11-03-2014, 03:47 PM
SOME IMPORTANT CONCEPTS FOR MBA ( FINANCE )
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1. 1. Amortization: the process of writing of intangible assets is term as amortization.
2. 2. Branches of accounting
a. financial accounting.
b. management accounting.
c. cost accounting.
1. 3. I.P.O à Initial Public Offer
2. 4. Definition of accounting:
“the art of recording, classifying and summarizing in a significant manner and in
terms of money, transactions and events which are, in part at least of a financial
character and interpreting the results there of”.
1. 5. Book keeping:
It is mainly concerned with recording of financial data relating to the business
operations in a significant and orderly manner.
6. Concepts of accounting:
A. separate entity concept B. going concern concept
C. money measurement concept D. cost concept
E. dual aspect concept F. accounting period concept
G. periodic matching of costs and revenue concept H. realization concept.
7. Conventions of accounting
A. conservatism
B. full disclosure
C. consistency
D. materiality.
8. Principles of accounting
a. personal a/c : debit the receiver
Credit the giver
b. real a/c : debit what comes in
Credit what goes out
c. nominal a/c : debit all expenses and losses
Credit all gains and incomes
9. Meaning of journal: journal means chronological record of transactions.
10. Meaning of ledger: ledger is a set of accounts. It contains all accounts of the business enterprise whether real, nominal, personal.
11. Posting: it means transferring the debit and credit items from the journal to their respective accounts in the ledger.
12. Trial balance: trial balance is a statement containing the various ledger balances on a particular date.
13. Credit note: the customer when returns the goods get credit for the value of the goods returned. A credit note is sent to him intimating that his a/c has been credited with the value of the goods returned.
14. Debit note: when the goods are returned to the supplier, a debit note is sent to him indicating that his a/c has been debited with the amount mentioned in the debit note.
15. Contra entry: which accounting entry is recorded on both the debit and credit side of the cash book is known as the contra entry.
16. Petty cash book: petty cash is maintained by business to record petty cash expenses of the business, such as postage, cartage, stationery, etc.
17. Promissory note: an instrument in writing containing an unconditional undertaking signed by the maker, to pay certain sum of money only to or to the order of a certain person or to the barer of the instrument.
18. Cheque: a bill of exchange drawn on a specified banker and payable on demand.
19. Systems of book keeping:
A. single entry system
B. double entry system
20. Bank reconciliation statement: it is a statement reconciling the balance as shown by the bank pass book and the balance as shown by the Cash Book.
Objective: to know the difference & pass necessary correcting, adjusting entries in the books.
21. Matching concept: matching means requires proper matching of expense with the revenue.
22. Capital income: the term capital income means an income which does not grow out of or pertain to the running of the business proper.
23. Revenue income: the income which arises out of and in the course of the regular business transactions of a concern.
24. Capital expenditure: it means an expenditure which has been incurred for the purpose of obtaining a long term advantage for the business.
25. Revenue expenditure: an expenditure that incurred in the course of regular business transactions of a concern.
26. Differed revenue expenditure: an expenditure which is incurred during an accounting period but is applicable further periods also. Eg: heavy advertisement.
27. Bad debts: bad debts denote the amount lost from debtors to whom the goods were sold on credit.
28. Depreciation: depreciation denotes gradually and permanent decrease in the value of asset due to wear and tear, technology changes, laps of time and accident.
29. Fictitious assets: These are assets not represented by tangible possession or property. Examples of preliminary expenses, discount on issue of shares, debit balance in the profit and loss account when shown on the assets side in the balance sheet.
30.Intangible Assets : Intangible assets means the assets which is not having the physical appearance & its have the real value, it shown on the assets side of the balance sheet.
31. Accrued Income : Accrued income means income which has been earned by the business during the accounting/current year but which has not yet been due and, therefore has not been received.
32. Out standing Income : Outstanding Income means income which has become due during the accounting year but which has not so far been received by the firm.
33. Suspense account: the suspense account is an account to which the difference in the trial balance has been put temporarily.
34. Depletion: it implies removal of an available but not replaceable source, Such as extracting coal from a coal mine.
35. All administration expenses are shown in profit & loss account.(debit balance)
36. Dilapidations: the term dilapidations to damage done to a building or other property during tenancy.
37. Capital employed: The term capital employed means sum of total long term funds employed in the business. i.e.
(share capital+ reserves & surplus +long term loans – (non business assets + fictitious assets)
38. Equity shares: Those shares which are not having pref. rights are called equity shares & real owners of the firm aswellas possess voting right.
39. Pref.shares: Those shares which are carrying the pref.rights is called pref. shares
1 Pref.rights in respect of fixed dividend.
2 Pref.right to repayment of capital in the even of company winding up.
40. Leverage: It is a force applied at a particular point to get the desired result.
41.Operating leverage:The operating leverage takes place when a changes in revenue greater
changes in EBIT.
42. Financial leverage : It is nothing but a process of using debt capital to increase the rate of
return on equity