Professional Documents
Culture Documents
SBI - Banking Awareness - Text.marked
SBI - Banking Awareness - Text.marked
SBI - Banking Awareness - Text.marked
y.c
www.BankExamsToday.com
nk
Ex
am
sTo
da
Banking
Awareness
ww
w.
Ba
Ramandeep Singh
B.com (PU), MBA (PAU)
Ramandeep Singh
Ba
nk
Ex
am
sTo
da
y.c
om
Functions of Banks
w.
Primary Functions
ww
Accepting deposits
Most important function of a bank is to mobilize public funds. Bank provides safe
custody as well as interest to the depositors.
Saving deposit
Saving deposit account meant for those people who wants to save for future needs
and uncertainties. There is no restriction on number and amount of withdrawals.
Bank provides cheque book, ATM cum debit card and Internet banking facility.
2
om
In fixed deposit account, money is deposited for a fixed tenure. Banks issues a
deposit certificate which contains name, address, deposit amount, withdrawal
date, depositor signatures and other important information.
y.c
Depositor can't withdraw money during this period. In case depositor want to
withdraw before maturity, banks levy pre-mature withdrawal penalty.
sTo
da
Current account
am
Ba
nk
Ex
In this type of account depositors deposits certain sum of money at regular period
of time. Benefit of recurring account is that it provides benefit of compounded
rate of interest and enables depositors to collect big sum of money.
Cash credit
w.
ww
It is a short term loan facility under which banks allows its customers to take loan
up to a certain limit, normally bank grants this loan against mortgage of certain
property.
Bank overdraft
Bank provides this facility to current account holders.Account holder can
withdraw money anytime up to the provided limit. He need to pay interest only on
borrowed amount for the period for which he took loan.
Ramandeep Singh
Loans
Banks providing loans for various kinds of short term as well as long term needs.
Borrower pay back the loan in installments.
Discounting bills
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
In normal day to day business, sellers sends bills to buyer whenever they sell their
products and it is mentioned in bill to make payment in stipulated time. Lets take
it 30 days. In such conditions seller may discount the bill from bank for some
fees. In such situation bill discounting acts as short term loan. In case the buyer or
the drawer defaults, bank send the bill back to seller to drawer so that he may take
legal action against drawee or buyer.
Secondary functions
Agency functions
Cheques collection
Periodic payments/collection
Portfolio management
om
Utility functions
Locker facility
Underwriting of shares
Project reports
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
Ramandeep Singh
y.c
om
The NRE account can be opened by Non-Resident Indians (NRIs). The account
can be operated individually or jointly. Persons of Indian Origin are also eligible
for the account. In case of NRE accounts, nomination can be made for NRI or
PIO resident only.
sTo
da
nk
Ex
am
The fund amount including the principal as well as the interest can be repatriated.
This facility may not be there in other accounts for NRIs. The repatriation could
be in foreign currencies.
The deposits under the NRE accounts are not taxable under Wealth Tax. Also, the
interest income is exempt from the income-tax.
ww
w.
Ba
While the NRE accounts are accessible only to NRI and PIO there might be some
special cases. NRIs who return to India for permanent settlement may hold the
account till maturity of their deposits.
om
y.c
"Basel III" is a name given to reform measures for the Banking sector. It was
developed by the Basel Committee, hence the name. The measures are to
strengthen the regulation, supervision and risk management of the banking sector.
am
sTo
da
nk
Ex
The reforms are targeted at the individual banks and banking institutions. It is also
aimed at reducing the system-wide risks.
w.
Ba
The norms have received a positive appreciation in India. The Reserve Bank of
India (RBI) Governor, D. Subbarao in an interview to a newspaper mentioned that
BASEL-III norms would strengthen Indian banks.
ww
The BASEL-III norms have provided important guidelines for Liquidity and
Capital. There are three important pillars defined for Capital.
