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SMMTuitionPoint:ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS

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ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS
ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS

1.Definitionofaccounting:theartofrecording,classifyingandsummarizinginasignificantmannerandintermsof
money,transactionsandeventswhichare,inpartatleastofafinancialcharacterandinterpretingtheresultsthereof.
2. Book keeping: It is mainly concerned with recording of financial data relating to the business operations in a
significantandorderlymanner.
3.Conceptsofaccounting:
A.Separateentityconcept
B.Goingconcernconcept
C.Moneymeasurementconcept
D.Costconcept
E.Dualaspectconcept
F.Accountingperiodconcept
G.Periodicmatchingofcostsandrevenueconcept
H.Realizationconcept.

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4Conventionsofaccounting:
A.Conservatism
B.Fulldisclosure
C.Consistency
D.Materiality
5.Systemsofbookkeeping:
A.singleentrysystem
B.doubleentrysystem
6.Systemsofaccounting:
A.Cashsystemaccounting
B.Mercantilesystemofaccounting.
7.Principlesofaccounting:
A.Personala/c:Debitthereceiver
Creditthegiver
B.Reala/c:Debitwhatcomesin
Creditwhatgoesout
C.Nominala/c:Debitallexpensesandlosses
Creditallgainsandincomes

8.Meaningofjournal:Journalmeanschronologicalrecordoftransactions.
9.Meaningofledger:Ledgerisasetofaccounts.Itcontainsallaccountsofthebusinessenterprise
whetherreal,nominal,personal.
10.Posting:Itmeanstransferringthedebitandcredititemsfromthejournaltotheirrespectiveaccounts
intheledger.
11.Trialbalance:Trialbalanceisastatementcontainingthevariousledgerbalancesonaparticular
date.
12.Creditnote:Thecustomerwhenreturnsthegoodsgetcreditforthevalueofthegoodsreturned.A
creditnoteissenttohimintimatingthathisa/chasbeencreditedwiththevalueofthegoodsreturned.
13.Debitnote:Whenthegoodsarereturnedtothesupplier,adebitnoteissenttohimindicatingthat
hisa/chasbeendebitedwiththeamountmentionedinthedebitnote.
14.Contraentry:Whichaccountingentryisrecordedonboththedebitandcreditsideofthecashbook

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14.Contraentry:Whichaccountingentryisrecordedonboththedebitandcreditsideofthecashbook
isknownasthecontraentry.
15.Pettycashbook:Pettycashismaintainedbybusinesstorecordpettycashexpensesofthe
business,suchaspostage,cartage,stationery,etc.
16.Promisorynote:aninstrumentinwritingcontaininganunconditionalundertakingsignedbythe
maker,topaycertainsumofmoneyonlytoortotheorderofacertainpersonortothebareroftheinstrument.
17.Cheque:Abillofexchangedrawnonaspecifiedbankerandpayableondemand.
18.StaleCheque:Astalechequemeansnotvalidofchequethatmeansmorethansixmonthsthe
chequeisnotvalid.
20.Bankreconciliationstatement:Itisastatementreconcilingthebalanceasshownbythebank
passbookandthebalanceasshownbytheCashBook.Obj:toknowthedifference&passnecessarycorrecting,
adjustingentriesinthebooks.
21.Matchingconcept:Matchingmeansrequirespropermatchingofexpensewiththerevenue.
22.Capitalincome:Thetermcapitalincomemeansanincomewhichdoesnotgrowoutoforpertainto
therunningofthebusinessproper.
23.Revenueincome:Theincome,whicharisesoutofandinthecourseoftheregularbusiness
transactionsofaconcern.
24.Capitalexpenditure:Itmeansanexpenditurewhichhasbeenincurredforthepurposeofobtaining
alongtermadvantageforthebusiness.
25.Revenueexpenditure:Anexpenditurethatincurredinthecourseofregularbusinesstransactions
ofaconcern.
26.Differedrevenueexpenditure:Anexpenditure,whichisincurredduringanaccountingperiodbut
isapplicablefurtherperiodsalso.Eg:heavyadvertisement.
27.Baddebts:Baddebtsdenotetheamountlostfromdebtorstowhomthegoodsweresoldoncredit.
28.Depreciation:Depreciationdenotesgraduallyandpermanentdecreaseinthevalueofassetdueto
wearandtear,technologychanges,lapsoftimeandaccident.
29.Fictitiousassets:Theseareassetsnotrepresentedbytangiblepossessionorproperty.Examplesof
preliminaryexpenses,discountonissueofshares,debitbalanceintheprofitAndlossaccountwhenshownon
theassetssideinthebalancesheet.
30.IntanglbeAssets:Intangibleassetsmeantheassetswhichisnothavingthephysicalappearance.
Anditshavetherealvalue,itshownontheassetssideofthebalancesheet.
31.AccruedIncome:Accruedincomemeansincomewhichhasbeenearnedbythebusinessduring
theaccountingyearbutwhichhasnotyetbeendueand,therefore,hasnotbeenreceived.
32.OutstandingIncome:OutstandingIncomemeansincomewhichhasbecomedueduringthe
accountingyearbutwhichhasnotsofarbeenreceivedbythefirm.
33.Suspenseaccount:Thesuspenseaccountisanaccounttowhichthedifferenceinthetrialbalance
hasbeenputtemporarily.
34.Depletion:Itimpliesremovalofanavailablebutnotreplaceablesource,Suchasextractingcoal
fromacoalmine.
35.Amortization:Theprocessofwritingofintangibleassetsistermasamortization.
36.Dilapidations:Thetermdilapidationstodamagedonetoabuildingorotherpropertyduring
tenancy.
37.Capitalemployed:Thetermcapitalemployedmeanssumoftotallongtermfundsemployedinthe
business.i.e.
(Sharecapital+reserves&surplus+longtermloans(nonbusinessassets+fictitiousassets)
38.Equityshares:Thoseshareswhicharenothavingpref.rightsarecalledequityshares.
39.Pref.shares:Thoseshareswhicharecarryingthepref.rightsarecalledpref.sharesPref.rightsin
respectoffixeddividend.Pref.righttorepaymentofcapitalintheeventofcompanywindingup.
40.Leverage:Itisaforceappliedataparticularworktogetthedesiredresult.
41.Operatingleverage:theoperatingleveragetakesplacewhenachangesinrevenuegreaterchanges
inEBIT.
42.Financialleverage:itisnothingbutaprocessofusingdebtcapitaltoincreasetherateofreturnon
equity
43.Combineleverage:Itisusedtomeasureofthetotalriskofthefirm=operatingrisk+financialrisk.

