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Understanding simple business terms in accounting software

This chapter covers

  • Meaning of simple terms used for the businesses in accounting software
  •  
  • The terms explained here are not the definitions, but we try to explain the terms in easy and understandable language to work in any accounting software.

Meaning of Company in accounting software

Company is any organization / firm / industry or any other business.
In accounting software like Balance-Biz to note business activity, firstly we create company.
We can create multiple companies as per our registration authorities made in "Balance-Biz" software.
To work regularly in a software, we first select the company.
(Legal definition of company This definition is not expected here because this definition denotes the legal registration of the business, and we expect term in software.)


After selecting company, you must select year to record or see the transactions

In accounting, Year is a financial year which starts from 1-April and ends with 31-March of next year. For example, year 2017-2018 means the year starts from 1-April-2017 to 31-March-2018.


Business types in general language :-

Service Industry

It is a business that does not maintain or hold the stock.

Trader

  1. Wholesaler : It is a trader who sales its goods to other business (retailer).
    For example, wholesaler of garment sales dress material to small shops.
  2. Retailer : Retailer is a trader who sales its goods to the consumer.
    For example, Retailer of garment sales dress material to the person / individual.

Manufacturer

Manufacturer purchases raw-materials, produces finished products and then sale it.

Dealer / Party

This term is used for any businesses


MRP

Maximum Retail Price of the product. This price is inclusive of taxes.

Journal Entry

The "Journal Entry" can consist of several recordings, each of which is either a debit or a credit. The total of the debits must equal the total of the credits.


Contra Entry

A contra entry is a transaction involving transfer of cash between one cash A/c to another or one cash A/c to another bank A/c i.e., is a transaction indicating transfer of funds from :

  • Cash account to bank account
  • Bank account to cash account
  • Bank account to bank account

Tax Invoice

This term is used for Sales Bill, in which taxes are mentioned clearly. Generally the regular GST registered dealer can give "Tax Invoice"


Bill of Supply

This term is used for Sales Bill, in which taxes are not mentioned.

Tips :
  • Generally the GST registered dealer under composition scheme, can give "Bill of Supply".
  • Non registered dealer also can give Bill of supply as a sales Bill.
  • When a registered dealer sales exempt goods to the customer, also can give "Bill of Supply".

Delivery Challan (D.C.)

D.C. is generated when the items (goods) are about to be delivered to the customer. Price or taxes are not mentioned in D.C.


Credit Note
Credit note may have following purposes : -

  1. Sales Return : A receipt given by a supplier to a customer who has returned goods.
  2. Turnover Discount (given) :A form or letter sent by a seller to a buyer, stating that a certain amount has been credited to the buyer's account.

Debit Note

If someone sends you credit note, you must record it as "Debit Note".


Debit note may have following purposes : -

  1. Purchases Return : A receipt given by a supplier to a customer who has returned goods.
  2. Turnover Discount (received) :A form or letter stating that your account has been debited by us.

HSN/SAC Code
These codes are used world-wide in businesses : -

  1. HSN : Harmonized System Nomenclature are used for products (Goods).
    These codes are conceived and developed by the World Customs Organization (WCO) with the vision of classifying goods from all over the World in a systematic and logical manner.
    1. Those with a turnover of less than INR 1.5 Crores need not follow HSN
    2. Those with a turnover exceeding INR 1.5 Crores but less than INR 5 Crores shall be using the 2 digit HSN codes
    3. Those with a turnover exceeding INR 5 Crores shall be using the 4 digit HSN codes
    4. Those dealers who are into imports or exports shall mandatorily follow the 8 digit HSN codes
  2. SAC :Service Accounting Codes are used for services, softwares, etc.
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