Accounting is vital to every business, organization, and individual’s life. Whether you own a business or have a job, understanding accounting fundamentals is necessary. It helps you keep track of all the money you are earning and spending while creating opportunities for smart investment decisions. Therefore, it is essential to understand enough to make the right financial decisions and get a good grip on the reports, suggestions, and strategies submitted by your accountant.
Some fundamentals of accounting
Along with knowing why an accountant is doing things, including calculating expenses and creating financial plans predicting possible earnings and spending, you need to know some basic features of good accounting. For example, you must understand that every monetary transaction is divided into credit and debit entries. This double-entry system is one of the most popular and applied systems in the market. Moreover, knowing which account should be credited and which one should be debited is essential for understanding accounting and what’s going on with your finances.
The golden rules of Accounting
When discussing modern accounting, it is essential to know that certain rules and systems must be followed. For example, there are certain fundamental practices in accounting which are considered the golden rules. The 3 golden rules of accounting are:
1. Debit the receiver, credit the giver
2. Debit what comes it, credit what goes out
3. Debit all expenses and losses, credit all incomes and gains
It is true that to understand these rules in-depth, one needs to explore them individually and within context, but that does not take away the basic understanding of these rules. In the double-entry bookkeeping system of accounting, it is entirely necessary to keep track of every rupee earned and spent. Only then will it be possible to have a more effective and stable business finance in place. While delving deeper, you will discover that the three golden rules of accounting apply to three different types of accounts respectively, the real account, personal account, and nominal account. In short, these rules monitor the accounting process of your business and keep it narrow and straight.
Looking into the GST and its different types
One of the most essential aspects of accounting is keeping track of the taxes and ensuring your business pays all the necessary taxes on time. There are different types of taxes you need to pay, and one of them is GST or Goods and Service Tax. There are four types of GSTs in India, and they are:
1. CGST or Central Goods and Service Tax
2. SGST or State Goods and Service Tax
3. UTGST or Union Territory Goods and Service Tax
4. IGST or Integrated Goods and Service Tax
Along with their names and application, these different GSTs have specific taxation rates. These taxes are implemented, managed, and decided by the government. Below we will explain these different GSTs to make them easier to understand and navigate for a business owner.
SGST
This is the GST implemented by the government of a particular state within the state, and the government remains the sole beneficiary of the revenue. The rates of SGST are:
For common grocery items – 2.5%
Processed food and electronic goods – 6%
Capital goods, toiletries, and such – 9%
Premium luxury items – 14%
If you are selling products which are interstate in nature, then you will have to pay both SGST and CGST. The rate of SGST keeps changing according to the notification published by the government from time to time.
CGST
The central government implements this type of GST, and it is implemented on the interstate supply of goods and services. CGST is governed by the CGST Act, and the revenue garnered from it is collected alongside SGST and then divided between the state and central government. The rates of CGST are:
Common groceries – 2.5%
Processed foods and electronic goods – 6%
Capital goods, toiletries, and such – 9%
Premium luxury goods – 14%
UTGST
As the name suggested, this particular GST applies to union territories. This tax is similar to SGST but can only be used in specific areas of the country, known as union territories. These places are Delhi, Andaman and Nicobar, Dadra, Nagar Haveli, Chandigarh, and Pondicherry. Being a replacement for the SGST, this tax is also collected along with CGST.
GUEST
This is the type of GST where the tax is payable on the interstate supply of goods and services and imported and exported goods and services. The central government is responsible for collecting the IGST, but it is divided equally between the central and state governments. The rates of IGST are:
Common groceries – 5%
Processed foods and electronic goods – 12%
Capital goods and toiletries – 18%
Premium luxury commodities – 28%
In conclusion
After going through all the details mentioned above, it is clear that accounting and GST are integral to every business. As a capable and intelligent business owner, keeping track of every aspect of your business is necessary, but the financial aspect always retains a little more importance than any other. Hence, professional help is essential for managing your accounting and tax-related needs. If you wish for something more convenient, then business management apps with a special focus on convenient financial tracking will be the perfect choice. So, you should focus on finding such an app that will make managing your finances easier than ever before.
