GST Invoice Rules

The time has come for businesses to prep themselves for their next GST returns filing. As the dates are nearing, it is crucial to issue tax invoices as per the recent GST guidelines to eliminate the risks of facing barriers. As businesses mark the beginning of the new era, they must ensure that each transaction is billed with the necessary invoice details and GST invoice rules. Staying GST compliant enables business owners to claim ITC that helps in continuous growth.

Amid the COVID-19 pandemic, incorrect invoice format has been the major GST issue due to raising confusion among the taxpayers. The government of India has notified several changes under the GST regime to relieve the burden for taxpayers. However, due to a lack of knowledge and understanding, taxpayers have not been able to adhere to the laws related to GST invoice rules and bills format. To counter this problem; modern businesses rely on accounting software instead of accountants to remain GST compliant.

It is crucial to issue and collect accurate GST invoices as a vendor or a client, respectively. If taxpayers fail to issue correct GST invoices, it can increase the clients’ costs of expenditure. In turn, it leads to the consequences of losing clients and causes loss in the overall business. This article throws light on the significant aspects of GST invoice rules that can help you better understand GST’s concept.

What is an Invoice?

Invoice is a typical representation of receipts issued on the transaction of products or services. It is a distinctive commercial document issued either by a supplier or a buyer, entailing the statement of agreed dues payable on the goods sent or services provided. Each country has its own GST invoice rules and tax regime that taxpayers must mandatorily follow. An invoice that indicates details and essential information regarding the notified GST guidelines is termed as the GST invoice.

What are GST Invoice Rules?

GST Invoice rules are a set of commands designed sequentially to enable taxpayers to follow the nation’s unified tax calculation system. It indicates taxpayers adhere to some of the mandatory GST accounting tasks, documentation, returns filing, and unified business record formatting, to name a few. Invoice rules aim to minimize the risks of late payments and bad debts for both government and taxpayers.

Why Should Taxpayers Adhere to GST Invoice Rules?

Invoice rules are designed to create a classified, transparent, and well-organized returns filing system for both taxpayers and the government. It eliminates hitches that can potentially cause complications in returns filing procedures and invoice formatting. Businesses must adhere to the legal obligation to avoid business risks and high penalties.

GST Invoice Rules – Essential Information

The government of India has categorized goods and services under various sections. Each category is differentiated based on availability, demand, needs, necessary facilities, luxuries, and other factors that determine its value in the market. Here are some of the most significant and recently notified GST invoice rules that taxpayers must follow in India.

Rule – 1  

Goods that primarily contribute to the nation’s GDP, for instance, alcohol, petrol, diesel, aviation turbine fuel, crude petroleum, high-speed diesel, natural gas, do not fall under the purview of GST. However, taxes applicable on these goods are continued as per the tax structure followed before the implementation of GST in India.

Rule – 2

Vendors supplying non-movable goods must issue invoices to the recipients within 45 days from the date of purchase. If not, vendors can issue invoices within six months after the recipient permits to move the goods supplied.

Rule – 3

Three copies of invoices must be issued in case of the supply of goods; An original copy for the recipient, a duplicate copy for the supplier, and a triplicate copy to the person delivering the goods.

Rule – 4

In case of a supply of services, the vendor must issue an invoice to the recipient before or at the payment time.

Rule – 5

Two copies of the invoices must be issued in case of the supply of services. The original invoice to the recipient and a duplicate copy retained by the vendor.

What is Billing Format?

Modern small business owners prefer handling accounting operations in their own desired ways to gain profits. It has resulted in diversified opinions and unique forms of handling procedures of record-keeping and documentation. This, in turn, leads to misinterpretations that might cost a fortune to the business owners.

A billing format is a standardized and distinctive invoicing template that a business must follow to represent necessary billing details of the goods and services supplied to the clients. The billing format ensures that businesses issue correct invoices as per the applicable GST invoice rules.

GST Invoice Details – Bills Format

A goods and services tax (GST) invoice is a commercial instrument that indicates the names of the individuals involved and the details of the goods or services provided in a specific transaction. The GST invoice format details include:

Billing Formats – Types

1.   Pro Forma

It is the type of invoice format issued by a supplier to a buyer to declare the actual price of goods or services supplied. It enables taxpayers to claim input tax credit in advance, ensuring the commitment between suppliers and buyers. The Proforma invoice under GST is usually kept unrecorded by both parties involved in a specific transaction.

2.   Credit Invoice

It is a commercial document that allows a buyer to return the goods or services in case of damages or dissatisfaction. The buyer might either receive a gift or exchange products in return as a gesture of goodwill instead of cash return on credit invoices.

3.   Debit Invoice

It is a billing format issued by buyers to their suppliers as a reminder of an upcoming invoice or the credit note that indicates supplier’s uncovered debts of credit invoices.

GST Invoice Software

As a registered taxpayer, you must issue GST invoices to your clients. An invoice or bill is a list of goods shipped or services rendered, along with the amount owed for payment. You can create GST compliant invoices and automate accounting operations with Imprezz invoicing software. It is a boon for taxpayers, entrepreneurs, and SEM’s in India. It eliminates the causes of misinterpretations that arise in the billing procedures, creating room for smooth functionalities.

Conclusion

It’s almost been a decade since the inception of Goods and Services Tax (GST) in India. Taxpayers across the nation have, by far, witnessed several changes in tax calculations and return filing systems. Most taxpayers in India are now well aware of GST laws with GST invoice software and simplified tax procedures.

The government is determined to build a flawless GST system in India. E-invoicing is mandated, aiming to ease the returns filing procedures as per the GST invoice rules. You can automate your invoice processing with Imprezz, the pioneer of accounting software in India. You can visit the official website, Imprezz.in, or get in touch with our support team to know more about the Invoice rules and other details.

We offer a 14 days free trial software program for small businesses in India. Log in to get started with your small business accounting.

Reverse Charge GST Invoice FormatThe Goods and Service Tax (GST); a new taxation system in India, has replaced many of the existing indirect taxes. The complicated GST invoice format of the asset-based tax system is now eliminated under GST, a destination-based tax system. It has replaced several indirect taxes that include, Taxes, VAT, CVD (Counter Veiling Duty), Excise Duty, Entry Tax, SAD, Purchase Tax, etc. The Central Government of India has so far enacted four types of GST Invoice format, namely, CGST, IGST, UTGST, and bills of compensating states that are implemented in the whole nation.

The well-structured GST regime has eliminated the cascading effects and double taxation, along with facilitating the smooth functionalities of business operations. Since its inception, India’s GST tax regime has increasingly registered growth and government revenue, affecting both the manufacturing and service sectors. However, India is a country that has regulated, partially regulated, and unregulated sectors that are continuously monitored. To counter these issues, the government has introduced the Reverse Charge Mechanism (RCM).

RCM strives to improve compliance procedures and tax coverage. Previously, the reverse charge concept was only meant for service taxes and applied to services sold and not for goods. Later, under the GST Act, the government notified specific goods and services on which reverse charge GST is applicable. In this article, you will learn more about RCM, rules, Self-invoicing, RCM GST invoice format, RCM GST tax invoice software, and other necessary fields of reverse charge mechanism.

What is Reverse Charge Mechanism Under GST?

Usually, under GST, the supplier is liable to collect tax on the goods and services offered. The reverse charge mechanism is a new concept introduced by the central government. The recipient is eligible for the Input Tax Credit on the product or the service received on behalf of an unregistered minor supplier. The RCM GST system aims to expand the base of taxes acquired in the nation. It also strives to provide compensation for the state’s loss of revenue.

Any person obligated to pay the tax on reverse charges must adhere to specific provisions such as threshold exemption, time of supply, and input tax credit changes. There is a minimum total turnover of RS 20,00,000 required to register as regular taxpayers, but there is no such limit in the case of reverse charges. A person must be registered under GST regardless of the total limit.

Reverse Charge Mechanism under GST is applicable under the following circumstances:

Specified Rules Under RCM

Rule – 1

Businesses or individuals who are liable to pay taxes under RCM must register themselves as a certified taxpayer even though the annual turnover is below the minimum tax pay limit.

Rule – 2

The tax application under RCM must be submitted to the government on the 20th of every month.

Rule – 3

The recipient liable to pay RCM can avail of the credits of ITC if the business or individual is registered under the reverse charge mechanism GST.

Rule – 4

Taxpayers registered under RCM are required to present the manually updated invoice or payment voucher details to avail of the tax credits or advantages if the crucial information in an auto-populated invoice is absent.

Rule – 5

Taxpayers can avail of tax credits under RCM even in case of advance payments.

Rule – 6

Enterprises with an annual turnover of lesser than ten crores can be omitted under RCM.

