Learn key accounting, finance, taxation, and ERP terms explained in simple language. Your go-to reference for understanding business terminology.
202 terms available
A costing method that allocates all manufacturing costs — both fixed and variable — to each product unit, also known as full costing.
Money a business owes to its suppliers or vendors for goods and services received but not yet paid for.
A report that categorizes a company's outstanding payable invoices by the length of time they have been unpaid.
A ratio measuring how quickly a company pays its suppliers, calculated by dividing total purchases by average accounts payable.
Money owed to a business by its customers for goods or services delivered but not yet paid for.
A type of business financing where a company uses its outstanding invoices (receivables) as collateral to obtain immediate cash.
An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.
Expenses that have been incurred but not yet paid or recorded in the accounting books at the end of an accounting period.
Revenue that has been earned by providing goods or services but has not yet been billed or received as payment.
A report that categorizes accounts receivable or payable by the length of time invoices have been outstanding, typically in 30-day buckets.
The gradual write-off of the cost of an intangible asset (like patents, software, or goodwill) over its useful life, or the repayment of a loan in installments.
An account that shows how a company's net profit is distributed among partners, shareholders, or reserves.
A table showing the systematic allocation of a fixed asset's cost over its useful life, detailing annual depreciation expense and book value.
A financial ratio that measures how efficiently a company uses its assets to generate revenue.
A chronological record of all transactions and changes made in an accounting system, providing a traceable path for verification and compliance.
The average number of days it takes a business to collect payment from customers after a sale is made, also known as Days Sales Outstanding (DSO).
Money owed to a business that is unlikely to be collected and is written off as an expense, reducing both accounts receivable and profit.
An estimated allowance set aside in the books to account for receivables that are unlikely to be collected, also called allowance for doubtful accounts.
A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
A promise by a bank to cover a financial obligation if the borrower (applicant) fails to fulfill their contractual duties.
A credit facility where a bank allows a business to withdraw more than its account balance up to an agreed limit, charging interest only on the amount overdrawn.
The process of comparing and matching a company's accounting records with its bank statement to identify and resolve any differences.
A periodic document issued by a bank summarizing all transactions (deposits, withdrawals, fees, interest) in an account over a specific period.
A short-term financing method where a business sells its trade receivable (bill of exchange) to a bank at a discount to receive immediate cash before the bill's due date.
A comprehensive list of raw materials, components, and sub-assemblies required to manufacture a finished product, along with quantities and specifications.
The systematic recording, organizing, and maintaining of all financial transactions in a business on a day-to-day basis.
The point at which a business's total revenue equals total costs, resulting in neither profit nor loss.
A financial plan that estimates income and expenses over a specific future period, used to guide spending and resource allocation.
An accounting principle that states a business is a separate entity from its owner(s), and personal transactions of the owner should not be mixed with business transactions.
The process of evaluating and selecting long-term investment projects based on their potential to generate returns above the cost of capital.
Funds spent by a business to acquire, upgrade, or maintain long-term physical assets such as property, equipment, or technology infrastructure.
The profit earned from selling a capital asset (property, shares, mutual funds, etc.) for more than its purchase price, taxable under the Income Tax Act.
A reserve created from capital profits that is not available for distribution as dividends to shareholders.
An accounting method where revenue and expenses are recorded only when cash is actually received or paid, not when they are earned or incurred.
A financial plan that estimates cash inflows and outflows over a specific period to ensure a business maintains adequate liquidity.
The number of days it takes for a company to convert its investments in inventory and other resources into cash from sales.
A reduction in the invoice amount offered by a seller to a buyer as an incentive for paying before the standard due date.
Short-term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of value change, typically maturing within 3 months.
The net amount of cash and cash equivalents moving into and out of a business during a specific period.
A complete listing of every account in a company's general ledger, organized by category (assets, liabilities, equity, revenue, expenses).
Journal entries made at the end of an accounting period to transfer balances of temporary accounts (revenue, expenses) to permanent accounts (retained earnings).
Interest calculated on both the initial principal and the accumulated interest from previous periods — 'interest on interest'.
A business arrangement where goods are sent by the owner (consignor) to an agent (consignee) who sells them on the owner's behalf.
