ACCOUNTING
BASIC TERMS
ASSETS
These are economic resources of an
enterprise that can be usefully expressed in
monetary terms. Assets are things of value
used by the business in its operations.

Fixed Assets

Current Assets
ASSETS
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 Fixed Assets are assets which have been
purchased by the enterprise for long-term
use and not for resale in the ordinary course
of business.
e.g. Land, Building, Machinery, Plant,
Furniture and Fixtures, goodwill, patent,
copyright.
ASSETS
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 Current Assets are assets held on a
short-term basis and can be easily
converted into cash.
e.g. Debtors, Bills receivable,
Stock(Inventory), Cash and Bank
balances, etc.
LIABILITIES
These are obligations or debts that the
enterprise must pay in money or services at
some time in the future.
• Long-term liabilities
• Short-term liabilities
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 Long-term liabilities are those that are
usually payable after a period of one year.
e.g. A term loan from a financial institution,
debentures (bonds) issued by a company.
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 Short-term liabilities are obligations that
are payable within a period of one year.
e.g. Creditors, bills payable, overdraft from
a bank for a short period.
CAPITAL
Investment by the owner for use in the firm
is known as capital. Owner’s equity is the
ownership claim on total assets. It is equal
to total assets minus total liabilities.
REVENUES
These are the amounts the business earns
by selling its products or providing services
to customers. Other titles and sources of
revenue common to many businesses are:
sales, fees, commission, interest, dividends,
royalties, rent received, etc.
EXPENSES
These are costs incurred by a business in
the process of earning revenue. Generally,
expenses are measured by the cost of
assets consumed or services used during an
accounting period. The usual titles of
expenses are: depreciation, rent, wages,
salaries, interest, costs of heat, light and
water, telephone, etc.
PURCHASES
Purchases are total amount of goods
procured by a business on credit and for
cash, for use or sale. In a trading concern,
purchases are made of merchandise for
resale with or without processing.
In a manufacturing concern, raw materials
are purchased, processed further into
finished goods and then sold. Purchases
may be cash purchase or credit purchase.
SALES
Sales are total revenues from goods or
services sold or provided to customers.
Sales may be cash sales or credit sales.
STOCK
Stock
(Inventory)
is
a
measure
of
something on hand – goods, spares and
other items – in a business.
It is called stock on hand.
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In a trading concern, the stock on hand is
the amount of goods which have not been
sold on the date on which the balance sheet
is prepared. This is also called closing
stock.
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In a manufacturing concern, closing stock
comprises
raw
materials,
semi-finished
goods and finished goods on hand on the
closing date.
Similarly, opening stock is the amount of
stock at the beginning of the accounting
year.
DEBTORS
Debtors are persons and/or other entities who
owe to an enterprise an amount for receiving
goods and services on credit.
The total amount standing against such persons
and/or entities on the closing date, is shown in the
Balance Sheet as Sundry Debtors on the asset
side.
CREDITORS
Creditors are persons and/or other entities who
have to be paid by an enterprise an amount for
providing the enterprise goods and services on
credit.
The total amount standing to the favour of such
persons and/or entities on the closing date, is
shown in the Balance Sheet as Sundry Creditors
on the liability side.