Rule – 7

Under RCM, a recipient can avail of tax credits only on the supplies issued by a business or a company.

Self – Invoicing Under RCM

Self-invoicing or billing is done when a registered taxpayer purchases goods or services subjected to RCM from an unregistered vendor. Self-invoicing is crucial as the supplier cannot issue a GST compliant invoice to the buyer. Therefore, the recipient is responsible for paying taxes on behalf of the vendor.

Payment Voucher Format or GST Invoice Format Under RCM

The payment voucher or invoice under RCM acts as proof of payment under GST. It is the evidence of the transaction carried out between a taxpayer and an unregistered supplier. Thus, the recipient’s responsibility is to create invoices or produce proof of payment/payment voucher on the goods or services received. Accordingly, a payment voucher or the RCM invoice format under GST is issued upon the payment of the supplies delivered.

Under CGST Act 2017, Section 31 (3) (g), a registered recipient must issue a payment voucher/RCM invoice to the supplier while making payments for goods or services on which reverse charges are applicable. A payment voucher/GST invoice format under RCM should include essential details as specified by the CBIC.

Necessary Fields of Payment Voucher/GST Invoice Format Under RCM

RCM GST Invoice Software & Features

Although certain small businesses have determined chartered accountants to manage financial accounting operations, it is vital to implement RCM billing and invoicing software. It simplifies the whole process that helps streamline other business operations effectively. Here are some of the significant features that you must look for in the RCM GST accounting software.

Conclusion

The GST tax regime in India has been in practice for almost a decade now. However, the ongoing COVID-19 economic crisis has stirred confusion due to several changes in the nation’s taxation policies, GST rules, and regulations. The changes in tax calculation aim to ease the burden of taxpayers alongside increasing the tax revenue generation. The simple solution amid the tough time for both government and the taxpayers is the e-invoicing/business software solutions.

The core value of accounting software strives to solve the problems concerning GST invoice format and bills. It is the one-step solution to all misinterpretations and manual errors of invoice computation. Imprezz is one such business intelligence software that helps create GST invoices, manage inventory, purchase orders, track purchases, and file returns directly on the GST portal in just a few clicks. It is the pioneer of small business accounting software in India that is trusted by thousands of accounting experts nationwide.

We offer a 14 days free trial software program for CA’s, freelancers, solopreneurs, and small businesses in India. Login in less than 2 minutes to get started right away!

accoutnig software for small businessBengaluru, India, October 27th, 2020 – Technology is the most extravagant source of successful businesses. Thus, implementing an ideal accounting software is vital for small businesses to sustain amidst the cut-throat competition. My team and I had an extremely positive experience using Imprezz accounting software during the tough times of COVID-19. In this review, I have elaborated on how it has changed the way we operated to help other business owners make the right choice.

I was continually searching for tax solutions online. A friend of mine on social media recommended me to try Imprezz software. I heard it was new in the market; thus, I decided to check out their website. I was impressed with their growing popularity. Their website was simple and easy to navigate. The blog posts on the website educated small business owners on various accounting niche.

Imprezz offers tax solutions for CA’s, freelancers, women working from home, solopreneurs, small business owners, and many other categories of working individuals that I don’t remember precisely. What impressed me the most was their customer service. Not many accounting software offers back-end support, without which it’s harder to cope with software installment and bugs. They have a specified team that provides advice over the call and follow up on subscriptions.

Imprezz billing and invoicing software enable small businesses to record each transaction and their income. It simplifies expense tracking, sending sales invoices, bills payment, import contacts, inventory tracking, and tax payment. The software offers unique integration that has benefited our business and has become an integral part of the growth and success of our company.

In simpler words, Imprezz invoicing software helps keep the finances organized that ensures a business is in good standing with the IRS.

“A great product isn’t just a collection of features. It’s how it all works together”.

Imprezz is a cloud-based invoicing software. The user-friendly product design simplifies the complex accounting functions for small business owners. The complied integrations of the software offer a lot in terms of utility, accounting, and features. The software offers customization as per the business size, type, and requirements. Here, I have listed some of the unique features provided by Imprezz accounting software for businesses that primarily focus on results.

Imprezz offers not only comprehensive features but also provides exceptional services at an inexpensive price. The pricing plans offered are tailored as per the convenience of small businesses and freelancers. You can visit their official website and check out the subscription plans. However, the software offers a 14 days free trial software program that allows you to determine what feature best suits your business requirements.

If you need help regarding your small business accounting problems, you can always contact the support team for guidance.

About Imprezz.in

Imprezz is the pioneer of GST accounting software in India. It is well-known for its design and features that have been revolutionizing the small business industries. Imprezz is a complete and integrated program that provides business solutions for all your needs. The company aims to provide accounting services that combine easy-to-use billing features with GST compliance.

Media contacts

For India                                         Amit Mundra           0049 2735 776248      info@imprezz.in

What is small business accounting

As a small business owner, you must master the art of accounting at some level. Small business accounting is all about the process, system, and people (your team members). It is done by recording expenses, profits, and financial information of each business transaction. These tasks are essential to track and manage money effectively, crucial during the early stages of development.

In addition to keeping you up-to-date with your company’s performance in the past and present, small business accounting also helps create invoices and complete payrolls. One of the most common reasons why small businesses fail is the lack of money management. However, having an accounting strategy helps to review your company’s financial goals. Irrespective of your business type, the survival solely depends on clearly defined financial plans.

The best way to counter small business financial problems is to implement efficient accounting program policies and sound financial strategies. Implementing an ideal accounting system can eventually boost the financial health of a business. This article is a part of our comprehensive guide – ideas for small businesses to set up in India. Read further to understand the know-how of business accounting basics.

What is Small Business Accounting?

Accounting is a higher-end process that examines the progress of the business. It gives meaning to the accounts data that the accountant collects through generating financial statements. Likewise, small business accounting helps track money coming in and going out of your business accounts. It includes sales, purchases, payments, and obligations.

Accounting helps you measure the health and value of a business, to make better decisions about short- and long-term success. As a small business owner, you need to know what accounting method best suits your organizational goals to succeed and sustain in the long run.

How to do Accounting for Small Business? – Accounting Basics

Accounting is the financial language of business. It enables business owners to analyze the utility of resources and funds within the business. The function of accounting is to record finances, interpret numbers, and determine the financial standing and prepare tax-related financial materials. If you are wondering how to do accounting for your small business, you have come to the right place. Here are ten golden rules to do it right.

1.   Create a Separate Bank Account for Your Small Business

Legally registered small business requires a place to stash the incurred income. Opening a separate bank account helps maintain distinct records that further simplifies the tax procedures. Business registered under LLC (Limited Liability Company) and partnership are mandated to have a separate bank account as per the legal rules. Sole proprietors and other businesses may not have a determined bank account; however, it is recommended.

Start by checking with individual banks to determine what type of account is best for your business type. Creating a savings account helps save a certain percentage on each payment as a deducted tax amount. This way, you can organize money and plan for taxes accordingly. Once you have successfully created a separate bank account, you must use a dedicated credit card to build business credit that bifurcates personal and business assets.

Consider doing your homework before you approach any bank for opening an account. You need to compare the fee structures offered by a bank. Most corporate banks have higher fee structures compared to personal banks. You need to know what you owe to the bank you choose for your small business.

2.   Track Your Income and Expenses

Learning how to track your income and expenses effectively is the key to establish a robust small business accounting system. It is a critical step in doing your accounts right by monitoring growth, generating financial statements, tracking deductible expenses, preparing tax returns, and supporting the generated tax reports. Create a system that organizes your receipts and other significant records since the inception of your accounting system.

Note that you should only record income and expenses that are directly related to work. Your records should also reflect any income or expense used partly for personal life and partly for business under mixed-use. For instance, you need to record invoices, canceled checks, purchase orders, and other related business documents.

3.   Select Accounting Methods and Establish an Accounting System

Before moving on to creating an accounting system, it is crucial to understand what accounting is and what type of accounting method you should use. Accounting is the daily process of recording, classifying transactions, and reconciling bank statements. As a small business owner, you need to know what account method best suits your business agendas and then establish your accounting system.

Here are two different methods of accounting; the cash method and the accrual method. The cash method is followed by businesses that record transactions at the time they receive the payments. Wherein the accrual method is implemented by businesses that require to track receivables and payables as they record transactions as and when it occurs (even if the payment isn’t processed).

4.   Develop a Payroll System

As a small business owner, you might hire part-time employees or freelancers to work for you to save costs. However, you need to determine if these individuals are employees or independent contractors. For these employees, you need to develop a payroll system to ensure if taxes are withheld accurately. You need to record your employees’ details and track how much you pay each individual.

