Financial Accounting Basic Terminologies

1. Transaction : the transfer of money, goods or services from one person or account to another person or account. These are :
1. Cash Transactions
2. Credit Transactions
3. Paper Transactions
2. Capital : Funds brought in to start a business
3. Share : one unit of the total company's capital
4. Assets : a resource legally owned y the enterprise. Assets can be classified based on purpose :
1. Fixed Assets : resources help for use in production of goods or services and are not for resale. Ex : land, plant, machinery etc.
2. Current Assets : resources held or receivable withing the year or the company's operating cycle. These are intended to be converted into cash. Ex: stocks, bill receivable cash at bank etc.
3. Liquid Assets : those which can be easily converted into cash.
4. Fictitious Assets : those which cannot be written off during the period of their incidence. Ex: promotional expenses
5. Liability : a financial obligation of an enterprise, which when settled results in an outflow of resources. Ex: loans payable
6. Current Liability : an obligation that has to be satisfied within a year.
7. Equity :  the residual interest in the asset of the enterprise after deducting all its liabilities.
8. Joint Stock Company : the capital for this company is contributed by shareholders.
9. Goods : merchandise, commodities, products etc in which a trader deals. Goods account is divided into :
1. Purchases
2. Sales
3. Purchases return or returns outward
4. Sales returns or returns inward
5. Opending stock
6. Closing stock
10. Inventory : goods held by a business for sale or consumption in production. Ex : raw materials
11. Drawings : goods, money or any asset withdrawn by the owner for his own personal expenses.
12. Debtor : A debtor is a person who owns money to a business. Types of debtors :
1. Trade Debtor
2. Loan Debtor
3. Debtor for asset sold
4. Debtor for service rendered
13. Debt : amount due from a debtor to this business. Types of debts:
1. Good Debt
2. Bad Debt
3. Doubtful Debt
14. Creditors : a person to whom business owes money. Types of creditors :
1. Trade Creditor
2. Loan Creditor
3. Creditor for asset pyrchased
4. Expenses Creditor
15. Loss : money or woth of money given up without any benefit in return. A situation when expenses exceed th expenditure.
16. Profit : a situation where revenue earned by the business is greated then its expenses.
17. Journal : a dail record of all business transactions. The first entry into the accounting system.
18. Ledger : an account book where all transactions are grouped and all accounts are maintained. Books of final entry.
19. Narration : breif explanation of a journal entry.
20. Posting : transferring the information from journal to ledger.
21. Voucher : a document which serves as an evidence for transactions.
22. Trial Balance : a list of all ledger account balances on a given day.
23. Balance Sheet : a financial statement which shows the amount and nature of a business' assets and liabilities.

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