1.

Three main financial statements are:

*Income statement
*Balance sheet
*Statement of cash flows

2.Definition of 'Generally Accepted Accounting Principles

- GAAP'
The common set of accounting principles, standards and procedures that
companies use to compile their financial statements. GAAP are a combination of
authoritative standards (set by policy boards) and simply the commonly accepted
ways of recording and reporting accounting information.

PERSONAL ACCOUNT These are accounts of parties with whom the business
is a carried on. Personal accounts may be:

Accounts of natural or physical persons. Ex: Rama Account, Krishna

Account

Accounts of artificial or legal persons. Ex: ABC & Co.

Representative personal account. Ex: O/S Expenses Account, O/S income

Account, Prepaid Expenses Account, Income Received in Advance.

Rules of Accounting:
Debit the Receiver
Credit the Giver

Real Account These are asset accounts that appear in the Balance Sheet. They are
referred to as Real Account (or Permanent Accounts) as these are owned by
businesses and the balances in these accounts at the end of an accounting period
will be carried over to the next period. Ex: Cash Account, Land Account, Building
Account etc.
Rules of Accounting:
Debit what comes in
Credit what goes out

Nominal Account These are accounts of expenses and losses which a business
incurs and income & gains which a business earn in the course of business. Ex:
Rent Account, Interest Account.
Rules of Accounting:
Debit all expenses and losses
Credit all income and gains
3.Where is Profit and Loss posted in a balance sheet?
assets side
(IF PROFIT THEN SHOW LIABILITIES SIDE AND IF LOSS THEN SHOW
ASSETS SIDE. )

4 What kind of items are posted in the Income statement

Revenue
Cost and expenses
Allowance and depreciation
Earnings per share (EPS)

5. What is depreciation and the method?

In accountancy, depreciation refers to two aspects of the same concept:
1. the decrease in value of assets (fair value depreciation), and
2. the allocation of the cost of assets to periods in which the assets are used
(depreciation with the matching principle).
3. There are several methods for calculating depreciation, generally based on
either the passage of time or the level of activity (or use) of the asset.

6. What is BRS, with an example?

Bank Reconciliation Statement is a statement prepared to reconcile
the difference between the balances as per the bank column of the
cash book and pass book on any given date.
Ex: Cheque deposited into bank but not recorded in the bank book.
Cheque issued but not presented in bank

7. What are the types of cash flows?

Operating activities
Investing activities
Financing activities

8. Where does closing stock appear in trial balance?

It does not appear in the trial balance.

9.What is LIFO & FIFO?

FIFO and LIFO are cost layering methods used to value the cost of goods sold and
ending inventory. FIFO is a contraction of the term "first in, first out," and means
that the goods first added to inventory are assumed to be the first goods removed
from inventory for sale. LIFO is a contraction of the term "last in, first out," and
means that the goods last added to inventory are assumed to be the first goods
removed from inventory for sale.

10.What is window dressing?

Window dressing in accounting is actions taken to improve the appearance of a
company's financial statements. These actions are usually shortly before the end of
an accounting period

Cash. Postpone paying suppliers, so that the period-end cash balance appears
higher than it should be.
Accounts receivable. Record an unusually low bad debt expense, so that the
accounts receivable (and therefore the current ratio) figure looks better than is
really the case.

11.Types of capital markets are:

Primary market
Second market
(i.e. Bond market, stock market, cash/spot ,market, derivatives market,forex
and the interbank market)

12.EQUITY: A share that gives the person who owns it the right to receive part of
a company's profits and to vote at shareholder meetings: (The net proceeds from
the issue of equity shares should be credited directly to shareholders funds.)

Preference share: a share which entitles the holder to a fixed dividend,

whose payment takes priority over that of ordinary share dividends.

Bonus shares: are additional shares given to the shareholders without any
additional cost, based upon the number of shares that a shareholder owns.
Bond: A debt investment in which an investor loans money to an entity
(corporate or governmental) that borrows the funds for a defined period of
time at a fixed interest rate. Bonds are used by companies, municipalities,
states and U.S. and foreign governments to finance a variety of projects and
activities.
Bonds are commonly referred to as fixed-income securities and are one of
the three main asset classes, along with stocks and cash equivalents.