Pillar I
Capital
Risk Coverage
Containing Leverage
7
Ramandeep Singh
Pillar-II
Risk Management and Supervision
om
Market Discipline
sTo
da
y.c
Pillar-III
ww
w.
Ba
nk
Ex
am
In order to meet the BASEL-III requirements, Indian banks would have to raise a
lot of external capital. While the norms would strengthen the robustness of banks
against risks, it will also have some effect on the profitability in the short run. The
norms would increase the cost of capital for the banks and have an adverse effect
on the reqturn on equity in the short run.
om
Special Economic Zone (SEZ) is an area where economic laws are more relaxed
than a country's typical or national laws. In India SEZs have been developed to
promote exports.
y.c
The Special Economic Zones (SEZs) Policy was announced in April 2000.
sTo
da
The Special Economic Zones Act, 2005, was passed by the Parliament in 2005.
am
nk
Ex
Ba
ww
w.
Ramandeep Singh
Exemption from Central Sales Tax (CST).
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ
Act).
10
om
y.c
Objective - To provide life and accident insurance to people without land living
in rural areas
sTo
da
Doodh Ganga
nk
Ex
am
w.
Ba
Goal - Provide interest free loan and capital subsidies to diary farmers
ww
Objective - Prociding financial assistance to rural and urban poor for construction
of houses
Working - Financial assistance of Rs 70,000 in plain areas and Rs 75,000 in
difficult areas is provided.
11
Ramandeep Singh
House is allotted in the name of woman or jointly in the name of both man
and woman.
om
Prefernce is given to
Mentally challenge
Physical challenged
Transgenders
am
sTo
da
y.c
Ba
nk
Ex
w.
Government provides
ww
12
Ladli Scheme
y.c
om
am
sTo
da
Aim- Objective of this scheme was to raise the status of girl child and change the
social mindset of people towards girls in Madhya Pradesh.
Working - Government purchases National saving certificate worth Rs 6000 per
year for four years for every girl child born after 01-04-2008 and whose parents
are domicile of Madhya Pradesh.
Additional money paid on following events :At the time of admission in 4th standard - Rs 2000
ww
w.
Ba
nk
Ex
Ramandeep Singh
labourers for 100 days at their home.
Budget aloocated for MNREGA - Rs 45000 crores ( 2012-2013)
sTo
da
y.c
om
nk
Ex
am
w.
Ba
ww
14
y.c
om
sTo
da
nk
Ex
am
Ba
ww
w.
Started - 2001
Aim - Provide useful and free education to children in the age group of 6 -14
years under RTE act 2009
Funds allocated - Rs 61,734 crores allocated in 2011-12
Swabhiman
15
Ramandeep Singh
services with a population of 2000 by March 2012
y.c
om
Swavalamban
ww
w.
Ba
nk
Ex
am
sTo
da
16
om
CRR 4% (Unchanged)
y.c
sTo
da
Repo Rate
nk
Ex
am
Repo rate or repurchase rate is the rate at which banks borrow money from the
central bank (RBI for India) for a short period by selling their securities (financial
assets) to the central bank with an agreement to repurchase it at a future date at
predetermined price. It is similar to borrowing money from a money-lender by
selling him something, and later buying it back at a pre-fixed price.
Bank Rate
w.
Ba
People often get confused between Bank Rate and Repo Rate. Though they
appear similar there is a fundamental difference between them.
ww
Unlike Repo Rate, there is no sale of security in Bank Rate. Bank rate is the rate
at which banks borrow money from the central bank without any sale of
securities. It is generally for a longer period of time. This is similar to borrowing
money from someone and paying interest on that amount.
Both these rates are determined by the central bank of the country based on the
demand and supply of money in the economy.
17
Ramandeep Singh
sTo
da
y.c
om
Reverse Repo Rate is used by the central bank to absorb liquidity from the
economy. When it feels that there is too much money floating in the market, it
increases the reverse repo rate, which means that banks earn higher rate of interest
when they deposit money with the central bank.
am
Reverse Report rate was an independent rate till 03/05/2011. However, in the
monetary policy announced on 03/05/2011, RBI decided to link it to Repo rate.
