Book-Keeping: Meaning, Objectives, Merits & Method – Vocabulary Flashcards

40 English vocabulary flashcards covering key terms and concepts from the lecture on book-keeping, its objectives, merits and methods.

Book-keeping

The art and science of systematically recording all business transactions in a set of books.

Accountancy

The broader process of recording, classifying, summarising and interpreting financial transactions, beginning with the trial balance and ending with final accounts.

Double Entry Method

Scientific system in which every transaction affects two accounts—debit and credit—allowing accurate preparation of Profit & Loss Account and Balance Sheet.

Single Entry System

Incomplete bookkeeping method that keeps only a cash book and a few personal accounts; unsuitable for full final accounts.

Cash Method

System that records only cash receipts and payments, often used by clubs, hospitals and professionals where profit measurement is secondary.

Indian Accounting System

Indigenous long-bahi record-keeping using folds and Indian scripts; parallels double entry and can yield financial statements.

Lucas Pacioli

15th-century Italian scholar whose 1494 work introduced the modern double entry system.

AICPA (Definition of Accounting)

Recording, classifying, summarising and interpreting money-measured transactions and events in a significant manner, per the American Institute of Certified Public Accountants.

Journal

Book of original entry in which transactions are first recorded chronologically.

Ledger

Principal book that classifies journal entries by posting them to individual accounts.

Trial Balance

Statement of ledger balances prepared to test the arithmetical accuracy of bookkeeping.

Profit and Loss Account

Statement showing profit earned or loss incurred during an accounting period.

Balance Sheet

Financial statement displaying assets, liabilities and capital on a specific date.

Debtors

Persons or entities that owe money to the business.

Creditors

Persons or entities to whom the business owes money.

Assets

Economic resources owned by a business expected to provide future benefits.

Liabilities

Obligations of a business payable to outsiders.

Capital

Owner’s investment in the business; the residual interest after deducting liabilities from assets.

Profit

Excess of revenues over expenses within an accounting period.

Loss

Excess of expenses over revenues within an accounting period.

Accounting Period

The span of time (monthly, quarterly, yearly, etc.) for which financial results are measured.

Solvency

Condition in which a firm’s assets exceed its liabilities, showing ability to meet debts.

Insolvency

Condition where liabilities exceed assets, often leading to a legal declaration of inability to pay debts.

Pilferage

Small, often repeated theft of goods; controlled by keeping accurate stock records.

Fraud

Intentional misrepresentation or misappropriation that proper bookkeeping helps detect and prevent.

Error

Unintentional mistake in recording or posting transactions, revealed by accountancy checks.

Objectives of Book-keeping

Overall goals of recording transactions to show profit or loss and ascertain financial position.

Main Objectives of Book-keeping

Core aims such as determining profit or loss, knowing assets and liabilities, and measuring business progress.

Subsidiary Objectives of Book-keeping

Additional aims like detecting fraud, determining taxes, knowing stock, cash, capital and debtor-creditor balances.

Characteristics of Book-keeping

Essential features including scientific basis, systematic recording, chronological order and focus on true financial position.

Ideal Method of Book-keeping

Recording approach that is simple, informative, economical, scientific, accurate, flexible, complete and legally compliant.

Science (in Book-keeping)

Body of universally accepted principles and laws that govern the recording of transactions.

Art (in Book-keeping)

Practical application of accounting principles requiring skill to create useful records.

Flexibility

Quality of an accounting system that adapts easily to expansion or change with minimal cost.

Economy (in Accounting Method)

Characteristic of a bookkeeping system that keeps recording costs low relative to benefits.

Purposive

Quality of a method that fully achieves the objectives of accountancy by covering all relevant transactions.

Scientific Method (in Accounting)

Use of well-defined rules and principles to ensure accuracy and reliability in records.

Chronological Order

Date-wise sequencing of entries to maintain clear and systematic records.

Debtor-Creditor Position

Information on amounts owed by and to the business, aiding payment planning and cash recovery.

Comparative Study of Profits & Losses

Analysis of current results against previous periods to identify trends and corrective measures.