Accounting and Financial Concepts

Accounting and Financial Concepts

1. Definition of Accounting: The art of recording, classifying and summarizing in a significant manner and in terms of money, transaction and events which are, in part at least of a financial character and interpreting the results there of.

2. Book keeping: It is mainly concerned with recording of financial data relating to the business operation in a significant and orderly manner.

3. Branches of Accounting:

(A) Financial Accounting: Financial accounting is concerned with ascertainment of profit earned or loss suffered and financial position of a business firm at the end of the accounting period which is usually a period of 12 months.

(B) Cost Accounting: The main purpose of cost accounting is to take note of the expenditure involved and to fix cost of production correctly.

(C) Management Accounting: It provides the financial information in such a way that will help the management in taking decisions.

4. Concepts of Accounting:

(1) Business entity concept: According to this concept the business is treated as a separate entity distinct from its owners and others.

(2)Going concern concept: According to this concept, it is assumed that a business has a reasonable expectation of continuing business at a profit for an indefinite period of time.

(3) Money measurement concept: This concept says that the accounting records only those transactions which can be expressed in terms of money only.

(4) Cost concept: According to this concept, an asset is recorded in the books at the price paid to acquire it and that this cost is the basis for all subsequent accounting for the asset.

(5) Dual aspect concept: In every transaction, there will be two aspects – the receiving aspect and the giving aspect; both are recorded by debiting one accounts and crediting another account. This is called double entry.

(6) Accounting period concept: It means the final accounts must be prepared on a periodic basis. Normally accounting period adopted is one year, more than this period reduces the utility of accounting data.

(7) Realization concept: According to this concepts, revenues is considered as being earned on the date which it is realized, i.e. the date when the property in goods passes the buyer and he become legally liable to pay.

(8) Materiality concept: It is a one of the accounting principle, as per only important information will be taken and un important information will be ignored in the preparation of the financial statement.

(9) Matching Concept: The cost or expenses of a business of a particular period are compared with the revenue of the period in order to ascertain the net profit and loss.

(10) Accrual concept: The profit arises only when there is an increase in owner’s capital, which is a result of excess of revenue over expenses and loss.

5. Conventions of Accounting:

(A) Conservatism: pay safe of the business transactions . ex bad debts.

(B) Full disclosure: According to this convention, all accounting statements should be honestly prepared and to that end full disclosure of all significant information will be made.

(C) Consistency: According to this convention it is essential that accounting practices and methods remain unchanged from one year top another.

(D) Materiality: it take only significant information

6. System of Book keeping:

(1) Diary system: Small proprietors of small business can keep their records in a small diary. All purchase of goods, incurring of expenses, sale of goods and earning of other incomes can be recorded directly in the diary.

(2) Single Entry system: Under this system whatever books may have been maintained are according to accounting knowledge, ability and convenience of the owner of business.

(3) Double Entry system: Every business event or transaction has two aspects. The recording the double effect of any transaction is known as double entry system.

7. System of Accounting:

(A)Cash system: In this system entries are made only when cash is received or paid.

(B)Mercantile system: In this system entries are made when a payment or receipts is merely due.

(C)Hybrid system: Hybrid system of accounting is a combination of the cash and mercantile system.

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 transaction.

10. Meaning of ledger: Ledger is a set of accounts. It contains all accounts of the business enterprise whether real, nominal, personal.

11. Posing: 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.

Object  of trial balance to check the arithmetical accuracy of ledger accounting.

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 bare of the instrument.

18. Cheque: A bill of exchange drawn on a specified banker and payable on demand.

19. Stale cheque: A stale cheque means not valid of cheque that means more than six months the cheque is not valid.

20. Bank Reconciliation Statement: It is a statement reconciling the balances as shown by the bank pass book and the balance as shown by the cash book. Obj: to know the difference and pass necessary correcting, adjusting entries in the books.

21. Matching concept: Matching concept means requires proper matching of expenses 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 transaction 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 decease 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 mean the assets which is not having the physical appearance. And 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 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. Amortization: The process of writing of intangible assets is term as amortization.

36. Dilapidation: The term dilapidation 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.

39. Pre. Shares: Those shares which are carrying the pref. rights is called pref. shares

·         Pref. rights in respect of fixed dividend.

·         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.

43. Combine leverage: It is used to measure of the total risk of the firm=operating risk + financial risk.

44. Joint Venture: A joint venture is an association of two or more the persons who combined for the execution of a specific transaction and divide the profit or loss their of an agreed ratio.

45. Partnership: Partnership is the relation b/w the persons who have agreed to share the profits of business carried on by all or any of them acting for all.

46. Factoring: It is an arrangement under which a firm (called borrower) receives advances against its receivables, from financial institutions (called factor).

47. Capital reserve: The reserve which transferred from the capital gains is called capital reserve.

48. General reserve: The reserve which transferred from normal profits of the firm is called general reserve.

49. Free cash: The cash not for any specific purpose free from any encumbrance like surplus cash.

50. Minority Interest. Minority interest refers to the equity of the minority shareholders in a subsidiary company.

51. Capital receipts: Capital receipts may be defined as “non-recurring receipts from the owner of the business or lender of the money crating a liability to either of them.

52. Revenue receipts: Revenue receipts may defined as “ a recurring receipts against sale of goods in the normal course of business and which generally the result of the trading activities”.

53. Meaning of Company: A company is an association of many persons who contribute money or money’s worth to common stock and employs it for a common purpose. The common stock so contributed is denoted in money and is the capital of the company.

54. Types of a company:

1. Statutory companies.

2. Government company.

3. Foreign company.

4. Registered companies:

    A. Companies limited by shares

    B. Companies limited by guarantee

    C. Unlimited companies

    D. Private companies

    E. Public companies

55. Private company: A private co. is which by its AOA:

• Restricts the right of the members to transfer of shares
• Limits the no. of members 50.
• Prohibits any Invitation to the public to subscribe for its shares/debentures.

56. Public company: A company, the articles of association of which do not contain the requisite restrictions to make it a private limited company is called a public co.

