Each term below has a plain meaning, a small example and the term it is most often mixed up with. Use it alongside the lessons, and use English terms in your answers because the exam is in English. The English, BM and Chinese concept bridge shows the same terms in all three languages.
Terms about the business and the accounting equation
Asset
Meaning: something the business owns or controls that is expected to bring future benefit. Example: a van bought for RM24,000. Mixed up with: expense, which is used up in the period. See assets, liabilities and capital.
Capital (owner’s capital)
Meaning: the amount the owner has invested in the business, plus profit kept and minus drawings. Example: the owner pays RM10,000 into the business bank account. Mixed up with: capital expenditure and share capital, which are different ideas, and with “capital” in Economics.
Drawings
Meaning: money or goods the owner takes for personal use. Example: the owner withdraws RM500 for family spending. Mixed up with: an expense, because drawings reduce capital but are not a cost of running the business. See drawings separate from expense.
Terms about entries and records
Debit and credit
Meaning: the left and right sides of an account. Which side increases a balance depends on the account type. Example: buying a machine debits Machinery and credits Bank. Mixed up with: “good” and “bad”. See selecting debit and credit.
Contra entry
Meaning: an entry that cancels a balance against another balance, such as cash moved between the cash and bank columns. Example: paying RM300 cash into the bank is entered on both sides of the cash book. Mixed up with: a correcting entry. See recording a contra entry.
Imprest
Meaning: a fixed float for petty cash that is topped up to the same amount. Example: a RM200 float with RM145 spent is restored by RM145. Mixed up with: the petty cash balance, which changes day to day. See restoring the imprest.
Trial balance
Meaning: a list of ledger balances that checks debit totals equal credit totals. Example: both columns total RM13,000. Mixed up with: the statement of financial position, which is a report, not a check. See treating agreement as proof.
Suspense account
Meaning: a temporary account that holds a difference until its cause is found. Example: a trial balance that differs by RM90 is parked there. Mixed up with: a permanent account. See which errors need suspense.
Terms about timing and adjustment
Expense and payment
Meaning: an expense is the cost that belongs to the period; a payment is cash leaving. Example: RM360 insurance paid for a year is a payment now but an expense spread across the year. Mixed up with: each other. See cash paid versus expense recognised.
Revenue and receipt
Meaning: revenue is income earned from trading in the period; a receipt is cash coming in. Example: a credit sale of RM800 is revenue today and a receipt next month. Mixed up with: each other, and with capital receipts. See separating capital receipt from recurring income.
Accrual and prepayment
Meaning: an accrual is an expense owed but not yet paid; a prepayment is an amount paid for a future period. Example: RM400 rent owing is an accrual. Mixed up with: each other, and with income received in advance. See allocating to the correct period.
Capital and revenue expenditure
Meaning: capital expenditure buys or improves an asset; revenue expenditure keeps the business running. Example: a new engine is capital; an oil change is revenue. Mixed up with: each other. See repair versus improvement.
Depreciation
Meaning: spreading an asset’s cost over its useful life. Example: a RM6,000 machine with no residual value over 5 years is RM1,200 a year. Mixed up with: valuation or saving up to replace the asset. See depreciation rather than expensing all at once.
Irrecoverable debt and allowance for doubtful debts
Meaning: an irrecoverable debt is a receivable that will not be paid; an allowance is an estimate for receivables that might not be. Example: RM150 from a customer who has closed down is written off. Mixed up with: each other. See allowance versus write-off.
Terms about statements and analysis
Purchases and cost of sales
Meaning: purchases is what was bought in the period; cost of sales is the cost of what was sold. Example: buying RM5,000 of goods and ending with RM800 unsold gives cost of sales of RM4,200 when there was no opening inventory. Mixed up with: each other. See purchases versus expense recognition.
Margin and markup
Meaning: margin is profit as a percentage of selling price; markup is profit as a percentage of cost. Example: cost RM80 and selling price RM100 gives markup of 25% and margin of 20%. Mixed up with: each other. See margin versus markup.
Current account and capital account (partners)
Meaning: the capital account holds the fixed investment; the current account records profit share, drawings and interest. Example: a partner’s salary goes to the current account. Mixed up with: each other. See capital and current accounts.
Share capital and loan
Meaning: share capital is owners’ investment in a company; a loan is borrowed money to be repaid. Example: shares issued for RM50,000 are equity, not debt. Mixed up with: each other. See share capital versus a loan.
Prudence
Meaning: not overstating assets or profit when unsure. Example: valuing inventory at the lower of cost and selling price less costs, where the syllabus applies that rule. Mixed up with: deliberately understating profit, which is not prudence. See prudence without understatement.
How to learn these terms
Take one pair a day. Write the two meanings, then make up a number example for each using your own fictional business. Check it against the lesson, then retest yourself two days later.
The Accounting original practice sets use these pairs in mixed questions, and the Accounting learning guide shows where each lesson fits. If the pairs still blur when you are under time pressure, online one-to-one Accounting tuition can drill the choice on your own examples.