So, Reverse Repo Rate is now always 100 bps below the Repo rate (till RBI
decides to delink the same).
nk
Ex
ww
w.
Ba
Have you ever wondered what happens to the amount that you deposit in bank? It
is used by banks to earn money by investing or lending it to others (house loans,
personal loans etc.). But as per the regulations, banks cannot use the entire
amount deposited with them for this purpose. They are required to maintain a
percentage of their deposits as cash. So, if you deposit Rs. 100/- in your bank,
then bank cant use the entire Rs. 100/- for lending or investment purpose. They
have to maintain a portion of the deposit as cash and can use only the remaining
amount for lending/investment. This minimum percentage, which is determined
by the central bank, is known as Cash Reserve Ratio.
So if CRR is 6% then it means for every Rs. 100/- deposited in the bank, it has to
maintain a minimum of Rs. 6/- as cash. However, banks do not keep this cash
with them, but are required to deposit it with the central bank, so that it can help
them with cash at the time of need.
18
y.c
om
Apart from keeping a portion of deposits with the RBI as cash, banks are also
required to maintain a minimum percentage of deposits with them at the end of
every business day, in the form of gold, cash, government bonds or other
approved securities. This minimum percentage is called Statutory Liquidity Ratio.
Example
ww
w.
Ba
nk
Ex
am
sTo
da
If you deposit Rs. 100/- in a bank, and assuming CRR to be 6% and SLR to be
8%, the bank can use 100-6-8= Rs. 86/- for giving loan or for investment purpose.
19
Ramandeep Singh
y.c
om
Chidambaram said India's economy, the 11th largest in theworld, had stabilised an
d was showing signs of turnaround. Hisspeech was marred by protests over the pr
oposed division of asouthern state.
GROWTH
sTo
da
FISCAL DEFICIT
am
* Fiscal deficit seen at 4.6 percent of GDP in 2013/14, belowtarget of 4.8 percent.
* Fiscal deficit projected at 4.1 percent of GDP in 2014/15
nk
Ex
Ba
* Current account deficit for 2013/14 estimated at $45 billion from last fiscal year'
s $88billion.
w.
ww
BORROWING/DEBT SERVICING
* Gross market borrowing for 2014/15 seen at 5.97 trillion rupees, net market borr
owing at4.57 trillion rupees.
* Government plans to buy back/switch bonds of 500 billion rupees in 2014/15.
* Ways and Means advances for 2014/15 estimated at 100 billion rupees
* Debt repayment in 2014/15 seen at 1.397 trillion rupees
20
PRIVATISATION
y.c
om
* Target from stake sale in state run firms for 2013/14 revised to 258.41 billion ru
pees
SPENDING
sTo
da
* Plan expenditure for 2014/15 seen at 5.55 trillion rupees, the same level as the p
reviousfiscal year
* Non plan spending estimated at about 12.08 trillion rupees in 2014/15
am
SUBSIDIES
* Total spending on food, fertilisers and fuel at 2.5 trillion rupees in 2014/15
nk
Ex
* Food subsidy estimated at 1.15 trillion rupees, fertiliser subsidy at 679.71 billio
n rupees.Petroleum subsidy seen at 634.27 billion rupees versus revised figure of
854.8 billion rupeesfor 2013/14.
Ba
DEFENCE
w.
EXPORTS
ww
* Merchandise exports seen at $326 billion in 2013/14, up 6.3 percent year on yea
r.
