Capital IQ Material (1)

8/4/2019 Capital IQ Material (1)

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01. Definition Of Accounting: the art ofrecording, classifying and summarizing in asignificant manner and in terms of money,

transactions and events which are, in part atleast of a financial character and interpretingthe results there of.

02. Book Keeping: It is mainly concerned withrecording of financial data relating to thebusiness operations in a significant and orderly

manner.

03. Concepts of accounting:

Separate entity concept

Going concern concept

Money measurement concept

Cost concept

Dual aspect concept Accounting period concept

Periodic matching of costs and revenueconcept

Realization concept.

04. Conventions Of Accounting

Conservatism Full disclosure

Consistency

D materiality.

05. Systems of bookkeeping

Single entry system

Double entry system


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06. Systems of accounting

Cash system accounting

Mercantile system of accounting.

07. Principles of accountingPersonal a/c: Debit the receiver

Credit the giver

Real a/c: Debit what comes in

Credit what goes out

Nominal a/c: Debit all expenses andlosses

Credit all gains andincomes

08. Meaning of journal: Journal meanschronological record of transactions.

09. Meaning of ledger: Ledger is a set ofaccounts. It contains all accounts of thebusiness enterprise whether real, nominal,personal.

10. Posting: It means transferring the debit andcredit items from the journal to their respectiveaccounts in the ledger.

11. Trial balance: Trial balance is a statementcontaining the various ledger balances on aparticular date.


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12. Credit note: The customer when returns thegoods get credit for the value of the goodsreturned. A credit note is sent to him intimating

that his a/c has been credited with the value ofthe goods returned.

13. Debit note: When the goods are returned tothe supplier, a debit note is sent to himindicating that his a/c has been debited with theamount mentioned in the debit note.

14. Contra entry: Which accounting entry isrecorded on both the debit and credit side ofthe cashbook is known as the contra entry.

15. Petty cash book: Petty Cash is maintained bybusiness to record petty cash expenses of thebusiness, such as postage, cartage, stationery,etc.

16. Promissory Note: An instrument in writingcontaining an unconditional undertaking Signedby the maker, to pay certain sum of money onlyto or to the order of a certain person or to thebarer of the instrument.

17. Cheque: A bill of exchange drawn on aspecified banker and payable on demand.

18. Stale Cheque: A stale cheque means not validof cheque that means more than six monthsthe cheque is not valid.


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20. Bank Reconciliation Statement: It is astatement reconciling the balance as shown bythe bank passbook and the balance as shown

by the Cash Book. Obj: to know the difference& pass necessary correcting, adjusting entriesin the books.

21. Matching concept: Matching means requiresproper matching of expense with the revenue.

22. Capital Income: The term capital incomemeans an income which does not grow out ofor pertain to the running of the business proper.

23. Revenue Income: The income, which arisesout of and in the course of the regular businesstransactions of a concern.

24. Capital Expenditure: It means an expenditure,which has been incurred for the purpose ofobtaining a long-term advantage for thebusiness.

25. Revenue Expenditure: An expenditure thatincurred in the course of regular business

transactions of a concern.

26. Differed Revenue Expenditure: Anexpenditure, which is incurred during anaccounting period but is applicable furtherperiods also. Eg: heavy advertisement.


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27. Bad Debts: Bad debts denote the amount lostfrom debtors to whom the goods were sold oncredit.

28. Depreciation: Depreciation denotes graduallyand permanent decrease in the value of assetdue to wear and tear, technology changes, lapsof time and accident.

29. Fictitious Assets: These are assets not

represented by tangible possession orproperty. Examples of preliminary expenses,discount on issue of shares, debit balance inthe profit and loss account when shown on theassets side in the balance sheet.

30. Intangible Assets: Intangible assets mean theassets which is not having the physicalappearance. And its have the real value, itshown on the assets side of the balance sheet.

31. Accrued Income: Accrued income meansincome which has been earned by the businessduring the accounting year but which has notyet been due and, therefore, has not been

received.

32. Out standing Income: Outstanding Incomemeans income which has become due duringthe accounting year but which has not so farbeen received by the firm.


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33. Suspense Account: the suspense account isan account to which the difference in the trialbalance has been put temporarily.

34. Depletion: It implies removal of an availablebut not replaceable source, Such asextracting coal from a coal mine.

35. Amortization: The process of writing ofintangible assets is term as amortization.

36. Dilapidations: The term dilapidations todamage done to a building or other propertyduring tenancy.

37. Capital Employed: The term capital employedmeans sum of total long-term funds employedin the business. i.e.

(share capital+ reserves & surplus +longterm loans

(non business assets + fictitious assets)

38. Equity Shares: Those shares which are nothaving pref. rights are called equity shares.

39. Pref.Shares: Those shares which are carryingthe pref.rights is called pref. shares

Pref.rights in respect of fixed dividend.Pref.right to repayment of capital in the even ofcompany winding up.

40. Leverage: It is a force applied at a particular

point to get the desired result.


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41. Operating leverage: The operating leveragetakes place when a changes in revenue

greater changes in EBIT.

42. Financial leverage: It is nothing but a processof using debt capital to increase the rate ofreturn on equity

43. Combine leverage: it is used to measure of

the total risk of the firm = operating risk +financial risk.