Debentures: debenture is a document that either creates a debt or

acknowledges it, and it is a debt without collateral. In corporate finance, the
term is used for a medium- to long-term debt instrument used by large
companies to borrow money

Dividend: A dividend is a payment made by a corporation to

its shareholders, usually as a distribution of profits. When a corporation
earns a profit or surplus, it can either re-invest it in the business
(called retained earnings), or it can distribute it to shareholders

13 As per SEBI (Securities and Exchange Board of India.) regulations, only

registered members can operate in the stock market. One can trade by executing a
deal only through a registered broker of a recognized Stock Exchange or through a
SEBI- registered sub-broker.
. we need a broker to carry out our financial transactions and to deal in purchasing
stock and shares.
14. Blue chip companies are the companies that have stable earnings and do not
have extensive liabilities eg reliance industries n bharti airtel.
15. Sensex is calculated using the "Free-float Market Capitalization" methodology.
As per this methodology, the level of index at any point of time reflects the Freefloat market value of 30 component stocks relative to a base period. The market
capitalization of a company is determined by multiplying the price of its stock by
the number of shares issued by the company. This market capitalization is further
multiplied by the free-float factor to determine the free-float market capitalization.
16. An International Securities Identification Number (ISIN) uniquely identifies
a security. Its structure is defined in ISO 6166. Securities for which ISINs are
issued include bonds, commercial paper, stocks and warrants. The ISIN code is a
12-character alpha-numerical code that does not contain information characterizing
financial instruments but serves for uniform identification of a security at trading
and settlement.

17. The illegal practice of trading on the stock exchange to one's own advantage
through having access to confidential information.(insider trading)

18. A corporation whose stock is performing well may opt to split its shares,
distributing additional shares to existing shareholders. The most common split is
two-for-one, in which each share becomes two shares
A buyback is a corporations repurchase of stocks or bonds that it has previously
issued. In the case of stocks, this reduces the number of shares outstanding, giving
each remaining shareholder a larger percentage ownership of the company

19. A corporate action is an event initiated by a public company that affects the
securities (equity or debt) issued by the company. Some corporate actions such as
a dividend (for equity securities) or coupon payment (for debt securities (bonds))
may have a direct financial impact on the shareholders or bondholders; another
example is a call (early redemption) of a debt security.

20.a change in the business strategy of an organization resulting indiversification, c

losing parts of the business, etc, to increase its long-term profitability

21. The term microcap stock (also micro-cap) refers to the stock of public
companies in the United States which have a market capitalization of roughly $50
million to $300 million. The shares of companies with a market capitalization of
less than $50 million are typically referred to as nano-cap stocks.
Small Cap' Refers to stocks with a relatively small market capitalization.
The definition of small cap can vary among brokerages, but generally it is a
company with a market capitalization of between $300 million and $2 billion
A company with a market capitalization between $2 and $10 billion, which is
calculated by multiplying the number of a company's shares outstanding by its
stock price. Mid cap is an abbreviation for the term "middle capitalization".
a market capitalization value of more than $10 billion. Large cap is an
abbreviation of the term "large market capitalization". Market capitalization is
calculated by multiplying the number of a company's shares outstanding by its
stock price per share.

22. National Stock Exchange (NSE) is ranked 10th with a total number of 1,660
listed companies. The listed firms on BSE has increased from 5,115 in January
to 5,174 in October, the WFE data showed. The number of companies listed on
BSE rose by 11 companies in October alone.

23. Dematerialization is the process of converting physical shares into electronic

format. An investor who wants to dematerialize his shares needs to open
a demat account with Depository Participant. Investor surrenders his physical
shares and in turn gets electronic shares in his demat account.

Demat format reduces the risk of bad deliveries

Time and money is saved as you are not dealing in paper now. You need not
go to the notary, broker for taking delivery or submitting the share certificate

Liquidity is very high in case of demat format as whole process in

automated.