44.Jointventure:Ajointventureisanassociationoftwoormorethepersonswhocombinedforthe
executionofaspecifictransactionanddividetheprofitorlosstheirofanagreedratio.
45.Partnership:Partnershipistherelationb/wthepersonswhohaveagreedtosharetheprofitsof
businesscarriedonbyalloranyofthemactingforall.
46.Factoring:Itisanarrangementunderwhichafirm(calledborrower)receivesadvancesagainstits
receivables,fromfinancialinstitutions(calledfactor)
47.Capitalreserve:Thereservewhichtransferredfromthecapitalgainsiscalledcapitalreserve.
48.Generalreserve:thereservewhichistransferredfromnormalprofitsofthefirmiscalledgeneral
reserve
49.FreeCash:Thecashnotforanyspecificpurposefreefromanyencumbrancelikesurpluscash.
50.MinorityInterest:Minorityinterestreferstotheequityoftheminorityshareholdersinasubsidiary
company.
51.Capitalreceipts:Capitalreceiptsmaybedefinedasnonrecurringreceiptsfromtheownerofthe
businessorlenderofthemoneycratingaliabilitytoeitherofthem.
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businessorlenderofthemoneycratingaliabilitytoeitherofthem.
52.Revenuereceipts:RevenuereceiptsmaydefinedasArecurringreceiptsagainstsaleofgoodsin
thenormalcourseofbusinessandwhichgenerallytheresultofthetradingactivities.
53.MeaningofCompany:Acompanyisanassociationofmanypersonswhocontributemoneyor
moneysworthtocommonstockandemploysitforacommonpurpose.Thecommonstocksocontributedis
denotedinmoneyandisthecapitalofthecompany.
54.Typesofacompany:
1.Statutorycompanies
2.Governmentcompany
3.Foreigncompany
4.Registeredcompanies:
A.Companieslimitedbyshares
B.Companieslimitedbyguarantee
C.Unlimitedcompanies
D.privatecompany
E.publiccompany

55.Privatecompany:Aprivateco.iswhichbyitsAOA:Restrictstherightofthememberstotransfer
ofsharesLimitstheno.Ofmembers50.ProhibitsanyInvitationtothepublictosubscribeforitssharesor
debentures.
56.Publiccompany:Acompany,thearticlesofassociationofwhichdoesnotcontaintherequisite
restrictionstomakeitaprivatelimitedcompany,iscalledapubliccompany.
57.Characteristicsofacompany:
>Voluntaryassociation
>Separatelegalentity
>Freetransferofshares
>Limitedliability
>Commonseal
>Perpetualexistence.
58.Formationofcompany:
>Promotion
>Incorporation
>Commencementofbusiness
59.Equitysharecapital:Thetotalsumofequitysharesiscalledequitysharecapital.
60.Authorizedsharecapital:Itisthemaximumamountofthesharecapital,whichacompanycan
raiseforthetimebeing.
61.Issuedcapital:Itisthatpartoftheauthorizedcapital,whichhasbeenallottedtothepublicfor
subscriptions.
62.Subscribedcapital:itisthepartoftheissuedcapital,whichhasbeenallottedtothepublic
63.Calledupcapital:Ithasbeenportionofthesubscribedcapitalwhichhasbeencalledupbythe
company.
64.Paidupcapital:Itistheportionofthecalledupcapitalagainstwhichpaymenthasbeenreceived.
65.Debentures:Debentureisacertificateissuedbyacompanyunderitssealacknowledgingadebt
duebyittoitsholder.
66.Cashprofit:cashprofitistheprofititisoccurredfromthecashsales.

67.DeemedpublicLtd.Company:Aprivatecompanyisasubsidiarycompanytopubliccompanyit
satisfiesthefollowingterms/conditionsSec3(1)3:
1.Havingminimumsharecapital5lakhs
2.Acceptinginvestmentsfromthepublic
3.Norestrictionofthetransferableofshares
4.Norestrictionofno.ofmembers.
5.Acceptingdepositsfromtheinvestors
68.Secretreserves:Secretreservesarereservestheexistenceofwhichdoesnotappearonthefaceof
balancesheet.Insuchasituation,netassetspositionofthebusinessisstrongerthanthatdisclosedbythe
balancesheet.
Thesereservesarecreatedby:
1.Excessivedepotanasset,excessiveovervaluationofaliability.
2.Completeeliminationofanasset,orundervaluationofanasset.
69.Provision:provisionusuallymeansanyamountwrittenofforretainedbywayofproviding
depreciation,renewalsordiminutionsinthevalueofassetsorretainedbywayofprovidingforanyknown
liabilityofwhichtheamountcannotbedeterminedwithsubstantialaccuracy.
70.Reserve:Theprovisioninexcessoftheamountconsiderednecessaryforthepurposeitwas
originallymadeisalsoconsideredasreserveProvisionischargeagainstprofitswhilereservesisan
appropriationofprofitsCreationofreserveincreaseproprietorsfundwhilecreationofprovisionsdecreaseshis
fundsinthebusiness.
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fundsinthebusiness.
71.Reservefund:Thetermreservefundmeanssuchreserveagainstwhichclearlyinvestmentetc.,
72.Undisclosedreserves:Sometimesareserveiscreatedbutitsidentityismergedwithsomeothera/c
orgroupofaccountssothattheexistenceofthereserveisnotknownsuchreserveiscalledanundisclosed
reserve.
73.Financemanagement:Financialmanagementdealswithprocurementoffundsandtheireffective
utilizationinbusiness.