44. Joint venture: A joint venture is an associationof two or more the persons whocombined for the execution of a specifictransaction and divide the profit or loss their ofan agreed ratio.

45. Partnership: Partnership is the relation b/w thepersons who have agreed to share the profitsof business carried on by all or any of themacting for all.

46. Factoring: It is an arrangement under which a

firm (called borrower) receives advancesagainst its receivables, from a financialinstitutions (called factor)

47. Capital Reserve: The reserve whichtransferred from the capital gains is calledcapital reserve.


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48. General Reserve: The reserve which istransferred from normal profits of the firm iscalled general reserve

49. Free Cash: The cash not for any specificpurpose free from any encumbrance likesurplus cash.

50. Minority Interest: Minority interest refers to theequity of the minority shareholders in a

subsidiary company.

51. Capital Receipts: capital receipts may bedefined as non-recurring receipts from theowner of the business or lender of the moneycrating a liability to either of them.

52. Revenue Receipts: Revenue receipts maydefined as A recurring receipts against sale ofgoods in the normal course of business andwhich generally the result of the tradingactivities.

53. Meaning of Company: A company is anassociation of many persons who contribute

money or moneys worth to common stock andemploys it for a common purpose. Thecommon stock so contributed is denoted inmoney and is the capital of the company.

54. Types of a company:

Statutory companies

Government company


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Foreign company

Registered companies:

Companies limited by shares

Companies limited by guaranteeUnlimited companies

D. Private company

E. Public company

55. Private company: A private co. is which by itsAOA: Restricts the right of the members to

transfer of shares Limits the no. Of members50. Prohibits any Invitation to the public tosubscribe for its shares or debentures.

56. Public company: A company, the articles ofassociation of which does not contain therequisite restrictions to make it a private limited

company, is called a public company.

57. Characteristics of a company:

Voluntary association

Separate legal entity

Free transfer of shares

Limited liability

Common seal Perpetual existence.

58. Formation of company:

Promotion

Incorporation

Commencement of business


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59. Equity share capital: The total sum of equityshares is called equity share capital.

60. Authorized share capital: it is the maximumamount of the share capital, which a companycan raise for the time being.

61. Issued capital: It is that part of the authorizedcapital, which has been allotted to the publicfor subscriptions.

62. Subscribed capital: it is the part of the issuedcapital, which has been allotted to the public.

63. Called up capital: It has been portion of thesubscribed capital, which has been called upby the company.

64. Paid up capital: It is the portion of the called upcapital against which payment has beenreceived.

65. Debentures: Debenture is a certificate issuedby a company under its seal acknowledging adebt due by it to its holder.

66. Cash Profit: Cash profit is the profit it isoccurred from the cash sales.

67. Deemed public Ltd. Company: A privatecompany is a subsidiary company to publiccompany it satisfies the following

terms/conditions Sec 3(1)3:


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Having minimum share capital 5 lakhs

Accepting investments from the public

No restriction of the transferable of shares

No restriction of no. Of members. Accepting deposits from the investors

68. Secret reserves: secret reserves are reservesthe existence of which does not appear on theface of balance sheet. In such a situation, netassets position of the business is stronger than

that disclosed by the balance sheet.These reserves are crated by:

Excessive dep.of an asset, excessive over-valuation of a liability.

Complete elimination of an asset, or undervaluation of an asset.

69. Provision: Provision usually means anyamount written off or retained by way ofproviding depreciation, renewals or diminutionsin the value of assets or retained by way ofproviding for any known liability of which theamount can not be determined withsubstantial accuracy.

70. Reserve: The provision in excess of theamount considered necessary for the purposeit was originally made is also considered asreserve Provision is charge against profitswhile reserves is an appropriation of profitsCreation of reserve increase proprietors fund

while creation of provisions decreases hisfunds in the business.


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71. Reserve Fund: The term reserve fund meanssuch reserve against which clearly investment

etc.

72. Undisclosed Reserves: Sometimes a reserveis created but its identity is merged with someother a/c or group of accounts so that theexistence of the reserve is not known suchreserve is called an undisclosed reserve.

73. Finance Management: financial managementdeals with procurement of funds and theireffective utilization in business.

74. Objectives Of Financial Management:Financial management having two objectivesthat Is: Profit maximization: The finance manager

has to make his decisions in a manner sothat the profits of the concern are maximized.

Wealth maximization: Wealth maximizationmeans the objective of a firm should be tomaximize its value or wealth, or value of afirm is represented by the market price of its

common stock.

75. Functions of financial manager:

Investment decision

Dividend decision

Finance decision

Cash management decisions

Performance evaluation


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Market impact analysis

76. Time value of money: The time value of

money means that worth of a rupee receivedtoday is different from the worth of a rupee tobe received in future.

77. Capital structure: It refers to the mix ofsources from where the long-term fundsrequired in a business may be raised; in otherwords, it refers to the proportion of debt,

preference capital and equity capital.

78. Optimum capital structure: capital structureis optimum when the firm has a combination ofequity and debt so that the wealth of the firm ismaximum.

79. Wacc: It denotes weighted average cost ofcapital. It is defined as the overall cost ofcapital computed by reference to the proportionof each component of capital as weights.

80. Financial break-even point: it denotes the levelat which a firms EBIT is just sufficient to coverinterest and preference dividend.

