1.

definition of accounting: the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least of a financial character and interpreting the results there of. 2. Book keeping: t is mainly concerned with recording of financial data relating to the !usiness operations in a significant and orderly manner. ". #oncepts of accounting: $. separate entity concept B. going concern concept #. money measurement concept %. cost concept &. dual aspect concept '. accounting period concept (. periodic matching of costs and revenue concept ). realization concept * #onventions of accounting $. conservatism B. full disclosure #. consistency % materiality +. ,ystems of !ook keeping: $. single entry system B. dou!le entry system -. ,ystems of accounting $. cash system accounting B. mercantile system of accounting .. /rinciples of accounting $. personal a0c: B. real a0c : %e!it the receiver #redit the giver %e!it what comes in #redit what goes out %e!it all e1penses and losses #redit all gains and incomes

#. nominal a0c :

2. 3eaning of 4ournal: 4ournal means chronological record of transactions. 5. 3eaning of ledger: ledger is a set of accounts. t contains all accounts of the !usiness enterprise whether real, nominal, personal. 16. /osting: it means transferring the de!it and credit items from the 4ournal to their respective accounts in the ledger. 11. 7rial !alance: trial !alance is a statement containing the various ledger !alances on a particular date.

12. #redit note: the customer when returns the goods get credit for the value of the goods returned. $ credit note is sent to him intimating that his a0c has !een credited with the value of the goods returned. 1". %e!it note: when the goods are returned to the supplier, a de!it note is sent to him indicating that his a0c has !een de!ited with the amount mentioned in the de!it note. 1*. #ontra entry: which accounting entry is recorded on !oth the de!it and credit side of cash!ook is known as the contra entry. the

1+. /etty cash !ook: petty cash is maintained !y !usiness to record petty cash e1penses of the !usiness, such as postage, cartage, stationery, etc. 1-.promisory note: an instrument in writing containing an unconditional undertaking signed !y the maker, to pay certain sum of money only to or to the order of a certain person or to the !arer of the instrument. 1.. #he8ue: a !ill of e1change drawn on a specified !anker and paya!le on demand. 12. ,tale che8ue: a stale che8ue means not valid of che8ue that means more than si1 the che8ue is not valid. months

26. Bank reconciliation statement: it is a statement reconciling the !alance as shown !y the !ank pass!ook and the !alance as shown !y the #ash Book. 9!4: to know the difference : pass necessary correcting, ad4usting entries in the !ooks. 21. 3atching concept: matching means re8uires proper matching of e1pense with the revenue. 22. #apital income: the term capital income means an income which does not grow out of pertain to the running of the !usiness proper. or

2". ;evenue income: the income, which arises out of and in the course of the regular !usiness transactions of a concern. 2*. #apital e1penditure: it means an e1penditure which has !een incurred for the purpose of o!taining a long term advantage for the !usiness. 2+. ;evenue e1penditure: an e1penditure that incurred in the course of regular !usiness transactions of a concern. 2-. %iffered revenue e1penditure: an e1penditure, which is incurred during an accounting period !ut is applica!le further periods also. &g: heavy advertisement. 2.. Bad de!ts: !ad de!ts denote the amount lost from de!tors to whom the goods were sold on credit. 22. %epreciation: depreciation denotes gradually and permanent decrease in the value of asset due to wear and tear, technology changes, laps of time and accident. 25. 'ictitious assets: 7hese are assets not represented !y tangi!le possession or property. &1amples of preliminary e1penses, discount on issue of shares, de!it !alance in the profit and loss account when shown on the assets side in the !alance sheet.

"6. ntangl!e $ssets: ntangi!le assets mean the assets which is not having the physical appearance. $nd its have the real value, it shown on the assets side of the !alance sheet. "1. $ccrued ncome : $ccrued income means income which has !een earned !y the !usiness during the accounting year !ut which has not yet !een due and, therefore, has not !een received. "2. 9ut standing ncome : 9utstanding ncome means income which has !ecome due accounting year !ut which has not so far !een received !y the firm. during the

"". ,uspense account: the suspense account is an account to which the difference in the trial !alance has !een put temporarily. "*. %epletion: it implies removal of an availa!le !ut not replacea!le source, ,uch as coal from a coal mine. "+. $mortization: the process of writing of intangi!le assets is term as amortization. "-. %ilapidations: the term dilapidations to damage done to a !uilding or other property during tenancy. ".. #apital employed: the term capital employed means sum of total long term funds employed in the !usiness. i.e. <share capital= reserves : surplus =long term loans > <non !usiness assets = fictitious assets? "2. &8uity shares: those shares which are not having pref. rights are called e8uity shares. "5. /ref.shares: 7hose shares which are carrying the pref.rights is called pref. shares /ref.rights in respect of fi1ed dividend. /ref.right to repayment of capital in the even of company winding up. *6. @everage: t is a force applied at a particular point to get the desired result. in revenue greater e1tracting

*1. 9perating leverage: the operating leverage takes place when a changes changes in &B 7.

