Contents
Finance & Accounting Glossary
Essential finance, accounting, and tax terms explained in plain language — with Indian context. References to ₹, GST, ITR, SEBI, RBI, and ICAI throughout.
A
Accounts Payable (AP)
Money owed by a business to its suppliers or vendors for goods/services received but not yet paid. In India, it appears as a current liability on the balance sheet and is common in GST-registered businesses managing invoice-based purchases.
Accounts Receivable (AR)
Money owed to a business by its customers for goods or services delivered but not yet paid for. High AR can affect a business’s working capital — use our Working Capital Calculator to assess impact.
Accrual Accounting
An accounting method where revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid. Mandatory for companies with turnover above ₹1 crore under Indian accounting standards (Ind AS).
Asset
Any resource owned or controlled by an individual or business that has economic value. Assets are listed on the balance sheet and include cash, FD, mutual funds, land, machinery, and receivables.
Audit
An independent examination of financial statements to ensure accuracy and compliance. In India, audits are mandatory for companies above a certain threshold under the Companies Act 2013 and conducted by ICAI-registered Chartered Accountants (CAs).
B
Balance Sheet
A financial statement showing a company’s assets, liabilities, and shareholders’ equity at a specific point in time. It must always balance: Assets = Liabilities + Equity. Under Ind AS, Indian companies present it in a prescribed format.
Bookkeeping
The day-to-day recording of financial transactions — sales, purchases, payments, receipts — in ledger accounts. The foundation of any accounting system and required for accurate GST returns and ITR filing.
Break-even Point
The sales volume at which total revenue equals total costs — meaning zero profit, zero loss. Use our Break-even Calculator to find yours instantly.
Bull Market
A period when stock prices are rising broadly — typically 20%+ from recent lows. In India, NIFTY 50 and SENSEX are the key indicators of market direction.
C
CAGR (Compound Annual Growth Rate)
The rate at which an investment would have grown if it grew at a steady rate annually. Formula: CAGR = (Ending Value / Beginning Value)^(1/n) – 1. Use our CAGR Calculator with ₹ values.
Capital Gains
Profit earned from selling a capital asset (shares, mutual funds, property) at a price higher than the purchase price. In India, classified as LTCG (Long-Term) or STCG (Short-Term), each taxed differently under the Income Tax Act.
Cash Flow
The net amount of cash and cash equivalents moving in and out of a business. Positive cash flow means more coming in than going out — critical for business survival even when showing accounting profit.
CIBIL Score
India’s most widely used credit score, ranging from 300 to 900, maintained by TransUnion CIBIL. A score above 750 is considered good and is typically required for loan approvals. It reflects your repayment history across all credit products.
CMA (Cost and Management Accountant)
A professional designation awarded by the Institute of Cost Accountants of India (ICMAI). CMAs specialise in cost accounting, management accounting, and financial planning for businesses.
D
Debit / Credit
Fundamental accounting concepts. In double-entry bookkeeping: Debits increase assets and expenses; Credits increase liabilities, equity, and revenues. Every transaction has equal debit and credit entries.
Depreciation
The systematic allocation of an asset’s cost over its useful life. In India, depreciation rates for tax purposes are governed by the Income Tax Act (Schedule II), and differ from rates used for books of accounts under Companies Act.
DCF (Discounted Cash Flow)
A valuation method that estimates the value of an investment based on its expected future cash flows, discounted to present value. Widely used by analysts in India to value stocks, businesses, and projects.
E
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortisation. A measure of core operating profitability, widely used in business valuation, lending decisions, and performance comparison across Indian companies.
EMI (Equated Monthly Instalment)
A fixed monthly payment made to a bank or lender to repay a loan. Covers both principal and interest. Use our EMI Calculator to compute your exact monthly outgo for home loans, personal loans, or car loans.
EPF (Employees’ Provident Fund)
A mandatory retirement savings scheme for salaried employees in India under the EPF Act. Both employer and employee contribute 12% of basic salary. Managed by EPFO, with interest rates announced annually by the government.
