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Accession Tax: firm or or ganization. This

It is the tax which levied on gifts and amalgamation takes place in order to

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inherited property. This tax is levied capture market share, reduced
on the recipient and is not the liability competition etc.
on the donor of gifts or property. Amortization :

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Accrued Income :
Accrued Income is an amount which
is actually earned by the business but
not yet received in that financial
period. For accrued income, proper
entry should be passed in the books of
at
account to show correct position of
business; Accrued Income is credited
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to Profit and Loss account and also
shown in Assets side of Balance Sheet.
Active Market:
A market (Stock exchange) which
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Amortizat ion is the process of
allocating the cost of an asset over a
period of time. It ref ers to the
repayment of loan principle with
interest. It also refers to the
spreading out of capital expenses for
assets i.e. intangible over a specific
duration for taxation and accounting
purpose.
Annuity:
In return to premiums, insurance

specifies the particular stock or share companies provides regular pension

dealing in frequent regular (equal intervals). In other words, this
transactions. This market of a security pension is called Annuity. The
having high trading volume with high amount of pension is calculated
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liquidity. keeping is vice the life expectancy of

Ad- Valorem Tax: the investor.
When a tax is levied on a commodity Appreciation:
according to its value, it is known as
Appreciation is an increase in value
‘Ad-Valorem tax’. ‘Ad-valorem’ is a
of stock of raw materials or finished
Latin word which means according to
goods, securities. It is antonym of
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value. VAT, import duties are few

