Glossary – Basic Terminology in Accounting

Accounting terms can feel confusing, but they are the building blocks of business records. This glossary explains common words in simple language so anyone on your team can follow. Use it when you raise invoices, record sales and costs, match bank entries, or file GST and income tax. It covers core ideas like assets, liabilities, revenue, expenses, profit, cash flow, journals, ledgers, trial balance, balance sheet, and P&L. It also includes Indian tax basics such as GSTIN, HSN/SAC, ITC, e-invoice (IRN and QR code), e-way bill, and GSTR-1 and GSTR-3B. Keep it handy to avoid mistakes and stay compliant.

BOOK A FREE DEMO




    Accounting Terms and Definitions

    • Account: A record that tracks one type of item, like Cash, Sales, or Rent.
    • Chart of Accounts (COA): The full list of all accounts your business uses.
    • Asset: Anything your business owns that has value (cash, machines, stock).
    • Liability: Money you owe to others (loans, supplier dues).
    • Equity / Capital: Owner’s share in the business (assets minus liabilities).
    • Revenue (Sales): Money earned from selling goods or services.
    • Expense: Costs to run the business (salary, rent, electricity).
    • Profit: When revenue is more than expenses.
    • Loss: When expenses are more than revenue.
    • Invoice: A bill you give to a customer for goods or services sold.
    • Receipt: Proof that you got money from a customer.
    • Purchase: Buying goods or services for the business.
    • Payable: Money you need to pay to suppliers (credit purchases).
    • Receivable: Money customers need to pay you.
    • Inventory (Stock): Goods you buy to sell later.
    • COGS (Cost of Goods Sold): Cost of items you sold during a period.
    • Journal: The first place where transactions are recorded by date.
    • Ledger: Accounts book where journal entries are grouped by account.
    • Debit (Dr): Left side of an entry; increases assets and expenses.
    • Credit (Cr): Right side of an entry; increases liabilities, equity, and income.
    • Trial Balance: A list of all accounts and their balances to check totals match.
    • Balance Sheet: Report that shows assets, liabilities, and equity on a date.
    • Income Statement (P&L): Report of revenue, expenses, and profit for a period.
    • Cash Flow: Money coming in and going out of the business.
    • Accrual: Recording income and expenses when they happen, not when cash moves.
    • Provision: Money set aside for an expected cost (like tax or bad debts).
    • Depreciation: Spreading the cost of a fixed asset over its useful life.
    • Reconciliation: Matching records with bank statements or other sources.
    • Financial Year (FY): Accounting year used for reports and tax.

    How Glossary Helps in GST & Tax Compliance

    • Correct codes and rates: Knowing terms like HSN/SAC and GST rate helps you classify items right. Right codes mean the right tax on invoices.
    • Clean invoices: Terms like GSTIN, IRN, QR code, and place of supply guide what to print on e-invoices. Correct invoices reduce errors and penalties.
    • ITC clarity: Understanding Input Tax Credit, GSTR-2B, and eligible vs. ineligible ITC helps you claim the right credit and avoid reversals.
    • Timely returns: Knowing GSTR-1, GSTR-3B, and due dates keeps filings on time and avoids late fees.
    • RCM awareness: Knowing Reverse Charge Mechanism tells you when you must pay GST instead of the supplier.
    • E-way rules: Terms like e-way bill, validity, and distance help while moving goods.
    • Audit ready: Clear meaning of books, vouchers, ledgers, and reconciliation makes audits smooth.
    • Team training: A simple glossary lets new staff learn fast and follow the same rules.

    Popular Accounting & Tax Terms in India

    • GST (Goods and Services Tax): A tax on most goods and services in India. It replaced many old taxes.
    • CGST / SGST / IGST: Parts of GST. CGST + SGST apply to within-state sales; IGST applies to inter-state sales.
    • GSTIN: Your 15-digit GST registration number.
    • HSN / SAC: Codes that classify goods (HSN) and services (SAC) to pick the correct GST rate.
    • Place of Supply: Location used to decide whether CGST+SGST or IGST applies.
    • E-Invoice: A system where B2B invoices get a unique IRN and QR code from the government portal.
    • IRN (Invoice Reference Number): A unique code that confirms your e-invoice is registered.
    • E-Way Bill: A document needed for moving goods beyond set distance/value limits.
    • Input Tax Credit (ITC): GST you paid on purchases that you can set off against your GST on sales.
    • GSTR-1: Monthly/quarterly return where you report your outward supplies (sales).
    • GSTR-3B: Summary return to report tax liability and claim ITC, then pay the net tax.
    • GSTR-2B: Auto-drafted statement that shows ITC available from your suppliers.
    • RCM (Reverse Charge Mechanism): You pay GST directly to the government for certain purchases.
    • Composition Scheme: A simple scheme for small taxpayers to pay tax at a fixed rate with fewer returns.
    • PAN (Permanent Account Number): 10-character ID for income tax.
    • TAN (Tax Deduction and Collection Account Number): ID used for TDS/TCS compliance.
    • TDS (Tax Deducted at Source): Tax your business deducts while paying others, then deposits to the government.
    • TCS (Tax Collected at Source): Tax your business collects from buyers in certain cases and deposits to the government.
    • Advance Tax: Income tax paid in parts during the year based on expected income.
    • Books of Account: All records like journals, ledgers, invoices, and vouchers kept for audit and tax.
    • Credit Note / Debit Note: Documents to adjust invoices for returns, discounts, or errors.
    • LUT (Letter of Undertaking): A declaration that lets exporters supply goods/services without paying IGST, subject to rules.
    • UDYAM (MSME Registration): Registration that identifies micro, small, and medium enterprises for benefits.

    Other Related Articles

    Please Wait
    phone
    Accounting Software
    Copyright © BUSY Infotech Pvt. Ltd. All Rights Reserved