107. Public deposits: It is very important source of short term and medium term finance. The company can accept PD from members of the public and shareholders. It has the maturity period of 6 months to 3 years. 108.Euro issues: The euro issues means that the issue is listed on a European stock Exchange. The subscription can come from any part of the world except India. 109.GDR (Global depository receipts): A depository receipt is basically a negotiable certificate , dominated in us dollars that represents a non-US company publicly traded in local currency equity shares. 110. ADR (American depository receipts): Depository receipt issued by a company in the USA are known as ADRs. Such receipts are to be issued in accordance with the provisions stipulated by the securities Exchange commission (SEC) of USA like SEBI in India. 111.Commercial banks: Commercial banks extend foreign currency loans for international operations, just like rupee loans. The banks also provided overdraft. 112.Development banks: It offers long-term and medium term loans including foreign currency loans 113.International agencies: International agencies like the IFC,IBRD,ADB,IMF etc. provide indirect assistance for obtaining foreign currency. 114. Seed capital assistance: The seed capital assistance scheme is desired by the IDBI for professionally or technically qualified entrepreneurs and persons possessing relevant experience and skills and entrepreneur traits. 115. Unsecured l0ans: It constitutes a significant part of long-term finance available to an enterprise. 116. Cash flow statement: It is a statement depicting change in cash position from one period to another. 117.Sources of cash: Internal sources- (a)Depreciation (b)Amortization (c)Loss on sale of fixed assets (d)Gains from sale of fixed assets (e) Creation of reserves External sources- (a)Issue of new shares (b)Raising long term loans (c)Short-term borrowings (d)Sale of fixed assets, investments 118. Application of cash: (a) Purchase of fixed assets (b) Payment of long-term loans (c) Decrease in deferred payment liabilities (d) Payment of tax, dividend (e) Decrease in unsecured loans and deposits 119. Budget: It is a detailed plan of operations for some specific future period. It is an estimate prepared in advance of the period to which it applies. 120. Budgetary control: It is the system of management control and accounting in which all operations are forecasted and so for as possible planned ahead, and the actual results compared with the forecasted and planned ones. 121. Cash budget: It is a summary statement of firm’s expected cash inflow and outflow over a specified time period. 122. Master budget: A summary of budget schedules in capsule form made for the purpose of presenting in one report the highlights of the budget forecast. 123. Fixed budget: It is a budget, which is designed to remain unchanged irrespective of the level of activity actually attained. 124.Zero- base- budgeting: It is a management tool which provides a systematic method for evaluating all operations and programmes, current of new allows for budget reductions and expansions in a rational manner and allows reallocation of source from low to high priority programs. 125. Goodwill: The present value of firm’s anticipated excess earnings. 126. BRS: It is a statement reconciling the balance as shown by the bank pass book and balance shown by the cash book. 127. Objective of BRS: The objective of preparing such a statement is to know the causes of difference between the two balances and pass necessary correcting or adjusting entries in the books of the firm. 128.Responsibilities of accounting: It is a system of control by delegating and locating the Responsibilities for costs. 129. Profit centre: A centre whose performance is measured in terms of both the expense incurs and revenue it earns. 130.Cost centre: A location, person or item of equipment for which cost may be ascertained and used for the purpose of cost control. 131. Cost: The amount of expenditure incurred on to a given thing. 132. Cost accounting: It is thus concerned with recording, classifying, and summarizing costs for determination of costs of products or services planning, controlling and reducing such costs and furnishing of information management for decision making. 133. Meaning of Company (A) Material (B) Labour (C) Expenses (D) Overheads 134. Components of total costs: (A) Prime cost (B) Factory cost (C)Total cost of production (D) Total c0st 135. Prime cost: It consists of direct material direct labour and direct expenses. It is also known as basic or first or flat cost. 136. Factory cost: It comprises prime cost, in addition factory overheads which include cost of indirect material indirect labour and indirect expenses incurred in factory. This cost is also known as works cost or production cost or manufacturing cost. 137. Cost of production: In office and administration overheads are added to factory cost, office cost is arrived at. 138. Total cost: Selling and distribution overheads are added to total cost of production to get the total cost or cost of sales. 