Accounting Definitions
1. Assets
Definition:
Assets are things the business owns ,control and can use in the future
and get economic benifits.
Examples:
Cash in hand, Shop furniture, A delivery van
2. Current Assets
Definition:
Current assets are things the business owns and will use or change
into cash within one year.
Examples:
Cash, Stock of goods, Customers who still have to pay (debtors)
3. Non-Current Assets
Definition:
Non-current assets are things the business owns for many years and
uses for work.
Examples:
Land and building, Computers, Machines
4. Liabilities
Definition:
Liabilities are amounts the business owes to other people.
Examples:
Bank loan, Supplier not yet paid, Rent not yet paid
5. Current Liabilities
Definition:
Current liabilities are amounts the business has to pay within one
year.
Examples:
Supplier’s bill, Bank overdraft,Wages still unpaid
6. Non-Current Liabilities
Definition:
Non-current liabilities are amounts the business has to pay after
many years.
Examples:
Bank loan for 5 years, Mortgage loan, Long-term borrowing
7. Capital
Definition:
Capital is money or things the owner puts into the business.
Examples:
Cash put by owner to start shop, Owner brings his own computer for
shop use, Owner adds more money later
8. Drawings
Definition:
Drawings are money or things the owner takes from the business
for personal use.
Examples:
Taking cash from shop for personal needs, Taking goods home from
shop
Paying home rent using shop money
9. Income
Definition:
Income is money the business earns.
Examples:
Money from selling goods, Money received as rent, Commission
received
10. Primary Income
Definition:
Primary income is main money earned from the business activity.
Examples:
Shop earns money from selling clothes, School earns money from
student fees
Taxi earns money from passengers
11. Secondary (Other) Income
Definition:
Secondary income is extra money earned, not from the main work.
Examples:
Interest earned from bank, Discount received from supplier
Profit from selling old furniture
12. Expenses
Definition:
Expenses are costs the business pays to run daily work.
Examples:
Wages, Rent, Electricity
13. Primary Expenses
Definition:
Primary expenses are main costs directly linked with goods.
Examples:
Buying goods (purchases), Carriage inwards (bringing goods to
shop)
Direct wages for making products
14. Other Expenses
Definition:
Other expenses are extra running costs of the business.
Examples:
Advertising, Stationery, Telephone bill
15. Inventory
Definition:
Inventory is goods kept in the shop to sell later.
Examples:
Clothes in a boutique, Books in a bookstore, Fruits in a fruit shop
16. Goods
Definition:
Goods are items a business buys to sell again.
Examples:
Shoes in a shoe shop
Mobiles in a mobile shop
Toys in a toy shop
17. Bank Overdraft
Definition:
Bank overdraft is when the business takes more money from the
bank than it has in its account.
Examples:
Account has $500, cheque written $700 (overdraft $200)
Shop uses bank overdraft to pay bills
Temporary borrowing from bank
18. Trade Receivables (Debtors)
Definition:
Trade receivables are customers who bought goods on credit and
still have to pay.
Examples:
A customer bought clothes on credit
A student still has to pay school fee
A shop sold shoes but has not received money yet
19. Trade Payables (Creditors)
Definition:
Trade payables are suppliers who gave goods on credit and must be
paid later.
Examples:
Shop bought mobiles on credit from wholesaler
A bookseller not yet paid for books received
A supplier of furniture waiting for payment