*2. 'inancial leverage : it is nothing !ut a process of using de!t capital to increase the rate of return on e8uity *". #om!ine leverage: it is used to measure of the total risk of the firm A operating risk = financial risk. **. Boint venture: $ 4oint venture is an association of two or more the persons who com!ined for the e1ecution of a specific transaction and divide the profit or loss their of an agreed ratio. *+. /artnership: partnership is the relation !0w the persons who have agreed to share the profits of !usiness carried on !y all or any of them acting for all. *-. 'actoring: t is an arrangement under which a firm <called !orrower? receives against its receiva!les, from a financial institutions <called factor? advances

*.. #apital reserve: 7he reserve which transferred from the capital gains is called capital reserve. *2.(eneral reserve: the reserve which is transferred from normal profits of the firm is general reserve *5. 'ree #ash: 7he cash not for any specific purpose free from any encum!rance like cash. called surplus a

+6. 3inority nterest: minority interest refers to the e8uity of the minority shareholders in su!sidiary company.

+1. #apital receipts: capital receipts may !e defined as nonCrecurring receipts from the owner of the !usiness or lender of the money crating a lia!ility to either of them. +2. ;evenue receipts: ;evenue receipts may defined as $ recurring receipts against sale of goods in the normal course of !usiness and which generally the result of the trading activities. +". 3eaning of #ompany: $ company is an association of many persons who contri!ute money or moneyDs worth to common stock and employs it for a common purpose. 7he common stock so contri!uted is denoted in money and is the capital of the company. +*. 7ypes of a company: 1.,tatutory companies 2.government company ".foreign company *.;egistered companies: a. #ompanies limited !y shares !. #ompanies limited !y guarantee c. Enlimited companies %. private company &. pu!lic company ++. /rivate company: $ private co. is which !y its $9$: ;estricts the right of the mem!ers to transfer of shares @imits the no. 9f /rohi!its any nvitation to the pu!lic to su!scri!e for its shares or de!entures. mem!ers +6.

+-. /u!lic company: $ company, the articles of association of which does not contain the re8uisite restrictions to make it a private limited company, is called a pu!lic company. +.. #haracteristics of a company: Foluntary association ,eparate legal entity 'ree transfer of shares @imited lia!ility #ommon seal /erpetual e1istence. +2. 'ormation of company: /romotion ncorporation #ommencement of !usiness +5. &8uity share capital: 7he total sum of e8uity shares is called e8uity share capital.

-6. $uthorized share capital: it is the ma1imum amount of the share capital, which a company can raise for the time !eing. -1. ssued capital: t is that part of the authorized capital, which has !een allotted to the for su!scriptions. pu!lic

-2. ,u!scri!ed capital: it is the part of the issued capital, which has !een allotted to the pu!lic -". #alled up capital: t has !een portion of the su!scri!ed capital which has !een called up !y the company. -*. /aid up capital: t is the portion of the called up capital against which payment has !een received. -+. %e!entures: %e!enture is a certificate issued !y a company under its seal de!t due !y it to its holder. --. #ash profit: cash profit is the profit it is occurred from the cash sales. -.. %eemed pu!lic @td. #ompany: $ private company is a su!sidiary company to pu!lic it satisfies the following terms0conditions ,ec "<1?": 1.having minimum share capital + lakhs 2.accepting investments from the pu!lic ".no restriction of the transfera!le of shares *.Go restriction of no. of mem!ers. +.accepting deposits from the investors company acknowledging a

-2. ,ecret reserves: secret reserves are reserves the e1istence of which does not appear on the face of !alance sheet. n such a situation, net assets position of the !usiness is stronger than that disclosed !y the !alance sheet. 7hese reserves are crated !y: 1.&1cessive dep.of an asset, e1cessive overCvaluation of a lia!ility. 2.#omplete elimination of an asset, or under valuation of an asset. -5. /rovision: provision usually means any amount written off or retained !y way of providing depreciation, renewals or diminutions in the value of assets or retained !y way of providing for any known lia!ility of which the amount can not !e determined with su!stantial accuracy. .6. ;eserve: 7he provision in e1cess of the amount considered necessary for the purpose it was originally made is also considered as reserve /rovision is charge against profits while reserves is an appropriation of profits #reation of reserve increase proprietorDs fund while creation of provisions decreases his funds in the !usiness. .1. ;eserve fund: the term reserve fund means such reserve against which clearly etc., investment

.2. Endisclosed reserves: ,ometimes a reserve is created !ut its identity is merged with some other a0c or group of accounts so that the e1istence of the reserve is not known such reserve is called an undisclosed reserve. .". 'inance management: financial management deals with procurement of funds and their effective utilization in !usiness.

.*. 9!4ectives of financial management: financial management having two o!4ectives that s: 1. /rofit ma1imization: the finance manager has to make his decisions in a manner so that the profits of the concern are ma1imized. 2. Health ma1imization: wealth ma1imization means the o!4ective of a firm should !e to ma1imize its value or wealth, or value of a firm is represented !y the market price of its common stock. .+. 'unctions of financial manager: nvestment decision %ividend decision 'inance decision #ash management decisions /erformance evaluation 3arket impact analysis .-. 7ime value of money: the time value of money means that worth of a rupee received is different from the worth of a rupee to !e received in future. today

... #apital structure: it refers to the mi1 of sources from where the longCterm funds re8uired in a !usiness may !e raisedI in other words, it refers to the proportion of de!t, preference capital and e8uity capital. .2. 9ptimum capital structure: capital structure is optimum when the firm has a com!ination of e8uity and de!t so that the wealth of the firm is ma1imum. .5. Hacc: it denotes weighted average cost of capital. t is defined as the overall cost of computed !y reference to the proportion of each component of capital as weights. capital