81. Capital budgeting: capital budgeting involvesthe process of decision making with regard toinvestment in fixed assets. Or decision makingwith regard to investment of money in long-term projects.


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82. Pay back period: Payback period representsthe time period required for complete recoveryof the initial investment in the project.

83. ARR: Accounting or average rate of returnmeans the average annual yield on the project.

84. NPV: The net present value of an investmentproposal is defined as the sum of the presentvalues of all future cash in flows less the sum

of the present values of all cash out flowsassociated with the proposal.

85. Profitability Index: where different investmentproposal each involving different initialinvestments and cash inflows are to becompared.

86. IRR: internal rate of return is the rate at whichthe sum total of discounted cash inflows equalsthe discounted cash out flow.

87. Treasury Management: It means it is definedas the efficient management of liquidity andfinancial risk in business.

88. Concentration Banking: It means identifylocations or places where customers areplaced and open a local bank a/c in each ofthese locations and open local collectioncanter.


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89. Marketable Securities: Surplus cash can beinvested in short term instruments in order toearn interest.

90. Ageing Schedule: In a ageing schedule thereceivables are classified according to theirage.

91. Maximum Permissible Bank Finance(MPBF): it is the maximum amount that banks

can lend a borrower towards his working capitalrequirements.

92. Commercial Paper: A cp is a short termpromissory note issued by a company,negotiable by endorsement and delivery,issued at a discount on face value as may bedetermined by the issuing company.

93. Bridge Finance: It refers to the loans taken bythe company normally from a commercialbanks for a short period pending disbursementof loans sanctioned by the financial institutions.

94. Venture Capital: It refers to the financing of

high-risk ventures promoted by new qualifiedentrepreneurs who require funds to give shapeto their ideas.

95. Debt Securitization: It is a mode of financing,where in securities are issued on the basis of apackage of assets (called asset pool).


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96. Lease Financing: Leasing is a contract whereone party (owner) purchases assets andpermits its views by another party (lessee) over

a specified period

97. Trade Credit: It represents credit granted bysuppliers of goods, in the normal course ofbusiness.

98. Over Draft: Under this facility a fixed limit is

granted within which the borrower allowed tooverdraw from his account.

99. Cash credit: It is an arrangement under whicha customer is allowed an advance up to certainlimit against credit granted by bank.

100. Clean overdraft: It refers to an advanceby way of overdraft facility, but not back by anytangible security.

101. Share capital: The sum total of thenominal value of the shares of a company iscalled share capital.

102. Funds Flow Statement: It is thestatement deals with the financial resources forrunning business activities. It explains how thefunds obtained and how they used.

103.Sources of funds: There are two sources offunds Internal sources and external sources.


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Internal source: Funds from operations is theonly internal sources of funds and someimportant points add to it they do not result in

the outflow of funds Depreciation on fixedassets(b) Preliminary expenses or goodwill written

off, Loss on sale of fixed assetsDeduct the following items, as they do not

increase the funds:Profit on sale of fixed assets, profit on

revaluation Of fixed assets

External sources:

Funds from long-term loans

Sale of fixed assets

Funds from increase in share capital

104. Application of funds: (a) Purchase offixed assets (b) Payment of dividend(c)Payment of tax liability (d) Payment of fixedliability

105. ICD (Inter corporate deposits):Companies can borrow funds for a short

period. For example 6 months or less fromanother company which have surplus liquidity.Such Deposits made by one company inanother company are called ICD.

106. Certificate of deposits: The CD is adocument of title similar to a fixed depositreceipt issued by banks there is no prescribed


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interest rate on such CDs it is based on theprevailing market conditions.

107. Public deposits: It is very importantsource of short term and medium term finance.The company can accept PD from members ofthe public and shareholders. It has thematurity 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 theworld except India.

109.GDR (Global depository receipts): Adepository receipt is basically a negotiablecertificate, dominated in us dollars thatrepresents a non-US company publicly tradedin local currency equity shares.

110. ADR (American depository receipts):Depository receipt issued by a company in theUSA are known as ADRs. Such receipts are tobe issued in accordance with the provisionsstipulated by the securities Exchangecommission (SEC) of USA like SEBI in India.

111.Commercial banks: Commercial banksextend foreign currency loans for internationaloperations, just like rupee loans. The banksalso provided overdraft.


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112.Development banks: It offers long-term andmedium term loans including foreign currencyloans.

113.International agencies: Internationalagencies like the IFC,IBRD,ADB,IMF etc.provide indirect assistance for obtaining foreigncurrency.

114. Seed capital assistance: The seed

capital assistance scheme is desired by theIDBI for professionally or technically qualifiedentrepreneurs and persons possessingrelevant experience and skills and entrepreneurtraits.

115. Unsecured loans: It constitutes asignificant part of long-term finance available toan enterprise.

116. Cash flow statement: It is a statementdepicting change in cash position from oneperiod to another.

117.Sources of cash: Internal sources-

Depreciation

Amortization

Loss on sale of fixed assets

Gains from sale of fixed assets

Creation of reservesExternal sources-

Issue of new shares Raising long term loans


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Short-term borrowings

Sale of fixed assets, investments

118. Application of cash: Purchase of fixed assets

Payment of long-term loans

Decrease in deferred payment liabilities

Payment of tax, dividend

Decrease in unsecured loans and deposits

119. Budget: It is a detailed plan of operationsfor some specific future period. It is anestimate prepared in advance of the period towhich it applies.

