Summary: Accountancy is the field of study, while Accounting is the systematic process of recording and reporting financial data. Detailed Explanation: Accountancy refers to the entire body of theory and practice. Accounting is the "action" phase—identifying, measuring, and communicating economic information to permit informed judgments and decisions. Accounting Rule Applied: Professional Standards (GAAP/IFRS).

Example:

A company following Accountancy principles decides to use the "Double Entry" method to perform its daily Accounting tasks.

Summary: Any economic event that changes the financial position of a business and can be measured in money. Detailed Explanation: A transaction involves a transfer of money, goods, or services. It must be an objective event supported by source documents like invoices or receipts. Accounting Rule Applied: Every transaction affects at least two accounts (Dual Aspect Concept).

Example:

Buying a laptop for office use worth ₹40,000 for cash is a transaction. Entry Example:

Summary: Assets are resources owned by the business meant for generating future profit. Detailed Explanation: Assets represent value that can be converted into cash. They are classified into Current (Cash, Stock) and Non-Current (Land, Machinery). Accounting Rule Applied: Real Account Rule: Debit what comes in, Credit what goes out.

Example:

Purchasing a building for ₹50,00,000 to serve as the company headquarters. Entry Example:

Summary: Liabilities are the financial obligations or debts that a business owes to outsiders. Detailed Explanation: They represent the claims of creditors against the assets of the company. These are settled over time through transfers of cash or services. Accounting Rule Applied: Credit to increase, Debit to decrease.

Example:

Taking a bank loan of ₹5,00,000 to expand operations. Entry Example:

Summary: Capital is the amount invested by the owner in the business. Detailed Explanation: It is the owner's claim on the assets of the firm. Under the Business Entity Concept, the business is liable to pay this back to the owner eventually. Accounting Rule Applied: Personal Account Rule: Credit the giver.

Example:

Owner Mr. X starts a business by bringing in ₹2,00,000 in cash. Entry Example:

Summary: Withdrawal of cash or goods by the owner for personal use. Detailed Explanation: Drawings reduce the owner's capital. It is not an expense of the business but a reduction in owner's equity. Accounting Rule Applied: Personal Account Rule: Debit the receiver.

Example:

Owner withdraws ₹5,000 from the business bank account for his daughter's school fees. Entry Example:

Summary: Physical items in which the business deals for the purpose of resale. Detailed Explanation: Goods are the commodities purchased with the intent of selling them at a profit. An item is only "goods" if it is part of the regular business trade. Accounting Rule Applied: Recorded via Purchases/Sales accounts.

Example:

A mobile retailer buying 50 iPhones for his shop. These iPhones are "Goods."

Summary: Acquisition of goods for the purpose of resale. Detailed Explanation: Purchases can be for cash or credit. Only the purchase of "Goods" is recorded in this account, not the purchase of fixed assets. Accounting Rule Applied: Real Account Rule: Debit what comes in.

Example:

Purchased goods worth ₹15,000 for cash. Entry Example:

Summary: Revenue generated from the transfer of ownership of goods to customers. Detailed Explanation: Sales is the primary source of income for a trading business. It is recorded at the invoice price. Accounting Rule Applied: Nominal Account Rule: Credit all incomes and gains.

Example:

Sold goods to a customer for ₹20,000 cash. Entry Example:

Summary: A person or entity who owes money to the business for credit sales. Detailed Explanation: Debtors are assets. They represent customers who have purchased goods but have not yet paid for them. Accounting Rule Applied: Personal Account Rule: Debit the receiver.

Example:

Sold goods worth ₹8,000 to Mr. B on credit. Mr. B is now a Debtor. Entry Example:

Summary: A person or entity to whom the business owes money for credit purchases or loans. Detailed Explanation: Creditor is a person or entity to whom we have to pay money. They represent a liability for the business. Accounting Rule Applied: Personal Account Rule: Credit the giver, Debit the receiver.

Example:

If we buy goods of ₹10,000 from A, He will be called a creditor, because we have to pay ₹10,000 to A. Entry Example:

Summary: The total amount of money owed by customers for goods/services provided on credit. Detailed Explanation: This is an aggregate term. It includes all Sundry Debtors and Bills Receivable. It is listed under Current Assets in the Balance Sheet.

Example:

If customer X owes ₹500 and customer Y owes ₹500, the total Accounts Receivable is ₹1,000.

Summary: The total amount the business owes to its suppliers and vendors for credit purchases. Detailed Explanation: Includes all Sundry Creditors and Bills Payable. It is a Current Liability. It indicates the short-term liquidity obligations of the firm.

Summary: The value of goods remaining unsold at the end of the accounting period. Detailed Explanation: Stock is an asset. Closing stock of one year becomes the Opening stock of the next. It is valued at cost or market price, whichever is lower.

Summary: A reduction in the price of goods or the amount to be paid. Detailed Explanation: Trade discount is a reduction from the list price (not recorded in books). Cash discount is given for prompt payment (recorded in books). Accounting Rule Applied: Nominal Account Rule: Debit all losses/expenses (Discount Allowed).

Example:

Receiving a 5% discount for paying an invoice early.

Summary: Costs incurred in the process of earning revenue. Detailed Explanation: Expenses include Rent, Salaries, Electricity, etc. They are recorded in the Profit & Loss Account to calculate Net Income. Accounting Rule Applied: Nominal Account Rule: Debit all expenses and losses. Entry Example:

Summary: The portion of debt that becomes uncollectible from a debtor. Detailed Explanation: When a debtor becomes insolvent, the money owed is written off as a loss. Accounting Rule Applied: Nominal Account Rule: Debit all losses. Entry Example:

Summary: Appreciation is an increase in asset value; Depreciation is a decrease due to usage or time. Detailed Explanation: Depreciation is a non-cash expense that spreads the cost of an asset over its useful life. Appreciation is less common in day-to-day books unless revalued. Accounting Rule Applied: Nominal Account Rule: Debit Depreciation (Expense). Entry Example (Depreciation):

Summary: A statement showing the debit and credit balances of all ledger accounts to check mathematical accuracy. Detailed Explanation: It is a working paper, not a part of the formal financial statements. If the total debits equal total credits, the books are arithmetically correct.