26. 'inancial !reakCeven point: it denotes the level at which a firmDs &B 7 is 4ust sufficient to cover interest and preference dividend. 21. #apital !udgeting: capital !udgeting involves the process of decision making with regard to investment in fi1ed assets. 9r decision making with regard to investment of money in longC term pro4ects. 22. /ay !ack period: pay!ack period represents the time period re8uired for complete recovery of the initial investment in the pro4ect. 2". $;;: accounting or average rate of return means the average annual yield on the pro4ect. 2*. G/F: the net present value of an investment proposal is defined as the sum of the present values of all future cash in flows less the sum of the present values of all cash out flows associated with the proposal. 2+. /rofita!ility inde1: where different investment proposal each involving different initial investments and cash inflows are to !e compared. 2-. ;;: internal rate of return is the rate at which the sum total of discounted cash inflows e8uals the discounted cash out flow. 2.. 7reasury management: it means it is defined as the efficient management of li8uidity and financial risk in !usiness.

22. #oncentration !anking: it means identify locations or places where customers are placed and open a local !ank a0c in each of these locations and open local collection canter. 25. 3arketa!le securities: surplus cash can !e invested in short term instruments in order to earn interest. 56. $geing schedule: in a ageing schedule the receiva!les are classified according to their age. 51. 3a1imum permissi!le !ank finance <3/B'?: it is the ma1imum amount that !anks can lend a !orrower towards his working capital re8uirements. 52. #ommercial paper: a cp is a short term promissory note issued !y a company, negotia!le !y endorsement and delivery, issued at a discount on face value as may !e determined !y the issuing company. 5". Bridge finance: t refers to the loans taken !y the company normally from a commercial !anks for a short period pending dis!ursement of loans sanctioned !y the financial institutions. 5*. Fenture capital: t refers to the financing of highCrisk ventures promoted !y new 8ualified entrepreneurs who re8uire funds to give shape to their ideas. 5+. %e!t securitization: t is a mode of financing, where in securities are issued on the !asis of a package of assets <called asset pool?. 5-. @ease financing: @easing is a contract where one party <owner? purchases assets and permits its views !y another party <lessee? over a specified period 5.. 7rade #redit: !usiness. t represents credit granted !y suppliers of goods, in the normal course of

52. 9ver draft: Ender this facility a fi1ed limit is granted within which the !orrower allowed to overdraw from his account. 55. #ash credit: t is an arrangement under which a customer is allowed an advance up to certain limit against credit granted !y !ank. 166. #lean overdraft: tangi!le security. t refers to an advance !y way of overdraft facility, !ut not !ack !y any

161. ,hare capital: 7he sum total of the nominal value of the shares of a company is called share capital. 162. 'unds flow statement: t is the statement deals with the financial resources for running !usiness activities. t e1plains how the funds o!tained and how they used. 16". ,ources of funds: 7here are two sources of funds nternal sources and e1ternal sources.

nternal source: 'unds from operations is the only internal sources of funds and some important points add to it they do not result in the outflow of funds <a? %epreciation on fi1ed assets <!? <!? /reliminary e1penses or goodwill written off, @oss on sale of fi1ed assets %educt the following items, as they do not increase the funds: /rofit on sale of fi1ed assets, profit on revaluation

9f fi1ed assets &1ternal sources: <a? 'unds from longCterm loans <!?,ale of fi1ed assets <c? 'unds from increase in share capital 16*. $pplication of funds: <a? /urchase of fi1ed assets <!? /ayment of dividend <c?/ayment of ta1 lia!ility <d? /ayment of fi1ed lia!ility 16+. #% < nter corporate deposits?: #ompanies can !orrow funds for a short period. 'or e1ample - months or less from another company which have surplus li8uidity. ,uch deposits made !y one company in another company are called #%. 16-. #ertificate of deposits: 7he #% is a document of title similar to a fi1ed deposit receipt issued !y !anks there is no prescri!ed interest rate on such #%s it is !ased on the prevailing market conditions. 16.. /u!lic deposits: t is very important source of short term and medium term finance. 7he company can accept /% from mem!ers of the pu!lic and shareholders. t has the maturity period of - months to " years. 162.&uro issues: 7he euro issues means that the issue is listed on a &uropean stock &1change. 7he su!scription can come from any part of the world e1cept ndia. 165.(%; <(lo!al depository receipts?: $ depository receipt is !asically a negotia!le certificate , dominated in us dollars that represents a nonCE, company pu!licly traded in local currency e8uity shares. 116. $%; <$merican depository receipts?: %epository receipt issued !y a company in the E,$ are known as $%;s. ,uch receipts are to !e issued in accordance with the provisions stipulated !y the securities &1change commission <,&#? of E,$ like ,&B in ndia. 111.#ommercial !anks: #ommercial !anks e1tend foreign currency loans for international operations, 4ust like rupee loans. 7he !anks also provided overdraft. 112.%evelopment !anks: loans t offers longCterm and medium term loans including foreign currency

11". nternational agencies: nternational agencies like the '#, B;%,$%B, 3' etc. provide indirect assistance for o!taining foreign currency. 11*. ,eed capital assistance: 7he seed capital assistance scheme is desired !y the %B for professionally or technically 8ualified entrepreneurs and persons possessing relevant e1perience and skills and entrepreneur traits. 11+. Ensecured loans: enterprise. t constitutes a significant part of longCterm finance availa!le to an