57. Characteristics of a company:

• Voluntary association
• Separate legal entity
• Free transfer of shares
• Limited liability
• Common seal
• Perpetual existence.

58. Formation of company:

• Promotion
• Incorporation
• Commencement of business

59. Equity share capital: The total sum of equity shares is called equity share capital.

60. Authorized share capital: It is the maximum amount of the share capital which a company can raise for the time being.

61. Issued capital: It is the part of the authorized capital which has been allotted to the public for subscriptions.

62. Subscribed capital: It is the part of the issued capital which has been allotted to the public.

63. Called up capital: It has been portion of the subscribed capital which has been called up by the company.

64. Paid up capital: It is the portion of the called up capital against which payment has been received.

65. Debentures: Debenture is a certificate issued by a company under its seal acknowledging a debt due by it to its holder.

66. Cash profits: Cash profit is the profit it is occurred from the cash sales.

67. Deemed public Ltd. Company: A private company is a subsidiary company to public company it satisfies the following terms/conditions Sec 3(1)3.

• Having minimum share capital 5 lakhs.
• Accepting investments from the public
• No restriction of the transferable of shares.
• No restriction of no. of members.
• Accepting deposits from the investors.

68. Secret reserves: Secret reserves are reserves the existence of which does not appear on the face of balance sheet. In such a situation, net assets position of the business is stronger than that disclosed by the balance sheet.

These reserves are created by:

·         Excessive dep. Of an asset, excessive over-valuation of a liability.

·         Complete elimination of an asset, or under valuation of an asset.

69. Provisions: Provision usually means any amount written off or retained by way of providing depreciation, renewals or diminutions in the value of assets or retained by way of providing for any know liability of which the amount can not be determined with substantial accuracy.

       Or

It is charge against profit to meet unknown loss

70. Reserve: Reserves are the amounts which the businessman keeps aside out of profits earned.

• Provision is charge against profits while reserves is an appropriation of profits
• Creation of reserve increase proprietor’s fund while creation of provisions decreases his funds in the business.

71. Reserve fund: Reserve fund is that amount of reserve which is invested outside the business.

72. Undisclosed reserves: Sometimes a reserve is created but its identity is merged with some other A/C or group of accounts so that the existence of the reserve is not known such reserve is called an undisclosed reserve.

73. Finance management: Financial management deals with procurement of funds and their effective utilization in business.

74. Objectives of financial management: Financial management having two objectives that is:

            1. Profit maximization: The finance manger has to make his decisions in a manner so that the profits of the concern are maximized.

            2. Wealth maximization: Wealth maximization means the objective of a firm should be to maximize its value or wealth, or value of a firm is represented by the market price of its common stock.

75. Functions of financial manager:

• Investment decision
• Dividend decision
• Finance decision]
• Cash management decisions
• Performance evaluation
• Market impact analysis

76. Time value of money: The time value of money means that worth of a rupee received today is different from the worth of a rupee to be received in future.

77. Capital structure: It refers to the mix of sources from where the long-term funds required in a business may be raised; in other words it refers to the proportion of debt, preference capital and equity capital.

78. Optimum capital structure: capital structure is optimum when the firm has a combination of equity and debt so that the wealth of the firm is maximum.

79. WACC: It denotes weighted average cost of capita. It is defined as the overall cost of capital computed by reference to the proportion of each component of capital as weights.

80. Financial break even point: It denotes the level at which a firm’s EBIT is just sufficient to cover interest and preference dividend.

81. Capital budgeting: Capital budgeting involves the process of decision making with regard to investment in fixed assets. Or decision making with regard to investment of money in long term projects.

Methods of capital budgeting:

Traditional :

82. Payback period: Payback period represents the time period required for complete recovery of the initial investment in the project.

83. ARR: Accounting or Average rates of return means the average annual yield on the project.

Time adusted method:

84. NPV: The net present value of an investment proposal is defined as the sum of the present values of all future cash inflows less the sum of the present values of all cash out flows associated with the proposal.

85. Profitability index: Where different investment proposal each involving different initial investments and cash inflows are to be compared.

86. IRR: internal rate is the rate at which the sum total of discounted cash inflows equals the discounted cash out flow.

87. Treasury management: it means it is defined as the efficient management of liquidity and financial risk in business.

88. Concentration banking: it means identify locations or place where customers are placed and open a local bank a/c in each of these locations and open local collection center.

89. Marketable securities: surplus cash can be invested in short term instruments in order to earn interest.

90. Ageing schedule: in an ageing schedule the receivables are classified according to their age.

91. Maximum permissible bank finance (MPBF): it is the maximum amount that banks can lend a borrower towards his working capital requirements.

92. Commercial paper: a cp is a short term promissory note issued by a company, negotiable by endorsement and delivery, issued at a discount on face value as may be determined by the issuing company.

93. Bridge finance: It refers to the loans taken by the company normally from commercial banks for a short period pending disbursement of loans sanctioned by the financial institutions.

94. Venture capital: It refers to the financing of high risk ventures promoted by new qualified entrepreneurs who require funds to give shape to their ideas.

95. Debt securitization: It is a mode of financing, where in securities are issued on the basis of a package of assets (called asset pool).

Subprime: to get loans  without any security

96. Lease financing: Leasing is a contract where one party (owner) purchases assets and permits its views by another party (lessee) over a specified period.

97. Trade credit: It represents credit granted by suppliers of goods, in the normal course of business.

98. Over draft: Under this facility a fixed limit is granted by suppliers of goods, in the normal course of business.

99. Cash credit: It is an arrangement under which a customer is allowed an advance up to certain limit against credit granted by bank.

100. Clean overdraft: It refers to an advance by way of overdraft facility, but not back by any tangible security.

101. Share capital: The sum total of the nominal value of the shares of a company is called share capital.

102. Funds flow statement: It is the statement deals with the financial resources for running business activities. It explains how the funds obtained and how they used.

