Question

Explain each of the following accounting terms with examples.
Fixed assets
Gain
Profit
Revenue
Expenses
Short term liability
Capital

Answer 1

• Fixed Assets-Fixed assets are those which lasts for a long period of time such as plant and machinery, building,land etc.
• Gain-A profit arises from events or transactions which are incidental to business such as sale of fixed assets,winning a court case, appreciation in the value of an asset.
• Profit- The excess of revenues of a period over its related expenses during an accounting year is termed as profit.Profit increases the investment of the owners.
• Revenue-These are the amounts of the business earned by selling its products or providing services to customers,such as commission,interest,dividends,royalties, rent received etc.
• Expenses-Coasts incurred by a business in the process of earning revenue are known as expenses.Such as rent, wages,salaries,interest,cost of heater,light and water,telephone etc.
• Short Term Liability-Short term liabilities are obligations that are payable within a period of one year,i.e.creditors,bills payable,bank overdraft.
• 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 the owner for the business.