11-. #ash flow statement: t is a statement depicting change in cash position from one period to another. 11..,ources of cash: nternal sourcesC

<a?%epreciation <!?$mortization <c?@oss on sale of fi1ed assets <d?(ains from sale of fi1ed assets <e? #reation of reserves &1ternal sourcesC <a? ssue of new shares <!?;aising long term loans <c?,hortCterm !orrowings <d?,ale of fi1ed assets, investments 112. $pplication of cash: <a? /urchase of fi1ed assets <!? /ayment of longCterm loans <c? %ecrease in deferred payment lia!ilities <d? /ayment of ta1, dividend <e? %ecrease in unsecured loans and deposits 115. Budget: t is a detailed plan of operations for some specific future period. prepared in advance of the period to which it applies. t is an estimate

126. Budgetary control: t is the system of management control and accounting in which all operations are forecasted and so for as possi!le planned ahead, and the actual results compared with the forecasted and planned ones. 121. #ash !udget: t is a summary statement of firmDs e1pected cash inflow and outflow over a specified time period. 122. 3aster !udget: $ summary of !udget schedules in capsule form made for the purpose of presenting in one report the highlights of the !udget forecast. 12". 'i1ed !udget: t is a !udget, which is designed to remain unchanged irrespective of the level of activity actually attained. 12*.JeroC !aseC !udgeting: t is a management tool which provides a systematic method for evaluating all operations and programmes, current of new allows for !udget reductions and e1pansions in a rational manner and allows reallocation of source from low to high priority programs. 12+. (oodwill: 7he present value of firmDs anticipated e1cess earnings. 12-. B;,: t is a statement reconciling the !alance as shown !y the !ank pass !ook and !alance shown !y the cash !ook. 12.. 9!4ective of B;,: 7he o!4ective of preparing such a statement is to know the causes of difference !etween the two !alances and pass necessary correcting or ad4usting entries in the !ooks of the firm. 122.;esponsi!ilities of accounting: ;esponsi!ilities for costs. t is a system of control !y delegating and locating the

125. /rofit centre: $ centre whose performance is measured in terms of !oth the e1pense incurs and revenue it earns.

1"6.#ost centre: $ location, person or item of e8uipment for which cost may !e ascertained and used for the purpose of cost control. 1"1. #ost: 7he amount of e1penditure incurred on to a given thing. 1"2. #ost accounting: t 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. 1"". &lements of cost: <$? 3aterial <B? @a!our <#? &1penses <%? 9verheads 1"*. #omponents of total costs: <$? /rime cost <B? 'actory cost <#?7otal cost of production <%? 7otal c6st 1"+. /rime cost: t consists of direct material direct la!our and direct e1penses. known as !asic or first or flat cost. t is also

1"-. 'actory cost: t comprises prime cost, in addition factory overheads which include cost of indirect material indirect la!our and indirect e1penses incurred in factory. 7his cost is also known as works cost or production cost or manufacturing cost. 1".. #ost of production: cost is arrived at. n office and administration overheads are added to factory cost, office

1"2. 7otal cost: ,elling and distri!ution overheads are added to total cost of production to get the total cost or cost of sales. 1"5. #ost unit: $ unit of 8uantity of a product, service or time in relation to which costs ascertained or e1pressed. may !e

1*6.3ethods of costing: <$?Bo! costing <B?#ontract costing <#?/rocess costing <%?9peration costing <&?9perating costing <'?Enit costing <(?Batch costing. 1*1. 7echni8ues of costing: <a? marginal costing <!? direct costing <c?a!sorption costing <d? uniform costing. 1*2. ,tandard costing: standard costing is a system under which the cost of the product is determined in advance on certain predetermined standards. 1*". 3arginal costing: it is a techni8ue of costing in which allocation of e1penditure to production is restricted to those e1penses which arise as a result of production, i.e., materials, la!our, direct e1penses and varia!le overheads. 1**. %erivative: derivative is product whose value is derived from the value of one or more !asic varia!les of underlying asset. 1*+. 'orwards: a forward contract is customized contracts !etween two entities were settlement takes place on a specific date in the future at todayDs pre agreed price.

1*-. 'utures: a future contract is an agreement !etween two parties to !uy or sell an asset at a certain time in the future at a certain price. 'uture contracts are standardized e1change traded contracts. 1*.. 9ptions: an option gives the holder of the option the right to do some thing. 7he option holder option may e1ercise or not. 1*2. #all option: a call option gives the holder the right !ut not the o!ligation to !uy an asset !y a certain date for a certain price. 1*5. /ut option: a put option gives the holder the right !ut not o!ligation to sell an asset !y a certain date for a certain price. 1+6. 9ption price: option price is the price which the option !uyer pays to the option seller. t is also referred to as the option premium. 1+1. &1piration date: the date which is specified in the option contract is called e1piration date. 1+2. &uropean option: it is the option at e1ercised only on e1piration date it self. 1+". Basis: !asis means future price minus spot price. 1+*. #ost of carry: the relation !etween future prices and spot prices can !e summarized in terms of what is known as cost of carry. 1++. nitial margin: the amount that must !e deposited in the margin a0c at the time of first entered into future contract is known as initial margin. 1+- 3aintenance margin: this is some what lower than initial margin. 1+.. 3ark to market: in future market, at the end of the each trading day, the margin a0c is ad4usted to reflect the investorsD gains or loss depending upon the futures selling price. 7his is called mark to market. 1+2. Baskets : !asket options are options on portfolio of underlying asset. 1+5. ,waps: swaps are private agreements !etween two parties to e1change cash flows in the future according to a pre agreed formula. 1-6. mpact cost: impact cost is cost it is measure of li8uidity of the market. t reflects the costs faced when actually trading in inde1. 1-1. )edging: hedging means minimize the risk. 1-2. #apital market: capital market is the market it deals with the long term investment funds. t consists of two markets 1.primary market 2.secondary market. 1-". /rimary market: those companies which are issuing new shares in this market. t is also called new issue market. 1-*. ,econdary market: secondary market is the market where shares !uying and selling. n ndia secondary market is called stock e1change.

