Accountancy

The accounting process in a nutshell:

 Capture and Record a business transaction.

 Classify and post transactions to their individual Ledger Accounts.

 Summarize and report the balances of Ledger Accounts in financial statements.

The three main financial statements:

 Income Statement

 Balance Sheet

 Statement of Cash Flows

What are the 3 Golden Rules of Accountancy?

Real Accounts :Debit what comes in

:Credit what goes out

Personal Accounts :Debit the receiver

:Credit the giver

Nominal Account :Debit all expenses and losses

:Credit all incomes and gains

Capital Market
The market for securities, where companies and the government can raise long-term funds. The
capital market includes the stock market and the bond market. It is a place where investors come
together to buy and sell shares.

 Segmentation of Securities Market:

 Primary Market: It deals with the issuance of new securities. Companies, governments
or public sector institutions can obtain funding through the sale of a new stock or bond
issue.
  Secondary Market: The financial market for trading of securities that have already been
issued in an initial public offering.

 Types of Shares

 Equity Shares: It is also known as Ordinary Shares. Equity Shares have voting rights, but
dividend is paid at last.

 Preference Shares: Preferred stock differs from common stock in that it typically does
not carry voting rights but is legally entitled to receive a certain level of dividend
payments before any dividends can be issued to other shareholders.

Mutual Fund
A Mutual Fund is a pool of money collected from investors and is invested according to stated
investment objectives such as portfolio diversification, reduction in risk, professional management, tax
benefits etc…

Derivatives
Financial instruments such as futures and options, which derive their value from underlying securities
including bonds, bills, currencies, and equities.

 Futures / Forwards: Investment contracts which specify the quantity and price of a commodity
to be purchased or sold at a later date.

 Options: A contract that gives the owner the right to buy or sell a security at a specific price
within a specific time limit. Options can be further classified as call option and put option.
 • Call option: An option to buy a certain asset by a certain date for a certain price

• Put option: An option to sell a certain asset by a certain date for a certain price

 Hedging: An investment strategy of lowering risk by buying securities that have off-setting risk
characteristics

 Arbitrage: An act of buying securities in one market and selling in another at higher prices. It
takes advantage of a price differential existing in the prices of the same commodity or security in
two or more different markets.

 Speculation: An act to take high risks for high return. It gives liquidity to the market.

 Collateral Management: Collateral management services are a method of securing a loan with
physical commodities. They are deposited as a pledge or guarantee that the loan will be repaid
at maturity; if not paid the commodities may be sold to reimburse the lender.

Calculation of NAV
(Market Value of the Investments + Receivables + Other Accrued Income + Other Assets – Accrued
Expenses – Other Payables – Other Liabilities) / (No. of units outstanding as on the NAV date)