A potential financial obligation that may arise depending on the outcome of a future uncertain event, such as a pending lawsuit or warranty claim.
A transaction involving the transfer of funds between a company's own cash and bank accounts, recorded on both the debit and credit sides of the cash book.
The amount remaining from sales revenue after deducting variable costs, available to cover fixed costs and generate profit.
A branch of accounting that records, classifies, analyzes, and allocates costs to products, services, or activities to help management make informed business decisions.
A department, team, or function within a business that incurs costs but does not directly generate revenue.
The minimum rate of return a company must earn on its investments to satisfy its debt holders and equity shareholders.
The direct costs attributable to the production or purchase of goods sold by a company during a specific period.
The total annual expenditure a company incurs for an employee, including salary, allowances, bonuses, and employer contributions to PF, ESI, and gratuity.
A financial analysis tool that examines the relationship between costs, sales volume, and profit to determine how changes in any of these affect profitability.
A document issued by a seller to a buyer reducing the amount owed, typically for returned goods, billing errors, or post-sale adjustments.
A document issued by a seller to a buyer reducing the amount owed, typically for returned goods, billing errors, or post-sale discounts.
The time duration a seller allows a buyer to pay for goods or services after delivery, typically expressed in days (e.g., Net 30, Net 60).
An assessment of a borrower's creditworthiness and ability to repay debt, expressed as a letter grade or score by rating agencies.
Assets that are expected to be converted to cash or consumed within one year or one operating cycle, whichever is longer.
Debts and obligations a business must pay within one year, including accounts payable, short-term loans, accrued expenses, and taxes owed.
A liquidity ratio that measures a company's ability to pay its short-term obligations using its short-term assets.
The average number of days it takes a company to collect payment after a sale has been made.
A document issued by a seller to increase the amount owed by a buyer, or by a buyer to formally request a credit from a seller for returns or overcharges.
A document issued by a seller to increase the amount owed by a buyer, typically when the original invoice amount was less than the actual value.
A financial ratio comparing a company's total debt to its shareholders' equity, measuring how much the business relies on borrowed money versus owner investment.
Payment received from a customer for goods or services that have not yet been delivered, recorded as a liability until the obligation is fulfilled.
Tax differences arising because taxable income (per Income Tax Act) differs from accounting profit (per accounting standards) in timing.
The systematic allocation of the cost of natural resources (minerals, oil, gas, timber) as they are extracted or consumed over time.
The systematic allocation of the cost of a tangible asset over its useful life, representing the decline in value due to wear, use, or obsolescence.
The systematic approaches used to allocate the cost of a tangible asset over its useful life.
A tax paid directly by an individual or organization to the government, where the burden cannot be shifted to another person. Examples include income tax, corporate tax, and capital gains tax.
A portion of a company's earnings distributed to shareholders as a return on their investment, typically paid quarterly or annually.
An accounting system where every transaction is recorded in at least two accounts — a debit in one and a credit in another — ensuring the accounting equation always balances.
A standardized electronic invoicing system under GST in India where invoices are authenticated by the Invoice Registration Portal (IRP) before being issued.
An electronic document required for the movement of goods worth more than ₹50,000 under GST, generated on the e-Way Bill portal before goods are transported.
A project management technique that integrates scope, schedule, and cost to measure project performance and progress in monetary terms.
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of a company's operating profitability excluding non-operating and non-cash expenses.
The optimal order quantity that minimizes the total cost of inventory including ordering costs and holding costs.
A fixed monthly payment amount made by a borrower to a lender to repay a loan, consisting of both principal and interest components.
An integrated software system that manages all core business processes — accounting, inventory, HR, CRM, manufacturing, and more — in a single platform.
The residual interest in the assets of a business after deducting all its liabilities. Also called owner's equity, net worth, or shareholders' equity.
A third-party account that holds funds until predetermined conditions are met between a buyer and seller.
The percentage of a fund's or company's total assets used to cover operating expenses and management fees.
A financial arrangement where a business sells its entire accounts receivable to a third party (factor) at a discount to obtain immediate cash.
