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Fixed interest rate- Not going to change during entire period,not effected by market increase or decrease.
Floating interest rate- Rate of interest changed here depending upon the market conditions related to benchmark rate.
Annuties- To pay a certain amount,periodically, for a period of time.
YTM- Yield time maturity.It refers to the total expected return once the bond is held till maturity in which investment is made in a disciplined manner.
It is long term investment.Rate is annual here.
IRR- Internal rate of return is the just the other name for the YTM.
Depreciation- Fall in value of asset over a period of time.
Accounting is language of business to communicate with the outside world,it is done by business entity to keep a record of day to day transaction to know expenses,asset,liability and profit at any particular time.
Financial Transaction- Transaction between two person in terms of money.
Difference between accountancy and bookkeeping- Accountancy is a language whereas bookkeeping is a part of this.
Accountancy is recording, measuring,grouping,summarizing,evaluating and reporting of transactions whereas bookkeeping is keeping proper records of financial transaction.
Accountancy is maintained by the accountant whereas bookkeeping is maintained by the bookkeeper.
Difference between journal and ledger-
Journal is record of all the transactions that are done at a particular time whereas ledger is the record of all transactions of particular account.
Journal is a subsidiary book whereas ledger is the principal book.
Journal is first entry book whereas ledger is second time entry book.
Journal entry is made with help of vouchers,receipts,cheques etc whereas ledger entry is made with the help of journal.
Possibility of error in the journal is less whereas in ledger is more.
Process of entry is called journalizing whereas in ledger it is termed as posting.
Journal recording of transaction is sequentially whereas in ledger it done account wise.Journal may or may not be balanced whereas ledger has to be balanced.
Difference between single entry & double entry bookkeeping- SE only one aspect of transaction is recorded whereas in DE both the aspect of transaction is recorded.
SE is simple,DE is complex.
SE is scienific,de is unscientific.
Frauds and error not easy to detect in SE,very easy to detect in DE.
SE is sutaible for small enterprises DE is suitable for big enterprises.
Drawings- Stock used by the owner for its personal use.
SEC- Securities exchange commission
GAAP- General accounted accounting principles, accounting used by usa.
IFRS -International financial reporting framework,accounting used by more than 100 countries.
ICAI- Institute of chartered accoutants of india.
EITF– Emerging Issues Task Force
Balance sheet equation- asset=capital+liabilities
Off balance-sheet- The thing that are not-mentioned in balance sheet
Types of account-
Real account,Personal account,Nominal account,Tangible account,Non-tangible account.
Artificial person- ex.company account.Company is the artificial person in terms of accountancy.
AS-1 It deals with the promotion of better understanding of financial statements
AS-2 It deals with the cost of values of the inventries.
AS-3 It deals with preparation & presentation of cash flow and financial statements.
AS-4 It deals with the treatment in financial statement of contigencies & events that occurs after the balance sheet date.
contigencies-penalty,court procedings etc
AS-5 It deals with the treatment in the financial statements of a prior period,changes in accout policies.
AS-6 It deals with various types of depreciation method related to the asset.
AS-7 It deals with accounting of construction contracts as delay in period creates problem in accounting related to work in progress,revenue etc.
AS-9 It deals with the revenue,various activities that are related to this.
AS-10 It deals with the fixed asset.
AS-11 It deals with the transaction in foreign transaction,rules for the foreign currency conversion and the difference.
AS-13 It deals with investment by an entity,long term investment,shares,debentures.
AS-14 It deals with amalgamation of the companies
AS-15 It deals with retirement benefits of the employees
Accounting procedures -reporting stage,recording stage
Accrual basis- It deals with concept to take receipt for the payment made and obligation to pay.
Law of conservatism- Take all the possible losses in consideration irrespective of all possible gains.
Transfer pricing- It is used for the evaluation of banks,implemented on branch to generate profit ultimately leads to profit of bank.
Equity shares- Real owner of the company but not the part of management
Preference shares- Secondary owner, dividend is fixed here to be paid, gets paid first(i.e on preference-payment of dividend on fixed rate) on profit or when company is winding up.
Types of preference shares-
Cumulative preference shares- right too claim the dividend even if the company is in loss or not in condition to pay,this carries to the next year.
Redeemable preference shares- can be redeemed under some condition of companies act.
Participating preference shares
Shares at par-
Shares at premium-shares are issued at higher price than the face value
Shares at discount
Sweat equity shares
ESOS- employee stock option scheme
Underwriting commission- If shares is left unsold,purchased by a person,for this he takes some charges.
Trial balance- here the entry is made to check the arithmatical accuracy.
Bill of exchange- It involves three parties(drawer-one who draws the bill, drawee-on whom the bill is drawn ,payee-who receives the money),made by the creditor(individual or bank).
Must be accepted by the debtor.
On dishonor must be notified.
Stamp is required on this,only used for the transaction of money,just like cheques transferable by endorsement. Ex-bank draft made by the bank.
Promissory note- It is the unconditional promise made by the debtor to pay the amount on fixed date or within a period of time.
Involves two parties only,signed by the debtor,acceptance is not required by creditor once debt is paid it is returned to the issuer.
On dishonour no notification is required.
Ratio analysis- It includes liquidity ratios-It is for the short term debt.
Solvancy ratio- It is for the long term debt.
Opening stock- 3 types- 1-raw material,2-work in progress,3-finished goods direct expenses opening stock-3 types-raw material,2-work in progress 3-finished goods direct expenses
Sales -revenue from operation
Sales return- the good that is sold but returned back due to some reason.
Closing stock – the stock that is available at the starting of the year.
