Coupon Accepted Successfully!



Assets are properties of the business that help it to earn revenue. Assets are the resources which result in economic benefits to the business. Assets are not meant for sale. They are maintained by the business because they increase the operational efficiency of the business.

Assets are of two types:
  • Non-Current Assets 
  • Current Assets

Non Current Assets are held permanently in the business e.g. land & building, machinery, furniture, etc.

Current Assets can be realized to discharge liabilities e.g. Stock,Trede  Receivables, Cash and Cash equivalents


Liabilities are the amounts which a business firm owes to others Liabilities may be of two types Long-term Liabilities are the obligations of the business which are paid after one year e.g. loan from bank, debentures.(Now known as Non Current Liabilities).

Short-term Liabilities are the obligations which are paid within one year e.g. creditors for goods, bills payable etc, (Now Known as Current Liabilities).


Capital is the investment of the owner in the business. Capital includes the undistributed profits. Capital is reduced by losses incurred by the business and withdrawals of capital. Capital may also be defined as the owner’s equity or owner’s claim against the assets.

Capital may be expressed in the following accounting equation :


Capital = Assets – Liabilities


Business Transactions

Business Transactions are the events or activities relating to a business entity which result in change in the values of assets and equity. Business transactions should have some economic consequence capable of being measured in monetary terms. For example, purchase of goods, sale of goods, payment of expenses, arranging loans from bank etc.


Expenses means the amount which is spent by the business in order to carry on its routine operations. Expenses are incurred for generating revenue e.g. purchase of goods, wages, salaries, advertisement, carriage, discount, stationery, commission etc.


Revenues are the amount earned by a business by its business operations i.e. selling the product or providing services to customers. Revenue increases the assets of the enterprise.

Debtors or Trade Receivables

Persons who owe to an enterprise for receiving goods and services on credit. Debtors are current asset of the enterprise and are shown on the assets side of Balance sheet.

Creditors or Trade Payables

Persons who have to be paid by an enterprise for providing the enterprise goods and services or credit. Creditors are shown on the liabilities side of Balance sheet.


Stock or inventory refers to the various items on hand on a particular day – raw materials, work-in-progress, finished goods and consumables and maintenance supplies. Part of Current Assets.

Income or Profit

Income is that part of revenue which increases owner’s equity Income or Profit = Revenue – Expenses.

​A Financial Statement

 A financial statement may be defined as statement of financial data according to logical and consistent accounting principles. There are three basic financial statements which are prepared by an enterprise:    a) Statement of Profit and Loss Account  b) Balance sheet. Vertical Form only. Revised Schedule VI  c) Cash Flow Statement



An account is a formal record of all transactions relating to changes in a particular item. For example, cash account shows transactions relating to cash at one place.


Accounting Equation

An accounting equation is a statement showing the equality between the assets and liabilities and capital.
It may be stated as:


 Assets = Liabilities + Capital





Expenditure is the amount whose benefit is to be derived in future. An expenditure may be revenue or capital expenditure. A revenue expenditure is known as expense while capital expenditure is known as expenditure.



Sales means transfer of ownership of goods or services to customers. Sales may be cash sales or credit sales.



Purchases means procuring of goods either for resale or for processing and then sold. A trading concern makes purchases for sale while a manufacturing concern purchases raw materials for processing and then sale. Purchases may be cash purchases or credit purchases.



Loss means decrease in the value of an asset or increase in the value of liability without resulting in any benefit to business. For example, decrease in cash due to theft is a loss, Loss by Fire, Sale of Goods at less than cost.



Drawings are the value of cash or goods withdrawn from the business by the owner for his personal use. It is opposite of capital.



Gains is the change in the equity or net worth due to transfer of an asset at more than cost.


Contingent Asset

Contingent asset has been defined by Kohler as “An asset, the existence, value and ownership of which depend upon the occurrence or non-occurrence of specific event or upon the performance or non-performance of a specified act; Suppose the firm has filed a suit for some property now in the possession of someone else. If the suit is decided in the firm’s favor, the firm will get the property; at the moment it is a contingent asset. 

Similar would be the position for a patent applied for arising out of the firm’s own research effort. It is show in the report of approving authority only like Board of Directors in Case of Company.


Test Your Skills Now!
Take a Quiz now
Reviewer Name