Introduction to Book-keeping and Accountancy

Comprehensive vocabulary flashcards covering the introduction to book-keeping, the evolution of accounting, basic terminologies, accounting concepts, and standards based on the lecture notes.

Book-keeping

The recording of business transactions in the books of accounts in a systematic way where all monetary transactions are recorded datewise.

Arthashastra

A book written by Minister Kautilya during Chandragupta Maurya's regime that references ways of maintaining accounting records.

Luca De Bargo Pacioli

An Italian merchant who introduced the Double-Entry Book-keeping system in the year 1494.

Management Accounting

A branch of accounting that emerged in the 20th century due to the need for analysis of financial information for managerial decision making.

Accountancy

The practice of recording, classifying, and reporting business transactions, referring to the entire body of the theory and process of accounting.

Cash Basis of Accounting

A method where actual cash receipts and actual cash payments are recorded; revenue is recognized when cash is received and expenses when cash is paid.

Accrual (Mercantile) Basis of Accounting

A method where revenue is recognized when it is earned or accrued and expenses are recognized when they are incurred, whether paid or not.

Mixed (Hybrid) Basis of Accounting

A combination of cash and accrual bases where revenues and assets are generally recorded on cash basis and expenses on accrual basis; its use is prohibited in India.

Reliability

A qualitative characteristic of accounting information that makes it useful for forming judgements about the earning potential and financial position of a business firm.

Relevance

The quality of accounting information that helps users form predictions about outcomes of past, present, and future events or confirm expectations.

Understandability

The quality of information that enables users to perceive its significance through the use of adapted terminology and form.

Comparability

The quality of financial information that assists decision-makers in determining relative financial strengths and weaknesses between firms or periods.

Monetary Transactions

Business transactions involving an exchange of money or money's worth directly or indirectly; only these are recorded in the books of accounts.

Cash Transactions

A business transaction in which cash is paid or received immediately.

Credit Transactions

A transaction where cash is not paid or received immediately at the time of the transaction but at a later date.

Barter Transactions

Non-monetary transactions involving the exchange of one thing against another thing.

Entry

The recording of a business transaction in the proper form or method in the books of accounts.

Narration

A brief explanation of a business transaction passed below the journal entry, usually starting with the word "Being" or "For".

Goods

Merchandise, commodities, articles, or things purchased or manufactured for the purpose of sale and to earn profit.

Capital

The total amount invested into the business by the owner, calculated as: $Capital = Assets - Liabilities$.

Drawings

The amount of cash or value of goods and assets withdrawn from the business by the owner for personal use.

Debtor

A person who owes money to the business for getting goods and services on credit.

Creditor

A person to whom the business owes money for getting goods or services on credit.

Bad Debts

An irrecoverable amount from a debtor which represents a revenue loss to the business.

Capital Expenditure

Expenditure incurred to acquire a fixed asset or increase its value, providing non-recurring benefits for a long period.

Revenue Expenditure

Normal day-to-day operating expenses from which no future benefit is expected, providing short-term benefits of less than one year.

Deferred Revenue Expenditure

An expenditure revenue in nature whose benefit is not exhausted within one year and is written off over multiple years.

Trade Discount

An allowance given on the catalogue or list price of goods at the time of purchase or sale which does not appear separately in the books of accounts.

Cash Discount

The amount deducted from the final amount due at the time of receipt to encourage prompt payment; it appears in the books of accounts.

Solvent

A person whose assets are more than or equal to their liabilities, making them financially sound to pay off debts.

Insolvent

A person whose liabilities are more than their assets and who is not in a position to pay off their debts.

Goodwill

The reputation of a business expressed in terms of money; it is an intangible asset that contributes to superior earning capacity.

Fixed Assets

Assets such as Land and Building or Plant & Machinery that give long-term benefits to the business.

Current Assets

Assets held for the operating year that can be converted into cash very easily, such as Debtors or Cash in Hand.

Fictitious Assets

Imaginary assets not represented by tangible property and having no realizable value, such as deferred revenue expenses.

Contingent Liabilities

Liabilities that may arise in the future depending on the happening or non-happening of a certain event; they are shown as a footnote to the Balance Sheet.

Business Entity Concept

The concept that a business unit is separate and distinct from its owner, meaning only business transactions are recorded.

Money Measurement Concept

The principle that only those transactions which can be expressed in terms of money are recorded in the books of accounts.

Cost Concept

The principle that an asset is recorded in the books based on its historical acquisition cost, reduced systematically by depreciation.

Conservatism

The policy of anticipating no profit but providing for all possible losses; also known as 'playing safe'.

Going Concern Concept

The basic assumption that a business will continue its operations for the future.

Matching Concept

The concept that revenues of an accounting period must be matched with the expenses incurred during that same period to earn that revenue.

Accounting Standards (AS)

Written policy documents or codes of conduct covering the recognition, measurement, treatment, and disclosure of accounting transactions.

IFRS

International Financial Reporting Standards issued by the International Accounting Standard Board (IASB) to be acceptable worldwide.

Ind AS

International Accounting Standards that have been converged and modified in accordance with Indian accounting practices, customs, and traditions.

AS-1

Accounting Standard for the Disclosure of Accounting Policies.