139. Cost unit: A unit of quantity of a product, service or time in relation to which costs may be ascertained or expressed. 140.Methods of costing: (A)Job costing (B)Contract costing (C)Process costing (D)Operation costing (E)Operating costing (F)Unit costing (G)Batch costing. 141. Techniques of costing: (a) marginal costing (b) direct costing (c)absorption costing (d) uniform costing. 142. Standard costing: standard costing is a system under which the cost of the product is determined in advance on certain predetermined standards. 143. Marginal costing: it is a technique of costing in which allocation of expenditure to production is restricted to those expenses which arise as a result of production, i.e., materials, labour, direct expenses and variable overheads. 144. Derivative: derivative is product whose value is derived from the value of one or more basic variables of underlying asset. 145. Forwards: a forward contract is customized contracts between two entities were settlement takes place on a specific date in the future at today’s pre agreed price. 146. Futures: a future contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Future contracts are standardized exchange traded contracts. 147. Options: an option gives the holder of the option the right to do some thing. The option holder option may exercise or not. 148. Call option: a call option gives the holder the right but not the obligation to buy an asset by a certain date for a certain price. 149. Put option: a put option gives the holder the right but not obligation to sell an asset by a certain date for a certain price. 150. Option price: option price is the price which the option buyer pays to the option seller. It is also referred to as the option premium. 151. Expiration date: the date which is specified in the option contract is called expiration date. 152. European option: it is the option at exercised only on expiration date it self. 153. Basis: basis means future price minus spot price. 154. Cost of carry: the relation between future prices and spot prices can be summarized in terms of what is known as cost of carry. 155. Initial margin: the amount that must be deposited in the margin a/c at the time of first entered into future contract is known as initial margin. 156 Maintenance margin: this is some what lower than initial margin. 157. Mark to market: in future market, at the end of the each trading day, the margin a/c is adjusted to reflect the investors’ gains or loss depending upon the futures selling price. This is called mark to market. 158. Baskets : basket options are options on portfolio of underlying asset. 159. Swaps: swaps are private agreements between two parties to exchange cash flows in the future according to a pre agreed formula. 160. Impact cost: impact cost is cost it is measure of liquidity of the market. It reflects the costs faced when actually trading in index. 161. Hedging: hedging means minimize the risk. 162. Capital market: capital market is the market it deals with the long term investment funds. It consists of two markets 1.primary market 2.secondary market. 163. Primary market: those companies which are issuing new shares in this market. It is also called new issue market. 164. Secondary market: secondary market is the market where shares buying and selling. In India secondary market is called stock exchange. 165. Arbitrage: it means purchase and sale of securities in different markets in order to profit from price discrepancies. In other words arbitrage is a way of reducing risk of loss caused by price fluctuations of securities held in a portfolio. 166. Meaning of ratio: Ratios are relationships expressed in mathematical terms between figures which are connected with each other in same manner. 167. Activity ratio: it is a measure of the level of activity attained over a period. 168. Mutual fund : a mutual fund is a pool of money, collected from investors, and is invested according to certain investment objectives. 169. characteristics of mutual fund : Ownership of the MF is in the hands of the of the investors MF managed by investment professionals The value of portfolio is updated every day 170.Advantage of MF to investors : Portfolio diversification Professional management Reduction in risk Reduction of transaction casts Liquidity Convenience and flexibility 17 Net asset value : the value of one unit of investment is called as the Net Asset Value 172.open-ended fund : open ended funds means investors can buy and sell units of fund, at NAV related prices at any time, directly from the fund this is called open ended fund. For ex; unit 64 173.close ended funds : close ended funds means it is open for sale to investors for a specific period, after which further sales are closed. Any further transaction for buying the units or repurchasing them, happen, in the secondary markets. 174.Dividend option : investors who choose a dividend on their investments, will receive dividends from the MF, as when such dividends are declared. 175.Growth option : investors who do not require periodic income distributions can be choose the growth option. 176.equity funds : equity funds are those that invest pre-dominantly in equity shares of company. 