120. Budgetary control: It is the system ofmanagement control and accounting in which

all operations are forecasted and so for aspossible planned ahead, and the actual resultscompared with the forecasted and plannedones.

121. Cash budget: It is a summary statementof firms expected cash inflow and outflow over

a specified time period.

122. Master budget: A summary of budgetschedules in capsule form made for thepurpose of presenting in one report thehighlights of the budget forecast.


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123. Fixed budget: It is a budget, which isdesigned to remain unchanged irrespective ofthe level of activity actually attained.

124.Zero-base-budgeting: It is a managementtool which provides a systematic method forevaluating all operations and programmes,current of new allows for budget reductions andexpansions in a rational manner and allowsreallocation of source from low to high priority

programs.

125. Goodwill: The present value of firmsanticipated excess earnings.126. BRS: It is a statement reconciling the

balance as shown by the bank pass book andbalance shown by the cash book.

127. Objective of BRS: The objective ofpreparing such a statement is to know thecauses of difference between the two balancesand pass necessary correcting or adjustingentries in the books of the firm.

128.Responsibilities of accounting: It is asystem of control by delegating and locatingthe Responsibilities for costs.

129. Profit centre: A centre whoseperformance is measured in terms of both theexpense incurs and revenue it earns.


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130.Cost centre: A location, person or item ofequipment for which cost may be ascertainedand used for the purpose of cost control.

131. Cost: The amount of expenditure incurredon to a given thing.

132. Cost accounting: It is thus concernedwith recording, classifying, and summarizingcosts for determination of costs of products or

services planning, controlling and reducingsuch costs and furnishing of informationmanagement for decision making.

133. Elements of cost:

Material

Labour

Expenses Overheads

134. Components of total costs:

Prime cost

Factory cost

Total cost of production

Total c0st

135. Prime cost: It consists of direct materialdirect labour and direct expenses. It is alsoknown as basic or first or flat cost.

136. Factory cost: It comprises prime cost, in

addition factory overheads which include costof indirect material indirect labour and indirect


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expenses incurred in factory. This cost is alsoknown as works cost or production cost ormanufacturing cost.

137. Cost of production: In office andadministration overheads are added to factorycost, office cost is arrived at.

138. Total cost: Selling and distributionoverheads 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 maybe ascertained or expressed.

140.Methods of costing:

Job costing Contract costing

Process costing

Operation costing

Operating costing

Unit costing

Batch costing.

141. Techniques of costing:

Marginal costing

Direct costing

Absorption costing

Uniform costing.


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142. Standard costing: Standard costing is asystem under which the cost of the product isdetermined in advance on certain

predetermined standards.

143. Marginal costing: It is a technique ofcosting in which allocation of expenditure toproduction is restricted to those expenseswhich arise as a result of production, i.e.,materials, labour, direct expenses and variable

overheads.

144. Derivative: Derivative is product whosevalue is derived from the value of one or morebasic variables of underlying asset.

145. Forwards: A forward contract iscustomized contracts between two entitieswere settlement takes place on a specific datein the future at todays pre agreed price.

146. Futures: A future contract is an agreementbetween two parties to buy or sell an asset at acertain time in the future at a certain price.Future contracts are standardized exchange

traded contracts.

147. Options: An option gives the holder of theoption the right to do some thing. The optionholder option may exercise or not.


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148. Call option: A call option gives the holderthe right but not the obligation to buy an assetby a certain date for a certain price.

149. Put option: A put option gives the holderthe right but not obligation to sell an asset by acertain date for a certain price.

150. Option price: Option price is the pricewhich the option buyer pays to the option

seller. It is also referred to as the optionpremium.

151. Expiration date: The date which isspecified in the option contract is calledexpiration date.

152. European option: It is the option atexercised only on expiration date it self.

153. Basis: Basis means future price minusspot price.

154. Cost of carry: The relation between futureprices and spot prices can be summarized in

terms of what is known as cost of carry.

155. Initial Margin: The amount that must bedeposited in the margin a/c at the time of firstentered into future contract is known as initialmargin.


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156 Maintenance Margin: This is some what lowerthan initial margin.

157. Mark to Market: In future market, at theend of the each trading day, the margin a/c isadjusted to reflect the investors gains or lossdepending upon the futures selling price. Thisis 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 inthe future according to a pre agreed formula.

160. Impact cost: impact cost is cost it ismeasure of liquidity of the market. It reflects thecosts faced when actually trading in index.

161. Hedging: Hedging means minimize therisk.

162. Capital market: Capital market is themarket it deals with the long term investment

funds. It consists of two markets 1.primarymarket 2.secondary market.

163. Primary market: Those companies whichare issuing new shares in this market. It is alsocalled new issue market.


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164. Secondary market: Secondary market isthe market where shares buying and selling. InIndia secondary market is called stock

exchange.

165. Arbitrage: It means purchase and sale ofsecurities in different markets in order to profitfrom price discrepancies. In other wordsarbitrage is a way of reducing risk of losscaused by price fluctuations of securities held

in a portfolio.

166. Meaning of ratio: Ratios are relationshipsexpressed in mathematical terms betweenfigures which are connected with each other insame manner.