It is a statement of  Applications and source

103. Sources of funds: There are two sources of funds internal sources and external   sources.

            Internal source: Funds from operations is the only internal sources of funds and some important points add to it they do not result in the outflow funds

            (A) Depreciation on fixed assets (b) Preliminary expenses or goodwill written off, Loss on sale of fixed assets.

Deduct the following items as they do not increase the funds:

            Profit on sale of fixed assets, profit on revaluation of fixed assets.

            External sources: (a) Funds from long term loans (b) Sale of fixed assets (c) Funds from increase in share capital.

104. Application of funds: (a) Purchase of fixed assets (b) Payment of dividend (c) Payment of tax liability (d) Payment of fixed liability.

105. ICD (Inter corporate deposits): Companies can borrow funds for a short period. For example 6 months or less from another company which have surplus liquidity. Such deposits made by one company in another company are called ICD.

106. Certificate of deposits: The CD is a document of title similar to a fixed deposit receipt issued by bank there is no prescribed interest rate on such CDs it is based on the prevailing market conditions.

107. Public deposits: It is very important source of short term and medium term finance. The company can accept PD from members of the public and shareholders. It has the maturity period of 6 months to 3 years.

108. Euro issues: The euro issues means that the issues are listed on a European stock Exchange. The subscription can come from any part of the world except India.

109. GDR (Global depository receipts): A depository receipt is basically a negotiable certificate, dominated in us dollars that represent a non-US company publicly traded in local currency equity shares.

110. ADR (American depository receipts): Depository receipt issued by a company in the USA is known as ADRs. Such receipts are to be issued in accordance with the provisions stipulated by the securities Exchange commission (SEC) of USA like SEBI in India.

111. Commercial banks: Commercial banks extend foreign currency loans for international operations, just like rupee loans. The banks also provided overdraft.

112. Development banks: It offers long-term and medium term loans including foreign currency loans.

113. International agencies: International agencies like the IFC<IBRD<ADB<IMF etc. provide indirect assistance for obtaining foreign currency.

114. Seed capital assistance: The seed capital assistance scheme is desired by the IDBI for professionally or technically qualified entrepreneurs and persons possessing relevant experience and skills and entrepreneur traits.

115. Unsecured loans: It constitutes a significant part of long-term finance available to an enterprise.

116. Cash flow statement: It is a statement depicting change in cash position from one period to another.

It is a statement of inflow and out inflow cash and cash equivalent

Cash flow statement of activities

1.Operating activity

2.Investing activity

3.Financing activity

117. Sources of cash:

Internal sources: (a) Depreciation (b) Amortization (c) Loss on sale of fixed assets (d) Gains from sale of fixed assets (e) Creation of reserves.

External sources: (a) Issue of new shares (b) Raising long term loans (c) Short-term borrowings (d) Sale of fixed assets, investments.

118. Application of cash: (a) Purchase of fixed assets (b) Payment of long-term loans (c) Decreasing in differed payment liabilities (d) Payment of tax, dividend (e) Decrease in unsecured loans and deposits.

119. Budget: It is a detailed plan of operations for some specific future period. It is an estimate prepared in advance of the period to which it applies.

120. Budgetary control: It is the system of management control and accounting in which all operations are forecasted and so for as possible planned ahead, and the actual results compared with the forecasted and planned ones.

121. Cash budget: It is a summary statement of firm’s expected cash inflow and outflow over a specified time period.

122. Master budget: A summary of budget schedules in capsule form made for the purpose of presenting in one report the highlights of the budget forecast.

123. Fixed budget: It is a budget which is designed to remain unchanged irrespective of the level of activity actually attained.

124. Zero-based budgeting: It is a management tool which provides a systematic method for evaluating all operations and programmes, current of new allows for budget reductions and expansions in a rational manner and allows reallocation of source from low to high priority programs.

125. Goodwill: The present value of firm’s anticipated excess earnings.

126. BRS: It is statement reconciling the balance as shown by the bank pass book and balance shown by the cash book.

127 Objectives of BRS: The obj. of preparing such a statement is to know the causes o difference between the two balances and pass necessary correcting or adjusting entries in the books of the firm.

128. Responsibilities of Accounting: It is a system of control by delegating and locating the responsibilities for costs.

129. Profit centre: A centre whose performance is measured in terms of both the expense incurs and revenue it earns.

130. Cost centre: A location, person or item of equipment for which cost may be ascertained and used for the purpose of cost control.

131. Cost: The amount of expenditure incurred on to a given thing.

132. Cost Accounting: It is thus concerned with recording, classifying and summarizing costs for determination of costs of products or services planning, controlling and reducing such costs and furnishing of information management for decision making.

133. Elements of cost: (A) Material (B) Labour (C) Expenses (D) Overheads.

134. Components of total Costs: (A) Prime cost (B) Factory cost (C) Total cost of production (D) Total cost.

135. Prime cost: It consists of direct material direct labour and direct expenses. It is also known as basic or first or flat cost.

136. Factory cost: It comprises prime cost, in addition factory overheads which include cost of indirect material, indirect labour and indirect expenses incurred in factory. This cost is also known as works cost or production cost or manufacturing cost.

137. Cost of production: In office and administration overheads are added to factory cost, office cost is arrived at.

138. Total cost: Selling and distribution overheads are added to total cost of production to get the total cost or cost of sales.

139. Cost unit: A unit of quantity of a product, service or time in relation to which costs may be ascertained or expressed.

140. Methods of costing: (A) Job costing (B) Contract costing (C) Process costing (D) Operation costing (E) Operating costing (F) Unit costing (G) Batch costing.

141. Techniques of costing: (A) Marginal costing (B) Direct costing (C) Absorption costing (D) Uniform costing.

142.  Standard costing: Standard costing is a system under which the cost of the product is determined in advance on certain predetermined standards.

143. Marginal cost: It is a technique of costing in which allocation of expenditure to production is restricted to those expenses which arise as a result of production, i.e. materials, labour, and direct expenses and variable overheads.

144. Derivates: Derivative is a product whose value is derived from the value of one or more basic variables of underlying asset.

