Glossary

Owing to the concept LIABILITY

of Separate Legal Entity
Resources
FUNDS

INTERNAL EXTERNAL

Contributed by the Borrowed funds

Owners contributed by the
Creditors

CAPITAL/EQUITY LOANS/BORROWINGS/CREDIT
 LIABILITY Anything which
the business owes

LONG TERM LIABILITY SHORT TERM LIABILITY

(the tenure of which is (which needs to be repaid
more than a financial year) within a financial year)

• Short Term Bank Loans

• Creditors
INTERNAL EXTERNAL • Bills Payable
• CAPITAL • LOANS (BANKS & FI) • Bank Overdraft
• EQUITY • DEBENTURES
• RESERVES & SURPLUS • BONDS
 ASSETS

Applications Anything which

the business
owns

FIXED ASSETS
(LONG TERM) CURRENT ASSETS
(SHORT TERM)
• PLANT & MACHINERY
• LAND & BUILDING • DEBTORS
• FURNITURE TANGIBLE FA • BILLS RECEIVABLE
• LONG TERM INVESTMENTS • SHORT TERM INVESTMENTS
• COMPUTER • CASH WORKING
• CAR & DELIVERY VANS • BANK BALANCE CAPITAL
• GOODWILL • STOCK
• PATENTS INTANGIBLE FA
• ROYALTY
• TRADEMARK
ACCOUNTING EQUATION
• RESOURCES= APPLICATIONS

• LIABILITIES=ASSETS

• EXTERNAL LIB. + INTERNAL LIB. (CAPITAL)= ASSETS

• CAPITAL=

• Statement prepared to assess the quantum of assets and liabilities in a business

entity during a financial year is Balance Sheet.
• B/s depicts the financial position of a Business Entity.
Accounting Terms
• Working Capital: Part of capital which is kept aside for conducting the day to day
operations of the business. It helps the businesses in remaining liquid.
(a) Gross CA
(b) CA-CL

• Selling goods
• Availing services
• Paying wages
• Buying loose tools
• Paying utility bills
• Buying raw material
Operating Cycle

Cash

Debtors/BR
Raw Material

Cash
Credit

Work in Progress

Sales

Finished Goods
Accounting Terms
• Cost: Total resource outlay on producing something. Typically it involves Labor, Raw
Material and Overheads.

• Expense: Part of resource outlay (cost), which is incurred directly for generating a given
portion of revenue, over a particular period of time.

• Price: Value at which goods are actually sold or services are actually rendered to the
customers.
Cost+ Profit Margin=Price

• Revenue:
(a) Income generated by selling goods or rendering services
(b) Sales proceeds
(c) No of units sold x Price per unit
Eg. 1
FY 2016-17
Machine purchased: Rs.1,00,000
Life: 5 yrs
Units produced using the machine in the same year: 1,000
Sold @Rs.50 each

Eg.2 FY 2016-17

Raw Material Purchased: 10000 uts @ Rs.5 each

Usage: 2/unit of product X
No. of units of X produced during the year: 3,000
Units of X sold@ Rs.15 each