Amotization- depreciation charges
Finance charges- bank takes charges to approve the loan.
Total sales=cash sales+(credit sales-sales return) total sales=cash sales+(credit sales-sales return)
Cost of goods sold=openingstock+purchases+direct expenses-closing stock cost of goods sold=opening stock+purchases+direct expenses-closing stock
Total sales=cost of goods sold + gross profit total sales=cost of goods sold + gross profit
(note – if information of direct expenses are not given in question,then they are nil.)
Operating expenses-expenses that are done in the process of running the business operating expenses.
Non-operating expenses-dividends,interest paid on loans non-operating expenses-dividends,interest paid on loans
Operating cost=operating cost + cost of goods sold operating cost=operating cost + cost of goods sold
Net profit =profit after tax
Operating profit=gross profit -operating expenses
Final accounts of companies- section 129
Balance sheet equation- Asset=liabilities+capital
Trial balance- It is prepared to find out the mathematical error,at the end of the year.
With the help of trial balance final account is prepared which includes trading,profit and loss account and balance sheet.profit= sales-(purchases+opening stock-closing stock+expenses)
Classification of asset and liabilities,payment of dividend,tax treatment accounting,managerial numeration-final account of company
Current asset- expected to release cash within operating cycle or 12 months whichever is higher.
goods that are to be traded. ex- raw material,finished goods.
Non-current asset- which are not current asset.
ex- whether given asset is current asset or non-current asset.
operating cycle is =12,period expected to converted in cash in 10 months.
Operating cycle- operation cycle,the cycle starting from spending on raw material till the finished goods is sold to get cash(note – if operating cycle is not given,assume it as twelve months)
Materials purchased(4 years)-work in progress(3 years) –stock of finished goods(3 years)-period allowed to debtors(4 years) -sold to get cash==add all to get operting cycle
Current liability-that are to be expected to be sold in operating cycle those of the company or 12 months(taken the higher value of the two)
Stock- tangible asset held by the enterprise for the purpose of production or sale of goods at a particular point of time known as inventory also.opening stock,closing stock.
note- when the company is going to die then liability is paid first then the dividend is paid to the preference share holder and finally the equity share holder.
Payment of dividend
Out of adequate profit
PRINCIPLE AND PRACTICES OF BANKING
Repo rate(RR)- Loan given by RBI for short term.
Reverse reserve ratio(RRR)
CRR- Cash reserve ratio,the amount of cash a scheduled commercial bank need to maintain with RBI.
Mandatory deposit in the central bank.
It is used to control the flow of money in the market.
It is a fixed % of a bank of their time and deposit liabilities declared by RBI.
SLR- Statutory Liquidity Ratio,some % of the time and demand liabilites of bank to be deposited to the central bank.
As liquid asset(that can be easily converted to cash) of cash, gold, government securities.
Percentage(maximum is 40%) to be declared by RBI.
Marginal Cost Lending Rate(MCLR)- It is introduced by RBI on 01-04-2016.
All lending rates are to be decided with respect to Mclr.
Retail banking- It refers to dealing of commercial banks with individual customers.
It includes products, delivery channels and customer groups.
Personal loan, educational loan, personal loan,crop loan on the asset side.
Fixed ,saving acc and current acc on libility side
Wholesale banking- To do business with industrial and business entity.
Narrow banking- Recommended by Tarapore committee.
Cash credit facility- In this short term loan is given in quick succession.
ADR- American depository rate
GDR- Global depository rate
Certificate of deposit
Libor- London inter bank offered rate
Mibor- Mumbai inter bank offered rate
FEMA- foreign exchange management act
Capital market- primary market-initial public issue, secondary market- traded after initially offered to public
SEBI- Security exchange board of india
Bank of guarantee- It involves three parties,debtor-bank-creditor.bank is involved when debtor fails to pay to creditor.
Letter of credit- It also involves three parties but this is termed when the case of importer and exporter of goods.irrevocable, revocable,
insurance- life insurance, non-life insurance
term inasurance plan
Cheque- crossed cheque, cancelled cheque, stale cheque, post-dated cheque
Cibil- It tells you about repayment capacity of a person.
Types of risk in bank-
Operational risk- Arises due to failed system,process or people.
Credit risk- Related to loans.
Market risk-Related to value of investment during the holding period.
Liquidity risk- Related to asset and liabilities.
Interest rate risk- Arises due to fluctuation in rate of asset during the held period.
Power of attorney
Money market- It is short term market,include short-term debt securities.
Debt Period is equal to one year or less.
Regulatory body is RBI.
Capital market- It is long term market,deals with long term securities.
Debt period is more than one year.
Regulatory body is SEBI.
Bancassurance- Selling of insurance products through bank branches.
Insurance products can be of both types life or non-life.
Money laundering- Indulging in crime of money related issues,knowingly or by mistake.
Non Bank Finance Companies- Engaged in budiness of loan and advnaces.
Insurance business- RN Malhotra committee
Narrow banking- Tarapore committee
Factoring- Kalyanasundrama committee
JAIIB exam Details
Principle and pratices of banking.
Legal and regulatory aspect of banking.
Process to fill for the exam-
1.Register on the portal of IIBF.
2.Make the payment.
3.Requirements- A valid e-mail id.
4.Photo and signature of appropriate size.
Twice in a year-In a month of may and November on consecutive sundays.
Mode of exam will be online.
Duration of exam will be 2 hrs.
Fee structure for the exam-
1st attempt- rs 2400,
2nd attempt- rs 1000,
3rd attempt- rs 1000,
4th attempt- rs 1000 for 4 attempts.