtained for the purpose of resale from a supplier
• Purchase Return: Goods sent back to the supplier
• Sales: Goods sold to the customer
• Sales Return: Goods returned back from the Customer
• Stock or Inventory: Goods held for sale or for consumption in the
production process
Bills Receivables: When the customer is not ready to pay in cash for the
goods, he draws a Bills of Exchange, promising to pay the amount some
time later, the document written in known as Bill.
Bills Payables: When the organization is not ready for making their
payment in cash, they can also issue a Bill to the vendor
Debtor: Customer who purchases the good on credit
Creditor: Vendor from whom we purchase the goods on credit
Trade Receivables: B/R and Debtors
Trade Payables: B/P and creditors
Discount: Discount is an incentive given to the customer
Types of Discount: Trade Discount & Cash Discount
Trade Discount: To promote sales, given to all traders
Cash Discount: discount given to the debtors for prompt payment of
cash
Capital Expenditure: the expenditure done to purchase an Asset, the
benefit of that asset is going to extend beyond current accounting
period
Revenue Expenditure: The expenses done to maintain the productivity
or earning capacity of a business and are incurred for day to day
expenses
Deferred Revenue Expenditure: expenditure made in the current
accounting period but the benefit for the same will be received in
subsequent accounting years. Normally this expenditure is written off
during 3 to 5 years
Revenue Receipts: The money received by normal course of action,
selling of product or services offered by the organization
Capital Receipts: money received in the business but not of revenue
nature eg: sale of assets, money received by loan
Drawings: the money or goods or any other asset used by the owner for
his personal use

Why accumulates losses are fictitious assets

The term fictitious means “Not True” or Fake
Expenses & losses which for some reason are not written off during the
accounting period of their incidence.
Eg: Preliminary expense
the expenses which are incurred by the organization before its
registration with the registrar
Deferred Revenue Expenditure
expenditure made in the current accounting period but the benefit
for the same will be received in subsequent accounting years. Normally
this expenditure is written off during 3 to 5 years
 Identify the following items as
Assets, Liabilities, Revenue, Expenses or Capital
• Machinery • Sales
• Purchases • Furniture
• Stock • Interest Received
• Creditors • Rent paid
• Capital • Loans Taken
• Salary paid to the • Loans Granted
employee
 Basis of Accounting
Cash System: the system records the Accrual System: the system records the
transactions relating to transactions relating to
• Revenue • Revenue
• Costs • Costs
• Assets • Assets
• Liabilities • Liabilities
in the year in which actual receipt or In the year in which they have been
payment takes place accrued
According to Co. Act 2013, all the
companies must maintain books of
accounts according to this system
• Prepaid: paid in Advance, not relating to the current accounting period
• Outstanding: Delay in payment, related to the current accounting period
• Cash System of Accounting: • Accrual System of Accounting:

Hybrid System of Accounting: the

system records the transactions
relating to
Incomes: Cash Basis
Expenses: Accrual Basis
 Books & Statements in Accounts
• Journal:
• The book of Prime Entry or original entry
• The transactions are recorded for the first time in chronological
order
• The process of recording the transactions in Journal is
Journalizing
• The entry made in Journal is Journal Entry
• Format of Journal
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

Date on which the Details about the Ledger folio or the Amount Debited Amount Credited
transaction is done transaction & Ledger page
Narration number
• Ledger
• Book of secondary Entry
• Prepared after Journal
• The process of making entry in ledger is Posting
• Posting is the process of transferring the details of transaction
from Journal to ledger
• It is a “T” shaped account
Name of the Account

Dr. Cr.
Date Particulars Folio Rs. Date Particulars Folio Rs.
• Trial Balance
• Prepared from the closing balances of all ledger accounts
•
• Depreciation: Normal wear and tear in the Tangible assets
• Depletion: Removal of available but irreplaceable resources such as coal from
coal mine
• Amortization: writing off Intangible Assets is amortization
• Dilapidations: damage done to the building when on rent or lease
• Wasting Assets: which include mineral rights, expenses related to exploration for
and extraction of oil, minerals, natural gas and other non-regenerative resources
• Biological Assets: Living
• Bearer Plants: used in production or supply of agricultural produce, more than a
period of 12 months, never sell the bearer produce as agri produce
• Mango tree (AS 10)
• IFRS: international financial Reporting System
• FEB: Future Economic Benefits