5.   Understand the Know-How of Import Tax

Your business model determines your plans to purchase or import products from other countries to sell in your store. You will be subjected to taxes and additional fees while importing any product. It would help if you mentioned these charges and tariffs applicable to incoming goods in your tax returns. To know the rules early on, lean about importing products to India and taxes associated with them.

Several tax rate calculators might help you in tax calculation and effective cost planning. Imprezz is one of the recommended tax calculators for small businesses in India. The GST accounting software automatically calculates applicable taxes and generate timely tax returns with a single click of a button. You need not pay extra fees for updates, and this way, you can also save costs and stay GST compliant.

6.   Determine the Payment Methods

When you start issuing sales invoices, you will need a way to accept payments. Choosing an ideal payment gateway has always been a struggle for small business owners. There are several options available for local businesses, including PayPal India, MobiKwik, RazorPay, etc. These payment gateways save the hassles of setting up a third-party payment gateway.

7.   Develop the Sales Tax Procedures

The e-commerce industry has drastically altered sales tax regulations to an extent where it is a bit confusing due to website issues. Every time a customer walks into a physical retail store, they pay the sales tax applicable as per the state or province where they make their purchases, regardless of whether they are a national resident or a visitor from around the world.

However, small businesses that sell online often sell to customers from different states or even countries. For small business owners in India, international purchases are also eligible for tax deductions. Owners must consult their accountants for detailed information on specific regulations regarding national and international sales tax. Thus, small businesses must launch effective sales tax procedures.

8.   Establish Tax Obligations

Tax obligations may vary according to the legal structure of your business. If you are self-employed (sole proprietor, limited liability company, partnership), you need to report business income on your tax return. On the other hand, companies are separate tax entities and are taxed independently of the owners. As an employee, your income from the company is taxed.

9.   Know Your Gross Margins

Optimizing your store’s gross margin is a primary step to getting more income. To calculate gross margin, you need to know the exact costs incurred in producing your product. To better understand these calculations, you need to be well aware of both COGS (Cost of Goods Sold) and the gross margin

Cost of Goods Sold (COGS) – It is the direct cost that a business incurs while producing the products that are being sold. Direct costs usually include both material costs and labor costs.

Gross margin – It is the number that represents total sales revenue remaining after a business has incurred all the direct costs of producing products or services.

Here’s how the gross margin is calculated:

Gross Margin (%) = Income – Cost of Goods Sold / Income

The difference between the amount of product sold and how much money a business takes home at the end of the day determines its ability to keep the doors open.

10.   Re-Evaluate Your Accounting Methods Frequently

Small business owners prefer doing it all by themselves, don’t you? When starting for the first time, you choose to use a simple spreadsheet to manage your accounts. However, as your business grows, you might want to consider more advanced methods like Imprezz online accounting software.

As you grow, it is always ideal for re-evaluating how much time you spend maintaining your accounting records and how much time is costing your business. The right accounting solution means you can spend more time improving business without having accounting on your schedule, potentially saving the business money.

Small Business Accounting Checklist – How to Maintain Records Effectively?

Business accounting basics can be drawn down to a handful of effective practices. Although most business owners think that these accounting tasks are daunting, it’s just a myth. Here’s a sketch of an accounting checklist that can help you stay up-to-date and analyze your business’ position.

Daily Accounting Tasks

Weekly Accounting Tasks

Monthly Accounting Tasks

Quarterly Accounting Tasks

Annual Accounting Tasks

Does Your Small Business Require an Accountant?

In most cases, small business owners find it more comfortable to hire an accountant or freelancer to handle accounting tasks effectively. Some small businesses also prefer hiring temporary accountants or trained part-time accounting clerks. However, in each of these cases, business owners transfer their financial responsibilities to another person. Outsourcing financial tasks can be an attractive option for business owners who lack accounting skills or hate manipulating numbers in the records.

Most business owners outsource financial duties to avail of an accounting expert in taxation and other legal obligations. Hiring a qualified accountant can help businesses manage financial details such as business plans, payroll, financial safety, monitoring financial growth, cost-saving operations, and GST tax audit. Their advice help creates a better business structure that provides flexibility to the business firm.

Hiring an Accounting Software

Small business owners that are familiar with technological advancements and accounting principles are likely to use accounting software. Because time is money in today’s fast-paced world, digital accounting is a boon. It saves a lot of time compared to manual accounting practices. Modern accounting software automatically processes numbers, data entry, performance tracking, creating reports, and so on. Once data is entered into the software, an accurate outcome is guaranteed. Further, it simples tax filing and payments.

Most software versions provide integration where several features are compiled under a single database software. It provides various functionalities, including tally, purchase orders, data trends, accounts receivables, invoices, tax requirements, quotations, and more. The ability to store extensive data under a single-platform builds room for the overall business’s efficiency, providing easy access to payment history with a click of a button. Hiring an accounting software is a much feasible option over accountants.

Conclusion

Small business accounting is essential to build a more substantial financial base since its inception. As a small business owner, it’s necessary to realize that implementing the best practices applies to you. Adhering to basic accounting principles is essential for the success of a business irrespective of its volume. Smart record keeping and financial analysis are imperative to monitor your expenses and discover new avenues for growth. Besides, it further ensures that you remain GST compliant.

Modern business owners usually opt for business accounting software even when their firm has a dedicated accountant to handle their finances. However, for small businesses that operate with little or no inventory and have only a few employees, simple accounting software can be of great help. These essential solutions are affordable and easy to implement. To rid the risk of spending extra money on tax audits and inaccurate reporting, you can choose Imprezz, a pioneer of accounting software in India.

We offer small business accounting software free trial for 14 days to determine features that best suit your organizational goals. Try the free trial today.

Definition of Commonly Used Basic Accounting Terms – Part 2

Stepping into the accounting field can be confusing at first with all the new terms to learn. Don’t feel left out in conversations, and don’t be left behind only because you aren’t sure what someone is talking about. Learn the basic accounting terms before you start your first big job or before you start your accounting classes, and you’ll be one step ahead of anyone else.

This article is a part of our comprehensive guide – the basic accounting principles for beginners/basic accounting rules. In the article, we have listed essential basic accounting terminologies for beginners. The accounting glossary’s alphabetical layout arrangement will help you look for just what you need to know.

Basic Accounting Terms – [A]

Accounting

Accounting is the process involved in classifying and recording financial data relating to a business. The method includes summarizing, analyzing, and reporting each financial transaction into an accounting system. It indicates completing an accounting year-end, financial statements production, and taxable amount payable by a registered taxpayer.

Accounting Equation

An accounting equation or balance sheet equation defines the fundamental relationship between the assets and liabilities of a business or a person. It is the foundation for the double-entry method of accounting. Under the fundamental accounting equation, each transaction’s total debt is equivalent to total credit.

Asset

Any resource with a monetary value that a business/person owns or controls to benefit from returns shortly. Assets are purchased to bring value and increase the organization’s functionalities or business, thus being recorded in the balance sheet. They are usually listed in the order of liquidity, starting from cash to land.

Basic Accounting Terms – [B]

Balance Sheet

A balance sheet is a timely report that enables business owners and managers to understand the financial statements of assets, equity, liabilities, and capital costs of a business or organization. It falls in line with the accounting equation.

Bank

A bank is a financial institution that securely accepts deposits from the businesses that enable them to pay their bills. Banks provide loans and financial advice to companies directly or indirectly through capital markets aiming to stimulate other businesses’ growth.

Bank Statement

A bank statement is a report of the balance amount in a bank account. It is a periodically issued statement of the holder’s account that entails the amount received and paid out of the bank account.

Banking

Banking is a business activity that includes accepting and safeguarding the money deposited by a person or business. Further, this money is lent out to conduct economic activities to help other individuals or companies succeed or cover operating expenses and investment banks.

Bookkeeper

A bookkeeper is a qualified and trained professional who keeps records of the financial activities of a business.

Bookkeeping Cycle

A bookkeeping cycle is a collective process of accounting procedures such as identification, analyzation, and record-keeping of accounting activities. The usually begins on the 1st of a month and ends on the last day of the month. The cycle repeats every month and is an eight-step process that starts with a transaction and ends as included in the financial statement. The cycle goes on for 12 months until the end of the financial year when entire financial data is sent to a chartered accountant.

Basic Accounting Terms – [C]

Cash Accounting

Cash accounting is one of the accounting methods that records income and expenses when paid for instead of recording when they incur.

Cash Book

A cash book is a financial journal that records all the funds flowing in and out of business through bank accounts. These entries are later updated in the general ledger. The cash book contains all the details of a bank transaction, including the date, amount, transaction description, accounts, and references.

