Maharashtra HSC Bookkeeping & Accountancy key terms

The systematic process of identifying, recording, classifying and summarising financial transactions in books of account, so that useful information can be communicated to the owner and other interested parties.

The wider discipline that begins where book-keeping ends: analysing, interpreting and communicating recorded accounting information, and designing the systems that produce it.

Any event involving money or money's worth that changes the financial position of a business and can therefore be recorded in its books, such as a cash sale or a credit purchase.

A documentary evidence supporting a transaction, such as a cash memo, invoice, receipt or pay-in-slip, which is the basis for making an entry in the books.

The original written record from which accounting entries are prepared, for example a purchase invoice, sales invoice, debit note, credit note or counterfoil of a receipt.

The principle that every transaction has two effects of equal amount, one debit and one credit, so that assets always equal liabilities plus capital.

A complete system of recording in which every transaction is entered in at least two accounts, one receiving value and one giving value, keeping the books in balance.

The relationship Assets = Liabilities + Capital, which expresses the resources of a business and the claims of owners and outsiders against them at any date.

The amount invested by the owner in the business, plus profits retained and less drawings; it represents the owner's claim on the net assets of the business.

Money or goods withdrawn by the proprietor from the business for personal use, which reduces capital and is not treated as a business expense.

The left-hand side of an account. Debits increase assets and expenses, and decrease liabilities, capital and income, following the rules of double entry.

The right-hand side of an account. Credits increase liabilities, capital and income, and decrease assets and expenses, following the rules of double entry.

The book of original entry in which transactions are recorded in date order with narration, showing the accounts to be debited and credited before posting to the ledger.

A single record in the journal giving the date, the accounts debited and credited with amounts, and a brief explanation of the transaction.

A short explanation written below each journal entry describing the reason for the transaction, usually beginning with the word 'Being'.

A journal entry in which more than two accounts are involved, combining several debits or several credits of the same transaction into one entry.

The principal book containing all accounts of the business in classified form, where each account collects its debits and credits so that a balance can be found.

The act of transferring entries from the journal or subsidiary books to the appropriate ledger accounts, debits to the debit side and credits to the credit side.

Finding the difference between the totals of the two sides of a ledger account and inserting it on the smaller side so that both sides agree.

Special journals such as the cash book, purchase book, sales book and returns books, used to record a particular class of transaction separately instead of in the general journal.

A subsidiary book that records all cash receipts and cash payments in date order, and also serves as the cash account in the ledger.

A book kept under the imprest system to record small day-to-day expenses, maintained by a petty cashier who is reimbursed periodically to restore the fixed float.

A method of controlling petty cash in which a fixed sum is advanced to the petty cashier, and the amount spent is reimbursed so the balance returns to the original figure.

A subsidiary book that records only credit purchases of goods meant for resale, and not cash purchases or purchases of assets.

An entry that appears on both sides of the cash book, such as cash deposited into bank or cash withdrawn for office use, marked with the letter 'C'.

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

A copy of the customer's account in the bank's books, issued by the bank, showing deposits, withdrawals and the balance recorded by the bank.

A written order on a bank to pay a stated sum to a named person or bearer, recorded as a payment immediately in the cash book but by the bank only when presented.

The permanent, gradual and continuing reduction in the book value of a fixed asset owing to wear and tear, use, obsolescence or the passage of time.

A depreciation method charging an equal amount every year, calculated as original cost less scrap value divided by the asset's useful life.

A depreciation method charging a fixed percentage on the reducing book value of the asset each year, so the annual charge falls over the asset's life.

The process of correcting mistakes found in the books, either by a journal entry when the error affects two or more accounts, or by a one-sided correction when it affects only one.

A temporary account opened to hold the difference in the trial balance, which is closed once the errors causing the difference are traced and rectified.

A mistake in which a transaction is recorded against the wrong type of account, for example treating the purchase of machinery as a purchase of goods.

A statement listing the debit and credit balances of all ledger accounts on a given date to test the arithmetical accuracy of the books.

The first part of the final accounts, showing gross profit or gross loss by matching net sales against cost of goods sold and direct expenses.

The account that compares gross profit with indirect expenses and indirect incomes to arrive at net profit or net loss for the period.

A statement prepared at the end of the period showing the assets, liabilities and capital of the business and proving that the two sides agree.

An incomplete and unscientific method of recording in which only personal accounts and cash are kept in full, so profit is found by comparing capital at two dates.

A summary of assets and liabilities prepared under the single entry system to find the opening or closing capital when a proper balance sheet is not available.

A written instrument containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum to a specified person or bearer.

A written instrument containing an unconditional promise, signed by the maker, to pay a certain sum to a specified person or bearer on demand or at a fixed date.

The refusal of the drawee or acceptor to pay a bill when it falls due, which cancels the bill, restores the debt and may require noting charges.

The small fee paid to a notary public for formally recording the dishonour of a bill, usually borne by the drawer but recovered from the drawee.

An entity formed for a charitable, educational, religious or social purpose rather than profit, whose surplus is added to capital instead of distributed to members.

A summarised cash book of a not-for-profit organisation showing all actual receipts and payments of the period, whether of a capital or revenue nature.

The revenue account of a not-for-profit organisation, prepared on an accrual basis like a profit and loss account, showing surplus or deficit for the period.