An inventory valuation method where goods purchased or manufactured first are sold or used first, meaning the oldest stock is consumed before newer stock.
The use of borrowed funds (debt) to finance business operations, amplifying both potential returns and risks for equity shareholders.
Formal records of a business's financial activities, comprising the Balance Sheet, Profit & Loss Statement, Cash Flow Statement, and Notes to Accounts.
A 12-month period used by businesses and governments for financial reporting, budgeting, and tax purposes, which may differ from the calendar year.
Long-term tangible assets owned by a business that are used in operations and not intended for sale, such as land, buildings, machinery, vehicles, and equipment.
The application of accounting skills and investigative techniques to examine financial records for evidence of fraud, embezzlement, or disputes.
A financial statement showing the sources from which funds were obtained and the uses to which they were applied during a period, focusing on working capital changes.
A financial statement that shows the sources from which funds were obtained and the uses to which they were applied during a period.
A legal process where a portion of an employee's wages is withheld by the employer to pay off a debt owed to a third party.
The master accounting record that contains all financial transactions of a business, organized by account.
A fundamental accounting assumption that a business will continue operating indefinitely and has no intention or need to liquidate or significantly scale down operations.
A comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple earlier taxes like VAT, excise duty, and service tax.
An intangible asset representing the excess purchase price paid during an acquisition over the fair value of the target company's identifiable net assets.
The percentage of revenue that exceeds the cost of goods sold, showing how much of each rupee in sales is retained as gross profit.
The profit a company makes after deducting the cost of goods sold (COGS) from its revenue, before accounting for operating expenses.
The total salary earned by an employee before any deductions such as income tax, provident fund, professional tax, or other statutory deductions.
The total compensation an employee earns before any deductions for taxes, provident fund, insurance, or other withholdings.
A comprehensive yearly summary of all GST transactions filed by regular taxpayers, consolidating monthly/quarterly returns into an annual statement.
A simplified GST scheme for small taxpayers with turnover up to ₹1.5 crore, allowing them to pay a flat percentage of turnover as tax instead of regular GST rates.
A periodic document filed with GST authorities declaring sales, purchases, tax collected, tax paid, and claiming input tax credit for a specified period.
An accounting method that pairs a hedging instrument (like a derivative) with the item being hedged to reduce reported earnings volatility.
Harmonized System of Nomenclature — an internationally standardized system of names and numbers to classify traded products, used in GST for goods classification.
A permanent reduction in the recoverable value of an asset below its carrying amount on the balance sheet, requiring a write-down and recognition of impairment loss.
An instant interbank electronic fund transfer service in India available 24/7, enabling real-time money transfers up to ₹5 lakh through mobile, internet banking, or ATMs.
A tax levied on goods and services rather than on income, where the burden can be passed on from the seller to the end consumer. GST is India's primary indirect tax.
The GST paid on business purchases that can be claimed as a credit against the GST collected on sales, reducing the net tax payable.
Financial transactions between two entities that belong to the same parent company or corporate group.
An independent evaluation conducted within a company to assess and improve the effectiveness of risk management, internal controls, and governance processes.
The process of ordering, storing, tracking, and controlling goods to ensure the right quantity is available at the right time while minimizing holding costs.
A ratio that measures how many times a company's inventory is sold and replaced over a specific period, indicating sales efficiency and inventory management.
A commercial document issued by a seller to a buyer, detailing the products or services provided, quantities, prices, and payment terms.
A form of short-term borrowing where a business uses its unpaid invoices as collateral to receive immediate cash from a financier, while retaining control of collections.
A record of a financial transaction in the accounting system, showing the accounts affected, amounts debited and credited, date, and description.
An accounting document used to record non-cash transactions and adjusting entries that don't involve direct receipt or payment of money.
The method of recording leased assets and liabilities on a company's balance sheet under Ind AS 116/IFRS 16.
The principal book of accounts where all financial transactions are classified and recorded under specific account heads, forming the basis for financial statements.
A written guarantee from a bank (on behalf of the buyer) promising payment to the seller upon presentation of specified documents proving shipment of goods.
An inventory valuation method where the most recently purchased or produced items are assumed to be sold first.