Chart of Accounts (COA)

It is a list of categories of accounts set up in an organizations’ bookkeeping system. The list categorizes the financial transactions that help distinguish the assets, liabilities, income, expenses, and other transactions.

Closing Balance

The ledger account’s final balance comes under the accounts chart at the end of an accounting period or any given day.

Coding

Coding in accounting refers to allocating numbers or letters to accounting data to generate a quick-search database. Coding can vary from one financial organization to another as per their requirements. Thus, coding is not universal and can be tailored to create unique coding systems.

Contra

The Contra account in the general ledger reduces the related account’s value when both are cleared together. The natural balance of the corresponding account is the opposite of that of the linked account. If the debit is the natural balance recorded in the linked account, then the corresponding account registers a credit. In simpler words, if the payment is made to a ledger account, then the same payment is made from the account for some reason, it is called “contra” – the two numbers contradict each other, that is, they cancel each other out of the account.

Commission

The commission is a portion of sales made by a person or company that sells a product owned by another person or company. The owner sets the commission amount as a percentage of the sale proceeds or as a fixed rate, the amount of fixed value. For the seller, it is commission income, and for the owner, it is commission expense.

Credit Note

It is a document that provides a refund to the customer for returned or sold goods at an incorrect price.

Creditor

A creditor is a person or company to whom business or an individual owes money for the purchases made.

Basic Accounting Terms – [D]

Data

Data can be defined as the financial information in the accounting system.

Deductible Purchase

A purchase that can be claimed as a business expense is called a deductible expense as it reduces business profits and reduces the amount of income tax owed to the government.

Non-Deductible Purchase

A non-deductible purchase is a purchase that cannot be used to reduce profits and taxes, such as when the owner uses business funds to buy something for personal use.

Double-Entry

An accounting method in which financial transactions are entered twice, once in the debit portion, and once in the credit portion. Always, debts must be equal to credits. If not, the unbalanced statement will have to be balanced by finding the fault or error.

Drawings

Drawing is a term that defines the action of withdrawing money or funds from a business as an owner for personal use.

Basic Accounting Terms – [E]

Expense

Expenses are the cost of operations that a business incurs to generate income. “Making money costs money.” Typical expenses include payments to suppliers, employee salaries, factory leases, and equipment depreciation.

Export Data

It is exporting information to excel or pdf in accounting software for various business purposes. It increases the flexibility of creating reports that saves a lot of time for businesses engaged with many bills.

Export Goods and Services

Exports are goods and services that are manufactured in one country and sold to buyers in another country. Exports, along with imports, constitute international trade.

Basic Accounting Terms – [F]

Fiscal Year

A fiscal year is a one-year time period that companies and governments use for financial reporting and budgeting. The fiscal year is the most basic accounting terms used for accounting purposes for preparing financial statements.

Funds

A fund is a collection of money intended for a specific purpose. These complexes can often be invested and managed professionally. Some of the common types of funds include pension funds, insurance funds, foundations, and grants.

Basic Accounting Terms – [G-I]

General Ledger Accounts

A general ledger account is a record used to order, store, and summarize a company’s transactions. These accounts are arranged in the general ledger (and chart of accounts) with the balance sheet accounts listed first, followed by the income statement accounts.

Income

Income is money that an individual or the company receives, usually in exchange for providing a good or service or capital investment.

Input

Input is data that is entered into a computer for processing. It is the process of entering data into the internal storage of a computer.

Interim Reports

It is an intermediate statement is a financial report that covers less than one year. Interim data is used to convey company performance before the end of regular year-round financial reporting cycles. Unlike annual statements, it is not mandatory to audit interim data.

Basic Accounting Terms – [J-L]

Liability

In financial accounting, liability is known as the future sacrifices of the economic benefits that an entity has to provide to other entities due to past transactions or other past events.

Basic Accounting Terms – [M-N]

Markup

The markup is an increase in the cost of a product to reach the selling price. The price is the seller’s gross margin, which is crucial to pay operating expenses and make a net profit. The amount of markup can be expressed as a percentage.

Nil

Nil signifies the same as zero.

Basic Accounting Terms – [O-Q]

Overhead expenses

Overhead expenses are the expenses related to running a business. It does not include the costs of manufacturing the product or providing the service. For example, overheads often include executives’ salaries and rents.

Payroll

Payroll indicates employee payments made by the employer. Payroll can be a noun when it describes a company’s financial records regarding an employee’s pay. You can also describe payroll as the business process for paying employee salaries and corresponding taxes.

PAYE

Pay-As-You-Earn (PAYE) refers to a system with income tax withholding by employers or an income-based system for paying off student loans.

Petty Cash

It is a small amount of discretionary money in the form of cash used to cover expenses where it is unwise to cash out by check, due to the inconvenience and costs of writing and signing and then cashing the check.

Profit

Earning also called net income, is the number of earnings that exceeds your expenses for your period. In other words, it is the total amount of revenue left after deducting all necessary and equivalent expenses for the period. Please note that I did not reduce all costs that were paid during the period.

Basic Accounting Terms – [R]

Receipt

A receipt is a sheet of a document representing the status of any payment as “paid.” It acts as proof of payment details, which is issued by most of the businesses, by a seller to a receiver after the payment is made in case of a purchase of goods or services, especially when the buyer pays in cash mode. It is essential in business when a transaction is done through cashless mode, debit, credit, and gift cards, as it confirms the precise details of the purchase that help maintain the accounts.

Reconcile

Retaliating or re-assuring any document’s accuracy by another similar detailed document as a reference to overcome the minor errors or dues to be corrected. Especially in account bookkeeping, which involves investigating and fixing the difference by checking the missing details of the documents such as missed invoices or amount to be included to be received, it is known as reconciling.

Recurring

A thing or image that repeatedly occurs periodically over time with the same details as in the first of those is known as recurring actions. In a matter of business, a transaction that repeats itself every week or month regularly with the same amount to be paid or received can be named as recurring/repeating transactions.

Reference

A unique code of combination that is generally used to connect an entity to another utilizing code representing the actual transaction details in search following via journals and ledgers that bookkeeping system follows in business for easy tact of tracing the transactions.

Refund

An amount that is returned to/from a business firm to compensate the extra amount paid in the case or overpay or in point of return of goods is known as a refund. A refund doesn’t need to be in the form of cash during returns.

Basic Accounting Terms – [S]

Single-Entry

An organizing system is adapted by businesses to manage the transaction accounts where the details of the transaction will be entered only once. Only the received or paid details are recorded, which doesn’t utilize ledgers or journals for bookkeeping, known as single-entry.

Software

A set of programmed instructions to make the typing or recording accounting process in business more reliable and error-free is known as software. Examples of software for such tasks include excel and word for typing tasks, Imprezz, Quickbooks, Xero, Sage, MYOB for processing payroll, etc.

Statement

A statement is a professional documentation representing all the financial status of a transaction between two entities as a proof of the commitment. There are various types of statements meant to avail for different departments of finance. Example: Bank statement for representing input and output transaction from a bank account, invoice statement which inputs all the details of the goods and services purchased from a seller, account statement which shows the details of losses and profits gained by the business firm.

Basic Accounting Terms – [T]

Tax (Payroll Tax)

A mandatory collection of tax by an employer from an employee’s salary or wages periodically and is transferred to the governing authorities regularly is known as payroll taxes. A payroll tax is also known as  “PAYE” – (Pay As You Earn), a system of collecting income taxes from an employee or a student as a loan repayment.

Tax (Sales Tax)

India’s taxing system imposes taxes on various goods and services, known as sales tax, with varying tax rates from 0% to 28%. These taxes are collected by the seller of the goods from the buyer of the goods or assets at the time of purchase and are paid to the government on an annual or monthly basis. It’s also known as GST, VAT, HST.

Time-billing

Time-billing is an authorized process of collecting, recording, rating daily, or monthly data.

Basic Accounting Terms – [U-Z]

Unpresented

Unpresented term that refers to cheques that are to be deposited to the bank account remains undeposited due to several reasons. It might also be termed as undeposited if the mode of payment is not in cash. It is a commonly used term in banks during the reconciling of the cash accounts.

Wages

Wage defines a fixed rate of the amount that an individual achieves due to the work he/she does on an hourly basis. The worker receives a payment regularly at certain time-interval (monthly, weekly, daily, etc.).

Write-Off

When a buyer delays/holds the unpaid payments, the data is entered into the company’s depths of unsettled funds account. But, when the customer doesn’t have to pay the outstanding due to various reasons, the bookkeeper brings down the customer’s account to zero in the company’s unsettled funds account. This act is known as a write-off.