examples of Ad-valorem Tax.
Amalgamation:
It is the combination of two are more
firms into a new entity. As and When
necessity arises, two or more
companies are merged into a large
Economy
‘Depreciation’ which means decrease
in the value. When the prices rise due
of inflation, appreciation occurs and
when the prices fall due of deflation,
depreciation occurs.
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Arbitration:
Arbitration is a proficiency for the
resolution of disputes outside the
court. It is the settlement of the
dispute between parties by third party
i.e. the arbitrator without resorting to
court action.
Autarchy:
An economy in which no activity is
conducted with outside economies. In
other words, the country itself can
satisfy the needs of its population
without making imports from other
countries, such country is called
Autarchy.
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Bank Draft:
It is a negotiable instrument drawn
upon a bank. A Bank draft is a
payment on the behalf of a payer that at
is guaranteed by the issuing bank.
These bank drafts cannot be returned
and unpaid.
Bank Rate :
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Bank Rate is the rate of interest
charged by the Central Bank on the
loans and advances to commercial
banks and other financial
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institutions. Bank rate is also called
Discount rate in some countries.
Bank rate caters long term funds
requirement of the commercial banks
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without collateral.
Bank rate policy is one of the
important tools used in the monetary
policy of central bank for influencing
the volume of credit in the country.
Base Rate :
Base rate is a minimum rate set by
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the central bank below which banks
are not allowed to lend its customers.
In order to enhance the transparency
in the economy and ensures that bank
will lend advances at lower cost to
their customers. Base rate differs from
banks to banks.
Economy
In another words, we can say that
in a cut throat competition, it is
necessary to decide base rate because
to earn high profits every bank will
lower their rates and soon economy
will collapse. Earlier, Base rate was
known as Prime lending Rate (PLR).
Bridge Loan:
A loan sanctioned by the bank for short
period to meet temporary shortage of
cash . Bridge loan is used to meet the
current obligations by providing
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immediate cash flow to enterprises.
Brokerage:
Brokerage is a commission charged
by an agent to conduct transactions
between buyers and sellers. It is also
refers to middle man earning. The
broker charges the brokerage fee for
various services rendered by him
such as purchases, sales, advices on
transactions etc.
Buffer Stock :
To protect a company or whole
economy from shortages of essential
production and price fluctuations,
supplied maintained in stock. Such
stocks are called Buffer stocks. During
market downturns, buffer stocks are
maintained as it protects the company
from market fluctuations. Buffer stock
is a reserve to safeguard against
unforeseen shortages.
Buffer stock as whole economy:
At the time of good harvests to prevent
price falling below the target price,
stocks are stored and releases when
prices will rise. Buffer stock scheme
is a government scheme where
agricultural products and food grains
are stored for future. The concept of
Buffer stock is introduced in India
during fourth five year plan (1969-74)
to meet emergency situations in the
market.
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Bulls and Bears :
Bulls and Bears are market trends.
The market trend is a comprehend
tendency of financial market over a
period of time. Bull market is a period
of rising prices whereas Bear market
is a period of decline in the prices of
stock market over a period of time.
These terms are used in stock market
but can be applied to anything that is
traded such as bonds, currencies and
commodities.
Capital Adequacy Ratio :
Capital Adequacy Ratio is the ratio of
a bank’s capital to its risk. It is also
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known as Capital to Risk weighted
Ratio (CRAR). It is used to promote the
stability of financial system as well as
to protect the interest of the at
depositors. It is the ratio which
determines the banks capacity to
meet time liabilities and other risks.
Capital Budgeting:
It is the process in which a business
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determines and evaluates potential
investment and expenses that are
long -run in nature. Capital Budgeting
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represents the process of preparing
the budget for long term period such
as investments in projects or plants
etc.
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Cash Discount :
The discount which is given to buyer
for making cash payment immediately
or early payment is called Cash
Discount. These discounts are given
to buyer to encourage them for cash
payment. Cash Discount is recorded
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in books of account.
Cash Reserve Ratio :
All the banks (scheduled and non-
scheduled) are required to maintain
cash with the central bank as a
certain percentage of their Demand
and Time liabilities (DTL).
Economy
Demand liabilities of the bank
shows its deposits which are payable
on demand of depositors (current and
savings deposits). Whereas Time
liabilities refers to deposits of the bank
which are payable on specif ied
maturities. In order to meet these
liabilities on time, bank has to keep
cash reserve with central bank. If the
bank fails to keep such reserve, it has
to pay penal interest on the shortfall
by adjustment from the interest
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receivable on the balances with
central bank.
Cheque Truncation System (CTS) :
Truncation means stopping or cutting
short. Cheque Truncation System is
the system by which flow of the
physical movement of the cheque will
be eliminated in process of cheque
clearing. Instead of physical
movement of cheque, an electronic
image of the cheque is sent to the
drawee bank branch, along with other
relevant information. CTS, thus,