1-+. $r!itrage: it means purchase and sale of securities in different markets in order to profit from price discrepancies. n other words ar!itrage is a way of reducing risk of loss caused !y price fluctuations of securities held in a portfolio. 1--. 3eaning of ratio: ;atios are relationships e1pressed in mathematical terms !etween figures which are connected with each other in same manner. 1-.. $ctivity ratio: it is a measure of the level of activity attained over a period. 1-2. mutual fund : a mutual fund is a pool of money, collected from investors, and is invested according to certain investment o!4ectives. 1-5. characteristics of mutual fund : 9wnership of the 3' is in the hands of the of the investors 3' managed !y investment professionals 7he value of portfolio is updated every day 1.6.advantage of 3' to investors : /ortfolio diversification /rofessional management ;eduction in risk ;eduction of transaction casts @i8uidity #onvenience and fle1i!ility 1.1.net asset value : the value of one unit of investment is called as the Get $sset Falue 1.2.openCended fund : open ended funds means investors can !uy and sell units of fund, at G$F related prices at any time, directly from the fund this is called open ended fund. 'or e1I unit -* 1.".close ended funds : close ended funds means it is open for sale to investors for a specific period, after which further sales are closed. $ny further transaction for !uying the units or repurchasing them, happen, in the secondary markets. 1.*. dividend option : investors who choose a dividend on their investments, will receive dividends from the 3', as when such dividends are declared. 1.+.growth option : investors who do not re8uire periodic income distri!utions can !e choose the growth option. 1.-.e8uity funds : e8uity funds are those that invest preCdominantly in e8uity shares of company. 1...types of e8uity funds : ,imple e8uity funds /rimary market funds ,ectoral funds nde1 funds 1.2. sectoral funds : sectoral funds choose to invest in one or more chosen sectors of the e8uity markets. 1.5.inde1 funds :the fund manager takes a view on companies that are e1pected to perform well, and invests in these companies 126.de!t funds : the de!t funds are those that are preCdominantly invest in de!t securities. 121. li8uid funds : the de!t funds invest only in instruments with maturities less than one year. 122. gilt funds : gilt funds invests only in securities that are issued !y the (9F7. and therefore does not carry any credit risk. 12".!alanced funds :funds that invest !oth in de!t and e8uity markets are called !alanced funds.

12*. sponsor : sponsor is the promoter of the 3' and appoints trustees, custodians and the $3# with prior approval of ,&B . 12+. trustee : trustee is responsi!le to the investors in the 3' and appoint the $3# for managing the investment portfolio. 12-. $3# : the $3# descri!es $sset 3anagement #ompany, it is the !usiness face of the 3', as it manages all the affairs of the 3'. 12.. ; : 7 $gents : the ;:7 agents are responsi!le for the investor servicing functions, as they maintain the records of investors in 3'. 122. custodians : custodians are responsi!le for the securities held in the mutual fundDs portfolio. 125. scheme take over : if an e1isting 3' scheme is taken over !y the another $3#, it is called as scheme take over. 156.meaning of load: load is the factor that is applied to the G$F of a scheme to arrive at the price. 152. market capitalization : market capitalization means num!er of shares issued multiplied with market price per share. 15".price earning ratio : the ratio !etween the share price and the post ta1 earnings of company is called as price earning ratio. 15*. %ividend yield: the dividend paid out !y the company, is usually a percentage of the face value of a share. 15+. 3arket risk: it refers to the risk which the investor is e1posed to as a result of adverse movements in the interest rates. t also referred to as the interest rate risk. 15-. ;eCinvestment 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 fi1ed income security. 15.. #all risk: call risk is associated with !onds have an em!edded call option in them. 7his option hives the issuer the right to call !ack the !onds prior to maturity. 152. #redit risk: credit risk refers to the pro!a!ility that a !orrower could default on a commitment to repay de!t or !and loans 155. nflation risk: inflation risk reflects the changes in the purchasing power of the cash flows resulting from the fi1ed income security. 266. @i8uid risk: it is also called market riskI it refers to the ease with which !onds could !e traded in the market. 261. %rawings: drawings denote the money withdrawn !y the proprietor from the !usiness for his personal use. 262. 9utstanding ncome: 9utstanding ncome means income which has !ecome due during the accounting year !ut which has not so far !een received !y the firm.

