Introduction To Accounting - Revision Flashcards

Comprehensive vocabulary flashcards covering the Class XI Accountancy Introduction to Accounting chapter, including definitions, subfields, terms, and types of expenditures.

Accounting

An art of recording, classifying and summarizing the monetary transactions in an efficient manner and interpreting the results.

Identifying

The first step of accounting which involves observing business activities and identifying those considered as financial transactions.

Recording

Systematically keeping a record of transactions that can be measured in terms of money in a journal.

Classifying

The process of grouping all transactions of the same nature at one place, typically in a ledger.

Summarising

The process of putting the balances of all accounts at one place, specifically the Trial balance.

Communicating

Sharing financial data like financial statements with users who analyze them according to individual requirements.

Window dressing

The manipulation of accounts so that financial statements describe a more favourable position than the actual position.

Book-keeping

An art of recording transactions in the books of accounts; it is the primary stage and base of accounting.

Financial Accounting

A subfield used to record business transactions systematically to ascertain profit or loss and present financial position via a balance sheet.

Cost Accounting

A subfield focused on ascertaining the total cost and per unit cost of goods produced and services rendered.

Management Accounting

The branch that presents accounting information to assist management in planning and controlling business operations.

Tax Accounting

A branch used for tax purposes, where Income tax and gst are computed.

Reliability

A qualitative characteristic implying that information must be factual, verifiable, and free from errors.

Relevance

A characteristic where accounting information must help users make decisions and align with enterprise objectives.

Understandability

The requirement that accounting information be presented so it is easily understood by investors, employees, and other users.

Comparability

The quality of financial statements containing previous year data so current performance can be compared with past performance.

Business Transaction

An economic activity of a business that changes its financial position.

Account

A T-shaped proforma that records all business transactions relating to a particular person or item.

Capital

The amount (cash, goods, etc.) invested by the owner in a business.

Drawing

Cash or goods withdrawn by the owner for personal use from business funds.

Profit

The excess of total revenue over total expense, calculated as $\text{Profit} = \text{Revenue} - \text{Expenses}$.

Loss

The excess of expenses over related revenue, calculated as $\text{Loss} = \text{Expenses} - \text{Revenue}$.

Gain

A monetary benefit resulting from incidental transactions, such as profit on the sale of fixed assets.

Stock

Includes goods unsold on a particular date.

Purchases

The amount of goods bought for resale or use in production, involving either cash or credit.

Purchase return

When purchased goods are returned to suppliers.

Sales

The transfer of goods or services for money in the normal course of business.

Sales return

When customers return goods that were sold to them.

Debtors

Persons to whom items have been sold on credit and payment has not been received yet.

Creditors

Persons from whom the business buys goods on credit and payment has not been made yet.

Voucher

A written document supporting a transaction (e.g., cash memo, invoice, receipt), necessary for auditing.

Income

The difference between revenue and expense.

Expense

The amount used in order to produce and sell goods and services.

Cash Discount

A discount allowed for making prompt payment, which is always recorded in books of accounts.

Trade Discount

A fixed percentage discount on the list price of goods which is not entered in the books of accounts.

Bad Debts

The amount a debtor has not paid after reminders and has no intention of paying in the future.

Liabilities

Financial obligations or amounts which a business owes to others, such as loans or creditors.

Non current liabilities

Obligations that fall due for payment in a relatively longer period, like long term loans.

Current liabilities

Obligations to be paid in the near future, such as outstanding expenses.

Assets

Properties or resources owned by a business, such as machinery or cash in hand.

Non current ASSETS

Assets held for a longer period in the business, such as building or land.

Tangible assets

Assets that have physical existence, such as machinery.

Intangible assets

Assets that cannot be touched, such as Goodwill.

Current assets

Assets held for a short period that can be converted into cash within one year, such as stock or debtors.

Revenue Expenditure

Expenditure where the full benefit is received during one accounting period, such as salaries or rent.

Capital Expenditure

Expenditure where the benefit is received during more than one year, such as machinery.

Deferred Revenue Expenditure

Expenditure that is revenue in nature but provides benefits likely derived over a number of years, such as advertisement.