Accounting & Inventory Terms, Explained Simply.

A bookkeeping system where every financial transaction is recorded with at least one debit and one credit, ensuring total debits always equal total credits.

Double-entry accounting is the foundational standard for modern financial integrity. Unlike single-entry notebooks that only track cash balance, double-entry maintains the accounting equation: Assets = Liabilities + Owner Equity. Every invoice, payment, expense, or asset purchase creates balancing entries, preventing undetected bookkeeping discrepancies.

An itemized inventory recipe listing all raw materials, sub-assemblies, parts, and quantities required to produce one unit of a finished product.

A Bill of Materials (BOM) provides the blueprint for manufacturing and assembly operations. It allows businesses to plan raw material procurement, calculate standard product costs, and automate the deduction of components from inventory when a production batch is completed.

An inventory management and picking strategy where products with the earliest expiration dates are sold or dispatched first, regardless of when they were purchased.

FEFO is essential for businesses handling perishable goods such as pharmaceuticals, food and beverages, and chemicals. Unlike FIFO (which only looks at shipment arrival dates), FEFO ensures that goods with the shortest remaining shelf life are dispatched before items with later expiration dates, minimizing expired stock write-offs.

A tax credit in GST/VAT systems allowing businesses to reduce the tax they owe on sales by the amount of tax they have already paid on business purchases.

Input Tax Credit prevents the cascading effect (tax on tax) in value-added tax regimes like Indian GST. When a business purchases raw materials, commercial equipment, or services for business use, the tax paid to suppliers can be deducted from the total output tax collected from customers before remitting the net amount to the government.

The counter billing system and hardware interface where customer retail checkout, payment processing, and receipt printing take place.

A modern Point of Sale (POS) system does more than act as an electronic cash register: when integrated with accounting and inventory, every checkout updates warehouse stock, records cashier shift sessions, captures customer khata details, and synchronizes with the general ledger in real time.

The accounting process of matching the cash and bank balance in a company’s internal ledger against the official bank account statement.

Bank reconciliation identifies timing differences, unpresented cheques, bank service charges, interest credits, or accounting errors between internal records and the bank statement. Performing regular reconciliation ensures financial statements accurately reflect true available liquid cash.