Accountancy - Chapter 1 -
Understanding Basic Terms
Business transaction
An economic activity that affects the financial position of the business and can be measured in terms of money, e.g., the purchase of goods for use in the industry.
Account
An account refers to a summarised record of relevant transactions for a particular head at one location. All accounts are divided into two sides. The left side of an account is referred to as the debit side, and the right side is referred to as the credit side.
Capital
The amount invested by the owner in the firm is known as capital. It may be bought in the form of cash or assets by the owner.
Drawings:
The money or goods or both withdrawn by the owner from the business for personal use is known as drawings. Example: purchasing a car for personal use by withdrawing money from a business account.