- 26
- March
18 Essential Finance & Accounting Terms Every ERP User Must Know
Using an ERP system effectively in finance and accounting starts with understanding the basic terminology that appears throughout the system. This article compiles 18 essential finance and accounting terms that every ERP user should know, with clear definitions and practical examples of how they are used in the system.
1. Chart of Accounts (COA)
Definition: The complete structure of all accounts in an organization, used to categorize revenue, expenses, assets, liabilities, and equity. Each account has a unique Account Code for reference.
Example in ERP: When you open the "Chart of Accounts" menu in the system, you will see the account structure displayed as a tree — e.g., 1000-Assets, 2000-Liabilities, 4000-Revenue. Users must select the correct account code every time they record a transaction. Read more in our article on What Is a Chart of Accounts?
2. General Ledger (GL)
Definition: The master accounting book that consolidates all accounting entries in the organization. It serves as the central data source for preparing all types of financial statements. Every transaction in the system is automatically posted to the GL.
Example in ERP: When a material requisition is created, the system automatically posts entries to the GL — for example, debiting material expenses and crediting inventory. Users can view details in the GL Report at any time.
3. Accounts Payable (AP)
Definition: Amounts the organization owes to vendors or creditors, including the processes for managing vendor invoices and payments. The AP module tracks who needs to be paid, when, and how much.
Example in ERP: When goods are received from a vendor, the system automatically creates an AP entry and displays it on the "Payables Due" page, enabling the finance team to plan timely payments.
4. Accounts Receivable (AR)
Definition: Amounts owed to the organization by customers or debtors, including the processes for collection follow-up and payment receipt. The AR module shows who owes money, how much, and how many days overdue.
Example in ERP: When an invoice is issued, the system creates an AR entry. When the customer pays, the status automatically changes to "Paid," reducing manual follow-up work.
5. Journal Entry
Definition: The recording of accounting transactions into the system, specifying the related debit and credit accounts along with amounts, dates, and descriptions. Every journal entry must have equal debit and credit totals.
Example in ERP: When adjustments are needed — such as recording monthly depreciation — users access the "Journal Entry" menu and create a new entry specifying the debit and credit accounts and amounts.
6. Trial Balance
Definition: A report summarizing all account balances as of a specific date, used to verify that total debits equal total credits. If they do not balance, it indicates a recording error.
Example in ERP: Before the monthly period close, the accounting team pulls the "Trial Balance" from the system to check whether debits and credits are balanced. Any anomalies can be corrected before closing.
7. Statement of Financial Position (Balance Sheet)
Definition: A report showing the financial position of the organization at a specific date, consisting of three main components: Assets, Liabilities, and Equity. The equation Assets = Liabilities + Equity always holds true. (Formerly called "Balance Sheet" — modern accounting standards use "Statement of Financial Position")
Example in ERP: Executives can view the Statement of Financial Position in real-time from the "Financial Reports" menu. The system automatically pulls data from the GL to generate the report — no need to wait for the accounting department to prepare it manually.
8. Statement of Financial Performance (Income Statement / P&L)
Definition: A report showing revenue and expenses over a specific period (such as 1 month, 1 quarter, or 1 year) to determine the organization's net profit or net loss.
Example in ERP: To view monthly operating results, users select the "Income Statement" menu and specify the date range. The system displays total revenue, total expenses, and net profit/loss. Read more at How to Find the True Cost of Manufacturing.
9. Bank Reconciliation
Definition: The process of comparing bank account balances (Bank Statement) with accounting system balances (GL) to identify and resolve discrepancies — such as outstanding checks or unrecorded interest income.
Example in ERP: At the end of each month, the accounting team imports the Bank Statement into the system and uses the "Bank Reconciliation" function to automatically match transactions. Unmatched items are flagged for manual review.
10. Invoice
Definition: A document listing goods or services along with the amount due for payment. It serves as a trade document between the seller and buyer. In ERP, invoices are automatically linked to Purchase Orders (PO) and Goods Receipts.
Example in ERP: When a vendor delivers goods in full, the procurement team creates an "Invoice" in the system referencing the Purchase Order (PO). The system automatically verifies that the price and quantity match the PO.
11. Receipt
Definition: A document confirming payment received from a customer or debtor, serving as proof that the payer has completed payment. In ERP, receipts are automatically linked to AR entries.
Example in ERP: When receiving payment from a customer, the user accesses the "Receive Payment" menu, selects the relevant invoice, enters the amount received, and the system automatically issues a receipt and clears the AR balance.