74.Objectivesoffinancialmanagement:financialmanagementhavingtwoobjectivesthatIs:
1.Profitmaximization:Thefinancemanagerhastomakehisdecisionsinamannersothattheprofits
oftheconcernaremaximized.
2.Wealthmaximization:Wealthmaximizationmeanstheobjectiveofafirmshouldbetomaximizeits
valueorwealth,orvalueofafirmisrepresentedbythemarketpriceofitscommonstock.
75.Functionsoffinancialmanager:
>Investmentdecision
>Dividenddecision
>Financedecision
>Cashmanagementdecisions
>Performanceevaluation
>Marketimpactanalysis
76.Timevalueofmoney:Thetimevalueofmoneymeansthatworthofarupeereceivedtodayis
differentfromtheworthofarupeetobereceivedinfuture.
77.Capitalstructure:Itreferstothemixofsourcesfromwherethelongtermfundsrequiredina
businessmayberaisedinotherwords,itreferstotheproportionofdebt,preferencecapitalandequitycapital.
78.Optimumcapitalstructure:Capitalstructureisoptimumwhenthefirmhasacombinationof
equityanddebtsothatthewealthofthefirmismaximum.
79.Wacc:Itdenotesweightedaveragecostofcapital.Itisdefinedastheoverallcostofcapital
computedbyreferencetotheproportionofeachcomponentofcapitalasweights.
80.Financialbreakevenpoint:ItdenotesthelevelatwhichafirmsEBITisjustsufficienttocover
interestandpreferencedividend.
81.Capitalbudgeting:Capitalbudgetinginvolvestheprocessofdecisionmakingwithregardto
investmentinfixedassets.Ordecisionmakingwithregardtoinvestmentofmoneyinlongtermprojects.
82.Paybackperiod:Paybackperiodrepresentsthetimeperiodrequiredforcompleterecoveryofthe
initialinvestmentintheproject.
83.ARR:Accountingoraverageratesofreturnmeanstheaverageannualyieldontheproject.
84.NPV:TheNetpresentvalueofaninvestmentproposalisdefinedasthesumofthepresentvaluesof
allfuturecashinflowslessthesumofthepresentvaluesofallcashoutflowsassociatedwiththeproposal.

85.Profitabilityindex:Wheredifferentinvestmentproposaleachinvolvingdifferentinitialinvestments
andcashinflowsaretobecompared.
86.IRR:Internalrateofreturnistherateatwhichthesumtotalofdiscountedcashinflowsequalsthe
discountedcashoutflow.
87.Treasurymanagement:Itmeansitisdefinedastheefficientmanagementofliquidityandfinancial
riskinbusiness.
88.Concentrationbanking:Itmeansidentifylocationsorplaceswherecustomersareplacedandopen
alocalbanka/cineachoftheselocationsandopenlocalcollectioncanter.
89.Marketablesecurities:Surpluscashcanbeinvestedinshortterminstrumentsinordertoearn
interest.
90.Ageingschedule:Inanageingschedulethereceivablesareclassifiedaccordingtotheirage.
91.Maximumpermissiblebankfinance(MPBF):Itisthemaximumamountthatbankscanlenda
borrowertowardshisworkingcapitalrequirements.
92.Commercialpaper:Acpisashorttermpromissorynoteissuedbyacompany,negotiableby
endorsementanddelivery,issuedatadiscountonfacevalueasmaybedeterminedbytheissuingcompany.
93.Bridgefinance:Itreferstotheloanstakenbythecompanynormallyfromcommercialbanksfora
shortperiodpendingdisbursementofloanssanctionedbythefinancialinstitutions.
94.Venturecapital:Itreferstothefinancingofhighriskventurespromotedbynewqualified
ntrepreneurswhorequirefundstogiveshapetotheirideas.
95.Debtsecuritization:Itisamodeoffinancing,whereinsecuritiesareissuedonthebasisofa
packageofassets(calledassetpool).
96.Leasefinancing:Leasingisacontractwhereoneparty(owner)purchasesassetsandpermitsits
viewsbyanotherparty(lessee)overaspecifiedperiod
97.TradeCredit:Itrepresentscreditgrantedbysuppliersofgoods,inthenormalcourseofbusiness.
98.Overdraft:Underthisfacilityafixedlimitisgrantedwithinwhichtheborrowerallowedto
overdrawfromhisaccount.
99.Cashcredit:Itisanarrangementunderwhichacustomerisallowedanadvanceuptocertainlimit
againstcreditgrantedbybank.
100.Cleanoverdraft:Itreferstoanadvancebywayofoverdraftfacility,butnotbackbyanytangible
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100.Cleanoverdraft:Itreferstoanadvancebywayofoverdraftfacility,butnotbackbyanytangible
security.
101.Sharecapital:Thesumtotalofthenominalvalueofthesharesofacompanyiscalledshare
capital.

102.Fundsflowstatement:Itisthestatementdealswiththefinancialresourcesforrunningbusiness
activities.Itexplainshowthefundsobtainedandhowtheyused.
103.Sourcesoffunds:Therearetwosourcesoffundsinternalsourcesandexternalsources.Internal
source:Fundsfromoperationsistheonlyinternalsourcesoffundsandsomeimportantpointsaddtoittheydo
notresultintheoutflowoffunds
(a)Depreciationonfixedassets
(b)Preliminaryexpensesorgoodwillwrittenoff,LossonsaleoffixedassetsDeductthefollowing
items,astheydonotincreasethefunds:
Profitonsaleoffixedassets,profitonrevaluationOffixedassets
Externalsources:(a)Fundsfromlongtermloans
(b)Saleoffixedassets
(c)Fundsfromincreaseinsharecapital
104.Applicationoffunds:(a)Purchaseoffixedassets(b)Paymentofdividend(c)Paymentoftax
liability(d)Paymentoffixedliability
105.ICD(Intercorporatedeposits):Companiescanborrowfundsforashortperiod.Forexample6
monthsorlessfromanothercompanywhichhavesurplusliquidity?Suchdepositsmadebyonecompanyin
anothercompanyarecalledICD.
106.Certificateofdeposits:TheCDisadocumentoftitlesimilartoafixeddepositreceiptissuedby
banksthereisnoprescribedinterestrateonsuchCDsitisbasedontheprevailingmarketconditions.
107.Publicdeposits:Itisveryimportantsourceofshorttermandmediumtermfinance.Thecompany
canacceptPDfrommembersofthepublicandshareholders.Ithasthematurityperiodof6monthsto3years.
108.Euroissues:TheeuroissuesmeansthattheissueislistedonaEuropeanstockExchange.The
subscriptioncancomefromanypartoftheworldexceptIndia.
109.GDR(Globaldepositoryreceipts):Adepositoryreceiptisbasicallyanegotiablecertificate,
dominatedinusdollarsthatrepresentsanonUScompanypubliclytradedinlocalcurrencyequityshares.
110.ADR(Americandepositoryreceipts):DepositoryreceiptsissuedbyacompanyintheUSAare
knownasADRs.Suchreceiptsaretobeissuedinaccordancewiththeprovisionsstipulatedbythesecurities
Exchangecommission(SEC)ofUSAlikeSEBIinIndia.

