Accounting Terminology — Class 11 Accountancy Notes (GSEB)

Fundamental Terms

Click any card to flip and reveal the definition and example.

Classification of Assets

Asset: Tangible or intangible product/item owned by business with economic value. Economic resources held by owner with expectation of future economic benefit.

Examples: Land, building, plant, machinery, furniture, trademark, copyright, patent, goodwill

Tangible Assets

Physical existence — can be seen and touched

Examples: Land, building, plant, machinery, furniture

Intangible Assets

No physical existence — cannot be seen or touched

Examples: Trademark, copyrights, patent, goodwill, franchise

Examples: Cash balance, bank balance, debtors, bills receivable, raw material stock, finished stock

Liquid Assets

Current assets excluding stock — convertible to cash quickly

Examples: Debtors, bills receivable

Examples: Tangible + intangible + current assets — all have realizable value

Examples: Share issue cost, preliminary expenses, share/debenture discount — also called deferred revenue expenses

Classification of Liabilities

Liability: Amount payable by business for credit purchase of goods/assets or borrowed money. Payable in future. Treated as liability until not paid.

Examples: Owner provides ₹ 1,00,000 capital → liability of business towards owner

Capital (Sole Proprietorship)

Owner provides all investment

Example: ₹ 1,00,000 cash brought by owner

Partners' Capital

Partners provide investment

Example: Three partners invest ₹ 50,000 each

Examples: ₹ 50,000 borrowed from Bhavnaben (redeem after 3 years), goods ₹ 2,000 purchased on credit from Raman

Current Liability

To be paid within 1 year

Example: Goods on credit from Raman, outstanding rent, credit purchase of furniture

Non-current Liability

To be paid during period > 1 year

Example: Bank loan, debenture, amount borrowed from Bhavnaben (3-year condition)

Receipts and Payments

Capital vs Revenue — Receipts and Payments
Aspect	Capital	Revenue
Nature	Irregular / non-recurring	Regular / recurring
Receipts source	Sale of assets, issuing debentures	Sales, commission, rent, discount
Payments source	Purchase of fixed assets, redemption of debentures	Salary, wages, rent, telephone, advertisement
Frequency	Infrequent	Frequent / day-to-day
Impact	Affects balance sheet (assets/liabilities)	Affects profit and loss account

Revenue Receipts

Regular receipts during year. Profit/loss ascertained from these. Income of sales, commission, discount, rent. Arise frequently. Also known as revenue income.

Capital Receipts

Not received regularly. Procured from sale of assets, issuing debentures. Not sold/issued frequently.

Revenue Expenditure

Regular payments. Profit/loss determined from these. Salary, wages, telephone, advertisement expense.

Capital Expenditure

Not regular. Generally when fixed assets purchased. Example: machine purchase. Redemption of debenture = capital payment.

Deferred Revenue Expenses

Known as fictitious assets. Benefit available for > 1 year. Written off over certain years. Examples: share issue cost, preliminary expenses.

Discount Types

Trade Discount

Deducted at time of sales. NOT recorded in books.

Goods ₹ 10,000 sold at 2% trade discount → ₹ 200 deducted → sales of ₹ 9,800 recorded.

Cash Discount

Deducted to attract quick collection. Recorded in books.

On ₹ 9,800, ₹ 200 cash discount allowed → customer pays ₹ 9,600.

Discount Received

When businessman purchases goods and pays less. This is INCOME. Example: Goods ₹ 10,000 from Ramilaben, 2% discount if paid in 15 days → pay ₹ 9,800 → ₹ 200 = discount received.

Discount Allowed

When businessman sales goods and receives less. This is EXPENSE. Example: Goods ₹ 15,000 to Kalpanaben, 2% discount if paid in 10 days → receive ₹ 14,700 → ₹ 300 = discount allowed.

Key Accounting Concepts

Expense

Amount spent and benefit available to respective accounting year (12 months). Revenue expense. Examples: salary, wages, brokerage, commission, discount.

Revenue

Goods/services sold and provided to customers. Credit sales with receivable amount = revenue. Other incomes: interest, rent, commission, dividend received.

Profit

After deduction of regular payments (revenue payments) from regular receipts (revenue receipts) → remaining surplus = profit. Computed from Profit and Loss Account.

Loss

Difference obtained by deduction of regular incomes from regular expenses = revenue loss. Also: goods destroyed by fire (₹ 5,000 loss), goods stolen. Asset sold less than book value = capital loss.

Gain

Profit and gain are popular as synonyms.

Purchase

Items/services purchased in business — not all treated as purchase. Businessman's goods = treated as purchase. Example: Stationery by grain merchant = stationery expense. Grain = purchase.

Sales

Businessman's goods sold = treated as sales in accounting. Example: Grain merchant's grain sales = sales.

Stock

Goods purchased for trading, remained unsold = stock. Example: Purchased ₹ 70,000 goods, sold ₹ 45,000 for ₹ 75,000 → stock = ₹ 25,000. Closing stock = current asset.

Debtors

Customers to whom goods sold on credit. Debtors = current assets.

Bills Receivable

Written document — bill writer has right to receive amount on predetermined future date. Generally emerges from debtors.

Creditors

Person from whom goods purchased on credit. Creditors = current liability.

Bills Payable

Written document — bill acceptor accepts responsibility to pay specified amount on specified date. Generally emerges from creditors.

Cost

Expenses required to produce product or provide service. Includes raw material cost, labor cost, other costs.

Voucher

Written document of business transaction. Determines transaction type (cash, credit, purchase, sales, bank, expense, income, asset, liability).

Depreciation

Expense of business. Value of assets reduced by certain rate every year. Amount reduced = depreciation. Deducted before tax payment. Non-cash expense.

Bad Debts

When debtor cannot pay full amount due to weak financial condition. Amount not received after necessary efforts = bad debts. Not an expense but a LOSS.

Solvent

Person who pays financial obligations regularly. Assets > liabilities.

Insolvent

Person who does not pay financial obligations regularly. Assets < liabilities. Unless declared insolvent by court → cannot be treated as insolvent.

Receivables vs Payables

Receivables vs Payables
Aspect	Receivables (Amount to Receive)	Payables (Amount to Pay)
Definition	Any amount to be received in future	Any amount to be paid in future
Includes	Debtors, bills receivable, commission outstanding, rent outstanding, interest outstanding, prepaid expense, loans, advances	Creditors, bills payable, outstanding salary/wages, expense outstanding, pre-received incomes
Classification	Current assets (mostly)	Current liabilities (mostly)
Example	Goods sold on credit to customer — amount receivable	Goods purchased on credit from supplier — amount payable

Debit, Credit, and Account

Two important words of accounting: Every transaction has two effects — debit and credit. Left hand side = debit side. Right hand side = credit side. True and fair understanding of debit and credit = true and fair understanding of accounting.

Account

Recording transactions pertaining to certain items/persons at one place. Example: Pushpaben — 20 credit sales + 20 settlements = 40 transactions. All recorded in Pushpaben's account (personal account). Types: personal, goods, asset, income, expenses.

Key Takeaways

46 essential accounting terms organized into fundamental terms, assets, liabilities, receipts/payments, discounts, key concepts, receivables/payables, and debit/credit.
Assets have 4 main categories: Non-current (tangible + intangible), Current (including liquid), Real, and Fictitious.
Liabilities split into Internal (to owner) and External (to third party), each with current and non-current sub-types.
Trade discount is NOT recorded in books; cash discount IS recorded. Discount received = income; discount allowed = expense.
Depreciation is a non-cash expense. Bad debts are a LOSS, not an expense. Solvent = assets > liabilities.