12. Tax Invoice
Definition: A document that VAT-registered entities must issue when selling goods or providing services. It is used as evidence for calculating input and output tax and must contain details as specified by the Revenue Department.
Example in ERP: The system can automatically issue a Tax Invoice when creating an Invoice, calculating 7% VAT and formatting it according to Revenue Department requirements. It also generates input/output tax reports for filing.
13. e-Tax Invoice
Definition: An electronic tax invoice created in digital format (XML) with a Digital Signature, legally equivalent to a paper tax invoice as per Revenue Department regulations. It reduces paper costs and delivery time.
Example in ERP: Organizations that enable e-Tax Invoice can generate the tax invoice in the system and send the XML file directly to the recipient or through the Revenue Department's system. The ERP system retains a digital copy for reference throughout the document's lifecycle.
14. Withholding Tax (WHT)
Definition: Tax that the payer must deduct from payments made to the payee and remit to the Revenue Department on their behalf. The withholding rate depends on the type of income — for example, 3% for service fees and 5% for rental income.
Example in ERP: When paying a vendor for services, the system automatically calculates the withholding tax, issues a tax withholding certificate, and generates data for filing tax returns.
15. Period Close (Closing)
Definition: The process of finalizing account balances and closing the accounting period to prepare periodic financial statements. Once a period is closed, no backdated entries can be posted, preventing modifications to finalized data.
Example in ERP: At the end of each month, the accounting team verifies all data, then uses the "Close Period" function. The system locks that period to prevent any further changes. Read more at Late Financial Close — A Recurring Problem Every Quarter.
16. Accounting Period (Fiscal Period)
Definition: A designated time frame for recording and summarizing accounting transactions — such as monthly (12 periods per year), quarterly (4 periods per year), or annually. For Thai government agencies, the fiscal year runs from October 1 to September 30.
Example in ERP: The system administrator sets up "Accounting Periods" during initial configuration — for example, defining 12 periods per year. The system then restricts users to posting entries only within open periods.
17. Government Advance (Petty Cash Advance)
Definition: Funds disbursed in advance to officers for official expenditures — such as travel expenses or meeting costs. The recipient must submit supporting documents for reimbursement within the specified timeframe.
Example in ERP: An officer creates an "Advance Request" in the system and submits it for approval through the workflow. Once approved, the finance team disburses the funds. The officer then records a "Return of Advance" with attached expense receipts in the system.
18. Financial Report
Definition: Reports summarizing financial data of the organization — such as Balance Sheet, Income Statement, Cash Flow Statement, Trial Balance, and specialized reports like Aging Reports and Tax Reports. These are essential tools for executive decision-making.
Example in ERP: Users access the "Financial Reports" menu, select the desired report, set criteria (date range, department, fund source), and generate the report. The system pulls data from the GL instantly. Reports can be exported to Excel or PDF. Read more at What Makes a Good Accounting System?
Summary Table: 18 Finance & Accounting Terms
| # | Term | Brief Definition |
|---|---|---|
| 1 | Chart of Accounts (COA) | Complete structure of all accounts in the organization |
| 2 | General Ledger (GL) | Master accounting book consolidating all entries |
| 3 | Accounts Payable (AP) | Amounts owed to vendors |
| 4 | Accounts Receivable (AR) | Amounts owed by customers |
| 5 | Journal Entry | Recording debit and credit transactions |
| 6 | Trial Balance | Summary of all account balances to verify balance |
| 7 | Statement of Financial Position (Balance Sheet) | Financial position at a specific date |
| 8 | Statement of Financial Performance (Income Statement / P&L) | Revenue, expenses, and profit/loss over a period |
| 9 | Bank Reconciliation | Comparing bank balances with system balances |
| 10 | Invoice | Document listing items and amounts due for payment |
| 11 | Receipt | Document confirming payment received |
| 12 | Tax Invoice | Legal document for VAT purposes |
| 13 | e-Tax Invoice | Electronic tax invoice in digital format |
| 14 | Withholding Tax (WHT) | Tax deducted from payments and remitted to the Revenue Department |
| 15 | Period Close / Closing | Finalizing and closing the accounting period |
| 16 | Accounting Period | Designated time frame for recording transactions |
| 17 | Government Advance | Funds disbursed in advance for official expenditures |
| 18 | Financial Report | Summary reports of organizational financial data |