177.types of equity funds : Simple equity funds Primary market funds Sectoral funds Index funds 178. sectoral funds : sectoral funds choose to invest in one or more chosen sectors of the equity markets. 179.Index funds :the fund manager takes a view on companies that are expected to perform well, and invests in these companies 180.Debt funds : the debt funds are those that are pre-dominantly invest in debt securities. 181. liquid funds : the debt funds invest only in instruments with maturities less than one year. 182. Gilt funds : gilt funds invests only in securities that are issued by the GOVT. and therefore does not carry any credit risk. 183.balanced funds :funds that invest both in debt and equity markets are called balanced funds. 184. sponsor : sponsor is the promoter of the MF and appoints trustees, custodians and the AMC with prior approval of SEBI . 185. trustee : trustee is responsible to the investors in the MF and appoint the AMC for managing the investment portfolio. 186. AMC : the AMC describes Asset Management Company, it is the business face of the MF, as it manages all the affairs of the MF. 187. R & T Agents : the R&T agents are responsible for the investor servicing functions, as they maintain the records of investors in MF. 188. Custodians : custodians are responsible for the securities held in the mutual fund’s portfolio. 189. Scheme take over : if an existing MF scheme is taken over by the another AMC, it is called as scheme take over. 190.Meaning of load: load is the factor that is applied to the NAV of a scheme to arrive at the price. 192. Market capitalization : market capitalization means number of shares issued multiplied with market price per share. 193.price earning ratio : the ratio between the share price and the post tax earnings of company is called as price earning ratio. 194. Dividend yield : the dividend paid out by the company, is usually a percentage of the face value of a share. 195.Market risk : it refers to the risk which the investor is exposed to as a result of adverse movements in the interest rates. It also referred to as the interest rate risk. 196. Re-investment risk : it the risk which an investor has to face as a result of a fall in the interest rates at the time of reinvesting the interest income flows from the fixed income security. 197. call risk : call risk is associated with bonds have an embedded call option in them. This option hives the issuer the right to call back the bonds prior to maturity. 198. credit risk : credit risk refers to the probability that a borrower could default on a commitment to repay debt or band loans 199.Inflation risk : inflation risk reflects the changes in the purchasing power of the cash flows resulting from the fixed income security. 200.liquid risk : it is also called market risk, it refers to the ease with which bonds could be traded in the market. 201.Drawings : drawings denotes the money withdrawn by the proprietor from the business for his personal use. 202.outstanding Income : Outstanding Income means income which has become due during the accounting year but which has not so far been received by the firm. 203.Outstanding Expenses : Outstanding Expenses refer to those expenses which have become due during the accounting period for which the Final Accounts have been prepared but have not yet been paid. 204.closing stock : The term closing stock means goods lying unsold with the businessman at the end of the accounting year. 205. Methods of depreciation : 1.Unirorm charge methods : a. Fixed installment method b .Depletion method c. Machine hour rate method. 2. Declining charge methods : a. Diminishing balance method b.Sum of years digits method c. Double declining method 3. Other methods : a. Group depreciation method b. Inventory system of depreciation c. Annuity method d. Depreciation fund method e. Insurance policy method. 206.Accrued Income : Accrued Income means income which has been earned by the business during the accounting year but which has not yet become due and, therefore, has not been received. 207.Gross profit ratio : it indicates the efficiency of the production/trading operations. Formula : Gross profit -------------------X100 Net sales 208.Net profit ratio : it indicates net margin on sales Formula: Net profit --------------- X 100 Net sales 209. Return on share holders funds : it indicates measures earning power of equity capital. Formula : profits available for Equity shareholders -----------------------------------------------X 100 Average Equity Shareholders Funds 210. Earning per Equity share (EPS) : it shows the amount of earnings attributable to each equity share. Formula : profits available for Equity shareholders ---------------------------------------------- Number of Equity shares 211.Dividend yield ratio : it shows the rate of return to shareholders in the form of dividends based in the market price of the share Formula : Dividend per share ---------------------------- X100 Market price per share 212. price earning ratio : it a measure for determining the value of a share. May also be used to measure the rate of return expected by investors. Formula : Market price of share(MPS) -------------------------------X 