Introduction to Basic Terminology of Accounting

Dec 14, 2024

Basic Vocabulary of Accounting

Introduction

  • In today's lecture, we will understand the basic vocabulary of accounting.
  • This vocabulary is divided into 12 points.
  • Today, we will cover some points and the rest in the next lecture.

1. Transactions

  • A transaction means behavior or transaction.
  • In business, transactions are of two types:
    • Monetary Transactions: Those that can be measured in money.
    • Non-Monetary Transactions: Those that cannot be measured in money.
    • Monetary transactions are recorded, whereas non-monetary transactions are not recorded.

Types of Monetary Transactions

  • Cash Transactions: Where cash is paid immediately.
  • Credit Transactions: Where goods are given on credit.

2. Capital

  • The amount of money a businessman invests to start a business is called capital.
  • Drawing: When a businessman withdraws money from the business for personal use.

3. Debtors and Creditors

  • Creditors: Those from whom the business has purchased goods on credit and has to pay them.
  • Debtors: Those to whom the business has sold goods on credit and has to receive payment from them.

4. Bad Debts

  • When the money is not recovered from a business's debtor and it becomes an unrecoverable debt, it is considered as a loss.

Conclusion

  • In today's lecture, we discussed a total of 6 points. In the next lecture, we will discuss the remaining points.