Basic Accounting Definitions

Basic Accounting

DEBIT

Debit is a record of an indebtedness; specifically: an entry on the left-hand side of an account constituting an addition to an expense or asset account or a deduction from a revenue, net worth, or liability account.

DEBIT RECORD

Debit record (DR) is an entry in a double-entry bookkeeping system recording an increase in an asset or an expense, or a decrease in liability, or owners equity item. Debit entries are conventionally made on the left-hand side of T accounts.

DEBIT CARD

Debit card is a banking card enhanced with automated teller machine (ATM) and point-of-sale (POS) features so that it can be used at merchant locations. A debit card is linked to an individual’s checking account, allowing funds to be withdrawn at the ATM and point-of-sale without writing a check. Each financial institution creates an identity for its debit card to customize the product and differentiate it in the market. Debit cards can also be called deposit access cards.

CREDIT

Credit in accounting, is an accounting entry system that either decreases assets or increases liabilities; in general, it is an arrangement for deferred payment for goods and services.

SUNDRY CREDITORS

Sundry creditors refers to companies or individuals to which money is owed.

CREDIT CARD

Credit card is a card authorizing purchases on credit at a predetermined interest rate and payment conditions.

INVENTORY

              INVENTORY for companies: includes raw materials, items available for sale or in the process of

              being made ready for sale (work in process) for securities: it is securities bought and held by a

              broker or dealer for resale.

CREDIT CONTROL

Credit control is policies and procedures aimed at controlling the granting of credit.

INCOME TAX

Income tax is a tax paid on money made or profit realized from employment, business, or capital.

CREDIT SALES

             Credit sales are merchandise or services sold on the promise to pay later.

PROFIT AND LOSS STATEMENT

Profit and loss statement (P&L) is also known as an income statement. It shows your business revenue and expenses for a specific period of time. The difference between the total revenue and the total expense is your business net income. A key element of this statement, and one that distinguishes it from a balance sheet, is that the amounts shown on the statement represent transactions over a period of time while the items represented on the balance sheet show information as of a specific date (or point in time).

REMUNERATION

Remuneration is the act of paying for goods or services or to recompense for losses (Example: Receiving remuneration for work, i.e., a paycheck).

INPUT VAT

Input vat is the VAT on a company’s input supplies. See also VALUE ADDED TAX (VAT).

INFLATION

Inflation is an increase in the general price level of goods and services; alternatively, a decrease in the purchasing power of the dollar or other currency.

INVOICE

Invoice is a detailed list of goods shipped or services rendered, with an account of all costs; an itemized bill.

INVOICE COMMERCIAL

             Invoice, commercial is a legal document that functions internationally as a bill of sale.               It usually contains the exporting company, contents of the shipment, amount charged,   name of carrying vessel, order number and payment terms.

INTEREST                                                                                            Interest, in law, is a right or legal share of something or a financial involvement with            something; in finance, it is a fixed charge for borrowing money; usually a percentage of             the amount borrowed.

SALES INVOICE

Sales invoice is a document that records the sale of goods or services from a vendor to a customer.

INTEREST EXPENSE

Interest expense is the cost of borrowing funds in the current period. It is shown as a financial expense item within the income statement.

NET PURCHASES

Net purchases are those items purchased less returns, discounts and allowances on those purchases.

OPENING BALANCE

Opening balance is the balance of an account at the start of an accounting period.

CLOSING ENTRY

Closing entry is a journal entry at the end of a period to transfer the net effect of revenue and expense items from the income statement to owners equity.

DAY BOOK

Day book is a written record/ledger in which transactions have been recorded as they occurred.

DEBENTURE

Debenture is a corporate IOU that is not backed by the company’s assets (unsecured) and is therefore somewhat riskier than a bond.

BAD CREDIT

Bad credit is a term used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding credit card limits or declaring bankruptcy. Bad credit can result in being denied credit.

DEBTOR

Debtor is the party against who one has a claim.

BAD DEBT

Bad debt is an open account balance or loan receivable that has proven to be uncollectible and is written off.

DEDUCTION

Deduction is the act of deducting; subtraction. It is an amount that is or may be deducted, e.g. tax deductions.

BALANCE SHEET

Balance sheet is an itemized statement that lists the total assets and the total liabilities of a given business to portray its net worth at a given moment of time. The amounts shown on a balance sheet are generally the historic cost of items and not their current values.

DIRECT LABOR

Direct labor is work performed by individuals which is directly related to a specific cost objective. This work is readily identifiable with a particular product or service.

BANK RECONCILIATION

Bank reconciliation is the verification of a bank statement balance and the depositor's checkbook balance.

DIRECT MATERIAL

Direct material is the cost of raw materials and components that can easily and economically be identified either with individual units of production or with a responsibility center.

OVERDRAFT

OVERDRAFT is, a. a draft in excess of the credit balance within an account; or b. a facility (usually at a bank or other financial institution) enabling an account holder to borrow up to an agreed amount and often for an agreed time.

DISPATCH

DISPATCH, in shipping, is the amount paid by a vessels operator to a chatterer if loading or unloading is completed in less time than stipulated in the charter party.

BANK STATEMENT

BANK STATEMENT is a statement reporting all transactions in the accounts held by the account holder.