111.Commercialbanks:Commercialbanksextendforeigncurrencyloansforinternationaloperations,
justlikerupeeloans.Thebanksalsoprovidedoverdraft.
112.Developmentbanks:Itofferslongtermandmediumtermloansincludingforeigncurrencyloans
113.Internationalagencies:InternationalagenciesliketheIFC,IBRD,ADB,IMFetc.provideindirect
assistanceforobtainingforeigncurrency.
114.Seedcapitalassistance:TheseedcapitalassistanceschemeisdesiredbytheIDBIfor
professionallyortechnicallyqualifiedentrepreneursandpersonspossessingrelevantexperienceandskillsand
entrepreneurtraits.
115.Unsecuredloans:Itconstitutesasignificantpartoflongtermfinanceavailabletoanenterprise.
116.Cashflowstatement:Itisastatementdepictingchangeincashpositionfromoneperiodto
another.
117.Sourcesofcash:
Internalsources
(a)Depreciation
(b)Amortization
(c)Lossonsaleoffixedassets
(d)Gainsfromsaleoffixedassets
(e)Creationofreserves
Externalsources
(a)Issueofnewshares
(b)Raisinglongtermloans
(c)Shorttermborrowings
(d)Saleoffixedassets,investments
118.Applicationofcash:
(a)Purchaseoffixedassets
(b)Paymentoflongtermloans
(c)Decreaseindeferredpaymentliabilities
(d)Paymentoftax,dividend
(e)Decreaseinunsecuredloansanddeposits

119.Budget:Itisadetailedplanofoperationsforsomespecificfutureperiod.Itisanestimateprepared
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119.Budget:Itisadetailedplanofoperationsforsomespecificfutureperiod.Itisanestimateprepared
inadvanceoftheperiodtowhichitapplies.
120.Budgetarycontrol:Itisthesystemofmanagementcontrolandaccountinginwhichalloperations
areforecastedandsoforaspossibleplannedahead,andtheactualresultscomparedwiththeforecastedand
plannedones.
121.Cashbudget:Itisasummarystatementoffirmsexpectedcashinflowandoutflowovera
specifiedtimeperiod.
122.Masterbudget:Asummaryofbudgetschedulesincapsuleformmadeforthepurposeof
presentinginonereportthehighlightsofthebudgetforecast.
123.Fixedbudget:Itisabudget,whichisdesignedtoremainunchangedirrespectiveofthelevelof
activityactuallyattained.
124.Zerobasebudgeting:Itisamanagementtoolwhichprovidesasystematicmethodfor
evaluatingalloperationsandprogrammes,currentofnewallowsforbudgetreductionsandexpansionsina
rationalinnerandallowsreallocationofsourcefromlowtohighpriorityprograms.
125.Goodwill:Thepresentvalueoffirmsanticipatedexcessearnings.
126.BRS:Itisastatementreconcilingthebalanceasshownbythebankpassbookandbalanceshown
bythecashbook.
127.ObjectiveofBRS:Theobjectiveofpreparingsuchastatementistoknowthecausesofdifference
betweenthetwobalancesandpassnecessarycorrectingoradjustingentriesinthebooksofthefirm.
128.Responsibilitiesofaccounting:Itisasystemofcontrolbydelegatingandlocatingthe
Responsibilitiesforcosts.
129.Profitcentre:Acentrewhoseperformanceismeasuredintermsofboththeexpenseincursand
revenueitearns.
130.Costcentre:Alocation,personoritemofequipmentforwhichcostmaybeascertainedandused
forthepurposeofcostcontrol.
131.Cost:Theamountofexpenditureincurredontoagiventhing.
132.Costaccounting:Itisthusconcernedwithrecording,classifying,andsummarizingcostsfor
determinationofcostsofproductsorservicesplanning,controllingandreducingsuchcostsandfurnishingof
informationmanagementfordecisionmaking.

133.Elementsofcost:
(A)Material
(B)Labour
(C)Expenses
(D)Overheads
134.Componentsoftotalcosts:(A)Primecost(B)Factorycost
(C)Totalcostofproduction(D)Totalc0st
135.Primecost:Itconsistsofdirectmaterialdirectlabouranddirectexpenses.Itisalsoknownasbasic
orfirstorflatcost.
136.Factorycost:Itcomprisesprimecost,inadditionfactoryoverheadswhichincludecostofindirect
materialindirectlabourandindirectexpensesincurredinfactory.Thiscostisalsoknownasworkscostor
productioncostormanufacturingcost.
137.Costofproduction:Inofficeandadministrationoverheadsareaddedtofactorycost,officecostis
arrivedat.
138.Totalcost:Sellinganddistributionoverheadsareaddedtototalcostofproductiontogetthetotal
costorcostofsales.
139.Costunit:Aunitofquantityofaproduct,serviceortimeinrelationtowhichcostsmaybe
ascertainedorexpressed.
140.Methodsofcosting:(A)Jobcosting(B)Contractcosting(C)Processcosting(D)Operationcosting
(E)Operatingcosting(F)Unitcosting(G)Batchcosting.
141.Techniquesofcosting:(a)marginalcosting(b)directcosting(c)absorptioncosting(d)uniform
costing.
142.Standardcosting:standardcostingisasystemunderwhichthecostoftheproductisdetermined
inadvanceoncertainpredeterminedstandards.
143.Marginalcosting:itisatechniqueofcostinginwhichallocationofexpendituretoproductionis
restrictedtothoseexpenseswhichariseasaresultofproduction,i.e.,materials,labour,directexpensesand
variableoverheads.
144.Derivative:derivativeisproductwhosevalueisderivedfromthevalueofoneormorebasic
variablesofunderlyingasset.
145.Forwards:aforwardcontractiscustomizedcontractsbetweentwoentitiesweresettlementtakes
placeonaspecificdateinthefutureattodayspreagreedprice.
146.Futures:Afuturecontractisanagreementbetweentwopartiestobuyorsellanassetatacertain
timeinthefutureatacertainprice.Futurecontractsarestandardizedexchangetradedcontracts.
147.Options:Anoptiongivestheholderoftheoptiontherighttodosomething.Theoptionholder
optionmayexerciseornot.
148.Calloption:Acalloptiongivestheholdertherightbutnottheobligationtobuyanassetbya
certaindateforacertainprice.
149.Putoption:Aputoptiongivestheholdertherightbutnotobligationtosellanassetbyacertain
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149.Putoption:Aputoptiongivestheholdertherightbutnotobligationtosellanassetbyacertain
dateforacertainprice.
150.Optionprice:Optionpriceisthepricewhichtheoptionbuyerpaystotheoptionseller.Itisalso
referredtoastheoptionpremium.
151.Expirationdate:Thedatewhichisspecifiedintheoptioncontractiscalledexpirationdate.
152.Europeanoption:Itistheoptionatexercisedonlyonexpirationdateitself.
153.Basis:Basismeansfuturepriceminusspotprice.
154.Costofcarry:Therelationbetweenfuturepricesandspotpricescanbesummarizedintermsof
whatisknownascostofcarry.
155.Initialmargin:Theamountthatmustbedepositedinthemargina/catthetimeoffirstenteredinto
futurecontractisknownasinitialmargin.
156Maintenancemargin:Thisissomewhatlowerthaninitialmargin.
157.Marktomarket:Infuturemarket,attheendoftheeachtradingday,themargina/cisadjustedto
reflecttheinvestorsgainsorlossdependinguponthefuturessellingprice.Thisiscalledmarktomarket.
158.Baskets:basketoptionsareoptionsonportfolioofunderlyingasset.
159.Swaps:swapsareprivateagreementsbetweentwopartiestoexchangecashflowsinthefuture
accordingtoapreagreedformula.
160.Impactcost:Impactcostiscostitismeasureofliquidityofthemarket.Itreflectsthecostsfaced
whenactuallytradinginindex.
161.Hedging:Hedgingmeansminimizetherisk.
162.Capitalmarket:Capitalmarketisthemarketitdealswiththelongterminvestmentfunds.It
consistsoftwomarkets1.primarymarket2.secondarymarket.
163.Primarymarket:Thosecompanieswhichareissuingnewsharesinthismarket.Itisalsocalled
newissuemarket.
164.Secondarymarket:Secondarymarketisthemarketwheresharesbuyingandselling.InIndia
secondarymarketiscalledstockexchange.

