Basics

Question 1

Transaction

Answer 1

Transfer of money or money’s worth (goods, services, ideas) from one person to another

Question 2

Cash transaction

Answer 2

Transaction that involves immediate cash receipt or immediate cash payment

Question 3

Credit transaction

Answer 3

Transaction in which cash is not paid or received immediately, but will be received or paid later

Question 4

Account

Answer 4

An account opened for a person, asset, expense, income, etc. In ledger, an account is a summary of transaction under a head.

Question 5

Capital

Answer 5

Amount invested by an owner or proprietor in an organisation

Question 6

Drawings

Answer 6

Amount of cash or value of goods, assets, etc. withdrawn from the business by the owner for the personal use of the owner

Question 7

Voucher

Answer 7

Any written or printed document in support of a business transaction is called a voucher. Eg. cash receipt, invoice, cash memo, bank pay-in-slip, etc

Question 8

Invoice

Answer 8

Statement prepared by a seller of goods to be send to the buyer. It shows details of quantity, price, value, etc. of the goods and any discount given, finally showing the net amount payable to the buyer

Question 9

Goods

Answer 9

Articles, things or commodities in which a business is dealing with

Question 10

Purchases

Answer 10

Buying of goods with an intention of resale is called purchase

Question 11

Purchase return or return onwards

Answer 11

When goods brought are returned to the supplier

Question 12

Sales

Answer 12

When goods meant for resale are sold

Question 13

Sales return or sales inwards

Answer 13

When goods brought are returned to the buyer

Question 14

Stock

Answer 14

Unsold goods

Question 15

Income

Answer 15

Amount receivable or realised for sales of goods and earnings from interest, dividend, commission, etc.

Question 16

Expense

Answer 16

It is the amount increased in order to produce and sell the goods and services

Question 17

Solvency

Answer 17

Capability of a person or an enterprise to pay the debts

Question 18

Insolvency

Answer 18

Incapable to pay the debts

Question 19

Asset

Answer 19

Any physical thing or right owned that has a monetary value

Question 20

Liability

Answer 20

Physical obligation of the business

Question 21

Debtor

Answer 21

Who receives a money without giving money or money’s worth immediately but liable to pay in future

Question 22

Creditor

Answer 22

Gives money or money’s worth without receiving benefit

Question 23

Depreciation

Answer 23

Gradual reduction in the value of fixed assets due to passage of time

Question 24

Bad debt

Answer 24

Failure of debtors to pay the dues