167. Activity ratio: It is a measure of the levelof activity attained over a period.

168. Mutual Fund: A mutual fund is a pool ofmoney, collected from investors, and isinvested according to certain investmentobjectives.

169. Characteristics of Mutual Fund :Ownership of the MF is in the hands of the ofthe investors MF managed by investmentprofessionals The value of portfolio is updatedevery day

170.Advantage of MF to Investors: Portfolio

diversification Professional management


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Reduction in risk Reduction of transactioncasts Liquidity Convenience and flexibility

171.Net asset value: The value of one unit ofinvestment is called as the Net Asset Value.

172.Open-Ended Fund: Open ended funds meansinvestors can buy and sell units of fund, at NAVrelated prices at any time, directly from thefund this is called open ended fund. For ex; unit

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173.Close Ended Funds: Close ended fundsmeans it is open for sale to investors for aspecific period, after which further sales areclosed. Any further transaction for buying theunits or repurchasing them, happen, in thesecondary markets.

174. Dividend Option: Investors who choose adividend on their investments, will receivedividends from the MF, as when such dividendsare declared.

175.Growth Option : Investors who do not require

periodic income distributions can be choose thegrowth option.

176.Equity Funds: Equity funds are those thatinvest pre-dominantly in equity shares ofcompany.


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177.Types of Equity Funds: Simple equity fundsPrimary market funds Sectoral funds Indexfunds

178. Sectoral Funds : Sectoral funds chooseto invest in one or more chosen sectors of theequity markets.

179.Index Funds: The fund manager takes a viewon companies that are expected to performwell, and invests in these companies

180.Debt Funds: The debt funds are those that arepre-dominantly invest in debt securities.

181.Liquid Funds: The debt funds invest only ininstruments with maturities less than one year.

182. Gilt Funds: Gilt funds invests only insecurities that are issued by the GOVT. andtherefore does not carry any credit risk.

183.Balanced Funds: Funds that invest both indebt and equity markets are called balancedfunds.

184. Sponsor: Sponsor is the promoter of theMF and appoints trustees, custodians and theAMC with prior approval of SEBI .

185. Trustee: Trustee is responsible to theinvestors in the MF and appoint the AMC formanaging the investment portfolio.


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186. AMC: The AMC describes AssetManagement Company, it is the business faceof 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 fundsportfolio.

189. Scheme Take Over: If an existing MFscheme is taken over by the another AMC, it iscalled as scheme take over.

190.Meaning Of Load: Load is the factor that isapplied to the NAV of a scheme to arrive at theprice.

192. Market Capitalization: Marketcapitalization means number of shares issuedmultiplied with market price per share.

193.Price Earning Ratio : The ratio between theshare price and the post tax earnings ofcompany is called as price earning ratio.

194. Dividend Yield: The dividend paid out bythe company, is usually a percentage of theface value of a share.


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195. Market Risk: It refers to the risk which theinvestor is exposed to as a result of adversemovements in the interest rates. It also referred

to as the interest rate risk.

196. Re-investment risk: It the risk which aninvestor has to face as a result of a fall in the

interest rates at the time of reinvesting theinterest income flows from the fixed Incomesecurity.

197. Call Risk: Call risk is associated withbonds have an embedded call option in them.This option hives the issuer the right to callback the bonds prior to maturity.

198. Credit Risk: Credit risk refers to theprobability that a borrower could default on acommitment to repay debt or band loans

199.Inflation Risk: Inflation risk reflects thechanges in the purchasing power of the cashflows resulting from the fixed income security.

200.Liquid Risk: It is also called market risk, itrefers to the ease with which bonds could be

traded in the market.

201.Drawings: Drawings denotes the moneywithdrawn by the proprietor from the businessfor his personal use.

202.Outstanding Income: Outstanding Income

means income which has become due during


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the accounting year but which has not so farbeen received by the firm.

203.Outstanding Expenses: OutstandingExpenses refer to those expenses which havebecome due during the accounting period forwhich the Final Accounts have been preparedbut have not yet been paid.

204.Closing Stock: The term closing stock means

goods lying unsold with the businessman at theend of the accounting year.

205. Methods of depreciation:Unirorm charge methods:

Fixed installment method

Depletion method

Machine hour rate method.Declining charge methods:

Diminishing balance method

Sum of years digits method

Double declining methodOther methods :

Group depreciation method

Inventory system of depreciation Annuity methodDepreciation fund method

Insurance policy method.

206.Accrued Income: Accrued Income meansincome which has been earned by the business

during the accounting year but which has not


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yet become due and, therefore, has not beenreceived.

207.Gross profit ratio: It indicates the efficiency ofthe production/trading operations.

Formula : Gross profit-------------------X100

Net sales

208.Net profit ratio: it indicates net margin on

salesFormula: Net profit--------------- X 100

Net sales

209. Return On Share Holders Funds : Itindicates measures earning power of equitycapital.Formula :profits available for Equity shareholders

-----------------------------------------------X100

Average Equity Shareholders Funds

210. Earning per Equity share (EPS): It shows

the amount of earnings attributable to eachequity share.Formula :profits available for Equity shareholders

----------------------------------------------

Number of Equity shares


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211.Dividend Yield Ratio: It shows the rate ofreturn to shareholders in the form of dividendsbased in the market price of the share

Formula : Dividend per share---------------------------- X100

Market price per share

212. Price Earning Ratio: It a measure fordetermining the value of a share. May also beused 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 debtpaying ability.