100 Earning per share (EPS) 213.Current ratio : it measures short-term debt paying ability. Formula : Current Assets ------------------------ Current Liabilities 214. Debt-Equity Ratio : it indicates the percentage of funds being financed through borrowings; a measure of the extent of trading on equity. Formula : Total Long-term Debt --------------------------- Shareholders funds 215.Fixed Assets ratio : This ratio explains whether the firm has raised adepuate long-term funds to meet its fixed assets requirements. Formula Fixed Assets ------------------- Long-term Funds 216 . Quick Ratio : The ratio termed as ‘ liquidity ratio’. The ratio is ascertained y comparing the liquid assets to current liabilities. Formula : Liquid Assets ------------------------ Current Liabilities 217. Stock turnover Ratio : the ratio indicates whether investment in inventory in efficiently used or not. It, therefore explains whether investment in inventory within proper limits or not. Formula: cost of goods sold ------------------------ Average stock 218. Debtors Turnover Ratio : the ratio the better it is, since it would indicate that debts are being collected more promptly. The ration helps in cash budgeting since the flow of cash from customers can be worked out on the basis of sales. Formula: Credit sales ---------------------------- Average Accounts Receivable 219.Creditors Turnover Ratio : it indicates the speed with which the payments for credit purchases are made to the creditors. Formula: Credit Purchases ----------------------- Average Accounts Payable 220. Working capital turnover ratio : it is also known as Working Capital Leverage Ratio. This ratio Indicates whether or not working capital has been effectively utilized in making sales. Formula: Net Sales ---------------------------- Working Capital 221.Fixed Assets Turnover ratio : This ratio indicates the extent to which the investments in fixed assets contributes towards sales. Formula: Net Sales -------------------------- Fixed Assets 222 .Pay-out Ratio : This ratio indicates what proportion of earning per share has been used for paying dividend. Formula: Dividend per Equity Share --------------------------------------------X100 Earning per Equity share 223.Overall Profitability Ratio : It is also called as “ Return on Investment” (ROI) or Return on Capital Employed (ROCE) . It indicates the percentage of return on the total capital employed in the business. Formula : Operating profit ------------------------X 100 Capital employed The term capital employed has been given different meanings a.sum total of all assets whether fixed or current b.sum total of fixed assets, c.sum total of long-term funds employed in the business, i.e., share capital +reserves &surplus +long term loans –(non business assets + fictitious assets). Operating profit means ‘profit before interest and tax’ 224 . Fixed Interest Cover ratio : the ratio is very important from the lender’s point of view. It indicates whether the business would earn sufficient profits to pay periodically the interest charges. Formula : Income before interest and Tax --------------------------------------- Interest Charges 225. Fixed Dividend Cover ratio : This ratio is important for preference shareholders entitled to get dividend at a fixed rate in priority to other shareholders. Formula : Net Profit after Interest and Tax ------------------------------------------ Preference Dividend 226. Debt Service Coverage ratio : This ratio is explained ability of a company to make payment of principal amounts also on time. Formula : Net profit before interest and tax ---------------------------------------- 1-Tax rate Interest + Principal payment installment 227. Proprietary ratio : It is a variant of debt-equity ratio . It establishes relationship between the proprietor’s funds and the total tangible assets. Formula : Shareholders funds ---------------------------- Total tangible assets 228.Difference between joint venture and partner ship : In joint venture the business is carried on without using a firm name, In the partnership, the business is carried on under a firm name. In the joint venture, the business transactions are recorded under cash system In the partnership, the business transactions are recorded under mercantile system. In the joint venture, profit and loss is ascertained on completion of the venture In the partner ship , profit and loss is ascertained at the end of each year. In the joint venture, it is confined to a particular operation and it is temporary. In the partnership, it is confined to a particular operation and it is permanent. 229.Meaning of Working capital : The funds available for conducting day to day operations of an enterprise. Also represented by the excess of current assets over current liabilities. 230.concepts of accounting : 1.Business entity concepts :- According to this concept, the business is treated as a separate entity distinct from its owners and others. 