All the benefits of corporate action like bonus, stock split, rights etc are
managed through the depository leading to elimination of transit losses

Interest on loan against demat shares are less as compared to physical shares

24. Depository is used to refer to any place where something is deposited for
storage or security purposes. More specifically, it can refer to a company, bank or
an institution that holds and facilitates the exchange of securities. Or a depository
can refer to a depository institution that is allowed to accept monetary deposits
from customers.
25. In India, a Depository Participant (DP) is described as an agent of the
depository. They are the intermediaries between the depository and the investors.
The relationship between the DPs and the depository is governed by an agreement
made between the two under the Depositories Act.
26. The benefits of participation in a depository are:

Quick transfer of securities.

No stamp duty on transfer of securities.

Elimination of risks associated with physical certificates such as bad

delivery, fake securities, etc.

Reduction in paperwork involved in transfer of securities.

Reduction in transaction cost.

27. A Mutual Fund is a pool of money collected from investors and is invested
according to stated investment objectives such as portfolio diversification,
reduction in risk, professional management, tax benefits etc
Equity funds (stocks)
Fixed-income funds (bonds)
Money market funds

28. The per share price of a mutual fund. For a no-load fund, NAV is the price
received by both buyers and sellers. For front loaded mutual funds, NAV is
equivalent of the bid price (what shareholders can get for selling a share), while the
offering price is the price buyers must pay per share (and includes front load). The
NAV is usually calculated at the end of each trading day by taking the closing
prices of all securities owned plus cash and equivalents and subtracting all
liabilities then dividing by the number of shares outstanding, which for open-end
funds, fluctuates depending on daily number of redemptions and purchases

How It Works/Example:
A fund's NAV fluctuates along with the value of its underlying investments. The formula for
NAV is:
NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent Holdings - Fund
Liabilities) / Total Fund Shares Outstanding
Let's assume at the close of trading yesterday that a particular mutual fund held $10,500,000
worth of securities, $2,000,000 of cash, and $500,000 of liabilities. If the fund had 1,000,000
shares outstanding, then yesterday's NAV would be:
NAV = ($10,500,000 + $2,000,000 - $500,000) / 1,000,000 = $12.00
A fund's NAV will change daily as the value of a fund's securities, cash held, liabilities, and the
number of shares outstanding fluctuate.

29. Financial instruments, such as futures and options, which derive their value
from underlying securities including bonds, bills, currencies, and equities.
Equity derivatives are financial derivative products whose value is dependent on
the value of an underlying share or group of shares.
Forwards
Options (Call n put)
Swaps
30. Futures: Investment contracts which specify the quantity and price of a
commodity to be purchased or sold at a later date. On contract date, the buyer must
take physical possession or make delivery of the commodity, which can only be
avoided by closing out the contract(s) before that date. Futures can be used for
speculation or hedging.
Option: A contract that gives the owner the right, if exercised, to buy or sell a
security or basket of securities (index) at a specific price within a specific time
limit. Usually, they are traded as securities themselves, with buyers and sellers
trying to profit from price changes. They are generally available for 1 to 9 month
with some longer term options (called LEAPS) also available for selected
securities.
Call Option: A call option gives the owner the right, but not the obligation, to buy
the underlying stock at a given price (the strike price) by a given time (the
expiration date). The owner of the call is speculating that the underlying stock will
go up in value, hence, increasing the value of the options.
Swaps
Swaps are private agreements between two parties to exchange cash flows in the
future according to a prearranged formula. They can be regarded as portfolios of
forward contracts. The two commonly used swaps are interest rate swaps and
currency swaps.