Formula : Current Assets------------------------

Current Liabilities

214. Debt-Equity Ratio: It indicates thepercentage of funds being financed throughborrowings; a measure of the extent of tradingon equity.

Formula : Total Long-term Debt---------------------------

Shareholders funds

215.Fixed Assets Ratio: This ratio explainswhether the firm has raised adepuate long-termfunds to meet its fixed assets requirements.

Formula Fixed Assets


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-------------------Long-term Funds

216 . Quick Ratio: The ratio termed as liquidityratio. The ratio is ascertained y comparing theliquid assets to current liabilities.Formula : Liquid Assets

------------------------Current Liabilities

217. Stock turnover Ratio: The ratio indicateswhether investment in inventory in efficientlyused or not. It, therefore explains whetherinvestment in inventory within proper limits ornot.

Formula: cost of goods sold------------------------

Average stock

218. Debtors Turnover Ratio: The ratio thebetter it is, since it would indicate that debts arebeing collected more promptly. The ration helpsin cash budgeting since the flow of cash fromcustomers can be worked out on the basis ofsales.

Formula: Credit sales

-------------------Average Accounts Receivable

219.Creditors Turnover Ratio: It indicates thespeed with which the payments for credit

purchases are made to the creditors.


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Formula: Credit Purchases-----------------------

Average Accounts Payable

220. Working Capital Turnover Ratio: It isalso known as Working Capital Leverage Ratio.This ratio Indicates whether or not workingcapital has been effectively utilized in makingsales.

Formula: Net Sales----------------------------

Working Capital

221.Fixed Assets Turnover Ratio: This ratioindicates the extent to which the investments infixed assets contributes towards sales.

Formula: Net Sales--------------------------

Fixed Assets

222.Pay-out Ratio: This ratio indicates whatproportion 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


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Capital Employed (ROCE) . It indicates thepercentage of return on the total capitalemployed in the business.

Formula :Operating profit

------------------------X 100Capital employed

The term capital employed has been given

different meanings a.sum total of all assetswhether fixed or current b.sum total of fixedassets, c.sum total of long-term fundsemployed in the business, i.e., share capital+reserves &surplus +long term loans (nonbusiness assets + fictitious assets). Operatingprofit means profit before interest and tax

224. Fixed Interest Cover Ratio: The ratio isvery important from the lenders point of view.It indicates whether the business would earnsufficient profits to pay periodically the interestcharges.

Formula : Income before interest and Tax

---------------------------------------Interest Charges

225. Fixed Dividend Cover Ratio: This ratio isimportant for preference shareholders entitledto get dividend at a fixed rate in priority to othershareholders.


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Formula : Net Profit after Interest and Tax----------------------------------------

--

Preference Dividend

226. Debt Service Coverage ratio: This ratio isexplained ability of a company to makepayment of principal amounts also on time.Formula : Net profit before interest and tax

---------------------------------------

- 1-Tax rate Interest + Principal paymentinstallment

227. Proprietary Ratio: It is a variant of debt-equity ratio . It establishes relationship betweenthe proprietors funds and the total tangibleassets.

Formula : Shareholders funds----------------------------Total tangible assets

228.Difference between joint venture andpartner ship:

In joint venture the business is carried onwithout using a firm name, In the partnership,the business is carried on under a firmname.

In the joint venture, the business transactionsare recorded under cash system In thepartnership, the business transactions arerecorded under mercantile system. In the

joint venture, profit and loss is ascertained on


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completion of the venture In the partnership , profit and loss is ascertained at the endof each year.

In the joint venture, it is confined to aparticular operation and it is temporary. Inthe partnership, it is confined to a particularoperation and it is permanent.

229.Meaning of Working Capital: The fundsavailable for conducting day to day operations

of an enterprise. Also represented by theexcess of current assets over current liabilities.

230.Concepts of accounting: Business entity concepts: According to this

concept, the business is treated as aseparate entity distinct from its owners and

others. Going concern concept: According to this

concept, it is assumed that a business has areasonable expectation of continuingbusiness at a profit for an indefinite period oftime.

Money measurement concept: Thisconcept says that the accounting recordsonly those transactions which can beexpressed in terms of money only.

Cost concept: According to this concept, anasset is recorded in the books at the pricepaid to acquire it and that this cost is thebasis for all subsequent accounting for theasset.


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Dual aspect concept: In every transaction,there will be two aspects the receivingaspect and the giving aspect; both are

recorded by debiting one accounts andcrediting another account. This is calleddouble entry.

Accounting period concept: It means thefinal accounts must be prepared on aperiodic basis. Normally accounting periodadopted is one year, more than this period

reduces the utility of accounting data. Realization concept: According to this

concepts, revenue is considered as beingearned on the data which it is realized, i.e.,the date when the property in goods passesthe buyer and he become legally liable topay.

Materiality concepts: It is a one of theaccounting principle, as per only importantinformation will be taken, and un importantinformation will be ignored in the preparationof the financial statement.

Matching concepts: The cost or expensesof a business of a particular period arecompared with the revenue of the period in

order to ascertain the net profit and loss. Accrual concept: The profit arises only

when there is an increase in owners capital,which is a result of excess of revenue overexpenses and loss.