Conclusion

One of the primary problems that most business owners have to deal with is basic accounting knowledge. You should be familiar with some basic accounting terms, whether you want to hire professionals to manage your books of accounts or for your business accounting. We hope that our comprehensive definition guide has walked you through some of the basic accounting terms that will help.

If you are looking for a pro accounting system to help your small business accounting, check out Imprezz.in, the pioneer of invoicing solutions in India. We offer a 14 days free trial software program for small businesses. Login to know more!

Definition of Commonly Used Basic Accounting Terms – Part 1

Language is a medium that eradicates confusion and provides accurate insights into the path you choose to explore. Every industry in the business world has its secret language and knowing the language is the gateway to the inner circle. Toddlers need to explore accounting or bookkeeping career; it is vital to familiarize yourself with basic accounting terms.

If you are looking forward to improvising your accounting vocabulary, you have come to the right place! This article is a part of our comprehensive accounting guide – the basic accounting principles for beginners/basic accounting rules. In the article, we have listed the essential basic accounting terminologies for beginners. It’s time to fasten your seat belts and get started! The alphabetical layout will help you look for just what you need to know.

Basic Accounting Terms – [A]

Account

An account helps you record all the financial entries of a specific period or purpose. An account is registered in an accounting system that tracks all the economic activities of assets, liabilities, equity, revenue, or expenses. For instance, the business’s income is recorded under the “sales” account, and costs incurred due to the purchase of pens, papers, staplers are registered under the “stationery” account, etc. Each account is stored in the general ledger that helps prepare financial statements at the end of an accounting period.

Accounts Payable (A/P)

The money owed by a business includes all the incurred expenses that are to be paid to its suppliers. These expenses are usually recorded as liabilities in the balance sheets of the company. Accounts payable is unlike notes payable liabilities since they are debts created due to formal legal instruments.

Accounts Receivable (A/R)

As the name infers, accounts receivable is defined as the legally enforceable claims for payments that include sales revenue that a business has rendered but has not yet received the payment for it. The particular account type is recorded as an asset in the company’s balance sheets. Accounts receivable are generally in the form of invoices sent to clients/customers for payment within a particular time and are likely to convert to cash in the agreed time frame.

Accrued Expenses

Accrued liabilities reflect the expenses that are yet to be paid or the ones that are stuffed under the account payable in a specific accounting period. In simple words, these are expenses that a company is obligated to pay for purchases on which invoices are yet to be received.

Basic Accounting Terms – [B]

Backup

Backup concerning the accounting system is the e-copy of financial data. Various backup facilities are starting from CDs, USD drives to online and cloud data storage. For any business, financial data is vital; thus, it is crucial to prevent data loss if a system crashes, or any other unfavorable situation. Modern companies usually opt for cloud-storage to rid of the risks of data loss and re-reconciliations.

Bad Debts

Bad debts are the type of expenses that list under the current accounts receivable. The overdue expense is less likely to be paid by the debtor and is also known as uncollectible accounts expense. Bad debts are one of those contingencies of businesses that need to be addressed by those that extend credits to their customers. Despite sending sales invoices, again and again, the chances of receiving the funds are doubtful.

Billing

Billing is one of the vital accounting processes that deals with issuing invoices for the total cost of goods and services purchased by a customer within a specific period.

Bookkeeping

It is a crucial business accounting process that includes collecting, recording, and reporting financial transactions carried out by a business. These transactions include sales, purchases, receipts, and payment by a person or entity.

Budget

Budget is an approximate estimation of expenses and revenue utilized to create an accurate financial plan that helps a person, business, or a government compile and re-evaluate the actual figures against the plan.

Book Value (BV)

The meaning of the term book value differs as per the context. However, it is commonly defined as the original value of an asset minus accumulated depreciation.

Basic Accounting Terms – [C]

Capital

The term capital refers to the financial assets that include funds obtained from deposit accounts or unique financing sources. Capital assets are commonly found under the current or long-term portion of a balance sheet.

Cash Flow

Cash flow is the movement of cash throughout the business; it gives a precise understanding of the amount of money or what is equivalent to cash received or paid out by a company. It provides a summary of money entering a business, from where and where to. Cash flow enables enterprises to make estimations concerning the income and expenses forecast for the coming year.

Chartered Accountant (CA)

A chartered accountant is an internationally recognized designation of qualified and trained accounting professionals in various countries worldwide, except the USA. In the United States, the equivalent to CA is known as Chartered Public Accountant (CPA). Regardless, both are engaged in public and private work employed by government bodies.

Cheque

A cheque is a specially printed piece of paper or slips in the format of a book provided by the bank to an account holder. Businesses use cheques to clear their bills instead of cash, as it has a higher command on banks to pay the specified amount in the cheque. It is mandatory for a cheque to be signed by the bank account’s authorized signatory and expires after 3 to 6 months from the issued date. Unlike cash that is prone to get stolen, a cheque is a secure way of carrying out transactions.

Conversion Balances

Conversion balances are a term used to define switching from one accounting system to another to convert the books of business. Comparative balances are old balances that are often compared with that of recent balances in a new system.

Cost of Goods Sold

The cost of goods sold is defined as the value of sales carried out during a particular period. Various factors influence the cost of products and services, such as manufacturing costs, average costs, specific identification, formulas, and more.

Credit

Credit is an entry made on the right-hand side of the double-entry bookkeeping method. A credit entry increases equity, liability, and income, wherein it decreases the expenses and assets. Alongside, in accounting terms, credit is also known as the money owed by an individual, business, or an entity. It can also be defined as the money owed to banks through credit cards.

Credit Card

A credit card is a small piece of a card made of plastic issued by banks, buildings, or societies that enables businesses or individuals to purchase goods or services on credit. This type of credit is collected back on a monthly installment until full repayment. Respective interest rates are applicable and charge each month as per the credit card balance owed to the card issuer.

Basic Accounting Terms – [D]

Debit

Opposite to credit, there is a debit balance on the left side of the double-entry ledger. The debit entry increases assets and expenses and reduces income, liabilities, and equity.

Debtor

The debtor is a customer owing money to your company.

Deposit

Deposit is defined as the money (cash or cheque) that is put into a bank account.

Deposit Slip

The sheet of paper that accompanies the cash or cheques shows the details of the bank account into which the money must be deposited, the amount of the deposit, and the date of the deposit.

Depreciation

Most of the assets that belong to a business lose value over time due to wear and tear, and daily use is termed as depreciation. The amount used to depreciate assets is calculated at special rates determined by the tax administration. It is usually calculated as a percentage of the cost price, minus the previously calculated depreciation. Depreciation can be claimed as a business expense to reduce income tax.

Description

The financial transactions section that describes the item or service purchased or sold.

Docket

A document containing information about a product sold from one company to another is termed a delivery docket.

Basic Accounting Terms – [E]

End of Month

The end of the month, often abbreviated as EOM, is an attribute that is used in many business credit terms to describe the due date and time to pay. Many vendors offer manufacturers and retailers a cash discount for paying bills early.

Entries

The accounting entry is an official record documenting a transaction. In most cases, the accounting entry is performed using a double-entry bookkeeping system, which requires a person to make credit and debit entry, ultimately creating a complete set of financial statements. Accounting entry can also be performed in a single-entry accounting system; this system generally tracks only cash receipts and cash payments and displays only the results necessary to create an income statement.

Equity

Equity is the residual value of the owner’s interest in the business, after deducting all liabilities. You may hear property rights referred to as “equity” (for companies) or “owner’s equity” (for individual ownership). Equity can be calculated as assets minus liabilities. The word ‘equity’ can also be used to refer to personal finances.

Basic Accounting Terms – [F]

File

The physical or digital place where the company places all its documents in a specialized way

Filing

Filing is the process of archiving documents systematically.

Financial Statements

Financial statements are written records that convey the business activities and financial performance of a company. The balance sheet provides an overview of shareholders’ assets, liabilities, and equity as a snapshot over time.

Basic Accounting Terms – [G-H]

Gains and Losses

The gains or losses are considered to be “realized” when the shares (or other investment) you own are sold. Unrealized gains and losses are also referred to as “paper” gains or losses. An unrealized loss occurs when the stock drops after the investor buys it but has not yet sold it.

Gross Profit

Gross profit is the income a business generates after deducting the costs associated with manufacturing, selling a product, or the costs associated with rendering a service. The total gain will appear on the company’s income statement. Further, it can be calculated by subtracting the cost of goods sold (COGS) from revenue (sales).

Hire Purchase

A hire purchase, also known as an installment plan, is an agreement by which a customer accepts a contract to acquire an asset by paying an initial premium and paying the balance of the asset price plus interest over a period of time.