26".9utstanding &1penses : 9utstanding &1penses refer to those e1penses which have !ecome due during the accounting period for which the 'inal $ccounts have !een prepared !ut have not yet !een paid. 26*.closing stock : 7he term closing stock means goods lying unsold with the !usinessman at the end of the accounting year. 26+. 3ethods of depreciation : 1.Enirorm charge methods : a. 'i1ed installment method ! .%epletion method c. 3achine hour rate method. 2. %eclining charge methods : a. %iminishing !alance method !. ,um of years digits method c. %ou!le declining method ". 9ther methods : a. (roup depreciation method !. nventory system of depreciation c. $nnuity method d. %epreciation fund method e. nsurance policy method. 26-.$ccrued ncome : $ccrued ncome means income which has !een earned !y the !usiness during the accounting year !ut which has not yet !ecome due and, therefore, has not !een received. 26..(ross profit ratio : it indicates the efficiency of the production0trading operations. 'ormula : (ross profit CCCCCCCCCCCCCCCCCCCK166 Get sales 262.Get profit ratio : it indicates net margin on sales 'ormula: Get profit CCCCCCCCCCCCCCC K 166 Get sales 265. return on share holders funds : it indicates measures earning power of e8uity capital. 'ormula : profits availa!le for &8uity shareholders CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCK 166 $verage &8uity ,hareholders 'unds 216. &arning per &8uity share <&/,? e8uity share. 'ormula : profits availa!le for &8uity shareholders CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC Gum!er of &8uity shares : it shows the amount of earnings attri!uta!le to each

211.dividend yield ratio : it shows the rate of return to shareholders in the form of dividends !ased in the market price of the share 'ormula : %ividend per share CCCCCCCCCCCCCCCCCCCCCCCCCCCC K166 3arket price per share 212. price earning ratio : it a measure for determining the value of a share. 3ay also !e used to measure the rate of return e1pected !y investors. 'ormula : 3arket price of share<3/,? CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCK 166 &arning per share <&/,? 21".#urrent ratio : it measures shortCterm de!t paying a!ility. 'ormula : #urrent $ssets CCCCCCCCCCCCCCCCCCCCCCCC #urrent @ia!ilities 21*. %e!tC&8uity ;atio : it indicates the percentage of funds !eing financed through !orrowingsI a measure of the e1tent of trading on e8uity. 'ormula : 7otal @ongCterm %e!t CCCCCCCCCCCCCCCCCCCCCCCCCCC ,hareholders funds 21+.'i1ed $ssets ratio : 7his ratio e1plains whether the firm has raised adepuate longCterm funds to meet its fi1ed assets re8uirements. 'ormula 'i1ed $ssets CCCCCCCCCCCCCCCCCCC @ongCterm 'unds

21- . Luick ;atio : 7he ratio termed as M li8uidity ratioD. 7he ratio is ascertained y comparing the li8uid assets to current lia!ilities.

'ormula : @i8uid $ssets CCCCCCCCCCCCCCCCCCCCCCCC #urrent @ia!ilities

21.. ,tock turnover ;atio : the ratio indicates whether investment in inventory in efficiently used or not. t, therefore e1plains whether investment in inventory within proper limits or not. 'ormula: cost of goods sold CCCCCCCCCCCCCCCCCCCCCCCC $verage stock

212. %e!tors 7urnover ;atio : the ratio the !etter it is, since it would indicate that de!ts are !eing collected more promptly. 7he ration helps in cash !udgeting since the flow of cash from customers can !e worked out on the !asis of sales. 'ormula: #redit sales CCCCCCCCCCCCCCCCCCCCCCCCCCCC $verage $ccounts ;eceiva!le

215.#reditors 7urnover ;atio : it indicates the speed with which the payments for credit purchases are made to the creditors. 'ormula: #redit /urchases CCCCCCCCCCCCCCCCCCCCCCC $verage $ccounts /aya!le

226. Horking capital turnover ratio : it is also known as Horking #apital @everage ;atio. 7his ratio ndicates whether or not working capital has !een effectively utilized in making sales. 'ormula: Get ,ales CCCCCCCCCCCCCCCCCCCCCCCCCCCC Horking #apital 221.'i1ed $ssets 7urnover ratio : 7his ratio indicates the e1tent to which the investments in fi1ed assets contri!utes towards sales. 'ormula: Get ,ales CCCCCCCCCCCCCCCCCCCCCCCCCC 'i1ed $ssets 222 ./ayCout ;atio : 7his ratio indicates what proportion of earning per share has !een used for paying dividend. 'ormula: %ividend per &8uity ,hare CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCK166 &arning per &8uity share 22".9verall /rofita!ility ;atio : t is also called as ;eturn on nvestment <;9 ? or ;eturn on #apital &mployed <;9#&? . t indicates the percentage of return on the total capital employed in the !usiness. 'ormula : 9perating profit CCCCCCCCCCCCCCCCCCCCCCCCK 166 #apital employed 7he term capital employed has !een given different meanings a.sum total of all assets whether fi1ed or current !.sum total of fi1ed assets, c.sum total of longCterm funds employed in the !usiness, i.e., share capital =reserves :surplus =long term loans ><non !usiness assets = fictitious assets?. 9perating profit means Mprofit !efore interest and ta1D 22* . 'i1ed nterest #over ratio : the ratio is very important from the lenderDs point of view. t indicates whether the !usiness would earn sufficient profits to pay periodically the interest charges.

