Wednesday, 29 June 2011

accounting glossaory-2

Greetings to fellow blog readers......

Types of Accounts: Basically accounts are three types,
ü    Personal account: Accounts which show transactions with persons are called personal account. It includes accounts in the name of persons, firms, companies.
            In this: Debit the reciver
                       Credit the giver.
            For example: - Naresh a/c, Naresh&co a/c etc…
ü    Real account: Accounts relating to assets is known as real accounts. A separate account is maintained for each asset owned by the business.
              In this: Debit what comes in
                         Credit what goes out
              For example: - Cash a/c, Machinary a/c etc…
ü    Nominal account: Accounts relating to expenses, losses, incomes and gains are known as nominal account.
              In this: Debit expenses and loses
                         Credit incomes and gains
         For example: - Wages a/c, Salaries a/c, commission recived a/c, etc.

Accounting conventions: The term convention denotes customs or traditions which guide the accountant while preparing the accounting statements.
ü    Convention of consistency: Accounting rules, practices should not change from one year to another.
              For example: - If Depreciation on fixed assets is provided on straight line method. It should be done year after year.
ü    Convention of Full disclosure: All accounting statements should be honestly prepared and full disclosure of all important information should be made. All information which is important to assets, creditors, investors should be disclosued in account statements.

Trail Balance: A trail balance is a list of all the balances standing on the ledger accounts and cash book of a concern at any given date.The purpose of the trail balance is to establish accuracy of the books of accounts.
Trading a/c: The first step of the preparation of final account is the preparation of trading account. It is prepared to know the gross margin or trading results of the business.
Profit or loss a/c: It is prepared to know the net profit. The expenditure recording in this a/c is indirect nature.
Balance sheet: It is a statement prepared with a view to measure the exact financial position of the firm or business on a fixed date.
Outstanding Expenses: These expenses are related to the current year but they are not yet paid before the last date of the financial year.
Prepaid Expenses: There are several items of expenses which are paid in advance in the normal course of business operations.
Income and expenditure a/c: In this only the current period incomes and expenditures are taken into consideration while preparing this a/c.
Royalty: It is a periodical payment based on the output or sales for use of a certain asset.
           For example: - Mines, Copyrights, Patent.
Hirepurchase: It is an agreement between two parties. The buyer acquires possession of the goods immediately and agrees to pay the total hire purchase price in instalments.
                Hire purchase price = Cash price + Interest.

Tuesday, 28 June 2011

accounting glossaory

Greetings to fellow blog readers......

Meaning of Accounting: According to American Accounting Association Accounting is “the process of identifying, measuring and communicating information to permit judgment and decisions by the users of accounts”.
Users of Accounts: Generally 2 types. 1. Internal management.
2. External users or Outsiders- Investors, Employees, Lenders, Customers,
Government and other agencies, Public. 
Sub-fields of Accounting:
ü  Book-keeping: It covers procedural aspects of accounting work and embraces record keeping function.
ü  Financial accounting: It covers the preparation and interpretation of financial statements.
ü  Management accounting: It covers the generation of accounting information for management decisions.
ü  Social responsibility accounting: It covers the accounting of social costs incurred by the enterprise.
Fundamental Accounting equation:
                                                Assets = Capital+ Liabilities.
                                           Capital = Assets - Liabilities.
Accounting elements: The elements directly related to the measurement of financial position i.e., for the preparation of balance sheet are Assets, Liabilities and Equity. The elements directly related to the measurements of performance in the profit & loss account are income and expenses.
Four phases of accounting process:
ü    Journalisation of transactions
ü    Ledger positioning and balancing
ü    Preparation of trail balance
ü    Preparation of final accounts.

Book keeping: It is an activity, related to the recording of financial data, relating to business operations in an orderly manner. The main purpose of accounting for business is to as certain profit or loss for the accounting period.
Accounting: It is an activity of analasis and interpretation of the book-keeping records.
Journal: Recording each transaction of the business. 
Ledger: It is a book where similar transactions relating to a person or thing are recorded.
      Types: Debtors ledger
                  Creditor’s ledger
                  General ledger
Concepts: Concepts are necessary assumptions and conditions upon which accounting is based.
ü    Business entity concept: In accounting, business is treated as separate entity from its owners.While recording the transactions in books, it should be noted that business and owners are separate entities.In the transactions of business, personal transactions of the owners should not be mixed.
       For example: - Insurance premium of the owner etc...
ü    Going concern concept: Accounts are recorded and assumed that the business will continue for a long time. It is useful for assessment of goodwill.
ü    Consistency concept: It means that same accounting policies are followed from one period to another.
ü    Accrual concept: It means that financial statements are prepared on merchantile system only.