Interest rate swaps: These involve swapping only the interest related cash flows
between the parties in the same currency.
Currency swaps: These entail swapping both principal and interest between the
parties, with the cash flows in one direction being in a different currency than those
in the opposite direction.
Arbitrage is an act of buying assets (or securities) in one market and selling in
another at higher prices. It takes advantage of a price differential existing in the
prices of the same commodity or security in two or more different markets.
Hedging:An investment strategy of lowering risk by buying securities that have
offsetting risk characteristics. A perfect hedge eliminates risk entirely. Hedging
strategies lower return since there is a cost involved in hedging. For example, a
portfolio manager could short a futures contract which will perfectly offset any
decrease in the value of the portfolio. Options and short selling stock can also be
used for hedging
Speculation: The act of trading in an asset, or conducting a financial transaction,
that has a significant risk of losing most or all of the initial outlay, in expectation of
a substantial gain. With speculation, the risk of loss is more than offset by the
possibility of a huge gain; otherwise, there would be very little motivation to
speculate.
Collateral Management refers to the handling of all tasks related to the monitoring
of collateral posted by a borrower (collateral reporting, processing of margin calls
and returns, monitoring of collateral substitution, notification of corporate events,
processing of securities transfers on behalf of the client, etc.)
Every bank has its individual list of approved securities (a list of companies)
against which the bank provides a loan. Both, resident and non-resident Indians
can take a loan against the shares. Shares must be held in the physical form or in
the demat form.
So, one can get a loan only if the borrower possess shares which are as per the
bank's list. But every lender has a different list so if one lender does not offer the
loan for your shares then you could try another lender.
ALBM is an acronym for automated lending/borrowing mechanism. It is a stocklending product introduced by NSCCL (National Securities Clearing Corporation
Limited) with the primary objective of providing a window for trading members of
NSE to borrow securities/funds to meet their pay-in obligations. ALBM sessions

are held every Wednesday for weekly markets and every day for rolling market.
ALBM trades are carried out at a spot price called "Transaction Price"(TP), while
positions are reversed at a benchmark price called "Securities Lending Price"
(SLP). . ALBM is a means of facilitating sophisticated trading strategies giving
good returns
32. The accounting period for the securities traded on the Exchange. On the NSE,
the cycle begins on Wednesday and ends on the following Tuesday, and on the BSE
the cycle commences on Monday and ends on Friday. At the end of this period, the
obligations of each broker are calculated and the brokers settle their respective
obligations as per the rules, bye-laws and regulations of the Clearing Corporation.
If a transaction is entered on the first day of the settlement, the same will be settled
on the eighth working day excluding the day of transaction. However, if the same
is done on the last day of the settlement, it will be settled on the fourth working
day excluding the day of transaction.
33. Any trade settled through a clearing corporation is termed as the 'Market
Trade'. These trades are done through stock brokers on a stock exchange.
Off Market Trade' is one which is settled directly between two parties without the
involvement of clearing corporation.

34.

On every stock exchange, various settlements are effected everyday such as

daily settlement, auction settlement etc. Each of these settlements is identified by
combination of a market type and a settlement number. You are required to
mention the appropriate settlement details on the delivery instruction slip while
transferring the shares to your broker's account. These settlement details
areavailable on the contract note issued by the broker.
35. . In case of T+2 rolling settlements, the trades taking place on each trading day
are required to be settled on the second working day following the date of trade.
For example, trades of Monday will be settled on Wednesday morning. In this
example, if you have sold securities, you need to make sure that the securities
reach the account of clearing member of the stock exchangelatest by Tuesday.
36. Its possible to buy and sell the same stock several times within a day, unless
the stock is in the trade-to-trade category. Hence, you can settle only your net
outstanding positions at the end of the day. If you buy 500 IBM shares

and sell 250 shares, you will have to pay only for 250
shares at the end of the settlement.
37. The rolling settlement ensures that each day's trade is settled by keeping a
fixed gap of a specified number of working days between a trade and its
settlement. At present, this gap is five working days after the trading day. The
waiting period is uniform for all trades.
38. In Pay-in of securities all the shares' obligations are picked up from the client's
beneficiary account and transferred to Broker pool account. All the shares are then
delivered to the clearing corporation as per obligation with Exchanges.
The expected financial return from an investment over a given period of time.
Payout may be expressed on an overall or periodic basis as either a percentage of
the investment's cost or in a real dollar amount. Payout can also refer to the period
of time in which an investment or a project is expected to recoup its initial capital
investment and become minimally profitable
39. A public sale in which goods or property are sold to the highest bidder.
(auction).