Basic Accounting Terms

Answer

An event is anything that brings about a change in the financial position of a business. It is the result of a transaction. Example: when business activities lead to profit, closing stock, cash balanc…

Answer

A transaction is a kind of event involving some value between two or more persons. It includes dealing between two or more persons involving exchange of goods or services for a consideration. A transa…

Answer

The four kinds are: cash transactions, credit transactions, barter transactions, and paper transactions. Cash transactions involve cash. Credit transactions do not involve immediate cash payment. Bart…

Answer

A voucher is a documentary evidence in support of a transaction. It is prepared by an accountant and signed by an authorized person. Vouchers are serially numbered and related source documents are att…

Answer

The principle of vouching is: there should be no entry without its voucher and no voucher without its entry. This means every accounting entry must be supported by proper documentary evidence.

Answer

A debit voucher is a cash voucher prepared when payment is made to creditors, money is deposited into bank, or payment of an expense is made. It records cash outflow or payment by the business.

Answer

A credit voucher is a cash voucher prepared when payment is received in cash or through cheque for sale of goods, money withdrawn from bank, or payment received from debtors. It records cash inflow or…

Answer

A non-cash voucher, also called a transfer voucher, is prepared when a transaction does not involve cash. It is used for credit sales, credit purchases, goods returned, and rectification of errors.