CBSE Class 11 Chapter 2 Basic Accounting Terms - Part 5

-

 Basic Accounting Terms

Introduction:

In this article, you will find simple and easy-to-understand explanations of the important basic accounting terms prescribed in the CBSE Class 11 Accountancy syllabus. Understanding these terms will help you grasp accounting concepts more effectively and prepare for your examinations with confidence.

👉 Download Theory Notes

👉 Download One Mark Notes

👉 Download Questions & Answers Notes

👉 Click Here to Watch YouTube Video (MCQs & Short Answer Questions)

👉 Click Here to Watch YouTube Video - CBSE Chapter 2 Basic Accounting Terms


What You Will Learn:

1) Book Value:

Book value is the value of an asset after deducting depreciation.
Formula: Book Value = Cost − Depreciation
Example:
Cost of Machine = ₹2,00,000; Depreciation = ₹40,000
Book Value = Cost – Depreciation
Book Value = ₹2,00,000 - ₹40,000
Book Value = ₹1,60,000

2) Books of Account:

Books of Account are records in which all business transactions are recorded.
Examples include:

  • Journal 
  • Ledger 
  • Cash Book 

Example
A business purchases furniture worth ₹15,000.
The transaction is first recorded in the journal and later posted to the ledger.

3) Cost of Goods Sold (COGS):

Cost of Goods Sold is the direct cost of goods that have been sold during the accounting period.
Example:
Opening Stock = ₹30,000; Purchases = ₹90,000; Closing Stock = ₹20,000
Cost of Goods Sold = Opening Stock + Purchases − Closing Stock
Cost of Goods Sold = ₹30,000 + ₹90,000 − ₹20,000
Cost of Goods Sold = ₹1,00,000

4) Credit:

Credit is the right side of an account.
Example: A business purchases furniture for cash.
Entry:
Furniture A/c Dr.
  To Cash A/c
Here, the cash account is credited.

5) Debit:

Debit is the left side of an account.
Example: A business purchases furniture for cash.
Entry:
Furniture A/c Dr.
  To Cash A/c
Here, the furniture account is debited.

6) Depreciation:

Depreciation is the reduction in the value of a fixed asset due to usage, wear and tear, or obsolescence.
Example:
A machine costs ₹5,00,000: Annual Depreciation = ₹50,000
Formula: Book Value = Cost – Depreciation
Book Value = Cost – Depreciation
Book Value = ₹5,00,000 - ₹50,000
After one year, Book Value = ₹4,50,000

7) Entity:

An Entity is an economic unit that carries on business activities.
Examples

  • Reliance Industries 
  • Tata Motors 
  • ABC Traders 
  • XYZ Furniture 

8) Entry:

An Entry is the recording of a business transaction in the books of account.
Example: Cash invested into business = ₹1,00,000
Journal Entry:
Cash A/c Dr. ₹1,00,000
  To Capital A/c ₹1,00,000

9) Insolvent:

An Insolvent person or business is unable to pay its debts.
Example:
Rahul owes ₹1,50,000 to different suppliers but has assets worth only ₹70,000.
Rahul is Insolvent.

10) Solvent:

A Solvent person or business is able to pay all its debts on time.
Example:
ABC Traders has Assets = ₹8,00,000; Liabilities = ₹3,00,000
Since assets are greater than liabilities, the business is solvent.

11) Proprietor:

A Proprietor is the owner of a business.
The proprietor invests capital and bears all the risks and rewards of the business.
Example:
Mr. Ramesh starts a stationery shop by investing ₹4,00,000.
Mr. Ramesh is the Proprietor of the business.

12) Financial Statements (Final Accounts):

Financial statements are prepared at the end of the accounting period to determine the financial performance and financial position of a business.
They include:

  • Trading Account 
  • Profit and Loss Account 
  • Balance Sheet 

Example
At the end of the financial year, ABC Traders prepares:

  • Trading account to calculate gross profit. 
  • Profit and Loss Account to calculate net profit. 
  • Balance Sheet to show Assets, Liabilities, and Capital as of 31st March. 

Conclusion:

Carefully rewrite all the important MCQs to clarify your concepts of basic accounting terms.

Print the below MS Word practice sheet and revise and practice offline anytime.

Repeat watching the video explanation to get more clarity and to revise fast before exams.

The PDF notes download link is available for you to download for free.

👉 Download Theory Notes

👉 Download One Mark Notes

👉 Download Questions & Answers Notes

👉 Click Here to Watch YouTube Video (MCQs & Short Answer Questions)

👉 Click Here to Watch YouTube Video - CBSE Chapter 2 Basic Accounting Terms

Reference Book:
TS Grewal's Double Entry Bookkeeping Class 11 Accountancy (for educational purposes only for concept building).

Disclaimer:
The content is designed for educational purposes as per the CBSE class 11 syllabus in accountancy. It is not a copy of any textbook.

Make sure to subscribe to our YouTube channel for more videos, CBSE Class 11 Accountancy MCQs, and exam preparation.

Stay tuned for more videos...!!

Keep watching...!!

Keep learning...!!

Thanks for visiting SAVVY LEARNER CHANNEL...!!

