Accounting Glossary
Clear, jargon-free definitions of every accounting and bookkeeping term you need to know. Search by letter, category, or keyword.
53 terms found
Accounts Payable (AP)
Money your business owes to suppliers and vendors for goods or services received but not yet paid for. Tracked as a current liability on the balance sheet. HelloBooks automates AP with purchase orders, GRN matching, and vendor bill management.
Accounts Receivable (AR)
Money owed to your business by customers who received goods or services on credit. Tracked as a current asset. HelloBooks manages AR through invoicing, payment tracking, aging reports, and automatic reminders.
Accrual Accounting
An accounting method that records revenue when earned and expenses when incurred, regardless of when cash changes hands. Required by GAAP for most businesses above a certain size. Contrasts with cash-basis accounting.
Balance Sheet
A financial statement showing what your business owns (assets), owes (liabilities), and the owner's stake (equity) at a specific point in time. Assets = Liabilities + Equity. HelloBooks generates balance sheets automatically from your transactions.
Bank Reconciliation
The process of matching your accounting records to your bank statement to ensure they agree. HelloBooks AI auto-categorizes and matches transactions from 11,000+ banks via Plaid, reducing reconciliation from hours to minutes.
Cash Flow Statement
A financial report showing how cash moves in and out of your business through operations, investing, and financing activities. Essential for understanding whether your business generates enough cash to cover expenses.
Chart of Accounts (COA)
An organized list of every account used to record financial transactions in your general ledger. Categories include assets, liabilities, equity, revenue, and expenses. HelloBooks creates a standard COA automatically when you set up your entity.
Cost of Goods Sold (COGS)
The direct costs of producing goods or services sold by your business — materials, labor, and overhead. Deducted from revenue to calculate gross profit. HelloBooks tracks COGS through inventory and purchase management.
Credit Note
A document issued by a seller to reduce the amount a buyer owes. Used for returns, overpayments, or post-sale discounts. In GST systems, credit notes adjust tax liability and must be reported in GSTR-1.
Debit Note
A document issued when the amount on the original invoice needs to increase — for additional charges, price revisions, or supplementary services. Opposite of a credit note.
Depreciation
The gradual reduction in value of a fixed asset over its useful life. Common methods include straight-line and declining balance. In the US, Section 179 allows immediate expensing of qualifying assets.
Double-Entry Bookkeeping
An accounting system where every transaction is recorded in at least two accounts — a debit and a credit — ensuring the accounting equation (Assets = Liabilities + Equity) always balances. HelloBooks uses double-entry automatically.
General Ledger (GL)
The master record of all financial transactions for a business, organized by account. Every entry in the GL follows double-entry bookkeeping. HelloBooks maintains your GL automatically from invoices, bills, payments, and journal entries.
Gross Profit
Revenue minus cost of goods sold (COGS). Represents the profit before operating expenses, taxes, and interest. Gross profit margin (gross profit / revenue) indicates pricing efficiency.
Journal Entry
A record of a financial transaction in the general ledger, showing debits and credits. Manual journal entries handle adjustments, corrections, and non-standard transactions that don't originate from invoices or bills.
Net Profit
The bottom line — revenue minus all expenses including COGS, operating costs, interest, and taxes. Also called net income. The P&L statement's final figure.
Profit & Loss Statement (P&L)
Also called an income statement. Shows revenue, expenses, and profit or loss over a period. Essential for understanding business performance. HelloBooks generates P&L reports automatically with AI-powered insights.
Trial Balance
A report listing all general ledger accounts and their balances to verify that total debits equal total credits. Used to check for errors before preparing financial statements.
Invoice
A document sent to a customer requesting payment for goods or services. Includes seller and buyer details, items, amounts, taxes, and payment terms. HelloBooks supports AI-powered smart invoicing with multi-channel delivery.
Proforma Invoice
A preliminary invoice sent before delivery as an estimate or quotation. Not a demand for payment — used for customs, advance payments, and price confirmation. Can be converted to a tax invoice in HelloBooks.
Purchase Order (PO)
A formal document sent to a vendor authorizing a purchase. Specifies items, quantities, agreed prices, and delivery terms. HelloBooks supports 3-way matching: PO to GRN to vendor invoice.
Recurring Invoice
An invoice automatically generated and sent on a schedule — weekly, monthly, quarterly. Ideal for subscription services, retainers, and maintenance contracts. HelloBooks automates creation, delivery, and payment tracking.
Sales Order
A confirmation document sent to a customer after they accept a quote, before delivery and invoicing. HelloBooks converts quotes to sales orders to invoices in a seamless workflow.
Goods Receipt Note (GRN)
A document confirming that goods ordered via a purchase order have been physically received and inspected. Part of 3-way matching (PO → GRN → Invoice) to prevent overpayment. HelloBooks has full GRN with validation rules.
Three-Way Matching
A verification process that matches the purchase order, goods receipt note, and vendor invoice to ensure you only pay for what was ordered and received at the agreed price. Prevents fraud and errors.
FIFO (First In, First Out)
An inventory valuation method where the oldest stock is sold first. During inflation, FIFO results in lower COGS and higher reported profits compared to LIFO.