* Agriculture exports expected to touch $45 billion in 2013/14, up from $41 billio
n in2012/13
TAX PROPOSALS
* No major change in tax rates
21
Ramandeep Singh
* Factory gate tax to be reduced to 10 percent from 12 percent on some capital go
ods,consumer durables
* Cut excise duty on small cars, two wheelers, commercial vehicles to 8 percent fr
om 12percent
om
y.c
BANKS RESTRUCTURING
sTo
da
* Govt to provide 112 billion rupees capital infusion in state run banks in 2014/15
* Propose to set up public debt management office to start5 work from 2014/15
am
Ba
nk
Ex
"I can confidently assert that the economy is more stable today than what it was t
wo yearsago. The fiscal deficit is declining, the current account deficit has been c
onstrained, inflationhas moderated, the quarterly growth rate is on the rise, the exc
hange rate is stable, exportshave increased and hundreds of projects have been un
blocked."
ww
w.
22
om
sTo
da
y.c
6. WEF The Global Gender Gap Report - India ranked 114 lisetd very poorly on
the economic,
education and health sub- indexes.
am
nk
Ex
ww
w.
Ba
10. India ranked at 105 in the Education for All Development Index.
23
Ramandeep Singh
Bank Slogans
Multinational Bank Slogans
Punch line
CITI Bank
HSBC Bank
Make it happen
sTo
da
y.c
om
BNP Paribas
am
Deutsche Bank
Ba
Barclays Bank
nk
Ex
Scotia Bank
w.
DBS Bank
A passion to perform
ww
Bank Slogan
Allahabad Bank
A tradition of trust
Andhra Bank
Bank of Baroda
24
Bank of Maharashtra
Bank of Rajasthan
Together we Prosper
Canara Bank
It's easy to change for those who you love, Together we Can
Corporation Bank
Dena Bank
Federal Bank
HDFC Bank
HSBC
sTo
da
am
IDBI Bank
nk
Ex
ICICI Bank
Indian Bank
w.
Ba
y.c
om
Bank of India
ww
25
Ramandeep Singh
The Nation banks on us; Pure Banking Nothing Else; With you
Syndicate Bank
Knowledge is Power
UCO Bank
nk
Ex
am
sTo
da
y.c
om
Vijaya Bank
ww
w.
Ba
Yes Bank
26
om
Bank name
State Bank of India
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Travancore
State Bank of Patiala
y.c
am
ww
w.
Ba
nk
Ex
Bank name
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Bharatiya Mahila Bank
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
IDBI Bank Ltd
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sindh Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
sTo
da
27
Ramandeep Singh
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
(NSG).
Mr. Dilip Trivedi : Director-General, CRPF.
Mr. Devendra Kumar Pathak : Director-General, Border Security Force (BSF).
Mr. Arvind Ranjan : Director-General, Central Industrial Security Force (CISF).
Mr. P. K. Mehta : Director-General, Railway Protection Force. (RPF)
Mr. Subhas Goswami : Director-General, Indo-Tibetan Border Police (ITBP).
Mr. Arun Chaudhary : Director-General, Sashastra Seema Bal.
Vice-Admiral Anurag G. Thapliyal : Director-General, Indian Coast Guard.
Lt. Gen. Avtar Singh : Director-General, Defence Intelligence Agency.
Prof. Ved Prakash : Chairman, UGC.
Dr. Avinash Chander : Scientific Adviser to Defence Minister and Secretary,
Defence Research and Development Organisation. (DRDO)
Dr. R. Chidambaram : Principal Scientific Adviser to the Government.
Mr. K. Radhakrishnan : Chairman, Space Commission and ISRO.
Mr. Ratan Kumar Sinha : Chairman, Atomic Energy Commission and
Secretary, Dept. of Atomic Energy.
Mr. Naseem Ahmad : Chairperson, National Commission for Minorities.
Mr. Rajiv Mathur : Chief Information Commissioner.
Mr. Amitava Bhattacharya : Chairman, Staff Selection Commission (SSC).
Dr. Vishwa Mohan Katoch : Director-General, Indian Council of Medical
Research.
Mr. C. Chandramouli : Registrar-General of India and Census Commissioner.
Justice D. K. Jain : Chairman, Law Commission.
Dr. Baldev Raj : President, Indian National Academy of Engineering (INAE).