145. Forwards: A forward contract is customized contracts between two entities were settlement takes place on a specific date in the future at today’s pre agreed price.

146. Futures: A future contract is an agreement b/w two parties to but or sell an asset at a certain time in the future at a certain price. Future contracts are standardized exchange traded contracts.

147. Options: An option gives the holder of the option the right to do some thing. The option holder may exercise or not.

148. Call Option: A call option gives the holder of the right but not the obligation to buy an asset by a certain date for a certain price.

149. Put option: A put option gives the holder the right but not obligation to sell an asset by a certain date for a certain price.

150. Option price: Option price is the price which the option buyer pays to the option seller. It is also referred to as the option premium.

151. Expiration date: The date which is specified in the option contract is called expiration date.

152. European option: It is the option at exercised only on expiration date it self.

153. Basis: Basis means future price minus spot price.

154. Cost of carry: The relation b/w future prices and spot prices can be summarized in terms of what is known as cost of carry.

155. Initial margin: The amount that must be deposited in the margin a/c at the time of first entered into future contract is known as initial margin.

156. Maintenance margin: This is some what lower than initial margin.

157. Mark to market: In future market, at the end of the each trading day, the margin a/c is adjusted to reflect the investor’s gains or loss depending upon the futures selling price. This is called mark to market.

158. Baskets: Basket options are options on portfolio of underlying asset.

159. Swaps: Swaps are private agreements b/w two parties to exchange cash flows in the future accounting to a pre agreed formula.

160. Impact cost: Impact cost is cost it is measure of liquidity of the market. It reflects the costs faced when actually trading in index.

161. Hedging: Hedging means minimizing the risk.

162. Capital Market: Capital market is the market it deals with the long term investment funds. It consists of two markets 1.Primary market 2.Secondary market.

163. Primary market: Those companies which are issuing new shares buying and selling. In India secondary market is called stock exchange.

164. Secondary market: Secondary market is the market where shares buying and selling. In India secondary market is called Stock Exchange.

165. Arbitrage: It means purchase and sale of securities in different markets in order to profit from price discrepancies. In other words arbitrage is a way of reducing risk of loss caused by price fluctuations of securities held in a portfolio.

166. Meaning of Ratio: Rations are relationships expressed in mathematical terms between figures which are connected with each other in same manner.

167. Activity ratio: It is a measure of the level of activity attained over a period.

168. Mutual Fund: A mutual fund is a pool of money, collected from investors, and is invested according to certain investment objectives.

169. Characteristics of Mutual fund:

• Ownership of the MF is in the hands of the investors.
• MF managed by investment professional
• The value of portfolio is updated every day.

170. Advantage of MF to investors:

• Portfolio diversification
• Professional management
• Reduction in risk
• Reduction of transaction casts
• Liquidity
• Convenience and flexibility

171. Net asset value: The value of one unit of investment is called as the Net Asset Value.

172. Open-ended fund: Open ended funds means investors can buy and sell units of fund, at NAV related prices at anytime, directly from the fund this is called open ended fund. For ex: unit 64.

173. Close-ended fund: Close ended funds means it is open for sale to investors for a specific period, after which further sales are closed. Any further transaction for buying the units or repurchasing them, happen, in the secondary markets.

174. Dividend option: Investors, who choose a dividend on their investments, will receive dividends from the MF, as when such dividends are declared.

175. Growth option: Investors who do not require periodic income distributions can be choose the growth option.

176. Equity funds: Equity funds are those that invest pre-dominantly in equity shares of company.

177. Types of equity funds:

• Simple equity funds
• Primary market funds
• Sectoral funds
• Index Funds

178. Sectoral funds: Sectoral funds choose to invest in one or more chosen sectors of the equity markets.

179. Index funds: The fund manager takes a view on companies that are expected to perform well, and invests in these companies.

180. Debt funds: The debt funds are those that are pre-dominantly invest in debt securities.

181. Liquid funds: The debt funds invest only in instruments with maturities less than one year.

182. Gilt funds: Gilt funds invest only in securities that are issued by the Govt. and therefore do not carry any credit risk.

183. Balanced funds: Funds that invest both in debt and equity markets are called balanced funds.

184. Sponsor: Sponsor is the promoter of the MF and appoints trustees, custodians and the AMC with prior approval of SEBI.

185. Trustee: Trustee is responsible to the investors in the MF and appoints the AMC for managing the investment portfolio.

186. AMC: The AMC describes Asset Management Company; it is the business face of the MF, as it manages all the affairs of the MF.

187. R&T Agents: The R&T agents are responsible for the investor servicing functions, as they maintain the records of investors in MF.

188. Custodians: Custodians are responsible for the securities held in the MF portfolio.

189. Scheme takes over: If an existing MF scheme is taken over by the another AMC, it is called as scheme take over.

190. Meaning of load: Load is the factor that is applied to the NAV of a scheme to arrive at the price.

191. Finance: 1. Provision of money at the time when it is required.

                           2. Funds to support an enterprise.

192. Market capitalization: Market capitalization means number of shares issued multiplies with market price per share.

193. Price earning ratio: The ratio b/w the share price and the post tax earning of company is called as price earning ratio.

194. Dividend yield: The dividend paid out by the company, is usually a percentage of the face value of a share.

195. Market risk: It refers to the risk which the investor is exposed to as a result of adverse movements in the interest rates. It also referred to as the interest rate risk.

196. Re-investment risk: It is the risk which an investor has to face as a result of a fall in the interest rates at the time of reinvesting the interest income flows from the fixed income security.

197. Call risk: Call risk is associated with bonds have an embedded call option in them. This option hives the issuer the right to call back the bonds prior to maturity.

198. Credit risk: Credit risk refers to the probability that a borrower could default on a commitment to repay debt or band loans.

199. Inflation risk: Inflation risk reflects the changes in the purchasing power of the cash flows resulting from the fixed income security.