Form 1099
An IRS information return used to report various types of income other than wages. 1099-NEC is for non-employee compensation ($600+ to contractors). Businesses must file by January 31. HelloBooks tracks contractor payments for 1099 reporting.
Form W-2
An IRS form reporting wages paid to employees and taxes withheld. Employers must provide W-2s to employees by January 31 and file copies with the SSA.
Sales Tax Nexus
The connection between a business and a state that requires the business to collect and remit sales tax. Nexus can be physical (office, warehouse) or economic (exceeding revenue/transaction thresholds). HelloBooks includes a nexus calculator.
Section 179 Deduction
An IRS provision allowing businesses to deduct the full purchase price of qualifying equipment and software in the year of purchase, rather than depreciating over time. HelloBooks includes a Section 179 calculator.
Estimated Quarterly Taxes
Quarterly tax payments made by self-employed individuals and businesses to cover income tax and self-employment tax. Due April 15, June 15, September 15, and January 15.
GST (Goods and Services Tax)
India's unified indirect tax replacing multiple central and state taxes. Applied at 5%, 12%, 18%, or 28% rates. Includes CGST (central), SGST (state), and IGST (inter-state). HelloBooks fully supports GST compliance.
CGST & SGST
Central GST (CGST) and State GST (SGST) are levied equally on intra-state supplies. For example, 18% GST on a local sale = 9% CGST + 9% SGST. Both go to different government levels.
IGST (Integrated GST)
GST levied on inter-state supplies and imports. IGST equals the full GST rate (e.g., 18% IGST vs 9% CGST + 9% SGST). The central government distributes the state portion to the destination state.
GSTIN
A 15-digit GST Identification Number assigned to every registered taxpayer in India. Format: 2 digits state code + 10 digits PAN + 1 digit entity number + 1 blank + 1 check digit. Must appear on all GST invoices.
GSTR-1
A monthly or quarterly return filed by registered dealers reporting all outward supplies (sales). Must be filed by the 11th of the following month. HelloBooks exports GSTR-1 data directly from your invoices.
GSTR-3B
A monthly self-declaration return summarizing outward supplies, input tax credit claimed, and net tax payable. Filed by the 20th of the following month. HelloBooks generates GSTR-3B summaries from your transaction data.
Input Tax Credit (ITC)
The GST paid on business purchases that can be offset against GST collected on sales. Reduces your net GST liability. ITC is only available if the supplier has filed their return and the invoice is valid.
HSN Code
Harmonized System of Nomenclature — a 4-8 digit code classifying goods for GST purposes. Required on GST invoices based on annual turnover. HelloBooks includes a searchable HSN code database.
SAC Code
Service Accounting Code — a 6-digit code classifying services under GST (similar to HSN for goods). Required on service invoices. Example: 998311 for management consulting.
TDS (Tax Deducted at Source)
Tax deducted by the payer at the time of payment to the government. Common TDS rates: 1% (purchase of goods above Rs. 50 lakh), 2% (contractors), 10% (professional services). HelloBooks tracks TDS on purchases and sales.
TCS (Tax Collected at Source)
Tax collected by the seller from the buyer at the time of sale. Applies to specific goods (scrap, minerals) and e-commerce operators. HelloBooks supports TCS calculation and reporting.
E-Invoice (India)
An electronic invoicing system where B2B invoices are registered on the GST Invoice Registration Portal (IRP). Each invoice gets an IRN (Invoice Reference Number) and signed QR code. Mandatory for businesses above Rs. 5 crore turnover.
E-Way Bill
An electronic document required for transporting goods worth more than Rs. 50,000 within or between states. Generated on the GST portal. HelloBooks auto-generates e-way bills with delivery challans.
Reverse Charge Mechanism (RCM)
A GST provision where the recipient of goods/services pays the tax instead of the supplier. Applies to specific services (legal, GTA) and purchases from unregistered dealers.
Plaid
A financial technology company that connects applications to bank accounts. HelloBooks uses Plaid to provide live bank feeds from 11,000+ US financial institutions for automatic transaction import and categorization.
Stripe Connect
Stripe's platform for marketplace and SaaS payments. HelloBooks uses Stripe Connect to enable invoice payment links — customers click "Pay Now" and pay via credit card, with funds going directly to the business's Stripe account.
Razorpay
India's leading payment gateway for online payments. HelloBooks integrates with Razorpay via OAuth to enable UPI, card, net banking, and wallet payments on invoices for Indian businesses.
UPI (Unified Payments Interface)
India's real-time inter-bank payment system that enables instant mobile payments using virtual payment addresses. Processes 10+ billion transactions monthly. Supported in HelloBooks via Razorpay.
MRR (Monthly Recurring Revenue)
The predictable revenue a subscription business earns each month. Calculated by multiplying the number of paying customers by the average revenue per user (ARPU). Key SaaS metric.
ARR (Annual Recurring Revenue)
The annualized version of MRR (MRR x 12). Used by SaaS companies to measure predictable yearly revenue. A key metric for valuation and growth tracking.
Burn Rate
The rate at which a company spends cash, typically measured monthly. Gross burn is total monthly spending. Net burn is spending minus revenue. Used to calculate runway (cash / net burn = months of runway).
Working Capital
Current assets minus current liabilities. Measures a business's ability to pay short-term obligations. Positive working capital means the business can cover its near-term debts.
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