2.Going concern concept :- According to this concept, it is assumed that a business has a reasonable expectation of continuing business at a profit for an indefinite period of time. 3.Money measurement concept :- This concept says that the accounting records only those transactions which can be expressed in terms of money only. 4.Cost concept :- According to this concept, an asset is recorded in the books at the price paid to acquire it and that this cost is the basis for all subsequent accounting for the asset. 5.Dual aspect concept :- In every transaction, there will be two aspects – the receiving aspect and the giving aspect; both are recorded by debiting one accounts and crediting another account. This is called double entry. 6.Accounting period concept :- It means the final accounts must be prepared on a periodic basis. Normally accounting period adopted is one year, more than this period reduces the utility of accounting data. 7.Realization concept :- According to this concepts, revenue is considered as being earned on the data which it is realized, i.e., the date when the property in goods passes the buyer and he become legally liable to pay. 8.Materiality concepts :- It is a one of the accounting principle, as per only important information will be taken, and un important information will be ignored in the preparation of the financial statement. 9.Matching concepts :- The cost or expenses of a business of a particular period are compared with the revenue of the period in order to ascertain the net profit and loss. 10.Accrual concept :- The profit arises only when there is an increase in owners capital, which is a result of excess of revenue over expenses and loss. 231. Financial analysis :The process of interpreting the past, present, and future financial condition of a company. 232. Income statement: An accounting statement which shows the level of revenues, expenses and profit occurring for a given accounting period. 233.Annual report : The report issued annually by a company, to its share holders. it containing financial statement like, trading and profit & lose account and balance sheet. 234. Bankrupt : A statement in which a firm is unable to meets its obligations and hence, it is assets are surrendered to court for administration 235 . Lease : Lease is a contract between to parties under the contract, the owner of the asset gives the right to use the asset to the user over an agreed period of the time for a consideration 236.Opportunity cost : The cost associated with not doing something. 237. Budgeting : The term budgeting is used for preparing budgets and other producer for planning,co-ordination,and control of business enterprise. 238.Capital : The term capital refers to the total investment of company in money, tangible and intangible assets. It is the total wealth of a company. 239.Capitalization : It is the sum of the par value of stocks and bonds out standings. 240. Over capitalization : When a business is unable to earn fair rate on its outstanding securities. 241. Under capitalization : When a business is able to earn fair rate or over rate on it is outstanding securities. 242. Capital gearing : The term capital gearing refers to the relationship between equity and long term debt. 243.Cost of capital : It means the minimum rate of return expected by its investment. 244.Cash dividend : The payment of dividend in cash 245.Define the term accrual : Recognition of revenues and costs as they are earned or incurred . it includes recognition of transaction relating to assets and liabilities as they occur irrespective of the actual receipts or payments. 245. accrued expenses : An expense which has been incurred in an accounting period but for which no enforceable claim has become due in what period against the enterprises. 246.Accrued revenue : Revenue which has been earned is an earned is an accounting period but in respect of which no enforceable claim has become due to in that period by the enterprise. 247.Accrued liability : A developing but not yet enforceable claim by an another person which accumulates with the passage of time or the receipt of service or otherwise. it may rise from the purchase of services which at the date of accounting have been only partly performed and are not yet billable. 248.Convention of Full disclosure : According to this convention, all accounting statements should be honestly prepared and to that end full disclosure of all significant information will be made. 249.Convention of consistency : According to this convention it is essential that accounting practices and methods remain unchanged from one year to another. 250.Define the term preliminary expenses : Expenditure relating to the formation of an enterprise. There include legal accounting and share issue expenses incurred for formation of the enterprise. 251.Meaning of Charge : charge means it is a obligation to secure an indebt ness. It may be fixed charge and floating charge. 252. Appropriation: It is application of profit towards Reserves and Dividends. 253. Absorption costing: A method where by the cost is determining so as to include the appropriate share of both variable and fixed costs. 