30 Essential Accounting Terms for Students

• 30 Basic Accounting Terms Every Student Should Know
• This guide provides essential accounting terminology for students, entrepreneurs, and finance beginners to help establish a strong foundation.
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30 BASIC ACCOUNTING TERMS

EVERY STUDENT SHOULD KNOW

1. Account : A record to classify and summarize financial transactions.
2. Assets : Resources owned by the business that provide future economic benefit.
3. Liabilities : Amounts the business owes to outsiders arising from past events.
4. Equity : The owner’s interest in the business after deducting liabilities from assets.
5. Revenue : Income earned from normal business activities.
6. Expenses : Costs incurred to earn revenue.
7. Profit : Excess of revenue over expenses.
8. Loss : Excess of expenses over revenue.
9. Capital : Funds invested by the owner in the business.
10. Drawings : Money or goods withdrawn by the owner for personal use.
11. Purchase : Buying goods or services for business use.
12. Sales : Goods or services sold to customers.
13. Debtor : A person who owes money to the business.
14. Creditor : A person or business to whom money is owed.
15. Journal : The book of original entry of transactions.
16. Ledger : A book containing all accounts in detail.
17. Trial Balance : A statement listing all ledger balances to check equality.
18. Balance Sheet : Statement showing assets, liabilities and owner’s equity at a date.
19. Income Statement : Shows revenues, expenses and profit or loss for a period.
20. Cash : Money in hand or in the bank.
21. Bank : Money held in a financial institution.
22. Outstanding Expenses : Expenses incurred but not yet paid.
23. Prepaid Expenses : Expenses paid in advance before use.
24. Accrued Income : Income earned but not yet received.
25. Depreciation : Decrease in the value of an asset over time.
26. Provision : Amount set aside for future uncertain losses.
27. Discount : Reduction allowed in the price.
28. Interest : Cost of using borrowed money or return on investment.
29. Vouchers : Documentary evidence for every transaction.
30. Goodwill : The reputation and customer trust of a business.

GOLDEN RULES OF ACCOUNTING

Personal Account Rule
Debit the Receiver
Credit the Giver

Real Account Rule
Debit What Comes In
Credit What Goes Out

Nominal Account Rule
Debit All Expenses & Losses
Credit All Incomes & Gains

QUICK TIP: Accounting is the language of business. Understand it well, and you’ll always stay a step ahead!