A financial ratio that measures a company's ability to pay short-term obligations using its most liquid assets, excluding inventory.
The process of preparing financial and non-financial reports for internal managers to aid in decision-making, planning, and performance control.
A costing method that assigns only variable costs to products and treats all fixed costs as period expenses charged to the profit & loss account.
The amount or percentage added to the cost price of a product to determine its selling price, covering overhead expenses and generating profit.
An accounting principle that requires expenses to be recorded in the same period as the revenues they help generate, ensuring accurate profit measurement.
The threshold above which missing or incorrect information in financial statements could influence the economic decisions of users relying on those statements.
The portion of a subsidiary's equity and profit that is not owned by the parent company in consolidated financial statements.
The process of reviewing, adjusting, and finalizing all financial transactions for a month to produce accurate financial statements and management reports.
A software architecture where a single instance of the application serves multiple customers (tenants), with each tenant's data isolated and invisible to others.
An electronic fund transfer system in India that enables bank-to-bank transfers in batches, available 24/7 with near-instant settlement.
The difference between the present value of future cash inflows and the initial investment, used to evaluate the profitability of a project.
The total profit of a business after deducting all expenses, taxes, and costs from total revenue. Also called the bottom line or net income.
The estimated selling price of an asset in the ordinary course of business, minus the estimated costs of completion, marketing, and disposal.
The actual amount of money an employee receives in hand after all deductions including income tax (TDS), provident fund, professional tax, and insurance premiums.
A loan or advance where the borrower has stopped making interest or principal payments for 90 or more days, classified by banks as a stressed asset.
The balance in an account at the beginning of a new accounting period, carried forward from the closing balance of the previous period.
The ongoing costs incurred by a business in its day-to-day operations, including rent, salaries, utilities, marketing, and administrative expenses.
The profit earned from a company's core business operations, calculated as revenue minus operating expenses, excluding interest and taxes.
Indirect business expenses that cannot be directly traced to a specific product or service, including rent, utilities, insurance, and administrative salaries.
A payment that covers only a portion of the total amount due on an invoice, leaving a remaining balance to be paid later.
A technology service that processes online payment transactions by securely transmitting data between the merchant, customer's bank, and the acquiring bank.
The complete process of calculating, distributing, and recording employee compensation including salary, deductions, taxes, and statutory contributions.
An inventory tracking method where stock levels are updated continuously in real-time with every purchase, sale, and adjustment.
A small amount of cash kept on hand in a business for minor, day-to-day expenses that are too small or impractical to pay by cheque or digital transfer.
Payments made in advance for goods or services to be received in the future, recorded as current assets and expensed over the benefit period.
A preliminary invoice sent to a buyer before the actual supply of goods or services, showing the estimated costs, terms, and conditions of the proposed transaction.
A financial statement that summarizes a company's revenues, costs, and expenses over a specific period to show net profit or loss.
A business unit, department, or segment that generates its own revenue and incurs its own costs, with its profitability tracked independently.
The ratio that shows the relationship between contribution margin and sales, indicating how much profit changes with each rupee change in sales.
A government-managed retirement savings scheme where both the employee and employer contribute a percentage of the employee's basic salary every month.
A liability of uncertain timing or amount recognized in the financial statements when a present obligation exists and a reliable estimate can be made.
A formal document issued by a buyer to a seller specifying the types, quantities, prices, and terms of products or services to be purchased.
Goods returned to a supplier due to defects, wrong items, or excess quantity, documented by issuing a debit note.
A method of evaluating a company's financial performance by calculating and comparing key relationships between financial statement items.
A written acknowledgment confirming that payment has been received for goods or services, serving as proof of the transaction for both buyer and seller.
The process of comparing two sets of records to ensure they agree and identify any discrepancies, most commonly matching internal accounting records with bank statements.
The transfer of money from one party to another, particularly the sending of funds by foreign workers to their home countries or cross-border business payments.
The inventory level at which a new purchase order should be placed to replenish stock before it runs out, accounting for lead time and demand.
The cumulative net profits of a company that have been kept in the business rather than distributed as dividends to shareholders.