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231. Financial analysis: The process ofinterpreting the past, present, and futurefinancial condition of a company.

232. Income statement: An accountingstatement which shows the level of revenues,expenses and profit occurring for a givenaccounting period.

233.Annual report: The report issued annually by

a company, to its share holders. it containingfinancial statement like, trading and profit &lose account and balance sheet.

234. Bankrupt : A statement in which a firm isunable to meets its obligations and hence, it isassets are surrendered to court foradministration

235. Lease: Lease is a contract between toparties under the contract, the owner of theasset gives the right to use the asset to theuser over an agreed period of the time for aconsideration

236.Opportunity cost : The cost associated with

not doing something.

237. Budgeting : The term budgeting is usedfor preparing budgets and other producer forplanning, co-ordination, and control of businessenterprise.


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238.Capital: The term capital refers to the totalinvestment of company in money, tangible andintangible assets. It is the total wealth of a

company.

239.Capitalization: It is the sum of the par value ofstocks and bonds out standings.

240. Over capitalization: When a business isunable to earn fair rate on its outstanding

securities.

241. Under Capitalization: When a business isable to earn fair rate or over rate on it isoutstanding securities.

242. Capital gearing: The term capital gearingrefers to the relationship between equity andlong term debt.

243.Cost of Capital: It means the minimum rate ofreturn expected by its investment.

244.Cash Dividend: The payment of dividend incash

245.Define the term accrual : Recognition ofrevenues and costs as they are earned orincurred. It includes recognition of transactionrelating to assets and liabilities as they occurirrespective of the actual receipts or payments.


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245. Accrued Expenses: An expense whichhas been incurred in an accounting period butfor which no enforceable claim has become

due in what period against the enterprises.

246.Accrued Revenue: Revenue which has beenearned is an earned is an accounting periodbut in respect of which no enforceable claimhas become due to in that period by theenterprise.

247.Accrued liability: A developing but not yetenforceable claim by an another person whichaccumulates with the passage of time or thereceipt of service or otherwise. it may rise fromthe purchase of services which at the date ofaccounting have been only partly performedand are not yet billable.

248.Convention of Full disclosure: According tothis convention, all accounting statementsshould be honestly prepared and to that endfull disclosure of all significant information willbe made.

249.Convention of consistency: According to thisconvention it is essential that accountingpractices and methods remain unchanged fromone year to another.

250.Define the term preliminary expenses:Expenditure relating to the formation of an

enterprise. There include legal accounting and


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share issue expenses incurred for formation ofthe enterprise.

251.Meaning of Charge : Charge means it is aobligation to secure an indebt ness. It may befixed charge and floating charge.

252.Appropriation : It is application of profittowards Reserves and Dividends.

253.Absorption costing: A method where by thecost is determine so as to include theappropriate share of both variable and fixedcosts.

254.Marginal Cost: Marginal cost is the additionalcost to produce an additional unit of a product.It is also called variable cost.

255. What are the ex-ordinary items in theP&L a/c: The transaction which are not relatedto the business is termed as ex-ordinarytransactions or ex-ordinary items. Egg:- profitor losses on the sale of fixed assets, interestreceived from other company investments,

profit or loss on foreign exchange, unexpecteddividend received.

256. Share premium: The excess of issue ofprice of shares over their face value. It will beshowed with the allotment entry in the journal, itwill be adjusted in the balance sheet on the


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liabilities side under the head of reserves &surplus.

257.Accumulated Depreciation: The total to dateof the periodic depreciation charges ondepreciable assets.

258.Investment: Expenditure on assets held toearn interest, income, profit or other benefits.

259.Capital: Generally refers to the amountinvested in an enterprise by its owner. Ex; paidup share capital in corporate enterprise.

260. Capital Work In Progress: Expenditureon capital assets which are in the process ofconstruction as completion.

261. Convertible Debenture: A debenture

which gives the holder a right to conversionwholly or partly in shares in accordance withterm of issues.

262.Redeemable Preference Share: Thepreference share that is repayable either after a

fixed (or) determinable period (or) at any timedividend by the management.

263. Cumulative Preference Shares : A class

of preference shares entitled to payment ofumulates dividends. Preference shares arealways deemed to be cumulative unless they


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are expressly made non-cumulative preferenceshares.

264.Debenture Redemption Reserve : A reservecreated for the redemption of debentures at afuture date.

265. Cumulative Dividend: A dividend payableas cumulative preference shares which itunpaid cumulates as a claim against the

earnings of a corporate before any distributionis made to the other shareholders.

266. Dividend Equalization Reserve: Areserve created to maintain the rate of dividendin future years.

267. Opening Stock: The term opening stockmeans goods lying unsold with thebusinessman in the beginning of theaccounting year. This is shown on the debitside of the trading account.

268.Closing Stock: The term Closing Stockincludes goods lying unsold with the

businessman at the end of the accounting year.The amount of closing stock is shown on thecredit side of the trading account and as anasset in the balance sheet.

269.Valuation Of Closing Stock: The closingstock is valued on the basis of Cost or Market

price whichever is less principle.


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272. Contingency: A condition (or) situationthe ultimate out come of which gain or loss will

be known as determined only as theoccurrence or non occurrence of one or moreuncertain future events.

