Bookkeeping Terminology
Bookkeeping and accounting are technically different, but you'll still need to be familiar with these key terms:

Accounts Payable – Outstanding payments the company currently owes to suppliers, vendors, and creditors — essentially any bills the company still has yet to pay.1
Accounts Receivable – Outstanding payments the company is currently owed by all customers or clients. Basically, this is anything the company bills out.1
Balance Sheet – A financial document that reconciles all the company's assets with their liabilities and equity.1
Costs of Goods Sold – The total money spent to produce goods and services, including production, labor, storage and material costs.2
Current Assets – Capital that has immediate value (typically that which will be used within one year), including cash, sellable products or accounts receivable.2
Equity – All capital currently invested in the company, including any profits that have been re-invested as retained earnings.2
Expenses – Any additional money spent operating the company that's not associated with the production of sellable products and services. Examples of expenses include office supplies, lease for the place of business and employee wages.1
Fixed Assets – Assets with long-term value, such as land and property, tools and machinery, or vehicles.2
General Ledger – Record of all financial transactions across all of a company's accounts, which is maintained continuously for the entire life of the company.1
Income Statement – All outstanding debts owed by the company. This could include accounts payable, loans, liens on property or other long-term investments.2
Liabilities – Outstanding payments the company is currently owed by all customers or clients. Basically, this is anything the company bills out.2
Net Income – The company's total profit (or loss, if negative) once costs and expenses are subtracted from revenue.1
Revenue – All incoming money from selling products and services or generated through a company's additional assets, before expenses are taken into account. Also referred to as "gross income."1
Terminology Used in Calculations
Credit – An entry on a balance sheet that decreases asset values and/or increases liability and equity values.2
Debit – An entry on a balance sheet that increases asset values and/or decreases liability and equity values (or incoming payments).2
Return on Investment (ROI) – Used to determine how much of the money spent producing goods and services was recouped in profits. You find ROI by calculating a ratio of a business’s net income to total assets.2
Present Value (PV) – The amount a future sum of money is currently worth today.2 Because a company can invest existing funds in order to collect interest or ROI in the future, a particular sum of money may not be worth the same thing now as it will be in the future. Accountants may use present value calculations to determine the true value of sales to be paid in the future, or to aid in investment decisions

Thank You.

**01- Some Basic Accounting Terminologies - Class 11 - Accountancy**

Accounting is the process of measuring, processing, and communicating financial information about an organization to various stakeholders. To understand accounting, it is important to grasp some basic accounting terminologies. Here are some key terms explained in detail:

**1. Assets:**
Assets refer to the economic resources owned or controlled by a business that can be measured in monetary terms. It includes cash, inventory, land, buildings, equipment, and investments. Assets are recorded on the balance sheet and are categorized as current assets or non-current assets.

**2. Liabilities:**
Liabilities are the obligations or debts owed by a business to external parties. They can be classified as current liabilities (short-term obligations) or non-current liabilities (long-term obligations). Examples include accounts payable, loans, and mortgages.

**3. Equity:**
Equity represents the residual interest in the assets of a business after deducting liabilities. It is the ownership interest of the shareholders in a company and can be calculated as total assets minus total liabilities. Equity includes share capital, retained earnings, and reserves.

**4. Revenue:**
Revenue refers to the inflow of economic benefits resulting from the ordinary activities of a business. It is generated through the sale of goods, provision of services, or other operating activities. Revenue is recorded when it is earned and can be recognized as sales, fees, interest, rent, or royalties.

**5. Expenses:**
Expenses are the costs incurred in the process of generating revenue or running a business. They decrease the owner's equity and are recorded when they are consumed or used up. Examples of expenses include salaries, rent, utilities, advertising, and depreciation.

**6. Profit/Loss:**
Profit is the excess of revenue over expenses, indicating the financial gain of a business. It represents the positive outcome of business operations. Conversely, a loss occurs when expenses exceed revenue, resulting in a negative financial outcome.

**7. Balance Sheet:**
The balance sheet is a financial statement that presents the financial position of a business at a specific point in time. It includes assets, liabilities, and equity. The balance sheet provides information about the company's resources, obligations, and ownership structure.

**8. Income Statement:**
The income statement, also known as the profit and loss statement, summarizes the revenues, expenses, gains, and losses of a business over a specific period. It shows the net profit or loss generated by the company during that period.

**9. Cash Flow Statement:**
The cash flow statement provides information about the cash inflows and outflows of a business during a given period. It categorizes cash flows into operating activities, investing activities, and financing activities. The statement helps assess the liquidity and cash-generating ability of a business.

Understanding these basic accounting terminologies is essential for students studying commerce and accountancy. They provide a foundation for comprehending more complex accounting concepts and principles.