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Glossary

Plain-language meanings of the costing, GST, income tax and company-law terms used on this website.

A

Activity-based costing: A costing method that assigns overheads to products or customers according to the activities they use, such as machine set-ups, inspections or orders handled, instead of spreading them evenly. Read more →
Advance tax: Income tax paid during the year instead of at the end. Businesses pay it in four instalments: 15% of the estimated tax by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. Read more →
AIS (Annual Information Statement): Annual Information Statement: the Income Tax Department's record of financial information reported about a PAN, such as interest, dividends, securities transactions and TDS. It is wider than Form 26AS. Read more →
AOC-4: The form a company uses to file its financial statements with the Registrar of Companies, within 30 days of the annual general meeting. Read more →
Assessment Year (AY): Under the Income-tax Act, 1961, the year after the financial year in which income is assessed; for example, income of FY 2025-26 is assessed in AY 2026-27. From 1 April 2026 the Income-tax Act, 2025 uses a single 'Tax Year' instead.

B

Break-even point (break-even, Break-even): The level of sales at which total contribution equals fixed costs, so there is neither profit nor loss. Every sale above it adds to profit. Read more →

C

CAS (Cost Accounting Standards): Cost Accounting Standards issued by The Institute of Cost Accountants of India. Companies covered by the cost records rules must follow them when maintaining cost records.
CAS-4: The Cost Accounting Standard on the cost of production for captive consumption. A CAS-4 certificate is commonly used to value goods supplied to related units for GST. Read more →
Cash conversion cycle (cash cycle): The number of days cash is tied up between paying suppliers and collecting from customers: debtor days plus inventory days minus creditor days. Read more →
CETA (Central Excise Tariff Act): The Central Excise Tariff Act, 1985. The cost records rules identify covered products by its tariff headings, so the heading of your product decides whether it is covered. Read more →
Contribution: Selling price minus variable cost. It is what each sale contributes towards fixed costs and then profit. Read more →
Contribution margin: Contribution as a percentage of the selling price. A 40% contribution margin means ₹40 of every ₹100 of sales is left after variable costs. Read more →
Cost audit: An audit of a company's cost records by a Cost Accountant in practice, required under Section 148 of the Companies Act, 2013 when the turnover thresholds in the Companies (Cost Records and Audit) Rules, 2014 are met. Read more →
Cost records: Records of the cost of materials, labour, overheads and other items for covered products or services, kept in the format of Form CRA-1 by companies covered under the Companies (Cost Records and Audit) Rules, 2014. Read more →
CRA-1 (Form CRA-1): The form that sets out the particulars to be kept in cost records: materials, employee costs, utilities, overheads and other cost items for each covered product. Read more →
CRA-2 (Form CRA-2): The form a company files with the Central Government to report the appointment of its cost auditor. Read more →
CRA-3 (Form CRA-3): The format of the cost audit report, which the cost auditor submits to the company's Board. Read more →
CRA-4 (Form CRA-4): The form a company uses to file the cost audit report with the Central Government, in XBRL format. Read more →
Creditor days: How long a business takes to pay its suppliers: trade payables divided by cost of goods sold (or purchases), multiplied by 365. Read more →
CSR (corporate social responsibility): Corporate social responsibility under Section 135 of the Companies Act, 2013. It applies to companies with net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more.

D

Debtor days: How long customers take to pay: trade receivables divided by sales, multiplied by 365. Read more →
DIR-3 KYC: The KYC filing that a person holding a Director Identification Number (DIN) makes with the Ministry of Corporate Affairs to keep the DIN active. Read more →

E

E-invoicing (e-invoice, e-invoicing): Reporting B2B invoices to the GST Invoice Registration Portal, which returns an Invoice Reference Number (IRN). It applies once aggregate turnover has exceeded ₹5 crore in any financial year since 2017-18. Read more →

F

Fixed cost (fixed costs): A cost that stays the same whatever the volume of sales in a period, such as rent, salaries and interest.
Form 26AS (26AS): The annual tax statement for a PAN showing tax deducted or collected at source, advance tax and self-assessment tax paid, and certain other transactions. Read more →

G

GACAP: Generally Accepted Cost Accounting Principles, issued by The Institute of Cost Accountants of India. Cost records are kept following these principles and the Cost Accounting Standards.
GSTR-1: The GST return that reports a business's outward supplies (sales). Monthly filers file it by the 11th of the following month. Read more →
GSTR-2B: An auto-drafted statement of the input tax credit available to a business, built from its suppliers' filed returns. It is the starting point for claiming ITC each month. Read more →
GSTR-3B: The summary GST return in which a business reports its tax liability and input tax credit and pays the tax due. Read more →
GSTR-9: The GST annual return, due by 31 December after the end of the financial year. Read more →
GSTR-9C: The self-certified reconciliation statement between the GST annual return and the audited financial statements, filed with GSTR-9 by businesses with aggregate turnover above ₹5 crore. Read more →