Mr. Justice (Retd.) B. N. Kirpal : Chairman, National Forest Commission.
Mr. T. Nanda Kumar : Chairperson, National Dairy Development Board
(NDDB).
Lt. General AT Parnaik : Director-General, Border Roads Organisation.
Dr. Raghuram Rajan : Governor, RBI.
Justice Mr. Markandey Katju : Chairman, Press Council of India.
Mr. Ravindra Pisharody : Chairman, Audit Bureau of Circulations (ABC).
Mr. R. K. Tewari : Chairman, Central Board of Direct Taxes (CBDT).
Mrs. J.M. Shanti Sundharam : Chairman, Central Board of Excise and
Customs.
Mr. Ashok Chawla : Competition Commission of India
Justice Syed Rafat Alam : Chairman, Central Administrative Tribunal
Mr. G. Sai Prasad : CMD, National Hydroelectric Power Corporation (NHPC).
29
Ramandeep Singh
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
(NFDC).
Mr. Ravindra Kumar: Chairman, United News of India.
Mr. K. N. Shanth Kumar : Chairman, PTI.
Mr. Ravindra Kumar : President, Indian Newspaper Society (INS).
Mr. Rana Kapoor : President, The Associated Chambers of Commerce and
Industry of India (ASSOCHAM).
31
Ramandeep Singh
y.c
om
AGM - Annual General Meeting, it is the year meeting held by every registered
company. Agenda is to explain the performance during the year, presentation of
annual financial statements, voting on important financial decisions. Any
shareholder can participate in AGM.
sTo
da
Asset turnover ratio - This ratio can be explained as Net assets / Total turnover
or sales. This ratio measures the operational efficiency of business assets. In
simple terms this measures how many time total assets turned in a year and how
efficiently the assets are used in a business.
nk
Ex
am
Acid test ratio - This is one of the important ratio to measure business liquidity.
Business liquidity is defined as ability of a business to pay it;s short term debts.
Acid test ratio = Highly liquid assets / current liabilities
w.
Ba
ww
32
om
sTo
da
y.c
am
nk
Ex
Bear market - A market situation in which most of the investors thinks that
markets will fall.
w.
Ba
ww
Capital gain - Gain by selling a capital asset in which a person is not doing
business. Income by selling a house by a bank employee is a capital gain whereas
when a builder do the same thing it is Income from business and professional.
33
Ramandeep Singh
Current asset - An asset that can be converted into cash with 12 months. For
example - debtors, stock etc.
y.c
om
sTo
da
am
Ba
nk
Ex
ww
w.
Dividend payout ratio - It is the ratio of dividend paid per share and EPS (
Earning per share )
Double entry bookkeeping - It is a method of bookkeeping in which every
transaction is recorded two accounts. Once in debit side and once in credit side.
34
y.c
om
sTo
da
Ex-divided - Ex-dividend means without dividend. When a seller makes a exdividend sales contract then he is entitled to get dividend or interest payment.
nk
Ex
am
Ba
ww
w.
35
Ramandeep Singh
Fundamental analysis - Analysis of a company based upon financial and
operational performance.
om
sTo
da
y.c
Floating rate - Rate of interest which changes with change in market rate.
am
Fund manager - A person who manages a mutual fund and tries to maximize
fund's returns while sticking to fund's objectives.
nk
Ex
Ba
w.
ww
GDP - Gross domestic product is the aggregate value of goods and services
produced by every person of a nation.
GST - Goods and services tax is the same tax system for everything. It is
proposed that GST will replace the multi tax system in India by 2015.
36
sTo
da
y.c
om
am
nk
Ex
Income statement
Ba
w.
IPO - Initial public offer is issue of stocks for the first time in the market.
ww
Intangible assets Assets which cant be seen but have value for business. For
example Goodwill.
Indemnity A legal contract under which one party promises to pay another for
any loses incurred to them by their acts.