273.Contingent Asset: An asset the existenceownership or value of which may be known ordetermined only on the occurrence or non

occurrence of one more uncertain futureevents.

274. Contingent Liability: An obligation to anexisting condition or situation which may arisein future depending on the occurrence of one ormore uncertain future events.

275. Deficiency : The excess of liabilities overassets of an enterprise at a given date is calleddeficiency.

276.Deficit: The debit balance in the profit and lossa/c is called deficit.

277.Surplus: Credit balance in the profit & lossstatement after providing for proposedappropriation & dividend, reserves.

278.Appropriation Assets: An account sometimesincluded as a separate section of the profit andloss statement showing application of profits

towards dividends, reserves.


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279. Capital Redemption Reserve: A reservecreated on redemption of the average cost:- the

cost of an item at a point of time as determinedby applying an average of the cost of all itemsof the same nature over a period. Whenweights are also applied in the computation it istermed as weight average cost.

280.Floating Change: Assume change on some or

all assets of an enterprise which are notattached to specific assets and are given assecurity against debt.

281.Difference between Funds flow and Cashflow statement:

A Cash flow statement is concerned only

with the change in cash position while afunds flow analysis is concerned with changein working capital position between twobalance sheet dates.

A cash flow statement is merely a record ofcash receipts and disbursements. Whilestudying the short-term solvency of abusiness one is interested not only in cashbalance but also in the assets which areeasily convertible into cash.

282. Difference Between the Funds flow andIncome statement :

A funds flow statement deals with thefinancial resource required for running thebusiness activities. It explains how were the


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funds obtained and how were they used,Whereas an income statement discloses theresults of the business activities, i.e., how

much has been earned and how it has beenspent.

A funds flow statement matches the fundsraised and funds applied during aparticular period. The source and applicationof funds may be of capital as well as ofrevenue nature. An income statement

matches the incomes of a period with theexpen

Shortcut Keys Description

F2 Edit the selected cell.

F5 Go to a specific cell. For example, C6.

F7 Spell check selected text and/or document.

F11 Create chart.

Ctrl + Shift

+ ;Enter the current time.

Ctrl + ; Enter the current date.

Alt + Shift +

F1Insert New Worksheet.

Shift + F3 Open the Excel formula window.

Shift + F5 Bring up search box.

Ctrl + A Select all contents of the worksheet.

Ctrl + B Bold highlighted selection.

Ctrl + I Italic highlighted selection.

Ctrl + K Insert link.


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Ctrl + U Underline highlighted selection.

Ctrl + 5 Strikethrough highlighted selection.

Ctrl + P Bring up the print dialog box to beginprinting.

Ctrl + Z Undo last action.

Ctrl + F9 Minimize current window.

Ctrl + F10 Maximize currently selected window.

Ctrl + F6Switch between open workbooks /

windows.

Ctrl + Page

up

Move between Excel work sheets in the

same Excel document.

Ctrl + Page

down

Move between Excel work sheets in the

same Excel document.

Ctrl + TabMove between Two or more open Excel

files.

Alt + =Create a formula to sum all of the above

cells

Ctrl + 'Insert the value of the above cell into cell

currently selected.

Ctrl + Shift

+ !

Format number in comma format.

Ctrl + Shift +

$Format number in currency format.

Ctrl + Shift +

#Format number in date format.

Ctrl + Shift +

%

Format number in percentage format.


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Ctrl + Shift +

^Format number in scientific format.

Ctrl + Shift +

@ Format number in time format.

Ctrl + Arrow

keyMove to next section of text.

Ctrl + Space Select entire column.

Shift + Space Select entire row.

diture of that period, which are both of arevenue nature.

Ctrl+Z Undo

Ctrl+C

Enter,Ctrl+V

Ctrl+X

Copy,

Paste,Multiple Paste,

Cut

Ctrl+F,

Ctrl+H

Find,

Find&Replace

Ctrl+P,

Ctrl+S, Ctrl+F4, Alt+F4

Print,

Save, Close,

Close

ExcelCtrl+Arrow Move

to edge of regionCtrl+* Select

current region

Ctrl+A Select

all cells

Ctrl+Home Select
http://www.computerhope.com/jargon/c/column.htmhttp://www.computerhope.com/jargon/r/row.htmhttp://www.computerhope.com/jargon/r/row.htmhttp://www.computerhope.com/jargon/c/column.htm


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Ctrl+End A1,

Select

last cell in used range

Ctrl+Shift+End Selectfrom active cell to last cell

in used range.

Ctrl+Shift+Home Select

from active cell to A1

Ctrl+Page

Down

Ctrl+PageUp

Move

to the next sheet,

Moveto the previous sheet

Ctrl+Tab Move

to next open workbookCtrl+N Open

new workbook

Shift+F11 Insert

new worksheet

Shift+F3 Paste

function window

=+FunctionName+Ctrl+A Insert

new function

Alt+F11 Open

VBE

Ctrl+Shift+Enter Array

formulaCtrl+F3,

F3

Define

name, Paste name

Ctrl+Spacebar

Shift+Spacebar

Select

columns, Select rows

Ctrl+1,

Ctrl+B, Ctrl+U

Format

cells, Bold, Underline

Ctrl+; Current


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, Ctrl+shift+: date, Current t

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