Maharashtra HSC Bookkeeping & Accountancy flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Book-keeping

The art of recording monetary transactions in books of account in a systematic manner, in date order, so that financial information can be summarised and used later.

Accountancy

The wider discipline covering design of accounting systems, recording, classification, summarising, analysis, interpretation and communication of financial information to interested users.

Drawings

Cash or goods withdrawn by the proprietor from the business for personal use. It reduces capital and is not an expense of the business.

Dual aspect concept

Every transaction has two aspects, a debit and a credit of equal amount, so that assets always equal liabilities plus capital in the accounting equation.

Accounting equation

Assets = Liabilities + Capital. Each transaction changes at least two elements but keeps both sides of the equation equal at all times.

Nominal account rule

Debit all expenses and losses, credit all incomes and gains. These accounts are closed to the trading and profit and loss account at year end.

Compound journal entry

A single journal entry that debits one account and credits several accounts, or debits several and credits one, with equal totals on both sides.

Narration

A brief explanation written below each journal entry stating the reason for the entry, helping readers understand the transaction recorded.

Opening entry

The first journal entry of a new year recording brought-forward assets, liabilities and capital, with assets debited and liabilities and capital credited.

Ledger posting

Transferring debit and credit amounts from the journal or subsidiary books to the respective accounts in the ledger, the principal book of accounts.

Balance c/d

The balancing figure written on the shorter side of a ledger account to equalise totals; it becomes balance b/d on the opposite side next period.

Ledger folio

The L.F. column records the page number of the ledger where an entry is posted, providing a cross-reference between journal and ledger.

Purchases book

A subsidiary book recording only credit purchases of goods dealt in by the business; cash purchases and asset purchases are excluded.

Contra entry

An entry affecting both cash and bank columns of a triple-column cash book, such as deposit or withdrawal, marked with a C in the L.F. column.

Imprest system

A petty cash arrangement where a fixed float is given to the petty cashier, who is reimbursed periodically for amounts spent so the float is restored.

Bank reconciliation statement

A statement prepared on a given date to explain the difference between the bank balance shown by the cash book and by the bank pass book.

Cheque issued not presented

A cheque already recorded as a payment in the cash book but not yet debited by the bank in the pass book; it is added when starting from the cash book balance.

Overdraft

A credit balance in the cash book bank column or a debit balance in the pass book, meaning the bank has allowed the account holder to withdraw beyond the deposit.

Straight-line depreciation

A method charging an equal amount each year, computed as cost minus scrap value divided by useful life, until the asset reaches its residual value.

Written-down value method

A depreciation method charging a fixed percentage on the opening book value each year, so the annual charge declines and the asset never reaches zero.

Profit on sale of asset

Sale proceeds minus the book value on the date of sale, where book value equals original cost less accumulated depreciation up to that date.

Suspense account

A temporary account opened to record the difference in the trial balance, cleared as one-sided errors are located and rectified through journal entries.

Error of principle

Recording a transaction against accounting principles, such as crediting the sale of a fixed asset to the sales account instead of the asset account.

Compensating errors

Two or more errors of equal amount on opposite sides that cancel each other, leaving the trial balance in agreement despite the mistakes.

Cost of goods sold

Opening stock plus net purchases plus direct expenses minus closing stock; deducted from net sales in the trading account to give gross profit.

Gross profit

Net sales minus cost of goods sold, calculated in the trading account before deducting indirect expenses and adding other incomes.

Outstanding expense adjustment

An expense incurred but unpaid at year end: add it to the expense in the profit and loss account and show it as a current liability.

Statement of affairs method

A single entry technique finding profit as closing capital minus opening capital, plus drawings, minus additional capital introduced during the year.

Total debtors account

An account prepared under conversion method to derive credit sales or closing debtors from opening debtors, cash received, returns, discounts and bad debts.

Bill of exchange

A written unconditional order signed by the drawer, directing the drawee to pay a stated sum to a specified person or bearer on demand or at a fixed future date.

Days of grace

Three days added to the tenor of a bill to arrive at the due date, unless the bill is payable on demand or at sight.

Income and expenditure account

An account of a not-for-profit concern recording revenue receipts and revenue payments on accrual basis, showing surplus or deficit for the period.