165.Arbitrage:Itmeanspurchaseandsaleofsecuritiesindifferentmarketsinordertoprofitfrom
pricediscrepancies.Inotherwordsarbitrageisawayofreducingriskoflosscausedbypricefluctuationsof
securitiesheldinaportfolio.
166.Meaningofratio:Ratiosarerelationshipsexpressedinmathematicaltermsbetweenfigureswhich
areconnectedwitheachotherinsamemanner.
167.Activityratio:Itisameasureofthelevelofactivityattainedoveraperiod.
168.Mutualfund:Amutualfundisapoolofmoney,collectedfrominvestors,andisinvested
accordingtocertaininvestmentobjectives.
169.Characteristicsofmutualfund:OwnershipoftheMFisinthehandsoftheoftheinvestorsMF
managedbyinvestmentprofessionalsThevalueofportfolioisupdatedeveryday
170.AdvantageofMFtoinvestors:PortfoliodiversificationProfessionalmanagementReductionin
riskReductionoftransactioncastsLiquidityConvenienceandflexibility
171.Netassetvalue:thevalueofoneunitofinvestmentiscalledastheNetAssetValue
172.Openendedfund:openendedfundsmeansinvestorscanbuyandsellunitsoffund,atNAV
relatedpricesatanytime,directlyfromthefundthisiscalledopenendedfund.
173.Closeendedfunds:closeendedfundsmeansitisopenforsaletoinvestorsforaspecificperiod,
afterwhichfurthersalesareclosed.Anyfurthertransactionforbuyingtheunitsorrepurchasingthem,happen,
inthesecondarymarkets.
174.Dividendoption:investorswhochooseadividendontheirinvestments,willreceivedividends
fromtheMF,aswhensuchdividendsaredeclared.
175.Growthoption:investorswhodonotrequireperiodicincomedistributionscanbechoosethe
growthoption.
176.Equityfunds:equityfundsarethosethatinvestpredominantlyinequitysharesofcompany.
177.Typesofequityfunds:SimpleequityfundsPrimarymarketfundsSectoralfundsIndexfunds
178.Sectoralfunds:Sectoralfundschoosetoinvestinoneormorechosensectorsoftheequity
markets.
179.Indexfunds:Thefundmanagertakesaviewoncompaniesthatareexpectedtoperformwell,and
investsinthesecompanies
180.Debtfunds:thedebtfundsarethosethatarepredominantlyinvestindebtsecurities.
181.Liquidfunds:thedebtfundsinvestonlyininstrumentswithmaturitieslessthanoneyear.
182.Giltfunds:giltfundsinvestsonlyinsecuritiesthatareissuedbytheGOVT.andthereforedoesnot
carryanycreditrisk.

183.Balancedfunds:Fundsthatinvestbothindebtandequitymarketsarecalledbalancedfunds.
184.Sponsor:sponsoristhepromoteroftheMFandappointstrustees,custodiansandtheAMCwith
priorapprovalofSEBI.
185.Trustee:TrusteeisresponsibletotheinvestorsintheMFandappointtheAMCformanagingthe
investmentportfolio.
186.AMC:theAMCdescribesAssetManagementCompanyitisthebusinessfaceoftheMF,asit
managesalltheaffairsoftheMF.
187.R&TAgents:theR&Tagentsareresponsiblefortheinvestorservicingfunctions,asthey
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SMMTuitionPoint:ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS
187.R&TAgents:theR&Tagentsareresponsiblefortheinvestorservicingfunctions,asthey
maintaintherecordsofinvestorsinMF.
188.Custodians:Custodiansareresponsibleforthesecuritiesheldinthemutualfundsportfolio.
189.Schemetakesover:ifanexistingMFschemeistakenoverbyanotherAMC,itiscalledas
schemetakeover.
190.Meaningofload:LoadisthefactorthatisappliedtotheNAVofaschemetoarriveattheprice.
192.Marketcapitalization:marketcapitalizationmeansnumberofsharesissuedmultipliedwith
marketpricepershare.
193.Priceearningsratio:Theratiobetweenthesharepriceandtheposttaxearningsofcompanyis
calledaspriceearningsratio.
194.Dividendyield:Thedividendpaidoutbythecompany,isusuallyapercentageofthefacevalue
ofashare.
195.Marketrisk:Itreferstotheriskwhichtheinvestorisexposedtoasaresultofadversemovements
intheinterestrates.Italsoreferredtoastheinterestraterisk.
196.Reinvestmentrisk:Ittheriskwhichaninvestorhastofaceasaresultofafallintheinterestrates
atthetimeofreinvestingtheinterestincomeflowsfromthefixedincomesecurity.
197.Callrisk:Callriskisassociatedwithbondshaveanembeddedcalloptioninthem.Thisoption
hivestheissuertherighttocallbackthebondspriortomaturity.
198.Creditrisk:Creditriskreferstotheprobabilitythataborrowercoulddefaultonacommitmentto
repaydebtorbandloans
199.Inflationrisk:Inflationriskreflectsthechangesinthepurchasingpowerofthecashflows
resultingfromthefixedincomesecurity.
200.Liquidrisk:Itisalsocalledmarketrisk,itreferstotheeasewithwhichbondscouldbetradedinthe
market.