254. Marginal Cost: Marginal cost is the additional cost to produce an additional unit of a product. It is also called variable cost. 255. What are the ex-ordinary items in the P&L a/c: The transaction which is not related to the business is termed as ex-ordinary transactions or ex-ordinary items. Egg: - profit or losses on the sale of fixed assets, interest received from other company investments, profit or loss on foreign exchange, unexpected dividend received. 256. Share premium: The excess of issue of price of shares over their face value. It will be showed with the allotment entry in the journal; it will be adjusted in the balance sheet on the liabilities side under the head of “reserves & surplus”. 257. Accumulated Depreciation: The total to date of the periodic depreciation charges on depreciable assets. 258. Investment: Expenditure on assets held to earn interest, income, profit or other benefits. 259. Capital: Generally refers to the amount invested in an enterprise by its owner. Ex; paid up share capital in corporate enterprise. 260. Capital Work In Progress: Expenditure on capital assets which are in the process of construction as completion. 261. Convertible Debenture: A debenture which gives the holder a right to conversion wholly or partly in shares in accordance with term of issues. 262. Redeemable Preference Share: The preference share that is repayable either after a fixed (or) determinable period (or) at any time dividend by the management. 263. Cumulative preference shares: A class of preference shares entitled to payment of emulates Dividends. Preference shares are always deemed to be cumulative unless they are expressly made non-cumulative preference shares. 264.Debenture redemption reserve : A reserve created for the redemption of debentures at a future date. 265. Cumulative dividend : A dividend payable as cumulative preference shares which it unpaid cumulates as a claim against the earnings of a corporate before any distribution is made to the other shareholders. 266. Dividend Equalization reserve : A reserve created to maintain the rate of dividend in future years. 267. Opening Stock : The term ‘opening stock’ means goods lying unsold with the businessman in the beginning of the accounting year. This is shown on the debit side of the trading account. 268.Closing Stock : The term ‘Closing Stock’ includes goods lying unsold with the businessman at the end of the accounting year. The amount of closing stock is shown on the credit side of the trading account and as an asset in the balance sheet. 269.Valuation of closing stock : The closing stock is valued on the basis of “Cost or Market price whichever is less” principle. 272. Contingency : A condition (or) situation the ultimate out come of which gain or loss will be known as determined only as the occurrence or non occurrence of one or more uncertain future events. 273.Contingent Asset : An asset the existence ownership or value of which may be known or determined only on the occurrence or non occurrence of one more uncertain future events. 274. Contingent liability : An obligation to an existing condition or situation which may arise in future depending on the occurrence of one or more uncertain future events. 275. Deficiency : the excess of liabilities over assets of an enterprise at a given date is called deficiency. 276.Deficit : The debit balance in the profit and loss a/c is called deficit. 277.Surplus : Credit balance in the profit & loss statement after providing for proposed appropriation & dividend , reserves. 278.Appropriation Assets : An account sometimes included as a separate section of the profit and loss statement showing application of profits towards dividends, reserves. 279. Capital redemption reserve : A reserve created on redemption of the average cost:- the cost of an item at a point of time as determined by applying an average of the cost of all items of the same nature over a period. When weights are also applied in the computation it is termed as weight average cost. 280.Floating Change : Assume change on some or all assets of an enterprise which are not attached to specific assets and are given as security against debt. 281.Difference between Funds flow and Cash flow statement : A Cash flow statement is concerned only with the change in cash position while a funds flow analysis is concerned with change in working capital position between two balance sheet dates. A cash flow statement is merely a record of cash receipts and disbursements. While studying the short-term solvency of a business one is interested not only in cash balance but also in the assets which are easily convertible into cash. 282. Difference Between the Funds flow and Income statement : A funds flow statement deals with the financial resource required for running the business activities. It explains how were the funds obtained and how were they used, Whereas an income statement discloses the results of the business activities, i.e., how much has been earned and how it has been spent. A funds flow statement matches the “funds raised” and “funds applied” during a particular period. The source and application of funds may be of capital as well as of revenue nature. An income statement matches the incomes of a period with the expenditure of that period, which are both of a revenue nature.
Posted on: Sat, 24 Aug 2013 05:19:38 +0000