Basic Terms in Accounting

(1) Entity: Entity means a reality that has a definite individual existence.

Business entity: It means a specifically identifiable business enterprise like Super Bazaar, Hira Jewellers, ITC Limited, etc. An accounting system is always devised for a specific business entity (also called accounting entity).

(2) Transaction: A event involving some value between two or more entities or parties. The financial transaction is made or recorded in the books of accounts in the term of money. It can be a purchase of goods, receipt of money, payment to a creditor, incurring expenses, etc. It can be a cash transaction or a credit transaction.

(3) Capital : Amount invested by the owner and partner in the firm is known as capital. Which may be in the form of money or assets having monetary value. 

(4) Account: Account is summarised record of financial expenditures and receipts or transactions relating to a particular period or purpose at one place. 

(5) Drawings: The money which is withdrawn by owner for personal uses is known as drawings.

(6) Assets : Assets are valuable or economic resources of an enterprise that can be usefully expresses in monetary terms. Assets are items of value used by the business in its operations. Examples: land, building, machinery, stock, bill recievable, furniture, goods etc. 

Assets can be classified into three parts:

(i) Non-current Assets : Non current Assets are those assets which are made by a bussiness firm for a long-term of view. 

(ii) Current Assets 

(iii) Fictitious Assets

(7) Banking: Continuing financial relationship between a customer and a bank in the term of money or a special kind of asset within a framework of established rules and procedures by making deposits and debts. 

(8) Commerce: It is a accounting term which is used for going contractual relationship between a buyer and a seller whereby payment is made for goods received within a time period.