removes the physical movement of
cheque from branch to branch. Also,
CTS helps in speeding the collection
of cheques and reduces the scope of
frauds and loss in transit. In CTS,
there are three parties, i.e. Clearing
house, Presenting Bank and Drawee
Bank.
Closing Stock :
The stock which is left with the
business at the end of the financial
year is called closing stock. It may
include, raw materials, work-in-
process and finished products. There
are various methods to calculate value
of closing stock i.e. First in First out
(FIFO), Last in First out (LIFO),
Weighted Average method, Retail
inventory method.
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Commercial Papers :
Commercial papers are unsecured
money market instrument issued by
reputed companies and financial
inst itutions wit h strong credit
standing. To issue commercial paper
(CP), it is necessary to have strong
credit rating. CPs are negotiable by
endorsement and delivery. An
unsecured instrument means these
are not backed by any security.
Various rating agencies rate the CP
before issue by the company. If it has
good rating means it is safe to invest
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and carry lower risk default. All
corporates cannot issue CP, only those
who met guidelines issued by RBI in
1997-98 can issue commer cial at
papers.
Maturity Period of CP :
CPs are issued for maturities between
7 days to one year. Moreover, the
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maturity date should not be beyond the
date up to which rating of issue is
valid.
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Denomination :
CPs are issued in denominations of
`5 lakh and multiples t hereof.
Commercial paper was introduced in
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India is 1990.
Consolidated fund:
Consolidated fund includes all
revenues and loans raised by the
government. All the expenses of the
Govt. are meet from the consolidated
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fund and no amount can be withdrawn
from the fund without authorization
of the Parliament. This fund includes
all the revenues such as tax revenue
as well as non-tax revenue and all
loans raised by the issues of Treasury
bills, internal and external loans.
Economy
Consumer Price Index:
CPI is a measure of change in the
retail prices of goods and services
consumed by the defined population in
the given area with reference to base
year. It is the indicator that shows
effect of inflation on purchasing power.
Contingency Fund:
The fund maintained by the
Government for meeting emergencies
and exigencies. The Govt.
subsequently obtains Parliamentary
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approval for the expenditure. The
amount spent from this fund is added
back to later. The Indian constitution
authorized the parliament to establish
a Contingency Fund of India.
Credit Rationing:
The measure undertaken by the
Central Bank to limit the credit supply
based on the creditworthiness of
investors and loan demands is called
Credit Rationing. In other words, it
refers to that situation in which
lenders are unwilling to advance loan
even at high rate of interest.
Customs Duty :
Customs Duty is a kind of indirect tax
levied on goods exported from India as
well as on goods imported into India.
The rates of customs duties are either
specific or on ad valorem (according
to value) basis. To raise revenue of
state as well as to protect domestic
market from competition from foreign
market, customs duties are imposed.
In India, the basic law for levy and
collections of customs duties is
customs Act, 1962. The central Board
of Excise Customs (CBEC) is the apex
body for customs matters. CBEC is the
part of Department of Revenue under
Finance Ministry. CBEC deals with
task of formulat ion of policies
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 concerning with levy and collections
of customs duties, prevention of
smuggling and ev asions and
administers all matters to customs
formations.
Deficit Financing :
Deficit financing is a method of
meeting government’s deficits. An
excess of expenditure over revenue
leads to deficit. This gap (deficit) is
being covered by borrowing from the
public, by the sale of bonds or by
issuing new curr encies. Deficit
financing in India means expenditure
over public which in excess of current
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revenue and public borrowing. The
Government may cover the deficit by
various ways such as issue of new
cur rency by gov ernment itself,
borrowing accumulated cash reserve
from RBI. Deficit financing leads to
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inflation inequality, which results in
unequal Balance of payment, adverse
effect on saving etc.
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Deflation :
The market situation where prices
are continuously falling is called
Deflation. It brings depression phase
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of business in the economy. In
deflation, the prices fall down and
value of money goes up. The inflation
rate becomes negative due to
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reduction in over all pr ice level.
Deflation is usually associated with
significant unemployment and need
steps for correction. A reduction in
money supply or credit availability
leads to deflation in the economy.
Demand Deposit Rate :
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The interest rate given by banks to
general public on their savings
deposits with the bank, such interest
rate is called demand deposit rate.
This interest rate is not regulated by
central bank means this rate is wholly
decided by the bank itself.
Economy
Demat Account :
Demat Account is similar t o a
traditional bank account, where
shares, bonds and other securities are
kept. Earlier, the investors invest his
money by purchasing certain shares
or bonds and have to wait until he get
cert ificat e but sometimes these
certificates of shares or bonds are lost,
theft, or mutilated, lead to loss for
investors. Thus to save interest of
investors, shares and other securities
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are held electronically in Demat
Account, instead of physical
possession of certificates. Demat
account holders also benefited as it