Basic Accounting Terms – [I]

Import

An import is a good or service that has been purchased in one country and produced in another country. Imports and exports are components of international trade. If the value of a country’s imports exceeds its exports, the government has a negative trade balance, also known as a trade deficit.

Inventory

Inventory is the term used to define the goods available for sale and the raw materials used to produce goods available for sale.

Invoice

An invoice is a time-stamped business document that separates and records a transaction between a buyer and a seller. If the goods or services are purchased on credit, the invoice will generally specify the transaction terms and provide information on available payment methods.

Basic Accounting Terms – [J-L]

Journal

The journal is a detailed account that records all of the company’s financial transactions, which will be used for future adjustments and transfers to other formal accounting records, such as the general ledger.

Ledger

The general ledger is a book with accounts classified and summarized information from journals such as debits and credits. It includes accounts for assets, liabilities, equity, income, and expenses.

Loan

A loan is when money is given to another party to repay the principal amount of the loan plus interest. Each of the parties agrees on the terms of the loan before paying the money. It may be secured by collateral like a mortgage or unsecured, like a credit card.

Loss

Losses are a one-time removal or decrease in a resource or business asset. Losses are unexpected and non-refundable. Staying on top of your accounts can help you easily track your income and losses.

Basic Accounting Terms – [M-N]

Margin

In business accounting, a margin is a difference between income and expenses, as companies often keep track of gross margins, operating margins, and net profit margins. The gross profit margin measures the relationship between a company’s revenue and the cost of goods sold (COGS).

Net Profit

In simple terms, net profit is the remaining money after all of the company’s expenses have been paid. Percentage Net Profit Margin is an associated relationship. This number is calculated by dividing net profit by revenue or turnover and represents profitability as a percentage.

Basic Accounting Terms – [O-Q]

Opening Balance

The debit or credit balance of the accounting account that is carried over from the previous period to the new accounting period is called the opening balance. It will be the first entry in the ledger account at the start of an accounting period.

Payable

An invoice payable is called a payable and is included in the list of accounts payable.

Purchase

Purchasing is the process that a company or organization uses to purchase goods or services to achieve its goals. Although many organizations try to establish standards in the procurement process, the processes can vary significantly between organizations.

Quotation

Any document sent to a potential customer offering the sale of goods or services at a specific price, subject to particular conditions. A quote is used to let a potential customer know the cost of the goods or services before buying them. When a seller submits a quote, they are bound by a specific price.

Basic Accounting Terms – [R]

Receivable

In simple words, receivable means pending payments/assets. When a buyer holds the hold’s payment, a business accountant lists those details on the “account receivable report,” which generally indicates the expectation of the money to be received.

Reimburse

The amount of money that a business or an individual pays to another person or company, respectively, to compensate losses or expenditure incurred. In other words, it is a payback amount from or to the business for the act of spending or covering losses.

Remittance

Documents such as invoices or any other obligations representing a payment procedure, which indicates the amount to be paid/received by or to the business firm, are known as remittances.

Basic Accounting Terms – [S]

Salary

An employer’s reward or cash payment is an accountable amount to be given for work done by an employee, which is paid periodically and is generally talked in terms of the annual figure of numbers, is known as salary.

Sales

The goods and services or assets that a buyer receives in exchange for money create a transaction between the seller and the receiver known as sales.

Basic Accounting Terms – [T]

Tax (Income Tax)

A mandatory percentage of the amount that an entity pays to the government as a taxpayer, depending upon the range of annual income that a person earns, is known as Income tax. Each asset and liabilities have different tax rates to be paid that are fixed by the nation’s taxing system. This tax, in return, is used by the government for the development of the country.

Transaction

The exchange of money via different sources between a seller and a buyer when purchasing goods or services; is a transaction.

Transfer

A movement/flow of money/assets from one account to another through banks or even a ledger account can be termed transfer.

Basic Accounting Terms – [U-Z]

Undeposited Funds

Undeposited funds are referred to the amount of money in cash/cheques that are yet to be deposited into the bank account; once the customers fulfill the payments – the bookkeeper adds up all the payments of the day and deposits it into the bank regularly and then move the statement from undeposited account to bank account

Withdrawal

Withdrawal is a term used when a person converts the required amount of money from the bank account to real cash.

Year-End

All the tax-related works under the finance department by an accountant reconciling works by a bookkeeper to ensure all the bank transactions with documents, all the transaction entries to know the amount of tax to be paid to the government body, etc. calculated accurately at the Year-End. Therefore, Year-End is a term that indicates the financial business status of a specific year. It can also be stated as Financial Year–End.

Conclusion

While not everyone can study accounting, the CEO/accountant must possess knowledge of all aspects of the business that are successfully managed, including when the company outsources accounting. We hope our comprehensive definition guide will help you start communicating effectively with your online accounting service provider.

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Basic Fundamentals of AccountingEach industry in today’s business world operates with its language; likewise, accounting is the primary language of finance and related businesses. It helps business owners understand the financial situation by transmitting the necessary financial data. It helps translate the fundamentals of accounting into a completely tangible report.

The scope of accounting makes it crucial for business owners and beginners to understand the meaning of accounting. This article is a part of our definitive guide – basic accounting principles that explain the importance and basic fundamentals of accounting. Let us get started right away!

Meaning of Accounting

As defined in our A-Z accounting glossary, accounting is a cycle or process that includes recording, summarizing, analyzing, and reporting of data related to financial transactions. There are various components of accounting that one has to understand to know the actual meaning and the basic fundamentals of accounting.

Record – Keeping

The primary function that accounting seeks to accomplish is recording the various transactions within a business. Accounting is also known as bookkeeping that recognizes transactions and prepares them as records.

The process of bookkeeping only deals with the recording/registering part and nothing otherwise. It further helps maintain a few books to record each transaction. Each bookkeeping procedure is carried out systematically for smooth functioning and clear understanding.

There are three basic methods of recording, namely:

Summary

Raw financial data is an outcome of recording transactions; Also known as the preliminary data that is not of much significance to the business or organization. Since raw financial data does not play an essential role in the decision-making process, it is divided into various categories. Thus, recording transaction is followed by the process of summarizing.

Reporting

Company affairs are a vital responsibility of the management. Business owners must be familiar with the various operations carried out within the business with their money. To understand the know-how of business operations and effectively manage the outcomes, owners receive financial reports. Reports are usually generated and handed over at the end of each quarter, and once annually, summarizing all their performance.

Analysis

After all, the results obtained so far are analyzed. Once the process of recording and summarizing is completed, it is imperative to come to conclusions. The management team of an organization or business has to analyze both the positive and negative points.

How does one analyze the results? Accounting entails the concept of comparison that enables accounting professionals to compare earnings, savings, sales, equity, etc. to analyze and determine the organization’s growth and performance.

Business Accounting Basics

The accounting function of any business revolves around the term ALOE, which plays a significant role in the accounting world and helps understand the meaning of each functionality. It is what the acronym “A-L-O-E” means.

Accounting Equation: A – Assets = L – Liabilities + O E – Owner’s Equity

Assets

Assets are those that carry value and converts into cash when sold. These are the items that belong to the owner of the business or organization. Some of the examples of assets are car, house, office, etc.

Liabilities

Anything you own becomes a liability. For instance, the loan is taken to, but an asset is considered as a liability.

Owner’s Equity

The total amount of cash that an owner invests in a business is known as owner’s equity. The investment doesn’t need to be made in the form of money. Most large business owners invest in the way of stocks.

Objectives of Accounting

Record Maintenance

As mentioned earlier in the article, accounting is a language for transactions. The human brain can’t store infinite information. Wherein, accounting takes charge of keeping records of all transactions within a business through the accounting system.

P&L (Profit & Loss)

The sustenance of any business depends on income generation. Making profits is very important while running a business. The profit and loss accounting chart enable bookkeeping professionals to determine whether a company is running under profit or loss.

Optimum Utilization of Resources

Resources play a crucial role in enabling a business to function smoothly. Optimum utilization of resources helps a company succeed in the long run. Reports are one of the key resources that provide timely records of various business activities. Resource utility makes it easier for the owners to take notes of each detail before investing or depositing money.

Financial Estimations

Although business sustainability depends on its profits, it is not the only factor that interests a business owner. It is essential to know how much a business owes its creditors and what amount one has to pay to its debtors. Enterprises focus on preparing statements that include all the financial reports. These statements are termed as a balance sheet that helps understand the estimations of financial position.

Decision Making

Records of financial reports help in the process of decision making. The precise financial information helps owners understand the business functionalities.

Basic Fundamentals of Financial Accounting

1.   Accounting Process

The accounting process, also known as the accounting cycle, is a series of procedures involved in gathering, processing, and reporting financial information. Usually, financial data is presented as reports in the form of financial statements. Before preparing statements, accountants need to gather all the transactions carried out within a business.