37
Ramandeep Singh
Interest rate risk Risk that value of financial assets will deteriorate because of
fall in interest rate. For example value of bonds decreases with decrease in interest
rate.
om
sTo
da
y.c
Indirect Costs - Indirect cost is a cost incurred on product that is not directly
related to its production.
nk
Ex
am
Junk fund A fund which invests investors money in junk investments means
high risk investments which high returns.
ww
w.
Ba
KYC Know Your Customer policy is mandatory in India and every investor
irrespective of his investment volume needs to furnish his identity and residence
details.
Libor London
38
om
y.c
sTo
da
am
nk
Ex
Monopoly - A situation in market where there are many buyers but a single seller
exist.
w.
Ba
Money market - Market dealing in short term lending and borrowing of funds.
Also know as Cash market.
ww
39
Ramandeep Singh
sTo
da
y.c
om
Margin call - Margin call term is used in two situations. First - Whenever a
lender gives a secured loan and loan value is a fixed percentage of loan then
whenever the value of security decrease below the decided ratio then lender given
a margin call to borrower to bring loan to security ratio to decided
level. Secondly in stock exchanges traders trades in various securities by paying
20-30% of the value of securities. Whenever the value of security goes below that
margin, broker gives margin call to trader to bring the margin to desired level.
nk
Ex
am
w.
Ba
NPV - Net Present Value is aggregate of future cash flows from a project minus
total costs. NPV is a capital budgeting technique used to check feasibility of
projects.
ww
Net profit - Net profit is Gross profit minus indirect cost. See indirect costs
40
NAV - Net Assets Value is mutual fund's per unit exchange traded price
om
y.c
sTo
da
am
nk
Ex
Preference shares - A type of shares having no voting rights and have higher rate
of dividend.
ww
w.
Ba
PLR - Prime lending rate is the minimum rate of interest that is to be charged by
a bank. Each bank decides its own PLR.
41
Ramandeep Singh
R
ROI - Rate on investment is return divided by value of investment
y.c
om
sTo
da
Repo rate - Rate at which Central bank (RBI in case of India) lends money to
commercial banks
am
Reverse repo rate - Rate at which commercial banks lends to central bank
nk
Ex
Right issue - Issue of shares in which existing shareholders gets right to buy
shares in proportion of their existing holding
ww
w.
Ba
Risk free return - Rate of return, normally it is 90 days bills issued by a national
government
42
om
y.c
sTo
da
am
Working capital - Money required by a business to run its day to day business.
Working capital = Current assets / Current liabilities
nk
Ex
Warrants - A document which gives right to holder to get shares at stated price
ww
w.
Ba
Yield - Yield is the return on investment which may in form dividend or interest
43
Ramandeep Singh
om
y.c
sTo
da
am
Accrual basis - An accounting system which explains that expenses and incomes
should be recognized at the time when they are actually realized.
nk
Ex
ww
w.
Ba
om
y.c
Bills Payable : A bill which shows that a firm has to pay money to the person or
firm whose name is mentioned in the bill.
sTo
da
Bills receivable : A bill which shows that money is to be paid to firm from those
whose names are mentioned in the bill.
Bonus shares : Shares which are issued to the existing shareholder w
am
nk
Ex
ww
w.
Ba
Brought forward : Written as b/f. This term is generally used to open an account
for the current year by posting the closing balance of previous year.
Ramandeep Singh
and used to balance an account.
Carried forward : Written as c/f. Term used to transfer the balance from one
period to the another.
om
Carriage inwards : These are the expenses incurred for transporting the goods
purchased by the firm.
y.c
Carriage outwards : Expenses incurred for transporting goods sold by the firm.
sTo
da
Cash : It broadly covers currency and generally accepted equivalents of cash, like
cheques, drafts and demand deposits in bank.
Cash at bank : Deposit with bank.
am
Cash Book : A book of all transactions or entries for cash payments and receipts.
Cash on hand : Cash available and undeposited.
nk
Ex
ww
w.