201.Drawings:Drawingsdenotesthemoneywithdrawnbytheproprietorfromthebusinessforhis
personaluse.
202.OutstandingIncome:OutstandingIncomemeansincomewhichhasbecomedueduringthe
accountingyearbutwhichhasnotsofarbeenreceivedbythefirm.
203.OutstandingExpenses:OutstandingExpensesrefertothoseexpenseswhichhavebecomedue
duringtheaccountingperiodforwhichtheFinalAccountshavebeenpreparedbuthavenotyetbeenpaid.
204.Closingstock:Thetermclosingstockmeansgoodslyingunsoldwiththebusinessmanattheend
oftheaccountingyear.
205.Methodsofdepreciation:
1.Unirormchargemethods:
a.Fixedinstallmentmethod
b.Depletionmethod
c.Machinehourratemethod.
2.Decliningchargemethods:
a.Diminishingbalancemethod
b.Sumofyearsdigitsmethod
c.Doubledecliningmethod
3.Othermethods:
a.Groupdepreciationmethod
b.Inventorysystemofdepreciation
c.Annuitymethod
d.Depreciationfundmethod
e.Insurancepolicymethod.
206.AccruedIncome:AccruedIncomemeansincomewhichhasbeenearnedbythebusinessduring
theaccountingyearbutwhichhasnotyetbecomedueand,therefore,hasnotbeenreceived.

207.Grossprofitratio:itindicatestheefficiencyoftheproduction/tradingoperations.
Formula:Grossprofit
X100
Netsales
208.Netprofitratio:itindicatesnetmarginonsales
Formula:Netprofit
X100
Netsales
209.Returnonshareholdersfunds:itindicatesmeasuresearningpowerofequitycapital.
Formula:
ProfitsavailableforEquityshareholders
X100
AverageEquityShareholdersFunds
210.EarningperEquityshare(EPS):itshowstheamountofearningsattributabletoeachequity
share.
Formula:
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Formula:
ProfitsavailableforEquityshareholders

NumberofEquityshares

211.Dividendyieldratio:itshowstherateofreturntoshareholdersintheformofdividendsbasedin
themarketpriceoftheshare
Formula:
Dividendpershare
X100
Marketpricepershare

212.Priceearningsratio:itameasurefordeterminingthevalueofashare.Mayalsobeusedto
measuretherateofreturnexpectedbyinvestors.
Formula:Marketpriceofshare(MPS)
X100
Earningspershare(EPS)
213.Currentratio:itmeasuresshorttermdebtpayingability.
Formula:
CurrentAssets

CurrentLiabilities
214.DebtEquityRatio:itindicatesthepercentageoffundsbeingfinancedthroughborrowingsa
measureoftheextentoftradingonequity.
Formula:TotalLongtermDebt

Shareholdersfunds
215.FixedAssetsratio:Thisratioexplainswhetherthefirmhasraisedadequatelongtermfundsto
meetitsfixedassetsrequirements.
Formula:FixedAssets

LongtermFunds
216.QuickRatio:Theratiotermedasliquidityratio.Theratioisascertainedycomparingtheliquid
assetstocurrentliabilities.
Formula:
LiquidAssets

CurrentLiabilities
217.StockturnoverRatio:Theratioindicateswhetherinvestmentininventoryinefficientlyusedor
not.It,thereforeexplainswhetherinvestmentininventorywithinproperlimitsornot.
Formula:costofgoodssold

Averagestock
218.DebtorsTurnoverRatio:Theratiothebetteritis,sinceitwouldindicatethatdebtsarebeing
collectedmorepromptly.Therationhelpsincashbudgetingsincetheflowofcashfromcustomerscanbe
workedoutonthebasisofsales.
Formula:Creditsales

AverageAccountsReceivable
219.CreditorsTurnoverRatio:Itindicatesthespeedwithwhichthepaymentsforcreditpurchases
aremadetothecreditors.
Formula:CreditPurchases

AverageAccountsPayable
220.Workingcapitalturnoverratio:ItisalsoknownasWorkingCapitalLeverageRatio.Thisratio
indicateswhetherornotworkingcapitalhasbeeneffectivelyutilizedinmakingsales.
Formula:NetSales

WorkingCapital
221.FixedAssetsTurnoverratio:Thisratioindicatestheextenttowhichtheinvestmentsinfixed
assetscontributetowardssales.
Formula:NetSales

FixedAssets
222.PayoutsRatio:Thisratioindicateswhatproportionofearningpersharehasbeenusedforpaying
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SMMTuitionPoint:ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS
222.PayoutsRatio:Thisratioindicateswhatproportionofearningpersharehasbeenusedforpaying
dividend.
Formula:DividendperEquityShare
X100
EarningperEquityshare
223.OverallProfitabilityRatio:ItisalsocalledasReturnonInvestment(ROI)orReturnonCapital
Employed(ROCE).Itindicatesthepercentageofreturnonthetotalcapitalemployedinthebusiness.
Formula:Operatingprofit
X100
Capitalemployed
Thetermcapitalemployedhasbeengivendifferentmeaningsa.sumtotalofallassetsWhetherfixedor
currentb.sumtotaloffixedassets,c.sumtotaloflongtermfundsemployedInthebusiness,i.e.,sharecapital
+reserves&surplus+longtermloans(nonbusinessassets+fictitiousassets).Operatingprofitmeansprofit
beforeinterestandtax
224.FixedInterestCoverratio:Theratioisveryimportantfromthelenderspointofview.It
indicateswhetherthebusinesswouldearnsufficientprofitstopayperiodicallytheinterestcharges.
Formula:IncomebeforeinterestandTax

InterestCharges

225.FixedDividendCoverratio:Thisratioisimportantforpreferenceshareholdersentitledtoget
dividendatafixedrateinprioritytoothershareholders.
Formula:NetProfitafterInterestandTax