Comments

Post a Comment

Popular posts from this blog

CBSE Class 11 Accounts Chapter 1 Introduction to Accounting - One Mark

-
Image
  Introduction to Accounting Introduction: In this article, you will find comprehensive study materials for CBSE Class 11 Accountancy Chapter 1: Introduction to Accounting , including theory notes, MCQs, and questions & answers to help you understand the chapter and prepare effectively for examinations. 👉  Download MCQs, Questions & Answers Notes 👉 MCQs Mock Test 👉 Click Here to Watch YouTube Video (MCQs & Short Answer Questions) 👉 Click Here to Watch YouTube Video - CBSE Chapter 1 Introduction to Accounting I. Multiple Choice Questions (MCQs): (i) Bookkeeping and Accounting (a) means the same and are used interchangeably. (b) does not mean the same and are not used interchangeably. (c) means both (a) and (b). (d) None of the above. Ans: (b) does not mean the same and are not used interchangeably. (ii) Which of the following is not a sub-field of accounting? (a) Bookkeeping (b) Management Accounting (c) Financial Accounting (d) Cost Accounting Ans: (a) Bookkee...
Read more

CBSE Class 11 Accounts Chapter 1 Introduction to Accounting - Questions and Answers

-
Image
  Introduction to Accounting Introduction: In this article, you will find comprehensive study materials for CBSE Class 11 Accountancy Chapter 1: Introduction to Accounting , including theory notes, MCQs, and questions & answers to help you understand the chapter and prepare effectively for examinations. 👉 Download MCQs Notes 👉 MCQs Mock Test 👉 Click Here to Watch YouTube Video (MCQs & Short Answer Questions) 👉  Click Here to Watch YouTube Video - CBSE Chapter 1 Introduction to Accounting Very Short Answer-Type Questions: 1.  Give the meaning of 'accounting.' Answer: Accounting is a process of identifying financial transactions, measuring them in money terms, recording them in primary books, classifying, summarizing, analyzing, and interpreting them, and communicating the results to the users. 2.  List any two functions of accounting. Answer: Two functions of accounting are (i) Identifying financial transactions (ii) Recording them in the books of accoun...
Read more

CBSE Class 11 Accounts Chapter 1 Introduction to Accounting - Part 1

-
Image
  Introduction to Accounting Introduction: Welcome to CBSE Class 11 Accountancy, Chapter 1: Introduction to Accounting .  In this article, we will learn the meaning, definition, characteristics, accounting process, and objectives of accounting in a simple and easy-to-understand manner. 👉 Download MCQs, Questions & Answers Notes 👉 MCQs Mock Test 👉 Click Here to Watch YouTube Video (MCQs & Short Answer Questions) 👉 Click Here to Watch YouTube Video - CBSE Chapter 1 Introduction to Accounting What You Will Learn: Introduction Meaning of Accounting Definition of Accounting Accounting Process Characteristics of Accounting Objectives of Accounting Quick Revision Notes Conclusion Meaning of Accounting: Accounting is a systematic process of recording, classifying, summarizing, analyzing, and interpreting the financial transactions and communicating the results to the users thereof.  The users of accounting information include owners, creditors, banks, governments, etc...
Read more

CBSE Class 11 Accounts Chapter 1 Introduction to Accounting - Part 2

-
Image
  Introduction to Accounting Introduction: Welcome to CBSE Class 11 Accountancy, Chapter 1: Introduction to Accounting .  In this article, we will learn the meaning, definition, functions, advantages, limitations, and role of accounting in a simple and easy-to-understand manner. 👉   Download MCQs, Questions & Answers Notes 👉 MCQs Mock Test 👉 Click Here to Watch YouTube Video (MCQs & Short Answer Questions) 👉 Click Here to Watch YouTube Video - CBSE Chapter 1 Introduction to Accounting What You Will Learn: Introduction Meaning of Accounting Definition of Accounting Functions of Accounting Advantages of Accounting Limitations of Accounting Role of Accounting in Business Quick Revision Notes Conclusion Meaning of Accounting: Accounting is a systematic process of recording, classifying, summarizing, analyzing, and interpreting the financial transactions and communicating the results to the users thereof.  The users of accounting information include owners, cr...
Read more

Samacheer Kalvi Class 12 Accounts Chapter 1 Accounts from Incomplete Records - Part 1

-
Image
Chapter 1: Accounts from Incomplete Records How to find Profit or Loss Using the Statement of Affairs Capital at the beginning and at the end can be found out by preparing a statement of affairs at the beginning and at the end of an accounting year, respectively.  A statement of affairs is a statement showing the balances of assets and liabilities on a particular date.  This method of ascertaining profit is also called the statement of affairs method, net worth method, or capital comparison method. In this article, you will learn: • Solved Book Back Questions (Questions 1-5) • Solved Book Back Questions (Questions 6-9) • Solved Book Back Questions (Questions 10-15) 👉 Study Notes: Calculate profit or loss from Statement of affairs Question 1: From the following particulars, ascertain the profit or loss for the year: Capital at the beginning of  the year (1st Apr 2018):  ₹ 500,000; Capital at the end of  the year (31st March 2019):  ₹ 850,...
Read more