The portion of net profit that a company keeps after paying dividends, accumulated in the balance sheet to fund growth, repay debt, or serve as a financial buffer.
A financial metric that measures the profitability of an investment by comparing the net profit to the cost of the investment, expressed as a percentage.
Expenditure whose benefit is consumed within the current accounting period and is charged to the Profit & Loss Account.
The accounting principle that determines when and how revenue is recorded in the financial statements, based on when it is earned rather than when cash is received.
A GST mechanism where the recipient of goods or services is liable to pay tax instead of the supplier, commonly applied to imports and specified goods/services.
A continuous, real-time payment system operated by RBI for large-value interbank transfers with a minimum transaction amount of ₹2,00,000, available 24/7.
A software delivery model where applications are hosted in the cloud and accessed via the internet on a subscription basis, eliminating the need for local installation.
A classification code used under India's GST system to identify and categorize services for taxation purposes.
The estimated value of an asset at the end of its useful life, representing what it could be sold for after depreciation is complete.
The disclosure of financial information by business segments or geographical areas to help users understand a diversified company's performance.
Money set aside periodically into a dedicated fund to repay a debt or replace a major asset at a future date, reducing default risk.
A tax levied by the government on legal documents and transactions such as property transfers, share purchases, and loan agreements.
A costing method that assigns predetermined (standard) costs to products and then compares actual costs against these standards to identify and analyze variances.
A legally mandated examination of a company's financial statements by an independent auditor to verify they present a true and fair view.
The legal framework of laws, regulations, and filings that a business must adhere to, including tax filings, labor laws, corporate regulations, and industry-specific requirements.
A unique alphanumeric code assigned to each distinct product or variant in inventory, used for tracking, ordering, and managing stock levels.
The method used to assign a monetary value to unsold inventory at the end of an accounting period.
A depreciation method that allocates an equal amount of an asset's cost as expense in each period of its useful life.
A detailed ledger that breaks down a general ledger control account into individual sub-accounts, such as separate records for each customer or supplier.
The coordination of all activities involved in sourcing, procurement, production, and delivery of products from raw materials to end customers.
A temporary account used to record transactions that cannot be immediately classified into the correct account due to incomplete information.
A widely-used desktop accounting software in India developed by Tally Solutions, known for basic bookkeeping, GST compliance, and inventory management for small businesses.
A system of collecting income tax at the source of income, where the payer deducts a percentage of tax before making payment to the payee.
A legal document issued by a registered GST dealer to a buyer showing the details of goods/services supplied, their value, and the applicable GST charged.
Tax deducted at source by an employer from an employee's salary before payment, based on the estimated annual tax liability.
A reduction in the list price of goods offered by a manufacturer or wholesaler to a reseller, based on trade relationship, volume, or distribution channel.
Amounts owed to a business by its customers for goods sold or services rendered on credit in the normal course of business.
The pricing of goods, services, and intangibles transferred between related entities (associated enterprises) across tax jurisdictions.
The management of a company's financial assets, liabilities, cash flows, and financial risks to ensure liquidity, optimize returns, and minimize risk exposure.
A report listing the closing balances of all general ledger accounts at a specific date, used to verify that total debits equal total credits.
Mistakes in accounting records that may or may not be revealed by the Trial Balance, categorized by their effect on the balance agreement.
Payment received in advance for goods or services that have not yet been delivered or performed, recorded as a liability.
An instant real-time payment system developed by NPCI that enables peer-to-peer and merchant payments through a single mobile interface across all Indian banks.
A consumption tax levied on the value added at each stage of the supply chain, used in many countries worldwide including Ireland, UK, Australia, and the EU.
The process of comparing actual financial results with budgeted or standard figures to identify, quantify, and explain the differences (variances).
An inventory valuation method that calculates the average cost per unit by dividing total cost of goods available by total units available, updating with each new purchase.
Tax deducted at the time of making a payment to a non-resident or on specified transactions, remitted directly to the government.
Partially completed goods that are in the production process but not yet finished and ready for sale.
The difference between a company's current assets and current liabilities, representing the short-term liquidity available for day-to-day operations.
The value of an asset after accounting for depreciation or amortization, representing its remaining book value on the balance sheet.
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