BUSINESS TERMS, IN PLAIN WORDS
Glossary
What the words on your invoices, returns and stock reports mean, and how to use them correctly.
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CAPACorrective and preventive action, a structured process to address causes and prevent recurrence.Read the definition →Cash conversion cycleThe approximate days cash is tied up in inventory and receivables after accounting for supplier credit.Read the definition →CGSTCentral Goods and Services Tax component in applicable intrastate taxable supplies.Read the definition →Composition schemeAn optional GST scheme for small taxpayers, who pay tax at a fixed percentage of turnover and keep their compliance simple.Read the definition →Credit noteDocument used to reduce a previously recorded invoice amount in qualifying circumstances.Read the definition →Cycle countCounting a small part of the stock on a regular schedule, instead of counting everything at once.Read the definition →
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Dead stockStock that has not been sold or used for a long time and is unlikely to be.Read the definition →Debit noteDocument recording an upward or other qualifying adjustment to an original transaction, depending on the issuing party and context.Read the definition →Delivery challanDocument recording movement of goods, including certain movements that do not involve an immediate tax invoice.Read the definition →DIODays inventory outstanding, a measure of the average number of days inventory is held.Read the definition →DPODays payable outstanding, an estimate of how long the business takes to pay suppliers.Read the definition →DSODays sales outstanding, an estimate of the average number of days receivables remain unpaid.Read the definition →
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E-invoice IRNInvoice Reference Number generated through the Invoice Registration Portal for applicable e-invoices.Read the definition →E-way billElectronic transport document used for specified movements of goods under GST rules.Read the definition →ESIEmployees' State Insurance: a scheme run by the ESIC that gives covered employees medical and cash benefits, funded by employer and employee contributions.Read the definition →
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GRNGoods receipt note, the business record of material physically received.Read the definition →Gross marginThe share of sales left after the direct cost of the goods sold, shown as a percentage of sales.Read the definition →GSTINThe 15-character registration number a business gets when it registers under GST.Read the definition →GSTR-1The GST return in which a business reports its sales (outward supplies) for a period.Read the definition →GSTR-2BA statement the GST portal prepares each month showing the input tax credit available to you, based on your suppliers' returns.Read the definition →GSTR-3BThe GST return in which a business declares its tax for the period, claims credit and pays what is due.Read the definition →
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IECImporter Exporter Code: a 10-digit number issued by the DGFT that a business needs to import or export goods.Read the definition →IGSTIntegrated Goods and Services Tax, generally relevant to interstate supplies and specified other transactions.Read the definition →IncotermsStandard trade terms from the International Chamber of Commerce that say who arranges and pays for transport and insurance, and when risk passes from seller to buyer.Read the definition →ISO 9001An international standard for a quality management system, against which a business can be audited and certified.Read the definition →ITCInput tax credit, the credit of eligible GST paid on business purchases under applicable conditions.Read the definition →
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PFProvident fund: a retirement savings scheme for employees, run by the EPFO, to which both employee and employer contribute.Read the definition →Place of supplyThe rule that decides which state a supply is treated as made in, and so whether CGST and SGST or IGST applies.Read the definition →Poka-yokeMistake-proofing: designing a process so that an error cannot happen, or is caught at once.Read the definition →PPAPProduction Part Approval Process, commonly used in automotive supply chains to evidence product and process readiness.Read the definition →Proforma invoiceA preliminary bill sent before the sale is final, to show the buyer what they will pay; it is not a tax invoice.Read the definition →Purchase orderA document a buyer sends a supplier to order specified goods or services at agreed prices and terms.Read the definition →
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RCMReverse charge mechanism, where the recipient may be responsible for paying GST in specified cases.Read the definition →Receivables ageingA report that groups unpaid customer invoices by how long they have been outstanding.Read the definition →Reorder pointThe stock level at which a new order should be placed, enough to last through the lead time plus a cushion.Read the definition →RFQRequest for quotation: a request sent to suppliers asking them to quote a price and terms for a specified need.Read the definition →
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SAC codeServices Accounting Code for classification of a taxable service.Read the definition →Safety stockExtra stock kept to cover uncertainty in demand or in supplier delivery, so that you do not run out.Read the definition →Sales orderThe seller's record of a customer's confirmed order, with the items, quantities, prices and delivery date.Read the definition →SGSTState Goods and Services Tax component in applicable intrastate taxable supplies.Read the definition →Shipping billThe declaration an exporter files with customs for goods sent out of India by sea or air.Read the definition →SKUStock keeping unit: a unique code for each distinct item you hold, down to its size, colour or pack.Read the definition →
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Tax invoiceThe bill a registered supplier issues for goods or services, carrying the details GST requires, which lets the buyer claim credit.Read the definition →TDSTax deducted at source: tax a payer holds back from certain payments and deposits with the government on the receiver's behalf.Read the definition →Trial balanceA listing of general-ledger account balances used to check bookkeeping totals and prepare financial statements.Read the definition →
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