Tamil Nadu HSE First Year Commerce flashcards

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

Accounting Equation

Assets equal liabilities plus capital. Every transaction changes at least two elements while keeping the total of both sides equal, forming the basis of double entry.

Dual Aspect Concept

Every business transaction has two aspects, a debit and an equal credit. This concept is the foundation of the double entry system of bookkeeping.

Going Concern Concept

The assumption that a business will continue operating for the foreseeable future, so assets are valued at cost rather than at forced sale value.

Accrual Concept

Revenue is recorded when it is earned and expenses when they are incurred, irrespective of when cash is actually received or paid.

Business Entity Concept

The owner and the business are treated as separate entities. Capital contributed by the owner is a liability of the business, and drawings reduce capital.

Real Account Rule

Debit what comes in and credit what goes out. Real accounts relate to assets and property, and their balances are carried forward to the next period.

Journal Narration

A brief explanation written below each journal entry describing the transaction, usually beginning with the word being, to make later reference clear.

Compound Journal Entry

A single journal entry recording a transaction that affects more than two accounts, with one total on the debit side and one on the credit side.

Ledger Posting

Transferring debit and credit amounts from the journal or subsidiary books into the respective ledger accounts, which are then balanced periodically.

Trial Balance

A statement listing debit and credit balances of ledger accounts on a given date to test arithmetical accuracy, since total debits must equal total credits.

Purchases Book

A subsidiary book recording only credit purchases of goods meant for resale. Cash purchases and purchase of assets are excluded from it.

Contra Entry

An entry appearing on both sides of the three-column cash book, arising when cash is deposited into or withdrawn from the bank.

Bank Reconciliation Statement

A statement prepared on a given date to reconcile the bank balance shown by the cash book with the balance shown by the bank pass book.

Cheque Issued Not Presented

A cheque already recorded as payment in the cash book but not yet debited by the bank. It makes the pass book balance higher than the cash book.

Gross Profit

Excess of net sales over cost of goods sold. Cost of goods sold equals opening stock plus net purchases plus direct expenses minus closing stock.

Closing Stock Adjustment

Closing stock is credited in the trading account and shown as a current asset in the balance sheet, because it remains unsold at year end.

Outstanding Expense

An expense incurred but not yet paid at year end. It is added to the expense and shown as a current liability in the balance sheet.

Prepaid Expense

An expense paid in advance for a period not yet expired. It is deducted from the expense and shown as a current asset.

Depreciation Treatment

Depreciation is debited to the profit and loss account as an expense and simultaneously deducted from the book value of the related fixed asset.

Balance Sheet

A statement showing assets, liabilities and capital on a specified date. It is a statement of financial position, not an account with a balance.

Law of Demand

Other things being equal, quantity demanded increases when price falls and decreases when price rises, producing a downward-sloping demand curve.

Price Elasticity of Demand

The ratio of percentage change in quantity demanded to percentage change in price. Demand is elastic above one and inelastic below one.

Mutual Agency

A feature of partnership under which each partner is both an agent and a principal of the firm, binding the firm by acts in the ordinary course of business.

Separate Legal Entity

A company is distinct from its members in law. It can own property, sue and be sued, and its liabilities are not the members' personal liabilities.

Equilibrium Price

The price at which quantity demanded equals quantity supplied. At this price there is neither excess demand nor excess supply in the market.

Business Environment

The sum of internal and external factors such as economic, social, technological, political and legal forces that influence business decisions and performance.

SWOT Analysis

A tool that maps internal strengths and weaknesses against external opportunities and threats to identify strategy and improve competitive position.

Liberalisation

Reduction of government controls such as licensing and price regulation, giving firms greater freedom to decide what and how much to produce.

Micro Environment

The immediate actors close to the firm, namely suppliers, customers, competitors, marketing intermediaries and the public, which directly affect operations.

Entrepreneur

A person who identifies a business opportunity, mobilises resources, bears the risk of the venture and earns profit as reward for initiative and innovation.

Business Ethics

Moral principles and standards guiding business conduct, including honesty in dealings, fair treatment of stakeholders and avoidance of harmful practices.

E-Commerce

Buying and selling of goods and services over electronic networks. Forms include business to business, business to consumer and consumer to consumer transactions.

Intellectual Property

Legally protected creations of the mind such as patents, trademarks, copyrights and designs, which give the owner exclusive rights for a defined period.