Later, accountants have to record and arrange them accordingly to obtain the value that is to be reported. The process of accounting or the cycle doesn’t end with the generation of financial statements. Various other steps must be carried out to set up an ideal accounting system for the next process.

Steps Involved in Accounting Process

2.   Reconciliation Statement

It is a document that begins with the company’s account balance records, carries out addition and subtraction of settlements in the additional columns, and uses the adjustments to access the records of the same account held by a third party. The intention of creating a reconciliation statement is to provide independent verification of the correctness of the balance in the company’s performance and to clarify the differences of accounting versions.

The differences are detailed in the reconciliation statement that helps determine what is valid, what is invalid, and if one requires adjustments. These statements are useful for both internal and external auditors. Internally prepared remarks enable auditors to precisely focus on the reconciling items that are a significant component of the financial statements.

A reconciliation statement is generated in various situations. It may include:

3.   Accounting for Depreciation

Depreciation is an accounting method that allocates the cost of physical or tangible assets over the expected life span. Depreciation is important to understand the amount of asset value spent by a business. It helps enterprises earn income from an asset while spending a portion of its cost each year the asset is used.

In case depreciation on accounts is not considered, it can drastically affect the profits of a business. Businesses can depreciate assets in the long run for accounting and taxation; however, according to the IRS (Internal Revenue Service). Companies are required to spread the costs out over time while depreciating assets.

4.   Preparing Final Accounts

It is categorized as the accounts that are prepared at the end of the fiscal year. It provides an accurate ideology of a business’s financial situation to the business owner, management, or other interested individuals. Financial statements are recorded primarily in a journal and later transferred to the ledger. In the end, the final account is prepared. In general, the final account includes the following components.

5.   Accounting for Private Transactions

It is one of the significant concepts of basic fundamentals of accounting. Accounting for private transactions are carried out in the following financial situations.

Conclusion

When preparing general-purpose financial statements, several guidelines need to be followed. They must be understood by both the accountants preparing them and the users of these reports. These guidelines are called Generally Accepted Accounting Principles or GAAP based on basic accounting principles and concepts.

We hope this article has helped you understand some of the basic fundamentals of accounting. For more accounting information, check out our blog section on the Imprezz official website. Imprezz is a small business accounting software that helps several business owners in India to grow effectively.

We offer a 14 days free trial software program, get started to rid of the risks of being an accounting toddler.

Advantages of Billing System And Its Types

Invoicing is the preliminary step of receiving payment; an invoice is made for every product or service sold and supplied. The times when payments were processed mainly in cash and transactions were recorded in books are long gone. In order to combat error invoicing and overdue accounts payable, modern businesses have adapted the financial technologies (e-transfer, card payment, and online payments). SME’s now enjoy the enormous advantages of the billing system, especially in terms of quick gains.

Suppose you want to relish the efficiency in productivity and robust the convenient functionalities for your overall business. In that case, you need to understand the types of accounting systems available out there in the market. This article is a part of our comprehensive invoice generator software guide, where we have discussed the core technology involved in the invoicing system. We have compiled various aspects, such as key features, advantages of billing system, types of invoicing solutions, features, and the know-how of invoicing software.

What is Billing & Invoicing Software?

Billing software is a tool that automates invoice generation for goods and services rendered. The integrated tools create a list of products and services and their related costs per tax calculations and send them to the respective recipient. The smart technology allows business owners to create invoices using ready-to-use templates that are also customizable. Templates on software are professionally designed, which saves the user’s time and effort.

What Does Billing/Invoicing Software Do?

Recently, several businesses are turning to e-invoicing due to the advantages of the billing system compared to manual invoicing or paper-based billing. Most companies specifically prefer saving the processing time and costs associated with the traditional billing system to better focus on other business operations. Billing software saves printing and postage costs, reduces deadlines, and streamlines business workflow through unified invoicing processing.

Efficiency gains and cost-saving are the most crucial advantages of billing system. Accounting scholars have identified that ideal invoicing software can improve working capital management and relationships with customers and suppliers. As a small business, you need not have a dedicated finance team to handle your daily accounting tasks. You can manage all the billing work solely.

Here, we have listed some of the basic accounting operations you can perform with invoicing software.

Create & Send Invoices

Modern billing software enables business owners to access their financial data from anywhere, anytime. The cloud-based invoicing software makes it easier to create, customize, and personalize invoices. It saves a lot of manual work; unlike manual invoices, you fill-up the information in the given fields. You can also automate the same for recurring invoices.

It is now easier than ever to brand your business, modify and insert brand logo or business icons on your invoices. Advanced billing software enables you to import customer database in just a click of a button. You can also convert client-approved quotations into invoices at your fingertips. The integrated system allows you to file GST returns directly on the online portal.

Simplified Billing & Payment

Online Invoicing Platforms facilitate the process of billing and payments without any additional setup. The online portal enables your customers to pay you instantly as they receive their invoices. An authorized billing system comes with multi-currency capability that allows you to accept payments in foreign currencies.

Updated online platforms allow integrating third party payment applications or credit card payments that simplify payment procedures and get paid faster. Billing software generally has features to handle multiple currencies, multiple languages, and tax adjustments.

Easy Reports Generation 

Billing software helps create instant reports that enable business owners to keep track of their finances and monitor outstanding invoices. Automation allows you to create reports, export data through PDF files that you can share directly through email. The ease of reporting simplifies data analysis and provides relevant information concerning the invoicing operations, like, the number of outstanding invoices, the time-period of a payment cycle, the number of customers that pay on time, and visa-versa.

Summary

How does invoicing software work? Billing software generally is designed to automate and create accurate invoicing operations. If your business involves regular invoicing tasks, the billing system can help you handle the repetitive tasks alongside keeping the system organized and error-free. It is designed to help a business get paid faster through proper maintenance of records, transactions, and accounting database.

Advantages of Billing System

The importance of effective billing cannot be undermined. Invoicing operations play a vital role in enabling businesses to get paid on time. Automated invoicing software helps individuals manage the entire payment process, from gathering data to creating and sending bills. The system contains essential billing elements such as data entry and authentication, billing codes, payment tracking, and security.

The advantages of billing system are far-reaching. In addition to efficiently managing all the billing-related tasks, the best billing software should be able to provide the following benefits:

Reduce Late Payments

A convenient software solution can help you simplify the billing process and enable you to receive payments on time. With the organized and scheduled financial data, you can amplify your profitability by getting paid faster.

Minimize the Payments Delayed or Forgotten

By carefully monitoring and tracking your billing obligations, you can ensure that you do not miss out on any payments, which leads to positive end profits.

Maintain a Professional Image

Did you know a goods billing system can do a lot more than handing invoice related operations? For instance, Imprezz integrated accounting software offers digital marketing tools that help promote your business and brand.

An ideal billing solution thus boosts your business’ reputation. Most software programs offer support for custom logos and other design improvements for invoices and payment documents, which conveys a professional image when sent to clients.

Automation

Automating accounting and financial processes enable you to increase the efficiency of the overall business workflow. It helps you in cutting costs by reducing the number of employees assigned for billing tasks. Likewise, it also increases the cash flow by streamlining payment procedures and improving customer relationships.

Data Security

Optimum data security rids of fraudulent accounting. A sound billing system should be able to offer you bank-grade security features; for instance, Imprezz GST accounting software is SSL certified, German-based software host that offers automation with the 256 BIT SSL data security.

The software provides optimal security to the entire payment process and protects your financial data against hackers or prying eyes. Using integrated software is much reliable and safer than manual invoices that are sent as email attachments.

Features of Invoicing Software

The market today is increasingly competitive, regardless of your profession. Be it a freelancer or retailer; a business primarily depends on attracting and retaining the customers. Therefore, taking advantage of the billing system has become the key to expanding the business.

Billing solutions broadly vary as per their feature set, target audience, and pricing plans. However, invoicing software must contain the features mentioned below.

Types of Billing Software

Not many business owners know what type of billing software is right for their business. Often, it is due to the lack of understanding that makes the choices unclear. Finding what software is right for you can be confusing due to the number of software providers that are available out there in the market today. You are in the right place if you are looking for various billing systems to know the best fit for you.

Here, we have listed the most vital billing software types to help small business owners make a clear decision.

Billing and Time Management Software

Companies indulged in professional services opt billing and time software. These companies usually deal with “desk” jobs, namely, law firms, accounting firms, marketing firms, and other similar service providers. Billing and time software is primarily designed to serve three vital features. Their characteristics include the potential to track time, manage bill hours, and facilitate both projects in hand.