200. Liquid risk: It is also called market risk; it refers to the ease with which bonds could be traded in the market.

201. Drawings: Drawings denotes the money withdrawn by the proprietor from the business for his personal use.

202. Equity: Any claim against the assets of the firm.

203. O/S Expenses: The expenses which have become due during the accounting period for which the Final Accounts have been prepared but have not yet been paid.

204. Methods of Depreciation:

            1. Uniform charge methods:

              A. Fixed installment method.

              B. Depletion method.

              C. Machine hour rate method.

            2. Decline charge methods:

              A. Diminishing balance method.

              B. Sum of years digits method.

              C. Double declining method.

            3. Other methods:

              A. Group depreciation method.

              B. Inventory system of depreciation

              C. Annuity method.

              D. Depreciation fund method.

              E. Insurance policy method.

205. Gross profit ratio: It indicates the efficiency of the production/trading operation.

            Formula: Gross profit    X 100

                              Net sales

206. Net profit ratio: It indicates net margin on sales.

            Formula: Net profit X 100

                           Net sales

207. Return on share holders funds: It indicates measures earning power of equity capital.

            Formula: Profits available for Equity share holders X 100

                           Avg. Equity share holders funds

208. Earning per Equity share (EPS): It shows the amount of earnings attributable to each equity share.

            Formula: profits available for E.S holders

                           No. of Equity shares

209. Dividend yield ratio: It shows the rate of return to shareholders in the form of dividends based in the market price of the share

            Formula: Dividend per share      X 100

                           Market price per share

210. Price earning ratio: It is a measure for determining the value of a share. May also be used to measure the rate of return expected by investors.

            Formula: Market price of share (MPS) X 100

                            Earning per share (EPS)

211. Current ratio: It measures short-term debt paying ability.

            Formula:  Current Assets

                             Current Liabilities

212. Debt-Equity ratio: It indicates the percentage of funds being financed through borrowing; a measure of the extent of trading on equity.

            Formula: Total Long-term Debt

                              Shareholders funds

213. Fixed Asset ratio: This ratio explains whether the firm has raised adequate long-term funds to meet its fixed assets requirements.

            Formula:     Fixed Assets

                                Long-term funds

214. Quick ratio: The ratio termed as ‘liquidity ratio’. The ratio is ascertained comparing the liquid assets to current liabilities.

            Formula:     Liquid Assets

                              Current Liabilities

215. Stock turnover ratio: The ratio indicates whether investment in inventory in efficiently used or not. It, therefore explains whether investment in inventory within proper limits or not.

            Formula:  Cost of goods sold

                                    Avg. stock

216. Debtors turnover ratio: The ratio the better it is, since it would indicate that debts are being collected more promptly. The ration helps in cash budgeting since the flow of cash from customers can be worked out on the basis of sales.

Formula:            Credit Sales

            Avg. Accounts Receivable

217. Creditors Turnover ratio: It indicates the speed with which the payments for credit purchases are made to the creditors.

            Formula:            Credit Purchases

                                      Avg. Accounts Payable

218. Working capital turnover ratio: It is also known as working capital leverage ratio. This ration indicates whether or not working capital has been effectively utilized in making sales.

            Formula:        Net sales

                               Working capital

219. Fixed assets turnover ratio: This ratio indicates the extent to which the investments in fixed assets contribute towards sales.

            Formula:    Net sales

                             Fixed Assets

220. Pay-out ratio: This ratio indicates what proportion of earning per share has been used for paying dividend.

            Formula: Dividend per equity share X 100

                             Earning per equity share

221. Overall profitability ratio: It is also called as “Return on Investment” (ROI) or Return on Capital Employed (ROCE). It indicates the percentage of return on the total capital employed in the business.

            Formula:   Operating profit X 100

                               Capital employed

The term capital employed has been given different meanings

            A. Sum total of all assets whether fixed or current

            B. Sum total of fixed assets

            C. Sum total of long-term funds employed in the business, i.e.

Share capital + reserves + long term loans – (non business assets + fictitious assets).

            Operating profit means ‘profit before interest and tax’

222. Fixed interest cover ratio: The ratio is very important from the lender’s point f view. It indicates whether the business would earn sufficient profits to pay periodically the interest charges.

            Formula:   Income before interest and tax

                                        Interest charges

223. Fixed dividend cover ratio: the ratio is important for preference shareholders entitled to get dividend at a fixed rate in priority to other shareholders.

            Formula: Net profit after Interest and Tax

                                    Preference dividend

224. Debt service coverage ratio: This ratio is explained ability of a company to make payment of principle amounts also on time.

            Formula: Net profit before interest and tax

                                    Interest + Principal payment installment

                                                                        1 – Tax rate

225. Proprietary ratio: It is a variant of debt-equity ratio. It establishes relationship between the proprietor’s funds and the total tangible assets.

            Formula:   Shareholder funds

                              Total tangible assets

226. Difference b/w joint venture and partnership:

• In joint venture the business is carried on without using a firm name,

In the partnership, the business is carried on under a firm name.

• In the joint venture the business transactions are recoded under cash system

In the partnership the business transactions are recorded under mercantile    system.

• In the joint venture, profit and loss is ascertained on completion of the venture.

In the partnership, profit and loss is ascertained at the end of each year.

• In the joint venture, it is confined to a particular operation and it is temporary.

In the partnership, it is confined to a particular operation and it is permanent.

227. Meaning of Working capital: The funds available for conducting day to day operations of an enterprise. Also represented by the excess of current assets current liabilities.

228. Financial analysis: The process of interpreting the past, present, and future financial condition of a company.

229. Income statement: An accounting statement which shows the level of revenues, expenses and profit occurring for a given accounting period.

230. Annual report: The report issued annually by a company, to its shareholders. It contains financial statement like, trading and profit & loss a/c and balance sheet.

231. Bankrupt: A statement in which a firm is unable to meets its obligations and hence, its assets are surrendered to court for administration.

232. Lease: Lease is a contract b/w two parties under the contract; the owner of the asset gives the right to use that the asset to the user over an agreed period of the time for a consideration.

233. Opportunity cost: The cost associated with not doing something.

234. Budgeting: The term budgeting is used for preparing budgets and other producer for planning, co-ordination, and control of business enterprise.

