Basic Accounting Terms
Part – 1
Your step-by-step journey to mastering accounting from scratch
📝 Handwritten Class Note
CA Devesh Thakur’s handwritten note for Day 1 — save it for quick revision!
🎬 Watch Day 1 Reel on Instagram
CA Devesh Thakur explains Basic Accounting Terms visually. Watch, like & share with your friends!
Welcome to the 50 Days Accounting Challenge!
Accounting can seem overwhelming at first, but every expert started with the basics. In Day 1, we cover the 6 most fundamental accounting terms that form the foundation of all financial recording. Whether you are a commerce student, a small business owner, or someone preparing for exams — this series is built for you. Let’s begin! 🚀
Why these terms matter
Before you can read a balance sheet or prepare a journal entry, you need to understand the language of accounting. These 6 terms are the ABCs — everything else builds on them.
Entity Concept 1
Accounting mein business aur owner ko alag-alag maana jaata hai. This is called the Business Entity Concept. Iska matlab yeh hai ki sirf business ke transactions record hote hain — owner ki personal cheezein nahi.
For example, agar owner apni personal car khareedta hai, woh transaction business ki books mein record nahi hoga.
Business Transaction Concept 2
Koi bhi activity jisme paisa ya value involve ho aur jo business ke financial position ko effect kare — use Business Transaction kehte hain.
Transactions do prakar ki hoti hain:
- Cash Turant paisa diya ya liya gaya. Example: ₹10,000 cash payment.
- Credit Paisa baad mein diya/liya jaayega. Payment deferred hoti hai.
Account Concept 3
Ek jagah pe similar type ke transactions ka record rakhna — isko Account kehte hain. Accounts teen prakar ke hote hain:
- Personal Personal A/c — Persons ya organizations se related. Eg: Ram A/c, Mohan A/c.
- Real Real A/c — Physical assets. Eg: Cash A/c, Building A/c.
- Nominal Nominal A/c — Income, expense, gain, loss. Eg: Salary A/c, Rent A/c.
Capital Concept 4
Jo paisa ya assets owner apne business mein invest karta hai — use Capital kehte hain. Capital is what the business owes to the owner. It represents the owner’s stake in the business.
Capital ke saath Drawings ka direct relationship hota hai — jab owner paise nikalte hain, Capital reduce hota hai.
Drawings Concept 5
Jab owner apne business se paisa ya maal personal use ke liye nikalta hai, use Drawings kehte hain. Drawings directly Capital ko reduce karta hai.
Yeh ek negative item hai for the business — kyunki isse owner ki equity (capital) kam hoti hai.
Liabilities Concept 6
Jo paisa business ko dusron ko dena hai — woh Liabilities hain. Liabilities do types ki hoti hain:
- Internal Internal Liabilities — Owner ko dena hai. Eg: Capital (owner’s equity).
- External External Liabilities — Outsiders ko dena hai. Eg: Bank Loan, Creditors.
📊 Quick Summary Table
| Term | Simple Definition | Example |
|---|---|---|
| Entity | Business aur owner alag hain | Ram ≠ Ram’s Shop |
| Business Transaction | Financial value involve ho aur position affect kare | ₹10,000 mal khareedna |
| Account | Similar transactions ka ek jagah record | Cash A/c, Salary A/c |
| Capital | Owner ka business mein investment | ₹1,00,000 invested |
| Drawings | Owner ne personal use ke liye nikala | ₹5,000 withdrawn |
| Liabilities | Business ka doosron ko dena | ₹50,000 bank loan |
Remember this formula!
Capital = Assets − Liabilities | This is the fundamental accounting equation and everything we learn builds on it. Stay tuned for Day 2!