Some Important Basic Accounting Terms

Qualitative characteristics of accounting information:

Accounting information is useful for interested users only if it posses the following characteristics 

1. Reliability : Means the information must be based on facts and be verified through source document by anyone. It must be free from bias and errors.

2. Relevance : To be relevant, information must be available in time and must influence the decisions of users by helping them to form prediction about the outcomes.

3. Understandability : The information should be presented in such a manner that users understand it well.

4. Comparability : The information should be disclosed in such a manner that it can be compared with previous years figures of business itself and other firm's data. 

Basic Accounting Terms

Business transaction

An economic activity that affect financial position of the business and can be measured in terms of money e.g., purchase of goods for use in business.

Account 

Account refers to a summarized record of relevant transaction particular head at one place. All accounts are divided into two sides left side of an account is called debit side and the right side of account is called credit side.

Capital

amount invested by the owner in the firm is known as capital it may be brought in the form of cash or assets by owner.

Drawings

the money or goods or both withdrawn by owner from business for personal use is known as drawings example purchase of car for personal use by withdrawing money from business.