235. Capital: The term capital refers to the total investment of company in money, tangible and intangible assets. It is the total wealth of a company.

236. Capitalization: It is the sum of the par values of stocks and bonds outstanding.

237. Over capitalization: When a business is unable to earn fair rate on its outstanding securities.

238. Under capitalization: When a business is able to earn fair rate or over rate on its outstanding securities.

239. Capital gearing: The term capital gearing refers to the relationship b/w equity and long term debt.

240. Cost of capital: It means the minimum rate of return expected by its investment.

241. Cash dividend: The payment of dividend in cash.

242. Accrual: Recognition of revenues and costs as they are earned or incurred. It includes recognition of transaction relating to assets and liabilities as they occur irrespective of the actual receipts or payments.

243. Accrued expenses: An expense which has been incurred in an accounting period but for which no enforceable claim has become due in what period against the enterprises.

244. Accrued revenue: Revenue which has been earned in an accounting period but in respect of which no enforceable claim has become due to in that period by the enterprise.

245. Accrued liability: A developing but not yet enforceable claim by an another person which accumulates with the passage of time or the receipt of service or otherwise. It may rise from the purchase of services which at the date of accounting have been only partly performed and are not yet billable.

246. Preliminary expenses: Expenditure relating to the formation of an enterprise. There include legal accounting and share issue expenses incurred for formation of the enterprise.

247. Charge: Charge means it is obligation to secure an indebt ness. It may be fixed charge and floating charge.

248. Appropriation: It is application of profit towards Reserves and Dividends.

249. Absorption costing: A method where by the cost is determining so as to include the appropriate share of both variable and fixed costs.

250. Marginal cost: Marginal cost is the additional cost to produce an additional unit of a product. It is also called variable cost.

251. What is the ex-ordinary item in P&L a/c: The transaction which is not related to the business is termed as ex-ordinary transactions or items. E.g. profit or loss on the sale of fixed assets, interest received from other company investments, profit or loss on foreign exchange, un expected dividend received.

252. Share premium: The excess of issue of price of shares over their face value. It will be should with the allotment entry in the journal; it will be adjusted in the balance sheet on the liabilities side under the head of “reserves & surplus”.

253. Accumulated Depreciation: The total to date of the periodic depreciation charges on depreciable assets.

254. Investment: Expenditure an asset held to earn interest, income, profit or other benefits.

255. Capital work in progress: Expenditure on capital assets which are in the process of construction as completion.

256. Convertible debenture: A debenture which gives the holder a right to conversion wholly or partly in shares in accordance with term of issues.

256. Redeemable preference share: The preference share that is repayable either after a fixed (or) determined period (or) at any time dividend by the management.

257. Cumulative Preference shares: A class of preference shares entitled to payment of cumulative dividends. Preference shares are always deemed to be cumulative unless they are expressly made non-cumulative preference shares.

258. Debentures redemption reserve: A reserve created for the redemption of debentures at a future date.

259. Cumulative dividend: A dividend payable as cumulative preference shares which it unpaid cumulates as a claim against the earnings of a corporate before any distribution is made to the other shareholders.

260. Dividend Equalization reserve: A reserve created to maintain the rate of dividend in future years.

261. Opening Stock: The term ‘opening stock’ means goods lying unsold with the businessman in the beginning of the accounting year. This is shown on the debit side of the trading account.

262. Closing Stock: The term ‘Closing Stock’ includes goods lying unsold with the businessman at the end of the accounting year. The amount of closing stock is shown on the credit side of the trading account and as an asset in the balance sheet.

263. Valuation of closing stock: The closing is valued on the basis of “Cost or Market prices whichever is less” principle.

264. Contingency: A condition [or] situation the ultimate out comes of which gain or loss will be known as determined only as the occurrence or non occurrence of one or more uncertain future events.

265. Contingent Asset: An asset the existence ownership or value of which may be known or determined only on the occurrence or non occurrence of one more uncertain future event.

266. Contingent liability: An obligation to an existing condition or situation which may arise in future depending on the occurrence of one or more uncertain future events.

Ex: Product warranty .

267. Deficiency: The excess of liabilities over assets of an enterprise at a given date is called deficiency.

268. Deficit: The debit balance in the profit and loss a\c is called deficit.

269. Surplus: Credit balance in the profit & loss statement after providing for proposed appropriation & dividend, reserves.

270. Appropriation Assets: An account sometimes included as a separate section of the profit and loss statement showing application of profits towards dividends, reserves.

271. Capital redemption reserve: A reserve created on redemption of the average cost: - the cost of an item at a point of time as determined by applying an average of the cost of all items of the same nature over a period. When weights are also applied in the computation it is termed as weight average cost.

272. Floating Change: Assume change on some or all assets of an enterprise which are not attached to specific assets and are given as security against debt.

273. Difference between Funds flow and Cash flow statement:

• A Cash flow statement is concerned only with the change in cash position while a funds flow analysis is concerned with change in working capital position between two balance sheet dates.

• A cash flow statement is merely a record of cash receipts and disbursements. While studying the short-term solvency of a business one is interested not only in cash balance but also in the assets which are easily convertible into cash.

274. Difference between the funds flow and Income statement:

• A funds flow statement deals with the financial resource required for running the business activities. It explains how were the funds obtained and how were they used.                                                                                                    Whereas an income statement discloses the results of the business activities, i.e. how much has been earned and how it has been spent.

• A funds flow statement matches the “funds raised” and “funds applied” during a particular period. The source and application of funds may be of capital as well as of revenue nature.                                                                         An income statement matches the incomes of a period with the expenditure of that period, which are both of a revenue nature.

275. What is Accounting Policies: Accounting policies are specific accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements.

276. GAAP: Generally Accepted Accounting Principles. The standards of accounting practice which guide the recording and reporting of accounting transactions.

