Financial accounting: (also known as stewardship) It is recording and summarizing

the financial transaction & preparing statements relating to business in accordance

with GAAP( generally accepted accounting principle).
Income tax accounting: It is the accounting done for the purpose of filing income tax
returns to local, state and central government.
Cost accounting: Its is the accounting which concerns with the determination of the
aggregate cost of goods
Management accounting: It is the accounting which uses financial and cost
accounting to help make managerial decisions..
Management reporting: It is to summarize and present data in a predetermined
format to the various levels of management.
Limitations of accounting:
1)
2)
3)
4)

It ignores the qualitative aspect.

It is not free from bias.
The estimated position of the assets does not match the real positions.
It ignores the price changes in case of financial statements prepared on
historical cost.
5) Danger of window dressing.

Glossary of accounting:
1) Capital: Cash, goods or assets brought in by the proprietor to start and run a
business.
2) Drawings: The cash, goods, assets or services drawn from the business by
the owner for personal use is called drawing.
3) Goods: The commodities in which the business deal is called goods.
4) Liability: Any amount payable by the business to any outsider is known as
liability
There are two types of liabilities (1) current liability and (2) Long term liability.
Amount payable within one year is called current liability and amount payable
after one year is called long term liability.
5) Asset:Items which are purchased with an intention to use them in the
business and not to sell it out are known as asset.
6) Fixed assets: land, building, goodwill, patent etc which can be used for a long
time are called fixed assets.
7) Current asset: Inventory for raw material, finished goods, cash balance, bank
balance needed for the operating of business is called current asset.
a) Fictitious assets: With some specific objective when some expenses are
incurred or when unusual loss is arises they are apportioned over the

year and gradually written off from the book, such assets are called
fictitious assets. .
8) Purchases: When a trader buys a product in which he deals, whether for cash
or on credit, it is called purchases.
9) Sales: When a trader sells the goods in which he deals either in cash or on
credit it is called sales.
10)
Revenue: It is the gross money received by the sale of product or
service.
11)
Expenditure: Amount spent or paid when the liability is created for
getting any benefit or service is known as expenditure. For Example,
purchase of machinery and payment of salary.
12)
Expense: it is money spent in conducting the business. It is paid for
some service rendered by others. E.g. salary, legal charges, stationery etc.
13)
Closing stock: Goods which are produced in during the year but not be
sold during the year are called the closing stock.
14)
Opening stock: The goods which were produced in the previous year
but not sold during that year becomes the opening stock.
15)
Debt: Total amount payable to the creditor is called debt.
16)
Debtor: When goods are sold or services rendered to customers on
credit and the amount is to be collected from customers then these
customers are known as debtor.
17)
Creditor: When goods are sold or services rendered to customers on
credit and the person to whom the amount is to be paid are known as
creditor.