'ormula :

ncome !efore interest and 7a1 CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC nterest #harges

22+. 'i1ed %ividend #over ratio : 7his ratio is important for preference shareholders entitled to get dividend at a fi1ed rate in priority to other shareholders. 'ormula : /reference %ividend 22-. %e!t ,ervice #overage ratio : 7his ratio is e1plained a!ility of a company to make payment of principal amounts also on time. 'ormula : Get profit !efore interest and ta1 CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC nterest = /rincipal payment installment 1C7a1 rate Get /rofit after nterest and 7a1 CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

22.. /roprietary ratio : t is a variant of de!tCe8uity ratio . t esta!lishes relationship !etween the proprietorDs funds and the total tangi!le assets. 'ormula : ,hareholders funds CCCCCCCCCCCCCCCCCCCCCCCCCCCC 7otal tangi!le assets

222.%ifference !etween 4oint venture and partner ship : n 4oint venture the !usiness is carried on without using a firm name, n the partnership, the !usiness is carried on under a firm name. n the 4oint venture, the !usiness transactions are recorded under cash system n the partnership, the !usiness transactions are recorded under mercantile system. n the 4oint venture, profit and loss is ascertained on completion of the venture n the partner ship , profit and loss is ascertained at the end of each year. n the 4oint venture, it is confined to a particular operation and it is temporary. n the partnership, it is confined to a particular operation and it is permanent. 225.3eaning of Horking capital : 7he funds availa!le for conducting day to day operations of an enterprise. $lso represented !y the e1cess of current assets over current lia!ilities. 2"6.concepts of accounting : 1.Business entity concepts :C $ccording to this concept, the !usiness is treated as a separate entity distinct from its owners and others. 2.(oing concern concept :C $ccording to this concept, it is assumed that a !usiness has a reasona!le e1pectation of continuing !usiness at a profit for an indefinite period of time. ".3oney measurement concept :C 7his concept says that the accounting records only those transactions which can !e e1pressed in terms of money only. *.#ost concept :C $ccording to this concept, an asset is recorded in the !ooks at the price paid to ac8uire it and that this cost is the !asis for all su!se8uent accounting for the asset.

+.%ual aspect concept :C n every transaction, there will !e two aspects > the receiving aspect and the giving aspectI !oth are recorded !y de!iting one accounts and crediting another account. 7his is called dou!le entry. -.$ccounting period concept :C t means the final accounts must !e prepared on a periodic !asis. Gormally accounting period adopted is one year, more than this period reduces the utility of accounting data. ..;ealization concept :C $ccording to this concepts, revenue is considered as !eing earned on the data which it is realized, i.e., the date when the property in goods passes the !uyer and he !ecome legally lia!le to pay. 2.3ateriality concepts :C t is a one of the accounting principle, as per only important information will !e taken, and un important information will !e ignored in the preparation of the financial statement. 5.3atching concepts :C 7he cost or e1penses of a !usiness of a particular period are compared with the revenue of the period in order to ascertain the net profit and loss. 16.$ccrual concept :C 7he profit arises only when there is an increase in owners capital, which is a result of e1cess of revenue over e1penses and loss. 2"1. 'inancial analysis :7he process of interpreting the past, present, and future financial condition of a company. 2"2. ncome statement : $n accounting statement which shows the level of revenues, e1penses and profit occurring for a given accounting period. 2"".$nnual report : 7he report issued annually !y a company, to its share holders. it containing financial statement like, trading and profit : lose account and !alance sheet. 2"*. Bankrupt : $ statement in which a firm is una!le to meets its o!ligations and hence, it is assets are surrendered to court for administration 2"+ . @ease : @ease is a contract !etween 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 2"-.9pportunity cost : 7he cost associated with not doing something. 2".. Budgeting : 7he term !udgeting is used for preparing !udgets and other producer for planning,coCordination,and control of !usiness enterprise. 2"2.#apital : 7he term capital refers to the total investment of company in money, tangi!le and intangi!le assets. t is the total wealth of a company. 2"5.#apitalization : t is the sum of the par value of stocks and !onds out standings. 2*6. 9ver capitalization : Hhen a !usiness is una!le to earn fair rate on its outstanding securities. 2*1. Ender capitalization : Hhen a !usiness is a!le to earn fair rate or over rate on it is outstanding securities.