Sunday, 26 June 2011

Finance Glossaory-part-3

Net Present Value:The Net Present Value technique involves discounting net cash flows for a project, then subtracting net investment from the discounted net cash flows. The result is called the Net Present Value(NPV). If the net present value is positive, adopting the project would add to the value of the company. Whether the company chooses to do that will depend on their selection strategies. If they pick all projects that add to the value of the company they would choose all projects with positive net present values, even if that value is just $1. On the other hand, if they have limited resources, they will rank the projects and pick those with the highest NPV's.
Internal Rate of Return:The internal rate of return (IRR) on a project is the rate of return where the cash inflows (net cash flows) equals the cash outflows (net investment.) The easiest way to find IRR is to use a financial calculator or spreadsheet program.
Bridge Financing :A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations.
Portfolio Management:The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk vs. performance.
             Portfolio management is all about strengths, weaknesses, opportunities, and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and numerous other trade-offs encountered in the attempt to maximize return at a given appetite for risk
Code Sharing: Code sharing is a commercial agreement between two airlines that allows an airline to put its two-letter identification code on the flights of another airline as they appear in computerized reservations systems and in the Official Airline Guide.  For example, US Airways' "US" code is used by the ten US Airways Express airlines.
             Additionally, US Airways and United Airlines have announced a marketing agreement that includes plans for code share flight within the U.S., and between the U.S. and points in Asia, Europe, Latin America and the Caribbean. Customers will be able to fly on a US Airways airplane from their home town to a city served by both US Airways and United, and then continue on a United aircraft to their final destination using the US Airways ticket designator. This will allow US Airways customers to have the benefits of a single airline ticket to destinations not previously available in the US Airways network.  Airlines that share codes typically coordinate schedules to minimize connection times as well as provide additional customer services, such as one-stop check-in and baggage checked through to the final destination.
Activity Based Budgeting - ABB :A method of budgeting in which activities that incur costs in each function of an organization are established and relationships are defined between activities. This information is then used to decide how much resource should be allocated to each activity.
Independent Director: In order for a director to qualify as an
Independent Director: In order for a director to qualify as an
"independent director," the Board must affirmatively determine that the director has no material relationship with Occidental (either as a partner, stockholder or officer of an organization that has a relationship with Occidental) that would preclude that nominee from being an independent director. 
What is a nominee director/manager?
The term is meant to imply that a client or clients who are the majority shareholders or  majority member certificate holders, have nominated Nevada First Holdings to appoint a Director or Managing Member and oversee that the Director/Manager completes their responsibilities. At NFH we are proud to offer Professional  Director/Manager Services. It is important to understand that Directors/Managers have a responsibility to the shareholders/certificate holders that all legal responsibilities of the mangers of the business have been reported annually and that their responsibilities according to the By-Laws/Operating Agreement have been satisfied.
Sec 313     -     Appointment and term of office of alternate directors.
The Board of directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called "the original director") during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.
Intangible Asset :An asset that is not physical in nature.
            Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets.
Why have and what is a Nominee Director?
Our nominee director service is used to ensure the highest degree of privacy and confidentiality.
Under the law of some countries information on directors and/or shareholders must be registered in the public files of the Companies Registry. Therefore only by using nominee directors and/or shareholders can the client's anonymity and confidentiality be ensured.
     Third party directors with residential status in a fiscally neutral country are used so that the offshore company cannot be considered resident for tax purposes and liable to tax at local rates on worldwide income in countries with onshore legislation.
        The essence of a nominee service is that it is the names of the nominee directors and/or shareholders that are indicated in the corporate documentation, according to their designation. Thus the names of the company's beneficial owners are not disclosed to the Companies Registry, so that clients are ensured the utmost confidentiality.
      At the same time the appointed nominees are not actually entitled to manage the company. We can provide the beneficial owner with a Power of Attorney empowering him to run the business, manage the company's activities and open and operate the company's bank accounts.
The basic function of the Nominee Director is to shield working executives of Limited and other companies from the public disclosure requirements that exist in the UK and other jurisdictions. It is a perfectly legal device which preserves the privacy of an individual. It is designed to help a person who would rather not disclose their interest or association with a given corporate body. Anyone performing a Company Search on a company with a Nominee Director would be unable to discover in whose name the Nominee Director was registered.
There are however limitations to the function of the Nominee Director. The Nominee is a director of a company in name only and has no other powers or responsibilities.
    The Nominee Director cannot and will not enter into any business contract or financial or moral commitment. The Nominee Director cannot sign any official forms or verify that any information provided to Government Agencies, including Tax Authorities, is correct.
Since the address of the Nominee Director will be one of ours, we will from time to time receive correspondence which will require the attention of the person requesting the Nominee Director Service. As part of the service we will forward these documents.
        Please note that this address should not be used for any trading purposes or general correspondence, or for any form of advertising. The address is only to be used to comply with the requirements of the Companies Act 1985 in relation to official mail and documents. 

