Tamil Nadu HSE First Year Commerce key terms

The process of identifying, measuring, recording and communicating economic information so that users can make informed judgements and decisions about a business.

The routine, clerical work of recording business transactions in the books of account in a systematic manner, forming the base on which accounting is built.

The fundamental relationship stating that assets always equal liabilities plus capital, which keeps the balance sheet in balance after every transaction.

The principle that every transaction has two effects of equal amount, one debit and one credit, which underpins the double entry system of recording.

The amount invested by the owner in the business, treated as a liability of the business towards the owner and increased by further investment and profit.

Money or goods withdrawn by the proprietor from the business for personal use, which reduces capital and is not treated as a business expense.

Resources owned or controlled by a business that are expected to yield future benefit, such as cash, stock, furniture, buildings and amounts receivable from customers.

Amounts a business owes to outsiders, such as creditors, bank loans and outstanding expenses, which are settled in future by payment or service.

The convention that revenue and expenses are recorded in the period to which they relate, whether or not cash has actually been received or paid.

The assumption that a business will continue operating for the foreseeable future, so assets are valued for use rather than for immediate sale.

The book of original entry in which transactions are recorded chronologically with narration, showing the account debited, the account credited and the amount.

A single journal entry that debits or credits more than one account, used when a transaction affects three or more accounts at the same time.

The principal book containing all accounts in classified form, to which journal entries are posted so that the balance of each account can be found.

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

A temporary account opened to hold the difference in a trial balance so that the books can proceed while the error is traced and corrected.

A mistake in which a transaction is recorded in accounts of the wrong class, such as treating a capital expenditure as revenue expenditure; it does not disturb the trial balance.

Special journals such as purchases book, sales book, cash book and returns books in which similar transactions are recorded before posting to the ledger.

A subsidiary book that also serves as a ledger account, recording all receipts and payments of cash and bank, with a debit and credit side.

A book kept on the imprest system to record small day-to-day payments, so that the main cash book is not cluttered with minor items.

A statement prepared to explain the difference between the cash book bank balance and the bank passbook balance on a particular date.

A cheque that the bank refuses to pay, for example due to insufficient funds, so the amount must be reversed in the cash book.

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

The statement that matches indirect expenses and losses against gross profit and other incomes to arrive at net profit or net loss for the period.

The excess of net sales over cost of goods sold, calculated in the trading account before deducting indirect expenses and other incomes are added.

The final profit remaining after all indirect expenses and losses are deducted from gross profit and all other incomes are added.

Goods remaining unsold at the end of the accounting period, valued at cost or net realisable value, whichever is lower, and credited in the trading account.

A statement showing the assets, liabilities and capital of a business on a particular date, prepared to reveal its financial position.

The systematic reduction in the book value of a fixed asset due to wear and tear, passage of time or obsolescence, charged as an expense.

An expense that has been incurred during the period but not yet paid, shown as a liability in the balance sheet and added to the expense concerned.

An expense paid in advance for a period not yet expired, treated as an asset at the year end and deducted from the expense concerned.

A long-term asset held for use in the business rather than for resale, such as land, buildings, plant, machinery and furniture.

The desires of people for goods and services, which are unlimited in number but can be ranked in order of urgency and satisfied only with scarce resources.

The condition in which resources are limited in supply relative to the unlimited wants of people, forcing choices about how to use them.

The value of the next best alternative given up when a resource is used for one purpose rather than another.

The want-satisfying power of a good or service; the satisfaction a consumer derives from consuming it, which varies from person to person and place to place.

A business owned, managed and financed by one person, who bears all risks, enjoys all profits and has unlimited liability for the debts of the business.

A business carried on by two or more persons who agree to share profits and losses, governed by a partnership deed and with unlimited liability unless registered as an LLP.

An artificial legal person created by incorporation, with perpetual succession, a common seal, transferable shares and liability of members limited to unpaid capital.

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

The removal or relaxation of government controls and licensing restrictions on business, allowing firms greater freedom in production, pricing and investment decisions.

The integration of national economies through trade, investment, technology and movement of capital, exposing domestic firms to international competition and opportunity.

A person who identifies an opportunity, mobilises resources and takes the risk of starting and running an enterprise, often introducing innovation.

Buying and selling of goods and services through electronic networks such as the internet, covering online ordering, payment and delivery of products.

A newly established business, often technology-driven, that seeks to grow quickly by offering a new product or service or a new way of doing things.

Transfer of money made electronically through mobile wallets, UPI, cards or net banking instead of physical cash, recorded and settled through banks.