277. Gross profit: Sales – Cost of goods sold.

278. Operating profit: Gross profit – Operating exp.

279. Profit before tax: Operating profit + other income –interest exp.

280. Net profit or income: PBT – tax liability.

281. Current assets: Cash, marketable securities, accounts receivable, inventory, prepaid exp.

282. Non current assets: Gross plant & equipment, accumulated depreciation, other assets and liabilities, all assets with a life exceeding one year.

283. Current liabilities: Accounts payable, notes payable, accrued salaries and wage, accrued taxes, current portion of long term debt, all liabilities due in 1 year or less than 1 year.

284. Non current liabilities: Bank term loan, mortgage, differed income tax, all liabilities with maturity exceeding one year.

285. Sunk cost: It is an expenditure that has previously been made, that has no bearing on the project being considered.

286. Causes of under capitalization:

            1. Under estimation of capital requirements.

            2. Under estimation of future earnings.

            3. Promotion during depression.

            4. Conservative a dividend policy.

287. Watered stock or capital: Water capital means that the realizable value of assets of a company is less than its books value. In the word of Hoagland,

288. Causes of watered stock:

            1. Adopting defective depreciation policy.

            2. Acquiring the assets of the company at too high (rate) price.

            3. Acquisition of intangible assets such as patents, copyrights, goodwill etc,    at high values which later prove worthless.

289. BITS:

           

            1. The real value of an under capitalized rate of return company is more  than book value.

            2. When the company is unable to earn affair rate of return on its  outstanding securities, it is over capitalized.

            3. Issue of bonus shares is a remedial measure for under capitalized.

290. Key terms and concepts:

• Financial analysis: Statement of change in financial.
• Income statement: Position.
• Revenue: Source of funds.
• Expense: Use of funds.
• Gross profit: Asset utilization ration’s.
• Balance sheet: Liquidity ration’s.
• Current liabilities: Common size financial statements.
• Non current liabilities: Dupont method.
• Share holders: Ratio-trend analysis gross sectional analysis.
• ACRS: Accelerated cost recovery system.
• FASB: Financial account standard board.
• Foreign exchange: The price of one currency expressed in terms of another.

291. Bridge loan: Temporary finance provided to a project until long term arrangement are need.

292. Insolvency: The in-ability of firm to meets debt obligations.

293. Extraordinary items: An income or expenses that arises from events that or clearly distinct from the ordinary activities of the enterprises and, therefore are not expected to recur frequently. It is as well as called exceptional items and prior period items. Eg: Loss due to earthquake, fire accident, profit & loss on sale or raw material, unclaimed dividend. Un expected dividend received etc.

294. Financial structure: It means the entire liabilities side of the balance sheet. It refers to all the financial resources marshaled by the firm short as well as long term, and all forms of debt as well as equity.

295.  Bonus shares:

• Bonus issue amounts to reduction in the amount of accumulated profits and reserves.
• The residual reserves after the proposed capitalization should be at least 40% of the paid up capital of the company.
• The bonus issue is permitted to be made out of free reserves and premium collected in cash.
• The notice to accept right shares should not be less than 15 days.
• Right issue is also known as pre emptive rights.
• Bonus issue is made to make the nominal value and the market value of the shares of the company comparable.

296. Dividend:

• Dividend is the distribution of profits of a company among its shareholders
• Dividend policy of a firm after both the long term financing and share holders wealth.
• Scrip or bond dividend promises to pay the share holders at a future date.
• Cash dividend is usual method of paying dividend in cash.
• Stock dividend it means the issue of bonus shares to the existing share holders.

297. Sources of bonus issues:

• Balance in the P & L a/c.
• General reserve.
• Capital reserve.
• Balance in the sinking fund reserve for redemption of debentures after the debentures have been redeemed.
• Capital redemption reserve a/c.
• Premium received in cash.

298. Stock split: The receipt by existing shareholders of a number of shares of stock for each share they currently own.

299. Pay out ratio: Corporations may choose to pay a stable or constant % of earnings are called payout ratio.

Key terms and concepts:

• Pay out ratio = Record date.
• Residual payment policies = Payment date.
• Cash dividend = ex-dividend date.
• Declaration date = dividend re-investment plans.
• Stock dividend = Differential taxation.
• Stock split = flotation and security transaction.
• Share re-purchase = costs.
• Dividends divide the pie they do not create it = Information costs clienteles.

300. Warrant: It is an option to buy a specified number of new shares of common stock at a predetermined price. It is a similar to call option.

301. Right Issue: A method of issuing new share of stock by first issuing rights to current share holders.

302. Portfolio Management: Portfolio refers to investment in different kinds of securities such as shares, debentures or bonds issued by different companies and securities issued by the government.

            Zero-coupon bond: A bond which does not pay any interest and is issued at a low discount from its par value which will be paid at maturity.

Bits:

• An investment which derives its value from an asset backing it is called derivative.
• Forward contracts are not at all standardized.
• The trader who promises to buy in a forward contract is said to be in “long position”
• In an options contacts the seller is referred to as a “writer”.
• Under financial derivates “swaps” are in the nature of long term a seeking.
• Financial derivatives are mainly used for “hedging risks”.
• The instruments that are marked to the market are “futures”
• In an option contract, if the option can be exercised only at the time of maturity it is called European option.
• The predetermined and price at which an underlying asset has to be bought or sold in an option contract is called “exercise price”.
• A combination of forwards by two counter parties with opposite but matching needs is called. “SWAPS”.

Key terms and concepts:

• IPE: International petroleum Exchange of London.
• FRC: Forward rate contract.
• OCT: Over the counter trading.
• MOP: Maximum offering price.
• IPO: Initial public offering.
• OTEL: Over the counter exchange of India.
• NSE: National stock exchange.
• ICSE: Inter connected stock exchange of India.
• WAP: Wireless application protocol.
• MPO: Minimum public offer.
• Stock index: It is a number that helps measure the levels of market.

303. Profit & Loss A/C: The main purpose to prepare a P&L A/C is to find how much profit or loss is gain in the operation of the enterprise

304. Balance Sheet: Balance sheet is prepared to find a financial position of firm at the end of the year.

BSE SENSITIVE INDEX OF EQUITY SHARES.

