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Understanding simple accounting terms

This chapter covers

  • Awareness of accounting terms.
  • Tax Basics
  • GST related information
  • GSTR Upload link

This help is not for teaching accounting, but to help understand basic accounting terms regularly used in the businesses.


Opening Balance

Balance of any account at the start of the year (1st April)

Opening Stock

Stock at the start of the year (1st April).

Closing Stock

Stock at the end of the year (31st March).

Ledger

Details of transactions of any account in a particular financial year (with the balances).

Outstanding

Remaining Amount or Balance Amount, to be received from party or to be paid to party. Also called as "Dues Receivables" or "Dues Payables".

  Generally outstanding report is expected as list of "Dues Receivables" from customers.



Trial Balance

A statement of all debits and credits in a double-entry account book, with any disagreement indicating an error.


Trading Account

The account which is prepared to determine the gross profit or gross loss of a business concern is called "Trading Account". The profit or loss determined by a trading account is the gross result of the business but not the net result.


Profit and Loss Account(P & L)

The account through which annual net profit or loss of a business is ascertained, is called "Profit & Loss Account".. Gross profit or loss of a business is ascertained through trading account and net profit is determined by deducting all indirect expenses (business operating expenses) from the gross profit through profit and loss account. Thus profit and loss account starts with the result provided by trading account.

  The particulars required for the preparation of profit and loss account are available from the trial balance. Only indirect expenses and indirect revenues are considered in it. This account starts from the result of trading account (gross profit or gross loss).


Balance Sheet

Balance Sheet is a statement of assets, liabilities and owner's equity (capital) on a particular date.

  Balance sheet is so called because it is prepared with the closing balance of ledger accounts at the end of the year. It has two sides - assets side or left hand side and liabilities side or right hand side. The accounts have a debit balance are shown on the asset side and those have a credit balance are shown on the liabilities side and the total of the two sides will agree.


  1. Assets : means all the things and properties under the ownership of the business i.e. building, plant, furniture, machinery, stock, cash etc. Assets also include anything against which money or service will be received i.e. creditors accrued income, prepaid expenses etc.
  2. Liabilities : means our dues to others or anything against which we are to pay money or render service, i.e. creditors, outstanding expenses, amount payable to the owner of the business (capital) etc.

Direct Tax

A tax, such as income tax, which is levied on the income or profits of the person/business who pays it, rather than on goods or services.


Indirect Tax

A tax levied on goods and services rather than on income or profits. GST is indirect tax.


Registered GST Dealer

Any business can be a registered GST Dealer. But the businessses having turnover below 20 lakh can deny from registration under GST. Businesses having turnover more than or equal to 20 lakh have compulsion to be registered under GST.


For sale having amount less than Rs. two hundred, Sale Bill is not neccessary.

Registered GST Dealers are of two types : -

  1. Regular : Tax Invoice with detailed description of collected tax is used for Sale Bill.
  2. Composition : Bill of Supply is used for Sale Bill.

POS (Place of Supply)

It is usually be the state of the party. for eg. Maharashtra, Gujarat, etc. From POS, we can determine either IGST have to apply or CGST+SGST have to apply in the bill.


GST

Goods and Services Tax.

  1. CGST : Central Goods and Services Tax
  2. SGST : State Goods and Services Tax.
  3. IGST : Integrated Goods and Services Tax.
  4. UTGST :Union Territory Goods and Services Tax.
Tips :
  • If supplier and customer are from same state, then CGST+(SGST or UTGST) are applicable.
  • If supplier and customer are from different state, then IGST is applicable.
  • If anyone imports goods (purchases from outside country), then IGST + basic customs are applicable.

GSTR

These are returns of GST tax for any businesses. Following returns have to fill-up on every month.

  1. GSTR1 : It contains information of "Sales" in a particular month. Last date of this return will be 10th of next month.
  2. GSTR2 : It contains information of "Purchases" in a particular month. Last date of this return will be 15th of next month.
  3. GSTR3 : It contains information of actual GST tax amount to pay to the government. Last date of this return will be 20th of next month.
Tips :
  • These GSTR can be submitted directly on government's portal : www.gst.gov.in
  • Actually every registered GST dealer has been given username and password for above stated portal to submit GSTR.
  • Either businessmen themselves or their tax consultants or CA can operate your account on gst portal to submit your GSTR.

B2B

Business to Business sale. In this type of sale, customer is also registered GST dealer


B2CS

Business to Consumer sale (Small). In this type of sale, customer is not business and bill amount is below Rs. 2.5 lakh.


B2CL

Business to Consumer sale (Large). In this type of sale, customer is not business and bill amount is equal to or more than Rs. 2.5 lakh.


Reverse Charge

Reverse charge is a mechanism where the recipient of the goods and/or services is liable to pay GST instead of the supplier.


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