Finance Glossaory-part-2

Futures: A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.
Seed Capital: The initial equity capital used to start a new venture or business. This initial amount is usually quite small because the venture is still in the idea or conceptual stage. Also, there's a high risk that the venture will fail.
Institutional Investor: A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. Institutional investors face less protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves.
Disinvestment: 1. The action of an organization or government selling or liquidating an asset or subsidiary. Also known as "divestiture".
2. A reduction in capital expenditure, or the decision of a company not to replenish depleted capital goods.
Underwriter: A company or other entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter's distribution network.
Balance of Trade: The largest component of a country's balance of payments. It is the difference between exports and imports. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.
Balance of Payments: A record of all transactions made by one particular country during a certain period of time. It compares the amount of economic activity between a country and all other countries.
Bridge Financing: A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations.
Diversification: A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance.
Capital Lease: A lease considered to have the economic characteristic of asset ownership.
Operating Lease :A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset.
Dematerialization—DEMAT: The move from physical certificates to electronic book keeping. Actual stock certificates are slowly being removed and retired from circulation in exchange for electronic recording.
Market Segmentation : A marketing term describing the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action.
FMCG is an acronym for Fast Moving Consumer Goods. FMCG is a classification that refers to wide range of frequently purchased consumer products including: toiletries, soaps, cosmetics, teeth cleaning products, shaving products, detergents, other non-durables such as glassware, bulbs, batteries, and plastic goods such as buckets. ‘Fast Moving’ is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year. The category may include pharmaceuticals, consumer electronics and packaged food products and drinks, although these are often categorised separately. The term Consumer Packaged Goods (CPG) is used interchangeably with FMCG.
Book Building:The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors.
An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay.

What is Reverse Book Building (Delisting of shares)?
The Reverse Book Building is a mechanism provided for capturing the sell orders on online basis from the share holders through respective Book Running Lead Managers (BRLMs) which can be used by companies intending to delist its shares through buy back process. In the Reverse Book Building scenario, the Acquirer/Company offers to buy back shares from the share holders. The Reverse Book Building is basically a process used for efficient price discovery. It is a mechanism where, during the period for which the Reverse Book Building is open, offers are collected from the share holders at various prices, which are above or equal to the floor price. The buy back price is determined after the offer closing date.
What is Anti Dumping Duty?
Where any article is exported from any country or territory to India at less than its normal value then upon the importation of such article to India the central Govt. may be notification in the official gazette impose an anti dumping duty not exceeding the margin of dumping in relation to such article. For purpose of identification, assessment and collection of Anti Dumping Duty on dumped articles and for determination of injury, the Govt. has appointed Additional Secretary to the Govt. of India Ministry of Commerce as designated Authority for purpose of above rules.

It is to be understood that imposition of Anti Dumping Duty is based on Commodity to Commodity, country to country and suppliers in Exporting countries.
Capital Budgeting Techniques
There are a number of capital budgeting techniques available to an analyst. For our purposes, we will only review net present value and internal rate of return.

Finance Glossaory

Commercial Paper : An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory. Maturities typically range from 2 to 270 days. Commercial paper is available in a wide range of denominations, can be either discounted or interest-bearing, and usually have a limited or nonexistent secondary market. Commercial paper is usually issued by companies with high credit ratings, meaning that the investment is almost always relatively low risk.
Credit Rating : An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities. Credit is important since individuals and corporations with poor credit will have difficulty finding financing, and will most likely have to pay more due to the risk of default.
Venture Capital : VC. Funds made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided. also called risk capital.
Letter of Credit : A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase the bank will be required to cover the full or remaining amount of the purchase.
Book Building : The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors.
Value Added Tax : A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. Value-added tax is most often used in the European Union. The amount of VAT that the user pays is the cost of the product less any of the costs of materials used in the product that have already been taxed.
Excise Duty
  1. An indirect tax charged on the sale of a particular good.
  2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS.
SEBI: The regulatory body for the investment market in India. The purpose of this board is to maintain stable and efficient markets by creating and enforcing regulations in the market place. The Securities and Exchange Board of India is similar to the U.S. SEC. The SEBI is relatively new (1992) but is a vital component in improving the quality of the financial markets in India both to attract foreign investors and to protect Indian investors. 
Sensex: The commonly used name for the Bombay Stock Exchange Sensitive Index - an index composed of 30 of the largest and most actively traded stocks on the Bombay Stock Exchange (BSE).
Nifty : The 50 stocks that were most favored by institutional investors in the 1960s and 1970s. Companies in this group were usually characterized by consistent earnings growth and high P/E ratios.
Meetings  Classified under three categories
1. Share Holders Meetings
2. Board Meetings
3. Meeting of Board Commitees
Share Holders Meetings are of three types
  1. Statutory Meeting
  2. Annual General Meeting
  3. Extra-Ordinary General Meeting
Statutory Meeting : Every company limited by shares, and every company limited by guarantee and having a share capital, shall, within a period of not less than one month nor more than six months from the date at which the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called " the statutory meeting.
Sec 166    -     Annual general meeting : A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings.
 Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it ; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next :
Provided that a company may hold its first annual general meeting within a period of not more than eighteen months from the date of its incorporation ; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation or in the following year :
Provided further that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a period not exceeding three months.
Quorum: The minimum acceptable level of individuals with a vested interest in a company needed to make the proceedings of a meeting valid under the corporate charter.
Proxy: An agent legally authorized to act on behalf of another party. Shareholders not attending a company's annual meeting may choose to vote their shares by proxy by allowing someone else to cast votes on their behalf.
Qualification Shares: It shall be the duty of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director. The nominal value of the qualification shares shall not exceed five thousand rupees, or the nominal value of one share where it exceeds five thousand rupees.