If you are a Class 11 student aiming to strengthen your basics, you’ve found the definitive resource on basic accounting terms class 11 notes. This comprehensive guide is tailored to clear up confusion, sharpen your understanding, and help you score better.
Topics Discussed
What Are Basic Accounting Terms?
Understanding the language of accounting is crucial. These terms form the backbone of every financial statement, ledger, and exam question. Whether you want clarity for your CBSE syllabus or goal-oriented revision, our basic accounting terms class 11 notes break every concept down into easy-to-remember explanations and relatable examples.
Why Are Basic Accounting Terms Important?
- Foundation for Advanced Concepts: Grasping basic terms makes higher-level accounting far less intimidating.
- Improved Problem-Solving: Clarity with terms means faster, more accurate answers.
- Confidence in Exams: Precise definitions help you score better and avoid silly mistakes.
Core Basic Accounting Terms for Class 11
Let’s dive into the most important accounting terms for Class 11, explained in simple language:
1. Business Transaction
A business transaction is any economic activity that changes a business’s financial position. Think of selling goods, paying salaries, or buying equipment; each of these is a business transaction.
2. Account
An account records all financial transactions relating to a particular item or person. It uses the T-shaped ledger format you’ll see in your textbooks.
3. Capital
Capital refers to the money or assets that the owner invests in the business. It could be in the form of cash, goods, or machinery. The business uses this capital to run its operations.
4. Drawings
Drawings are the amounts or goods withdrawn by the owner for personal use from business funds. If you take money out of the cashbox to buy a gift for yourself, that’s a drawing!
5. Assets
Assets are resources or things of value owned by a business. They are classified into:
- Current Assets: Easily convertible to cash within a year (e.g., stock, cash, debtors)
- Non-current (Fixed) Assets: Used for a longer period (e.g., buildings, machinery).
6. Liabilities
Liabilities are the financial obligations or debts that a business owes to others. Liabilities can also be:
- Current Liabilities: Payable in the short term (e.g., creditors, outstanding expenses)
- Non-current Liabilities: Due over the long term (e.g., long-term loans).
7. Revenue
Revenue is the total income earned by the business through sales of goods or services.
8. Expenses
Expenses are the costs incurred by a business to earn revenue, like rent, salaries, and electricity bills.
9. Profit
Profit is the amount by which revenue exceeds expenses. Formula: Profit=Revenue−Expenses
Loss occurs if expenses exceed revenue. For example, if your total sales are less than your expenses in a month, you have a loss.
11. Gain
A gain is a monetary benefit from events outside normal business operations, such as selling an old asset for more than its book value.
12. Purchases and Purchases Return
- Purchases: Goods bought for resale or use in production.
- Purchases Return: Goods returned to the supplier due to defects or other reasons.
13. Sales and Sales Return
- Sales: Sale of goods or services to customers.
- Sales Return: Goods sold that are returned by customers.
14. Stock
Stock refers to the inventory of goods available for sale at a particular point in time.
Types include:
- Opening Stock: At the start of the accounting period.
- Closing Stock: At the end of the period.
15. Debtors
Debtors are people or entities that owe money to your business because you sold them goods on credit. This is a current asset.
16. Creditors
Creditors are people or entities your business owes money to for goods or services bought on credit. This is a liability.
17. Bad Debts
Bad Debts are amounts owed by debtors that are now considered irrecoverable.
18. Voucher
A voucher is any written document supporting the authenticity of a transaction, like receipts, invoices, or cash memos.
19. Discount
A discount is a reduction in the price of goods:
- Cash Discount: For prompt payment (recorded in books)
- Trade Discount: Reduction based on volume or value (not recorded in books)
Key Differences At a Glance
| Term | Meaning / Example |
|---|---|
| Assets | Owned resources (cash, stock, machinery) |
| Liabilities | Dues to others (loans, creditors) |
| Capital | Owner’s investment in business |
| Drawings | Goods/cash taken by owner for personal use |
| Debtors | Customers who owe your business money |
| Creditors | Suppliers you owe money to |
| Purchases | Goods bought for resale |
| Sales | Goods/services sold |
| Expenses | Day-to-day costs (rent, salary) |
| Revenue | Total income from business activities |
More Fundamental Terms from the Syllabus
- Goods: Items bought and sold in the course of business.
- Entry: A transaction/event recorded in books of account.
- Entity: The separate legal identity of a business (distinct from its owners).
- Depreciation: Decrease in value of assets over time due to use or obsolescence.
- Expenditure: Money spent to acquire assets, goods or services; includes revenue and capital expenditure categories.
- Receipt: Money received by a business, possibly for a variety of reasons.
How to Memorize Basic Accounting Terms Effectively
- Make Flashcards for each term and test yourself daily.
- Group Similar Terms (e.g., assets/liabilities, capital/drawings).
- Learn With Examples: Use real-life cases or create examples from your everyday life.
- Use Revision Notes: Refer to basic accounting terms class 11 notes for a quick recap before exams.
Common Questions on Basic Accounting Terms
What is the difference between trade receivables and debtors?
Trade receivables refer to the total amount receivable, while debtors are specifically those entities that owe money for goods bought on credit.
Gross Profit vs. Net Profit?
- Gross Profit = Sales – Direct Costs
- Net Profit = Gross Profit – Other Expenses (e.g., salaries, depreciation)
Prepaid vs Outstanding Expenses?
- Prepaid expenses: Paid in advance, benefits to be received in future.
- Outstanding expenses: Incurred but not yet paid.
Trade Discount vs Cash Discount?
- Trade discount: Deduction for bulk purchase, not shown in books.
- Cash discount: Deduction for prompt payment, shown in books.
Quick Tips to Ace Class 11 Accountancy
- Regularly revise your basic accounting terms class 11 notes.
- Practice with diagrams (like the T-Account format).
- Do sample questions from past year papers.
- Seek clarity on confusing terms—never move ahead with doubts.
- Discuss concepts with peers or teachers for deeper insight.
Conclusion
Getting familiar with basic accounting terms class 11 notes is a game changer for your commerce studies. By learning and applying these terms, you’ll breeze through not only your accounting syllabus but also real-world financial discussions.