F
FD (Fixed Deposit)
A savings instrument offered by banks and NBFCs where you deposit a lump sum for a fixed tenure at a pre-agreed interest rate. FD interest is taxable as income in India, and TDS is deducted if interest exceeds ₹40,000/year (₹50,000 for seniors).
FIRE (Financial Independence, Retire Early)
A financial planning movement focused on aggressive saving and investing to retire earlier than the traditional age. In India, the 25x rule is commonly used — you need 25 times your annual expenses invested. Use our FIRE Calculator.
FOIR (Fixed Obligation to Income Ratio)
A metric used by Indian banks to assess loan eligibility. It measures the percentage of your monthly income already committed to loan EMIs. Most banks prefer FOIR below 40-50%.
Financial Year (FY)
In India, the financial year runs from April 1 to March 31 of the following year. Income Tax Returns (ITR) and GST annual returns are filed based on this period. E.g., FY 2024-25 covers April 2024 to March 2025.
G
GST (Goods and Services Tax)
India’s unified indirect tax system introduced in July 2017, replacing multiple taxes like VAT, Service Tax, and Excise Duty. GST has four main slabs: 5%, 12%, 18%, and 28%. Businesses with turnover above ₹40 lakh (₹20 lakh for services) must register. Use our GST Calculator.
GSTIN
Goods and Services Tax Identification Number — a 15-digit unique code assigned to every GST-registered business in India. The format: 2-digit state code + 10-digit PAN + 1-digit entity number + 1-digit Z + 1-digit check digit.
H
HRA (House Rent Allowance)
A component of salary that salaried employees receive to meet rental housing expenses. Part of HRA can be claimed as a tax exemption under Section 10(13A) of the Income Tax Act. Use our HRA Calculator to compute your exact exemption.
I
ICAI (Institute of Chartered Accountants of India)
The statutory body governing the Chartered Accountancy (CA) profession in India, established in 1949. ICAI sets accounting standards (Ind AS), auditing standards, and regulates CA examinations and ethics.
ITR (Income Tax Return)
The form filed with the Income Tax Department of India declaring your income, deductions, and tax liability for a financial year. Different ITR forms apply based on income type — ITR-1 (salaried), ITR-3 (business), ITR-4 (presumptive), etc.
IRR (Internal Rate of Return)
The discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. Used extensively in project evaluation, real estate, and investment analysis. Use our IRR Calculator.
L
LTCG (Long-Term Capital Gains)
Profit from selling a capital asset held beyond a specified period. In India: equity mutual funds/shares held >1 year — LTCG above ₹1 lakh taxed at 10% (no indexation). Property held >2 years — LTCG taxed at 20% with indexation benefit.
Liability
An obligation or debt owed by a business or individual to another party. Liabilities are classified as current (due within 1 year) or non-current (due after 1 year) on the balance sheet.
M
Mutual Fund
A pooled investment vehicle managed by SEBI-registered Asset Management Companies (AMCs). Investors buy units of the fund, which invests in stocks, bonds, or other instruments. SIP (Systematic Investment Plan) is the most popular way Indians invest in mutual funds.
N
NAV (Net Asset Value)
The per-unit value of a mutual fund scheme, calculated daily. NAV = (Total Assets – Liabilities) / Number of Units. When you invest in a mutual fund SIP in India, you receive units at the applicable NAV on that day.
NIFTY 50
India’s premier stock market index maintained by NSE (National Stock Exchange), comprising the 50 largest and most liquid Indian companies. A key benchmark for equity mutual funds and the overall health of the Indian economy.
NPS (National Pension System)
A government-sponsored retirement savings scheme in India, regulated by PFRDA. Contributions up to ₹1.5 lakh are eligible for deduction under Section 80C, and an additional ₹50,000 under Section 80CCD(1B).
Net Worth
Total Assets minus Total Liabilities. Your personal net worth shows your actual financial position. Use our Net Worth Calculator to calculate yours. In India, your PPF, EPF, gold, FDs, mutual funds, and property all count as assets.