2*2. #apital gearing : 7he term capital gearing refers to the relationship !etween e8uity and long term de!t. 2*".#ost of capital : t means the minimum rate of return e1pected !y its investment. 2**.#ash dividend : 7he payment of dividend in cash 2*+.%efine the term accrual : ;ecognition of revenues and costs as they are earned or incurred . it includes recognition of transaction relating to assets and lia!ilities as they occur irrespective of the actual receipts or payments. 2*+. accrued e1penses : $n e1pense which has !een incurred in an accounting period !ut for which no enforcea!le claim has !ecome due in what period against the enterprises. 2*-.$ccrued revenue : ;evenue which has !een earned is an earned is an accounting period !ut in respect of which no enforcea!le claim has !ecome due to in that period !y the enterprise. 2*..$ccrued lia!ility : $ developing !ut not yet enforcea!le claim !y 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 !een only partly performed and are not yet !illa!le. 2*2.#onvention of 'ull disclosure : $ccording to this convention, all accounting statements should !e honestly prepared and to that end full disclosure of all significant information will !e made. 2*5.#onvention of consistency : $ccording to this convention it is essential that accounting practices and methods remain unchanged from one year to another. 2+6.%efine the term preliminary e1penses : &1penditure relating to the formation of an enterprise. 7here include legal accounting and share issue e1penses incurred for formation of the enterprise. 2+1.3eaning of #harge : charge means it is a o!ligation to secure an inde!t ness. t may !e fi1ed charge and floating charge. 2+2.$ppropriation : t is application of profit towards ;eserves and %ividends. 2+".$!sorption costing : $ method where !y the cost is determine so as to include the appropriate share of !oth varia!le and fi1ed costs. 2+*.3arginal #ost : 3arginal cost is the additional cost to produce an additional unit of a product. t is also called varia!le cost. 2++. Hhat are the e1Cordinary items in the /:@ a0c : 7he transaction which are not related to the !usiness is termed as e1Cordinary transactions or e1Cordinary items. &gg:C profit or losses on the sale of fi1ed assets, interest received from other company investments, profit or loss on foreign e1change, une1pected dividend received. 2+- . ,hare premium : 7he e1cess of issue of price of shares over their face value. t will !e showed with the allotment entry in the 4ournal, it will !e ad4usted in the !alance sheet on the lia!ilities side under the head of reserves : surplus. 2+..$ccumulated %epreciation : 7he total to date of the periodic depreciation charges on deprecia!le assets.

2+2. nvestment : &1penditure on assets held to earn interest, income, profit or other !enefits. 2+5.#apital : (enerally refers to the amount invested in an enterprise !y its owner. &1I paid up share capital in corporate enterprise. 2-6. #apital Hork n /rogress : &1penditure on capital assets which are in the process of construction as completion. 2-1. #onverti!le %e!enture : $ de!enture which gives the holder a right to conversion wholly or partly in shares in accordance with term of issues. 2-2.;edeema!le /reference ,hare : 7he preference share that is repaya!le either after a fi1ed <or? determina!le period <or? at any time dividend !y the management. 2-". #umulative preference shares : $ class of preference shares entitled to payment of umulates dividends. /reference shares are always deemed to !e cumulative unless they are e1pressly made nonCcumulative preference shares. 2-*.%e!enture redemption reserve : $ reserve created for the redemption of de!entures at a future date. 2-+. #umulative dividend : $ dividend paya!le as cumulative preference shares which it unpaid cumulates as a claim against the earnings of a corporate !efore any distri!ution is made to the other shareholders. 2--. %ividend &8ualization reserve : $ reserve created to maintain the rate of dividend in future years. 2-.. 9pening ,tock : 7he term Mopening stockD means goods lying unsold with the !usinessman in the !eginning of the accounting year. 7his is shown on the de!it side of the trading account. 2-2.#losing ,tock : 7he term M#losing ,tockD includes goods lying unsold with the !usinessman at the end of the accounting year. 7he amount of closing stock is shown on the credit side of the trading account and as an asset in the !alance sheet. 2-5.Faluation of closing stock : 7he closing stock is valued on the !asis of #ost or 3arket price whichever is less principle. 2.2. #ontingency : $ condition <or? situation the ultimate out come of which gain or loss will !e known as determined only as the occurrence or non occurrence of one or more uncertain future events. 2.".#ontingent $sset : $n asset the e1istence ownership or value of which may !e known or determined only on the occurrence or non occurrence of one more uncertain future events. 2.*. #ontingent lia!ility : $n o!ligation to an e1isting condition or situation which may arise in future depending on the occurrence of one or more uncertain future events. 2.+. %eficiency : the e1cess of lia!ilities over assets of an enterprise at a given date is called deficiency. 2.-.%eficit : 7he de!it !alance in the profit and loss a0c is called deficit.

2...,urplus : #redit !alance in the profit : loss statement after providing for proposed appropriation : dividend , reserves. 2.2.$ppropriation $ssets : $n account sometimes included as a separate section of the profit and loss statement showing application of profits towards dividends, reserves. 2.5. #apital redemption reserve : $ reserve created on redemption of the average cost:C the cost of an item at a point of time as determined !y applying an average of the cost of all items of the same nature over a period. Hhen weights are also applied in the computation it is termed as weight average cost. 226.'loating #hange : $ssume change on some or all assets of an enterprise which are not attached to specific assets and are given as security against de!t. 221.%ifference !etween 'unds flow and #ash flow statement : $ #ash flow statement is concerned only with the change in cash position while a funds flow analysis is concerned with change in working capital position !etween two !alance sheet dates. $ cash flow statement is merely a record of cash receipts and dis!ursements. Hhile studying the shortCterm solvency of a !usiness one is interested not only in cash !alance !ut also in the assets which are easily converti!le into cash. 222. %ifference Between the 'unds flow and ncome statement : $ funds flow statement deals with the financial resource re8uired for running the !usiness activities. t e1plains how were the funds o!tained and how were they used, Hhereas an income statement discloses the results of the !usiness activities, i.e., how much has !een earned and how it has !een spent. $ funds flow statement matches the funds raised and funds applied during a particular period. 7he source and application of funds may !e of capital as well as of revenue nature. $n income statement matches the incomes of a period with the e1penditure of that period, which are !oth of a revenue nature.