Ba
Conservatism principle : Accounting concept that states that all expected losses
should be recorded but not expected gains.
46
om
y.c
sTo
da
am
Du-Pont System : The System merges the income statement and balance sheet
into two measures of profitability: Return on Assets (ROA) and Return on Equity
(ROE).
nk
Ex
Entity Principle : The business firm is treated as a separate entity for the purpose
of accounting.
Ba
w.
Exchange Rate : The rate at which one currency can be converted into another.
ww
F
Face Value : Commonly referred to the amount paid to a bondholder at the
maturity date, given that the issuer doesn't default.
47
Ramandeep Singh
Financial Asset : An intangible asset that derives value. Stocks, bonds, bank
deposits etc are all examples of financial asset.
om
Financial Ratio : Ratio based on firm's financial statement which reflects firm's
financial condition and performance.
y.c
sTo
da
Fixed Assets : It includes premises, plant and machinery, furniture, land and
buildings etc.
Fixed Charge : A required payment under a contract.
am
nk
Ex
Funds Flow Statement : A statement which shows inflow and outflow of funds.
ww
w.
Ba
Gross Profit Margin : Ratio of Gross profit to net sales i.e. gross profit as a
percentage of net sales.
om
y.c
Income Due but not received : Receivable income but not yet received.
sTo
da
Income Received but not due : Income received during current accounting
period which is supposed to be received at some future date.
Income statement : Profit and loss statement that measures the firm's operations.
am
nk
Ex
Intangible assets : Assets like patents, copyrights, goodwill etc which are
valuable but are not physical in nature.
Interest earned ratio : Ratio which measures firm's ability to meet its interest
payments out of its annual earnings i.e. EBIT / Interest expense.
w.
Ba
ww
49
Ramandeep Singh
L
Ledger : A record of all individual accounts of a business or firm.
om
y.c
sTo
da
am
Matching Principle : States that expenses should be recorded during that period
when it is incurred, regardless the period of transfer of cash.
nk
Ex
w.
Ba
ww
Net block : Net block is what asset are worth to the company. Generally, it is
gross block less accumulated depreciation.
Net current assets : Current assets less current liabilities.
Net income : Total earnings of company. It represents firm's total profit or loss,
calculated by taking all revenues and deducting all the costs of the business.
Net profit margin : Net profit or income as a percent of sales i.e. net Income/
50
om
y.c
sTo
da
Overdraft : When money is withdrawn from bank account and account balance is
below zero.
am
Paid up capital : The amount of company's capital which has been funded by
shareholders.
nk
Ex
Patent : The sole right to make and sell the product for set period of time.
Petty cash book : Record of entries for small amount payments.
Ba
Prepaid expenses : Expenses which have been paid but benefits of which is yet to
be received.
ww
w.
Profit and loss account : A statement which shows all revenues and expenses of
firm for a given time period. Subtracting expenses from revenues gives net
income of the firm for that time period, that's why known as profit and loss
account.
Proposed dividend : Company's board of directors declare an amount of dividend
every year and this amount is noted as a liability in balance sheet. The rate of
proposed dividend can be changed by shareholders in annual general meeting.
Provision for doubtful debts : Keeping aside an amount out of the firm's profit
to meet the losses due to doubtful debts.
51
Ramandeep Singh
Provision for tax : Keeping aside an amount to meet future tax liability.
om
R
Realization principle : It states that recognize the revenue only when it is earned.
y.c
sTo
da
nk
Ex
am
w.
Ba
Sales Returns Book : A record of entries of those goods which are returned by
customers and earlier sold on credit.
ww
Secured loans : Loan backed by an asset belongs to the borrower, just to reduce
the risk for the lender.
Sinking fund : Fund created by keeping aside some money annually for gradual
repayment of debt.
Sundry expenses : Miscellaneous expenses.
52
ww
w.
Ba
nk
Ex
am
sTo
da
y.c
om
53