P
P&L Statement (Profit & Loss)
Also called the Income Statement. Shows a company’s revenues, expenses, and net profit or loss over a period. One of the three core financial statements alongside the Balance Sheet and Cash Flow Statement.
PAN (Permanent Account Number)
A 10-character alphanumeric identifier issued by the Income Tax Department of India. Mandatory for filing ITR, opening bank accounts, transactions above ₹50,000, and investing in mutual funds or stocks.
PPF (Public Provident Fund)
A government-backed long-term savings scheme with a 15-year lock-in. Interest rate is set quarterly by the government. Contributions up to ₹1.5 lakh per year qualify for 80C deduction. Both interest and maturity are tax-free (EEE status).
R
RBI (Reserve Bank of India)
India’s central bank, established in 1935. Controls monetary policy, issues currency, regulates banks, manages foreign exchange, and maintains financial stability. Key rate decisions (repo rate, CRR) directly impact FD rates and EMIs.
RD (Recurring Deposit)
A savings instrument where a fixed amount is deposited monthly for a chosen tenure at a fixed interest rate. Suitable for those who can’t invest a lump sum. Use our RD Calculator to estimate maturity amount.
ROI (Return on Investment)
A performance measure expressing the gain or loss relative to the investment cost. Formula: ROI = (Gain – Cost) / Cost × 100. Use our ROI Calculator.
S
SEBI (Securities and Exchange Board of India)
India’s capital markets regulator, established in 1992. SEBI regulates stock exchanges (NSE, BSE), mutual funds, stockbrokers, and listed companies to protect investor interests and ensure transparent markets.
SENSEX
BSE’s benchmark index comprising 30 large-cap, financially sound companies listed on the Bombay Stock Exchange. Along with NIFTY 50, it is a primary indicator of the Indian stock market’s performance.
SIP (Systematic Investment Plan)
A method of investing a fixed amount regularly (weekly/monthly) in a mutual fund. Harnesses rupee-cost averaging — you buy more units when markets are low, fewer when high. Use our SIP Calculator to project your corpus.
STCG (Short-Term Capital Gains)
Profit from selling an asset held for less than the specified period. For equity shares/mutual funds held <1 year, STCG is taxed at 20% in India. For debt funds and property held <2 years (or 3 years), it's added to income and taxed per your slab.
SWP (Systematic Withdrawal Plan)
The reverse of SIP — you withdraw a fixed amount from your mutual fund investment at regular intervals. Popular among retirees in India for creating a pension-like income stream. Use our SWP Calculator.
Section 80C
The most used income tax deduction in India, allowing up to ₹1.5 lakh deduction per financial year. Eligible investments include PPF, ELSS, EPF, NSC, tax-saving FDs, life insurance premiums, and tuition fees.
Section 87A
A tax rebate available to resident Indian individuals whose total taxable income does not exceed ₹5 lakh (old regime) or ₹7 lakh (new regime under 115BAC). The rebate effectively means zero tax for eligible taxpayers.
T
TDS (Tax Deducted at Source)
A mechanism under the Income Tax Act where tax is deducted at the point of income generation. For example, banks deduct TDS on FD interest if it exceeds ₹40,000/year. TDS can be adjusted against your final tax liability when filing ITR.
Trial Balance
A bookkeeping report that lists all ledger account balances to verify that total debits equal total credits. The starting point for preparing financial statements under the double-entry bookkeeping system.
W
Working Capital
Current Assets minus Current Liabilities. Measures a business’s short-term liquidity and operational efficiency. Positive working capital means the business can meet its short-term obligations. Use our Working Capital Calculator.
X
XIRR (Extended Internal Rate of Return)
A function used to calculate the return on investments with irregular cash flows (like SIPs). Unlike IRR, XIRR accounts for the actual dates of each cash flow, making it ideal for real-world SIP and mutual fund return calculations. Use our XIRR Calculator.
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