CHSE Odisha Elective Accountancy key terms

The basic identity that assets always equal liabilities plus owner's equity; every recorded transaction keeps this balance intact, so it underpins the double-entry system and the balance sheet.

Resources controlled by a business from which future economic benefit is expected, such as cash, stock, machinery, and amounts owed by customers.

Present obligations of a business arising from past events, whose settlement will require an outflow of resources; examples include creditors, loans, and outstanding expenses.

The owner's claim on the business, equal to assets minus liabilities; it rises with fresh investment and profit and falls with drawings and loss.

Money or goods withdrawn by the proprietor for personal use; it reduces capital and is not treated as a business expense in the profit and loss account.

The assumption that a business will continue operating in the foreseeable future, which justifies carrying assets at cost rather than at forced-sale value.

Revenue and expense are recognised when they are earned or incurred, not when cash moves; this creates outstanding expenses, prepaid expenses, accrued income, and income received in advance.

Expenses of a period are set against the revenue they helped to generate, so profit reflects the true result of that period rather than unrelated cash receipts and payments.

Once a firm adopts an accounting policy, such as a depreciation method, it should apply it uniformly from period to period so that results remain comparable over time.

Every transaction has two effects of equal amount, one debit and one credit; this is the reasoning behind recording each entry in at least two accounts.

The first written record of a transaction, showing date, accounts debited and credited, amount, and a short narration explaining why the entry was passed.

The book containing all accounts in classified form, where journal entries are posted so that the movement and closing balance of each account can be seen.

A journal entry affecting more than two accounts at once, with total debits still equalling total credits, commonly used for transactions such as salary paid with tax deducted.

A statement listing debit and credit balances of all ledger accounts on a given date; agreement of totals is a check on arithmetical accuracy, not proof of correctness.

A statement prepared on a chosen date to explain why the cash book bank balance differs from the bank statement balance, reconciling items such as cheques not yet presented.

A cheque deposited by a customer that the bank refuses to pay, usually for insufficient funds; the entry must be reversed, restoring the customer's debt and reducing the bank balance.

A temporary account opened to carry the difference in a trial balance while errors are traced; it is closed once all one-sided errors are corrected.

Mistakes caused by treating a capital item as revenue or vice versa, such as debiting machinery repairs to the machinery account; such errors do not disturb trial balance agreement.

The systematic allocation of the depreciable cost of a fixed asset over its useful life, reflecting wear, passage of time, and obsolescence rather than a fall in market price.

A depreciation method charging an equal amount each year, computed as cost less scrap value divided by useful life, so the book value falls at a constant rate.

A depreciation method applying a fixed percentage to the reducing book value each year, giving larger charges early and smaller charges later over the asset's life.

An amount charged against profit to meet a known liability or expected loss whose exact amount is uncertain, such as a provision for doubtful debts.

An appropriation of profit retained in the business to strengthen its financial position, not created for any identified liability or expected loss.

A written instrument in which the drawer directs the drawee to pay a stated sum to the payee or bearer on demand or at a fixed future date.

A written promise by the maker to pay a specified sum to a named person or bearer on demand or after a stated period, signed by the maker.

Refusal by the drawee or maker to pay on the due date; the holder reverses the earlier entries, restores the debtor's account, and may record noting charges.

Fees paid to a notary public for formally recording the dishonour of a bill, usually recovered from the defaulting party and debited to that party's account.

An expense incurred during the accounting period but still unpaid at its end; it is added to the expense in the profit and loss account and shown as a liability.

An amount paid in the current period for benefit that extends into the next period; it is deducted from the expense and shown as a current asset.

Goods remaining unsold at the end of the period; it is credited to the trading account, shown as a current asset, and valued at cost or net realisable value, whichever is lower.

Assets held for conversion into cash within the normal operating cycle, such as stock, debtors, bills receivable, and cash at bank.

The proportion in which existing partners give up their share of profit in favour of an incoming partner, computed as old share minus new share for each partner.

The proportion in which continuing partners acquire the outgoing partner's share, computed as new share minus old share; it governs payment of the retiring partner's goodwill.

The value of a firm's reputation, customer base, and earning capacity beyond the normal return on its net assets; it is paid privately or adjusted through partners' capital accounts.

The account recording a retiring partner's unpaid dues when the firm cannot settle them at once; interest is charged on it until the amount is finally paid.

An account opened on dissolution to record the sale of assets and settlement of liabilities, with the resulting profit or loss shared by partners in their profit-sharing ratio.

The end of the relationship among all partners of a firm, followed by sale of assets, payment of liabilities, and final settlement of partners' capital accounts.

The amount received above the face value of a share; it is credited to securities premium, a capital receipt not available for distribution as dividend.

The amount contributed by shareholders and shown in the balance sheet, split into authorised, issued, subscribed, called-up, and paid-up categories.

Amounts called by the company on shares that shareholders have not yet paid; it is deducted from called-up capital to arrive at paid-up capital.

A written acknowledgement of debt issued by a company, carrying a fixed rate of interest and usually repayable after a stated term, with no voting rights.

A liquidity measure dividing current assets by current liabilities; a value near two is often considered comfortable, though norms differ by industry.

A stricter liquidity test dividing quick assets, that is current assets excluding stock and prepaid expenses, by current liabilities.

The principal revenue-producing activities of a business, such as cash received from customers and cash paid to suppliers and employees, reported in the cash flow statement.

Cash flows from acquiring or disposing of long-term assets and investments, such as purchase of machinery or sale of land, excluding trading stock.

Cash flows that change the size and composition of owners' capital and borrowings, such as issue of shares, fresh loans, and repayment of debentures.