I

IMS (Invoice Management System): The Invoice Management System on the GST portal, where a buyer accepts, rejects or keeps pending the invoices uploaded by its suppliers before they flow into GSTR-2B. Read more →
Internal audit: A review of a business's processes and controls, carried out during the year. Section 138 of the Companies Act, 2013 requires it for listed companies and for other companies above specified turnover, capital or borrowing thresholds. Read more →
Inventory days: How long stock is held before it is sold: inventory divided by cost of goods sold, multiplied by 365. Read more →
IRN (Invoice Reference Number): The Invoice Reference Number the GST Invoice Registration Portal gives to each e-invoice. Without a valid IRN, the document is not a valid invoice for businesses covered by e-invoicing. Read more →
ITC (input tax credit): Input tax credit: the GST paid on purchases, which a registered business can set off against the GST it collects on sales, subject to conditions and time limits. Read more →

L

LLP Form 11: The annual return of a limited liability partnership, due by 30 May. Read more →
LLP Form 8: The statement of accounts and solvency of a limited liability partnership, due by 30 October. Read more →

M

Margin (profit margin): Profit as a percentage of the selling price. It is not the same as markup: a 25% markup on cost is a 20% margin. Read more →
Margin of safety: How far sales can fall before a business reaches its break-even point, usually shown as a percentage of expected sales. Read more →
Markup: Profit as a percentage of cost. A ₹100 cost with a 25% markup gives a ₹125 price. Read more →
MGT-7 (MGT-7A): The form a company uses to file its annual return with the Registrar of Companies, within 60 days of the annual general meeting. Small companies and one-person companies use MGT-7A. Read more →
Micro, small and medium enterprises (MSME, micro enterprise, small enterprise): Since 1 April 2025, a micro enterprise has investment in plant and machinery or equipment up to ₹2.5 crore and turnover up to ₹10 crore; a small enterprise, up to ₹25 crore and ₹100 crore; a medium enterprise, up to ₹125 crore and ₹500 crore. Both limits must be met. Read more →
MIS (management information system): Management information system: the regular reports that show owners and managers how the business is doing, such as sales, margins, costs, cash and budget against actual. Read more →
MSME Form 1: A half-yearly return in which specified companies report amounts due to micro and small enterprises for more than 45 days. It is due by 30 April and 31 October. Read more →
MSMED Act (MSMED Act, 2006): The Micro, Small and Medium Enterprises Development Act, 2006. Sections 15 and 16 set the time limits for paying micro and small suppliers and the interest on late payment. Read more →

O

Overhead absorption: Spreading indirect costs, such as factory rent and supervision, over products using a fair basis such as machine hours or labour hours. Read more →

P

Presumptive taxation: Schemes under which eligible small businesses and professionals declare income at a set percentage of turnover or receipts instead of keeping full books for tax purposes, within turnover limits. Read more →

Q

QRMP: Quarterly Return, Monthly Payment: a GST scheme for businesses with aggregate turnover up to ₹5 crore, who file returns quarterly but pay tax monthly. Read more →

R

Rule 37BA: A rule under the Income-tax Rules, 1962 providing that credit for TDS is given for the assessment year in which the related income is assessable. Read more →

S

Section 43B(h) (43B(h)): The provision of the Income-tax Act, 1961 under which an amount owed to a micro or small enterprise and paid after the time allowed by the MSMED Act is deductible only in the year it is actually paid. From Tax Year 2026-27 the corresponding provision is Section 37(2)(g) of the Income-tax Act, 2025. Read more →
Small company: A private company with paid-up capital up to ₹10 crore and turnover up to ₹100 crore (limits effective 1 December 2025), other than holding, subsidiary, Section 8 and special-Act companies. Small companies have lighter compliance. Read more →
Standard costing: Setting expected costs for each product in advance and comparing them with actual costs, so that the differences (variances) can be investigated. Read more →

T

Tax audit: An audit of a business's accounts for income tax, required when turnover exceeds ₹1 crore, or ₹10 crore where cash receipts and cash payments are each within 5%. Read more →
Tax Year: Under the Income-tax Act, 2025, the financial year in which income is earned and assessed. It replaces the separate 'previous year' and 'assessment year' from Tax Year 2026-27.
TCS (tax collected at source): Tax collected at source: tax a seller collects from the buyer on specified sales and deposits with the government.
TDS (tax deducted at source): Tax deducted at source: tax a payer deducts from specified payments, such as professional fees, rent or contract payments, and deposits with the government on the payee's behalf.

U

Udyam (Udyam registration, Udyam portal): The government portal on which micro, small and medium enterprises register. The Udyam certificate shows the enterprise's classification. Read more →

V

Variable cost (variable costs): A cost that rises and falls with the volume produced or sold, such as materials, packing and sales commission. Read more →
Variance (variance analysis): The difference between a standard or budgeted figure and the actual figure, analysed to find out why it arose. Read more →

W

Working capital: The money tied up in running the business day to day: mainly debtors plus inventory, less creditors. Read more →

X

XBRL: A machine-readable format for financial reports. Specified companies must file their financial statements, and all cost audit reports, in XBRL.

Definitions are simplified for general understanding and reflect the law as of September 2026. They are not professional advice.