PreferenceDividend
226.DebtServiceCoverageratio:Thisratioisexplainedabilityofacompanytomakepaymentof
principalamountsalsoontime.
Formula:Netprofitbeforeinterestandtax
1Taxrate
Interest+Principalpaymentinstallment
227.Proprietaryratio:Itisavariantofdebtequityratio.Itestablishesrelationshipbetweenthe
proprietorsfundsandthetotaltangibleassets.
Formula:Shareholdersfunds

Totaltangibleassets
228.Differencebetweenjointventureandpartnership:Injointventurethebusinessiscarriedon
withoutusingafirmname,Inthepartnership,thebusinessiscarriedonunderafirmname.Inthejointventure,
thebusinesstransactionsarerecordedundercashsystemInthepartnership,thebusinesstransactionsare
recordedundermercantilesystem.Inthejointventure,profitandlossisascertainedoncompletionofthe
ventureInthepartnership,profitandlossisascertainedattheendofeachyear.Inthejointventure,itis
confinedtoaparticularoperationanditistemporary.Inthepartnership,itisconfinedtoaparticularoperation
anditispermanent.
229.MeaningofWorkingcapital:Thefundsavailableforconductingdaytodayoperationsofan
enterprise.Alsorepresentedbytheexcessofcurrentassetsovercurrentliabilities.
230.Conceptsofaccounting:
1.Businessentityconcepts:Accordingtothisconcept,thebusinessistreatedasaseparateentity
distinctfromitsownersandothers.
2.Goingconcernconcept:Accordingtothisconcept,itisassumedthatabusinesshasareasonable
expectationofcontinuingbusinessataprofitforanindefiniteperiodoftime.
3.Moneymeasurementconcept:Thisconceptsaysthattheaccountingrecordsonlythosetransactions
whichcanbeexpressedintermsofmoneyonly.
4.Costconcept:Accordingtothisconcept,anassetisrecordedinthebooksatthepricepaidto
acquireitandthatthiscostisthebasisforallsubsequentaccountingfortheasset.
5.Dualaspectconcept:Ineverytransaction,therewillbetwoaspectsthereceivingaspectandthe
givingaspectbotharerecordedbydebitingoneaccountsandcreditinganotheraccount.Thisiscalleddouble
entry.
6.Accountingperiodconcept:Itmeansthefinalaccountsmustbepreparedonaperiodicbasis.
Normallyaccountingperiodadoptedisoneyear,morethanthisperiodreducestheutilityofaccountingdata.
7.Realizationconcept:Accordingtothisconcepts,revenueisconsideredasbeingearnedonthedata
whichitisrealized,i.e.,thedatewhenthepropertyingoodspassesthebuyerandhebecomelegallyliableto
pay.
8.Materialityconcepts:Itisaoneoftheaccountingprinciple,asperonlyimportantinformationwill
betaken,andUNimportantinformationwillbeignoredinthepreparationofthefinancialstatement.
9.Matchingconcepts:Thecostorexpensesofabusinessofaparticularperiodarecomparedwiththe
revenueoftheperiodinordertoascertainthenetprofitandloss.
10.Accrualconcept:Theprofitarisesonlywhenthereisanincreaseinownerscapital,whichisa
resultofexcessofrevenueoverexpensesandloss.
231.Financialanalysis:Theprocessofinterpretingthepast,present,andfuturefinancialconditionofa
company.
232.Incomestatement:Anaccountingstatementwhichshowsthelevelofrevenues,expensesand
profitoccurringforagivenaccountingperiod.
233.Annualreport:Thereportissuedannuallybyacompany,toitsshareholders.itcontaining
financialstatementlike,tradingandprofit&loseaccountandbalancesheet.
234.Bankrupt:Astatementinwhichafirmisunabletomeetsitsobligationsandhence,itisassetsare
surrenderedtocourtforadministration
235.Lease:Leaseisacontractbetweentopartiesunderthecontract,theowneroftheassetgivesthe
righttousetheassettotheuseroveranagreedperiodofthetimeforaconsideration.
236.Opportunitycost:Thecostassociatedwithnotdoingsomething.
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SMMTuitionPoint:ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS
236.Opportunitycost:Thecostassociatedwithnotdoingsomething.
237.Budgeting:Thetermbudgetingisusedforpreparingbudgetsandotherproducerforplanning,co
ordination,andcontrolofbusinessenterprise.
238.Capital:Thetermcapitalreferstothetotalinvestmentofcompanyinmoney,tangibleand
intangibleassets.Itisthetotalwealthofacompany.
239.Capitalization:Itisthesumoftheparvalueofstocksandbondsoutstandings.
240.Overcapitalization:Whenabusinessisunabletoearnfairrateonitsoutstandingsecurities.
241.Undercapitalization:Whenabusinessisabletoearnfairrateoroverrateonitisoutstanding
securities.
242.Capitalgearing:Thetermcapitalgearingreferstotherelationshipbetweenequityandlongterm
debt.
243.Costofcapital:Itmeanstheminimumrateofreturnexpectedbyitsinvestment.
244.Cashdividend:Thepaymentofdividendincash
245.Definethetermaccrual:Recognitionofrevenuesandcostsastheyareearnedorincurred.it
includesrecognitionoftransactionrelatingtoassetsandliabilitiesastheyoccurirrespectiveoftheactual
receiptsorpayments.
245.Accruedexpenses:Anexpensewhichhasbeenincurredinanaccountingperiodbutforwhichno
enforceableclaimhasbecomedueinwhatperiodagainsttheenterprises.
246.Accruedrevenue:Revenuewhichhasbeenearnedisanearnedisanaccountingperiodbutin
respectofwhichnoenforceableclaimhasbecomeduetointhatperiodbytheenterprise.
247.Accruedliability:Adevelopingbutnotyetenforceableclaimbyanotherpersonwhich
accumulateswiththepassageoftimeorthereceiptofserviceorotherwise.Itmayrisefromthepurchaseof
serviceswhichatthedateofaccountinghavebeenonlypartlyperformedandarenotyetbillable.
248.ConventionofFulldisclosure:Accordingtothisconvention,allaccountingstatementsshouldbe
honestlypreparedandtothatendfulldisclosureofallsignificantinformationwillbemade.
249.Conventionofconsistency:Accordingtothisconventionitisessentialthataccountingpractices
andmethodsremainunchangedfromoneyeartoanother.
250.Definethetermpreliminaryexpenses:Expenditurerelatingtotheformationofanenterprise.
Thereincludelegalaccountingandshareissueexpensesincurredforformationoftheenterprise.
251.MeaningofCharge:chargemeansitisaobligationtosecureanindebtness.Itmaybefixed
chargeandfloatingcharge.
252.Appropriation:ItisapplicationofprofittowardsReservesandDividends.
253.Absorptioncosting:Amethodwherebythecostisdeterminesoastoincludetheappropriate
shareofbothvariableandfixedcosts.
254.MarginalCost:Marginalcostistheadditionalcosttoproduceanadditionalunitofaproduct.Itis
alsocalledvariablecost.

