Basic Accounting terms:Assets & Liabilities

  • Accounting terminology is the language of accounts which serve as a means of communication of business activities to the users.
  • Assets refer to anything which is in the possession or is the property of business, which will enablea business enterprise to get cash or a benefit in future.
  • Fixed assets are the assets which are purchased for continuous use in the business for the purpose of producing goods or providing services and are not held for resale. Fixed assets are further classified into tangible assets and intangible assets.
  • Non-current assets are the assets which are not current assets.
  • Current Assets are those assets which are meant for sale or which are to be converted into finished goods or into cash within one year.
  • Liquid Assets are the assets which are either in the form of cash or can be quickly converted into cash.
  • Fictitious Assets are the assets which cannot be realised in cash or no further benefit derived from these assets.
  • Wasting Assets are the assets which are consumed through being worked or used like mines.
  • Debtors are the persons/firms to whom goods are sold on credit.
  • Stock is the tangible asset held by an enterprise for the purpose of sale in the ordinary course of business or for the purpose of using it in the production of goods meant for sale.
  • Liabilities refer to the amount which the firm owes to outsiders. They can be classified as internal liabilities and external liabilities.
  • Long-term Liabilities refer to liabilities which are payable after a long period.
  • Current Liabilities refer to liabilities which are payable in the near future.
  • Contingent Liabilities refer to liabilities which may or may not arise in future depending on the happening of some specific event.
  • Trade Receivables refer to the amount receivable on account of sale of goods or services rendered by the company in the normal course of business.
  • Trade Payables is the amount payable for purchase of goods or services taken in the ordinary course of business.
  • Any cash or value of goods withdrawn by the owner for personal use or any private payments made out of business funds are called drawings.

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