            The equity shares of 30 companies from both specified and non specified groups have been selected on the basics of market activity it due representation to the major industries.

            COMPUTATION: The index of the day is calculated has they percentage of the aggregated market value of the equity shares of all companies in the sample on that day to the average market value of the equity shares of the same companies during the basic period.

            INDEX SERVICE: India index service and products limited (IISE) promoted by NSE and CRISIL is the only specialized organization in the country to provide stock index service.

           

COST INDEX: Total cost of customers purchases in terms of cost index.

ADRS: American depository receipts.

GDRS: Global depository receipts.

ADS: Each unit of an ADR is called an American Depository Share.

MUTUAL FUNDS

            DEF:  A fund established in the form of a trust by a sponsor, to raise monies by the trustees through the sale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations. It is started from 1964 in India, under the UTI.

Classification: It is depends up on the two basis.

1. On the basis of exclusion and operations: Again it is classified in two types.

           

            A. Close-ended: Once the subscription reaches the pre-determined level. The entry of investing is closed after the expiry of the fixed period, the entire corpus is disinvested and the proceeds are distributed to the various unit holders in proportion to their holding.

Features:

• Once the period is over and/or the target is reached, the door is closed for the investors. They can not purchase any more units.
• There is no repurchase facility by the fund.
• There is no facility to the purchase and sales in the medial of period.
• The prices of closed – ended scheme units are quoted at a discount of up to 40% below their net asset value.

            B. Open-ended: Any body can buy this unit at anytime and sell it also at any time at his discretion.

Features:

• There is free entry and exit of investors in an open – ended fund.
• There is no time limit.
• The investors can join in and come out from the fund as and when he desires.
• These units are ready to repurchase and resell their at any time.
• The listed prices are very close to their net asset value.
• The fund fixes a different price for their purchases and sales.

2. On the basis of yield and investment pattern: Again it is classified in to 6 types.

·         Income fund

·         Growth fund

·         Balance fund

·         Specialized mutual fund

·         Money market

·         Taxation fund.

Bits:

• Many market investments are commercial paper.
• Banker acceptance certificates of deposits, treasury bills etc.
• The corpus of the fund and its duration are prefixed under close – ended fund.
• Money market mutual fund (MMMF) invests in highly liquid securities like commercial paper.
• The company which sets up a mutual fund in called sponsor.
• The net asset value is nothing but the intrinsic value of each unit of a mutual fund.
• The small investor’s gate way to enter in to big companies is mutual fund.
• The best suited fund to the business people is growth fund.
• The facility offered to investors to shift from one schemed to and under the save fund is called “lateral shifting facing”.
• Mutual funds are very popular in USA
• The pattern of investment of a mutual fund is oriented towards fixed income yielding securities under “income fund scheme”.
• In India the company which actually deals with the corpus of the mutual funds is called asset Management Company.

DERIVATIVES

            Def: Derivatives are a special type of off balance sheet instruments in which no principal is ever paid. In other words, derivatives are instruments which make payments calculated using price of invest rates derived from on balance sheet or cash investment but do not actually employ those cash instruments to fund payments.

FINANCIAL DERIVATES:

            A. Forwards: It refers to an agreement between two parties to exchange an agreed quality of an asset for cash at a certain date in future at a predetermined spice specified in that agreement. In a forward contract, a user (holder) who promises to buy the specified asset at an agreed price at a fixed future date is said to be in the long position.

FEATURES:

            1. OVER THE COUNTER TRADING (OTC): They are traded over counter and not in exchanges. There is much flexibility since the contract can be modified according to the requirements of the parties to the contract.

            2. NO DOWN PAYMENTS: There must be a promise to supply or receive a specified asset at an agreed price at a future date. The contracting parties need not pay any down payment at the time of agreement.

            3. SETTLEMENT AT MATURITY: The important feature of a forward contract is that no money or commodity changes hand when the contract is signed. It takes place on the date of maturity only as given in the contract.

            4. NO SECONDARY MARKET: A forward rate contract is a purely PVT contract and it cannot be traded on an organized stock exchange.

           

            B. FUTURES: Future contract is one where there is an agreement between two persons to exchange any asset or currency or commodity for cash at a certain future date an agreed price. The trader who promises to buy is said to be in long position and the one who promises to sell is said to be in short position in future also.

FEATURES:

            1. Futures are standardized and legally enforceable.

            2. Once the agreement is entered in to the chances of modifying it are very remote.

            3. Down payment the contracting parties need not pay any down payment at the time of agreement.

            4. Secondary market futures are dealt in organized exchange and as such they have secondary market too.

            C. OPTIONS:             Options are yet another tool to manage such risks. The types are:-

            1. CALL OPTION: A call option is one which gives the option holder the right to buy an underlying asset at a pre-determined price called excise price or strike price on or before a specified date in future.

            2. PUT OPTION: A put option is one which gives the option holder he right to sell an underlying asset at a predetermined price on or before a specified date in future.

            3. DOUBLE OPTION: The option holder both the rights either to by or to sell an underlying asset at a predetermined price on or before a specified date in future.

CREDIT CARD

            Def: A Credit card is a card which enables card holders to purchase goods, travel and take dinner in a hotel with out making immediate payments.

Types of cards:

• Credit card
• Change card
• In store card
• Corporate credit card
• Business card
• Smart card
• Debit card

In store card:

1. The in store cards are issued by retailers or company.

2. These cards have currently only at the issuer’s outlets for purchasing product of the issuer company

3 In India such cards are normally issued by 5 star hotels resorts and big hotels.

Corporate credit card:

1. It’s issued to pvt and public limited companies.

2. Generally the directors, secretary of the company are eligible to this card.

Business cards:

1. A business card is similar to a corporate card.

2. It is meant for the use of proprietary concerns, firms of chartered a/c etc.

3. It is issued to the person of business trips.

4. The credit unit is depending on the status of company.

Smart cards: It is a new generation card. In India the DENA BANK launched the smart card in MUMBAI.