Billing and time management software are basic types of billing systems offered by various software service providers out there. Not many business owners are an expert in managing accounting operations; to cover that up, these software systems offer extensive features that include records and documentation, scheduling, reporting, and other time-tracking tools.

Legal Billing Software

Most billing systems enter the market as billing and time software, but they gradually evolve and improvise their design with legal billing software features. Legal billing software is mostly used by large organizations that deal with fiduciary accounting, reporting, withholdings management, batch billing, and other similar business operations.

As mentioned earlier, legal billing software is most commonly used by large organizations that prefer licensing the entire billing system for managing legal practices. The legal billing software packages offer more than just billing features; these packages mostly include documentation, case schedule management, legal research system integration, and more.

Medical billing software

The functionalities of medical billing software are entirely different as it does not involve time management. The software is specifically designed to generate the billing amount of medical billing codes, standardly termed as CPT (Current Procedure Terms). The billing system operates as per the rate tables available to price each CPT code entered by the office staff or assigned individual.

Adjustments are carried out in the billing system when a doctor or the hospital has to present the bills to any insurance company for processing payments. Once the respective CPT codes are either approved, rejected, or reduced, changes are made in the invoice price accordingly concerning the insurance company’s rate schedule.

Inventory Billing Software

Inventory billing software is most commonly seen covering the programs for various corporate types; basically, those involved in the trade. Invoices generated through inventory systems are based on the prices of inventory items. Retailers, manufacturers, wholesalers, and other similar companies use inventory billing as it involves various methods and sources of billing.

An inventory system determines an inventory item’s price based on pricing lists, fluctuating prices, or markup amount. Unlike most billing systems, inventory software doesn’t require a unique customer record for each purchase made by an individual. Instead, inventory software creates a unique record automatically for each transaction.

Recurring Billing Software

As the name suggests, the recurring billing system is used by businesses that provide running subscription services or monthly services. These businesses include the IT service companies, house maintenance companies that bill the same items to its recurring customers. Automation bifurcates the time and efforts wasted on billing recurring invoices at each periodic interval.

Recurring billing software accumulates historical data of previous bills and enables business owners to use revenue projections and historical data comparisons. However, it is less likely that businesses opt for this system, as it only offers a single business operation discipline. Most companies prefer time and billing software as it provides recurring module along with other unique billing features.

Most common Loopholes of Billing Software

The billing system is considered one of the most advanced technologies of current innovations. It has come a long way since its initial forms as paperless e-invoices. Even now, however, the system has various loopholes that need to be addressed and changed. Here we have listed some of the most common loopholes of the billing system.

Universal Standard

In today’s modernized world, most businesses operate digitally. Thus, billing systems function in various billing environments as per the geographic region, tax calculation changes, and vague compliance requirements of e-invoices. Most global companies involved in international trade and business often get around the billing system’s complexities due to a lack of universal standards of billing.

Safe & Secure Billing System

Nothing on the internet is an impenetrable bulwark despite all the security mechanisms and protocols. Anything online can be hacked by individuals that are an expert in building systems. Before making your purchase decision, you might want to check with your service provider once regarding this concern. Make sure that your business database is integrated and secure.

Conclusion

Ideal online invoice software is one that fits your business. Before implementing the right system in place, it is vital to examine and familiarize yourself with all the current billing processes. You need to know what type of billing system will help you and your team grow your business effectively. Do not waste money paying for the features that are useless for your business type.

Weigh the advantages of your billing system against the loopholes. If your billing system isn’t doing its job, it’s time for you to switch to a better option. Do not make the mistake of choosing the wrong software, switching from one system to another, and implementing Imprezz accounting software.

We offer a 14 days free trial software program for small businesses in India. Issue bills that serve your business more than just generating invoices.

A Comprehensive Guide - Best GST Invoicing SoftwareOver the past few years, the introduction of goods and service tax (GST) has revolutionized India’s taxation system. So far, it is considered as the most crucial tax calculation changes after independence. Scholars believe that India’s GST regime is more likely to offer a significant overhaul of the current indirect tax system. Besides, these changes have increased the demand for GST invoicing software in India.

The government has also subsumed various other taxes, including the VAT (Value Added Tax), Service Tax, Entertainment tax aiming to reduce the descending effects of taxes on the end consumers. However, the impact of GST has affected almost every business sector leaving most professionals under pressure. Is it possible to find the best GST accounting software that best suits all professionals?

The government and tax authorities have been patient with implementing rules and regulations under the GST regime. The impact of COVID-19 on GST India has led to sudden changes in GST compliance, leaving taxpayers at bay. It is ideal for taxpayers in India to adapt digital tax processing to ease compliance and stay updated with the ongoing changes.

This article is a part of our GST Guide to help readers choose the best while purchasing the program. In this article, we have compiled everything you ought to know about Imprezz GST invoicing software. Imprezz offers GST accounting solutions to various professionals, enabling them to take advantage of uninterrupted GST billing and hazel free return filing experience.

Imprezz GST Invoicing Software – What is it?

Imprezz GST invoicing and billing software enables professionals from the various business sector to stay GST compliant. It supports flawless return filling of various GST forms, like, GSTR-1, 3-B, 4, and GSTR-9. The software offers seamless integration, which makes it a unique software compared to other service providers. We strive with a mission to help small businesses in India grow efficiently.

Our GST accounting software instills the most simplified compliance procedures for accounting toddlers. It includes reconciling invoice mismatches, inbuilt HSN/SAC codes, automatic data validation, and tax liability updates. Implement Imprezz GST invoicing software for seamless and timely return filing, customized GST ready invoices, easy accounting, and records management.

Contact our support team for guidance and support. We are always by your side to help you succeed in all endeavors.

Imprezz Accounting Software – Is It a GST Suvidha Provider (GSP)?

What is a GST Suvidha Provider? It is an enabler or authorized conciliator that enables businesses to access GST portal services. Is Imprezz a GST Suvidha Provider? Yes, Imprezz helps small businesses comply under the provisions of the GST law. The cloud-based software is a GSTIN-authorized GSP, connected with the portal through secure API’s. It provides an integrated platform for various GST-related accounting functionalities.

Why is Imprezz the Best Invoicing Software as a GSP?

India is evolving as a modern and digitalized country. This transition has made GST the most prominent structure for taxpayers, from merchants to traders and large companies. The phase of GST in India is new, but, at the same time, it is dubious. In this regard, implementing the best invoicing software emerges and plays a vital role in managing the legal GST tax returns.

GST has enabled emerging Indian companies to adopt GST requirements. Several GST accounting software applications are available in the market today. Each company is striving to prove themselves to be the best of all. However, it is questionable. How can one determine if a GST software is the best and genuine? Why is Imprezz the best of the accounting tool as a GSP?

Imprezz is the pioneer of GST invoicing software in India, approved and certified under GSTN. Alongside being a GSP, Imprezz is SSL certified, German-based software host that offers automation and 256 BIT SSL data security.

What Makes Imprezz the Unique GST Accounting Software?

Imprezz all in one accounting software is one of the most popular tools that offer the best financing and invoicing program for small businesses and freelancers in India. The free trial program provides the software’s absolute functionalities (GST, E-way Bills, Accounting, TDS, and Income Tax). Post free trial, users can opt one of three pricing plans; starter, standard, and unlimited. Click Here to know more about the pricing plans.

How is Imprezz Accounting Software Useful for Small Businesses in India?

Imprezz is a cost-effective GST invoicing software that enables small businesses to handle GST calculations, business reports, inventory control, and other comprehensive accounting tasks. It helps small business owners focus on growing their clientele and the overall business.

Here, we have listed some of the vital features offered by Imprezz GST that are of utmost useful for SME’s in India.

Why Choose Imprezz GST Invoicing & Billing Software for Your Small Business?

There is a wide range of GST software products available in the market today. It is indeed difficult to choose between reliable ones and ones that are cost-effective. Let us break it down for you. Imprezz is an integrated GST invoicing software that offers reliable and cost-effective accounting tools. It provides the best GST billing software features for CPA’s.

Conclusion

Imprezz GST invoicing software is developed by “Bundesverand IT-Mittelstand,” a German-based software host. It is one of the profitable GST programs built to help Indian business owners overcome the obstacles concerning small business accounting, GST, and compliances. We have been successfully helping small industries in India to grow their clientele effectively.

Imprezz is an Indian GST software committed to providing integrated and advanced GST depository Systems. The software is designed entirely based on the new environment and adheres to the newly notified guidelines of India’s Government (GOI). We hope our comprehensive GST guide was useful to you.

The 14 days trial version of Imprezz is available for free. The paid range starts at 249rs per month. Log in to start your GST accounting right away!