255.WhataretheexordinaryitemsintheP&La/c:Thetransactionwhichisnotrelatedtothe
businessistermedasexordinarytransactionsorexordinaryitems.Egg:profitorlossesonthesaleoffixed
assets,interestreceivedfromothercompanyinvestments,profitorlossonforeignexchange,unexpected
dividendreceived.
256.Sharepremium:Theexcessofissueofpriceofsharesovertheirfacevalue.Itwillbeshowed
withtheallotmententryinthejournalitwillbeadjustedinthebalancesheetontheliabilitiessideunderthe
headofreserves&surplus.
257.AccumulatedDepreciation:Thetotaltodateoftheperiodicdepreciationchargesondepreciable
assets.
258.Investment:Expenditureonassetsheldtoearninterest,income,profitorotherbenefits.
259.Capital:Generallyreferstotheamountinvestedinanenterprisebyitsowner.Expaidupshare
capitalincorporateenterprise.
260.CapitalWorkInProgress:Expenditureoncapitalassetswhichareintheprocessofconstruction
ascompletion.
261.ConvertibleDebenture:Adebenturewhichgivestheholderarighttoconversionwhollyor
partlyinsharesinaccordancewithtermofissues.
262.RedeemablePreferenceShare:Thepreferencesharethatisrepayableeitherafterafixed(or)
determinableperiod(or)atanytimedividendbythemanagement.
263.Cumulativepreferenceshares:Aclassofpreferencesharesentitledtopaymentofemulates
dividends.Preferencesharesarealwaysdeemedtobecumulativeunlesstheyareexpresslymadenon
cumulativepreferenceshares.
264.Debentureredemptionreserve:Areservecreatedfortheredemptionofdebenturesatafuture
date.
265.Cumulativedividend:Adividendpayableascumulativepreferenceshareswhichitunpaid
Emulatesasaclaimagainsttheearningsofacorporatebeforeanydistributionismadetotheothershareholders.
266.DividendEqualizationreserve:Areservecreatedtomaintaintherateofdividendinfutureyears.
267.OpeningStock:Thetermopeningstockmeansgoodslyingunsoldwiththebusinessmaninthe
beginningoftheaccountingyear.Thisisshownonthedebitsideofthetradingaccount.
268.ClosingStock:ThetermClosingStockincludesgoodslyingunsoldwiththebusinessmanatthe
endoftheaccountingyear.Theamountofclosingstockisshownonthecreditsideofthetradingaccountand
asanassetinthebalancesheet.
269.Valuationofclosingstock:TheclosingstockisvaluedonthebasisofCostorMarketprices
whicheverislessprinciple.
272.Contingency:Acondition(or)situationtheultimateoutcomesofwhichgainorlosswillbe
knownasdeterminedonlyastheoccurrenceornonoccurrenceofoneormoreuncertainfutureevents.
273.ContingentAsset:Anassettheexistenceownershiporvalueofwhichmaybeknownor
determinedonlyontheoccurrenceornonoccurrenceofonemoreuncertainfutureevent.
274.Contingentliability:Anobligationtoanexistingconditionorsituationwhichmayariseinfuture
dependingontheoccurrenceofoneormoreuncertainfutureevents.
275.Deficiency:theexcessofliabilitiesoverassetsofanenterpriseatagivendateiscalleddeficiency.
276.Deficit:Thedebitbalanceintheprofitandlossa/ciscalleddeficit.
277.Surplus:Creditbalanceintheprofit&lossstatementafterprovidingforproposedappropriation&
dividend,reserves.
278.AppropriationAssets:Anaccountsometimesincludedasaseparatesectionoftheprofitandloss
statementshowingapplicationofprofitstowardsdividends,reserves.
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SMMTuitionPoint:ACCOUNTINGBASICSANDINTERVIEWQUESTIONSANSWERS
statementshowingapplicationofprofitstowardsdividends,reserves.
279.Capitalredemptionreserve:Areservecreatedonredemptionoftheaveragecost:thecostofan
itematapointoftimeasdeterminedbyapplyinganaverageofthecostofallitemsofthesamenatureovera
period.Whenweightsarealsoappliedinthecomputationitistermedasweightaveragecost.
280.FloatingChange:Assumechangeonsomeorallassetsofanenterprisewhicharenotattachedto
specificassetsandaregivenassecurityagainstdebt.
281.DifferencebetweenFundsflowandCashflowstatement:ACashflowstatementisconcerned
onlywiththechangeincashpositionwhileafundsflowanalysisisconcernedwithchangeinworkingcapital
positionbetweentwobalancesheetdates.Acashflowstatementismerelyarecordofcashreceiptsand
disbursements.Whilestudyingtheshorttermsolvencyofabusinessoneisinterestednotonlyincashbalance
butalsointheassetswhichareeasilyconvertibleintocash.
282.DifferencebetweentheFundsflowandIncomestatement:
Afundsflowstatementdealswiththefinancialresourcerequiredforrunningthebusinessactivities.It
explainshowwerethefundsobtainedandhowweretheyused,whereasanincomestatementdisclosesthe
resultsofthebusinessactivities,i.e.,howmuchhasbeenearnedandhowithasbeenspent.Afundsflow
statementmatchesthefundsraisedandfundsappliedduringaparticularperiod.Thesourceandapplication
offundsmaybeofcapitalaswellasofrevenuenature.Anincomestatementmatchestheincomesofaperiod
withtheexpenditureofthatperiod,whicharebothofarevenuenature.
PURNACHANDRARAOSUDA
MBA.,(Ph.D)

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93comments:
amolkulkarni 6July2013at23:39
thankyouverymuchsir..!itisveryhelpful...
Reply

VijayBhaskar 19July2013at00:47
Tankyousir.Givinginformation
Reply

NagarjunGouru 28November2013at23:06
ThankyouSir.......
Reply

ShahbazRahim 1March2014at11:34
thankusirithelpsalot
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