Friday, 1 July 2011

accounting glossaory-3

Greetings to fellow blog readers......

Lease: A contractual arrangement whereby the lessor grants the lessee the right to use an asset in return for periodic lease rental payments.
Doubleentry: Every transaction consists of two aspects
                                                 1. The receving aspect
                                                 2. The giving aspect
The recording of two aspect effort of each transaction is called ‘double entry’.
The principle of double entry is, for every debit there must be an equal and a corresponding credit and vice versa.
BRS: When the cash book and the passbook are compared, some times we found that the balances are not matching. BRS is preparaed to explain these differences.
Capital Transactions: The transactions which provide benefits to the business unit for more than one year is known as “capital Transactions”.
Revenue Transactions: The transactions which provide benefits to a business unit for one accounting period only are known as “Revenue Transactions”.
Deffered Revenue Expenditure:  The expenditure which is of revenue nature but its benefit will be for a very long period is called deffered revenue expenditure.
Ex: Advertisement expences
A part of such expenditure is shown in P&L a/c and remaining amount is shown on the assests side of B/S.
Capital Receipts: The receipts which rise not from the regular course of business are called “Capital receipts”.
Revenue Receipts: All recurring incomes which a business earns during normal cource of its activities.
Ex: Sale of good, Discount Received, Commission Received.
Reserve Capital: It refers to that portion of uncalled share capital which shall not be able to call up except for the purpose of company being wound up.
Fixed Assets: Fixed assets, also called noncurrent assets, are assets that are expected to produce benefits for more than one year. These assets may be tangible or intangible. Tangible fixed assets include items such as land, buildings, plant, machinery, etc… Intangible fixed assets include items such as patents, copyrights, trademarks, and goodwill.
Current Assets: Assets which normally get converted into cash during the operating cycle of the firm. Ex: Cash, inventory, receivables.
Flictitious assets: They are not represented by anything tangible or concrete.
Ex: Goodwill, deffered revenue expenditure, etc…
Contingent Assets: It is an existence whose value, ownership and existence will depend on occurance or non-occurance of specific act.
Fixed Liabilities: These are those liabilities which are payable only on the termination of the business such as capital which is liability to the owner.
Longterm Liabilities: These liabilities which are not payable with in the next accounting period but will be payable with in next 5 to 10 years are called longterm liabilities. Ex: Debentures.
Current Liabilities: These liabilities which are payable out of current assets with in the accounting period. Ex: Creditors, bills payable, etc…
Contingent Liabilities: A contingent liability is one, which is not an actual liability but which will become an actual one on the happening of some event which is uncertain. These are staded on balance sheet by way of a note.
Ex: Claims against company, Liability of a case pending in the court.
Bad Debts: Some of the debtors do not pay their debts. Such debt if unrecoverable is called bad debt. Bad debt is a business expense and it is debited to P&L account.
Capital Gains/losses: Gains/losses arising from the sale of assets.

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