reduces stamp duty and filling up of
transfer deeds. These account holders
have to pay certain fees to operate the
Account i.e. opening fee, annual
maintenance fee, custodians’ fee and
transaction fee. Demat account is
maintained by depository participant
(DP). DP is an intermediary between
the depository and the investors. DP
can be any financial organization like
banks, br okers, and financial
corporates.
Demonetization :
Demonetization is a financial step
taken by country’s Government where
currency’s status as legal tender
declared invalid. There are various
reasons why country demonetizes its
currency such as to check inflation,
to curb black money and corruption
and terror financing. In economics,
demonetization refers as excellent tool
to curb counterfeit and black money
from the economy.
As per RBI, 87 % of transactions
in India are cash transactions which
lead to black money or unaccounted
money. Usually in demonetization, old
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 currencies are to be replaced with new
ones. Demonetization is done three
times in India i.e. in 1946, 1978 and
2016.
Devaluation :
A reduction in the value of a currency
in comparison to those goods, services
or other monetary units with which
currency can be exchange is known
as Devaluation. Devaluation is a tool
of monetary policy used by various
countries to adjust with foreign
market or international market. To
improve country’s Balance of Payment
(BoP), devaluating a currency is being
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adopted which will boost exports and
reduce imports.
E-Commerce :
Electronic commerce (e-commerce) is at
the buying and selling of goods and
services over an electronic network,
typically over internet. There are four
mar ket segment s on which e-
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commerce operates: business to
business, business to consumer,
consumer to consumer and consumer
to business. In today’s era, e-
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commerce is highly growing market
as economy is going towards cashless.
Engels law:
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This law was formulated by Ernst
Engel. The law states that the rise in
income, the proportion of income
spent on the food falls with given taste
and preference. In other words, the
smaller person’s income the greater
proportion of income is spent on food
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and vice versa.
Estate Duty :
Estate Duty is a tax paid by a person
who inherits money or property of a
person who has died. The Estate Duty
Act came into effect from 15th October
1953 whereas the Estate Duty
Economy
(Amendment) Act 1935 discontinued
the estate duty on death on or after
16th march 1985. Estate duty is also
called inheritance tax as it is a tax
that was levied against particular
asset during the time of its
inheritance. Some analyst argued
that there is a difference between
inheritance tax and estate duty but
there is no such difference.
Excise Duty :
Excise duty is a type of indirect tax
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levied on goods manufactured within
the country. The goods produced
within the country means within the
geographical boundary of the country.
This tax is now known as Central
Value Added Tax (CENVAT) in India.
The tax is generally levied on
percentage basis, as expressed as
percentage of the transaction value or
maximum retail price. The rate on
which excise duty is applied to goods
depends on the classification of the
goods under excise tariff.
‘Excisable Goods’ means the goods
which are specif ied in the f irst
schedule and second schedule to the
Central Excise Tariff Act, 1985.
Gender Budgeting :
Gender Budgeting is a tool for
achieving gender maintaining so as
to ensure that benefits of development
reach to women as much as men. In
order to have the desired impact, it is
imperative that State Govt./UTs also
adopt Gender Budgeting.
Gilt edge market :
Gilt-edge market refers to the market
for government and semi-government
securities that is backed by the
Reserve Bank of India (RBI). The term
gilt-edge means ‘First Class’. The
Government securities are ‘first class’
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 because it is free from risks of default
and highly liquid in nature. RBI
controls inflation and deflation in the
economy under open mar ket
operations while conducting such
securities.
Gilt Fund :
Gilt funds are mutual funds that
invest only in government securities.
Government securities are highly
secured and have no risk to default in
future. These funds have different
maturity profiles. Net Asset Value of
Gilt fund fluctuates due to interest
rates and other economic factors as
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compare t o other mut ual funds
schemes.
Indian Financial System Code (IFSC) : at
Indian Financial System Code is an
alphanumeric code which facilitates
electronic funds transfer in India. The
code uniquely identifies each bank
branch in Payment and Settlement
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systems in India i.e. RTGS and NEFT
systems.
The code is 11 character code
Magnetic Ink Character Recognition
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wher e first four are alphabetic
characters represents bank name,
fifth character is 0 (zero) that is
reserved for future purpose and the
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last six characters representing the
bank branch (usually number but can
be alphabetic).
Intangible Assets :
Intangible Assets are just opposite of
tangible assets. These assets have no
physical form, such as patents,
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trademarks, goodwill and copyrights.
Internet domain names are also
intangible assets for e-commerce
company. Intangible assets are
recorded in Balance Sheet at cost (or
lower).
Economy
Legal Tender of Money :
Legal Tender of money is the money
that is legally valid for making
payment of debts and that must be
accepted for that purpose when
offered. Legal Tender of money is
further divided into two categories i.e.
(a) Limited legal Tender : It refers
to that form of legal tender where
discharge of debt up to certain limit
can be accepted. Beyond this limit the
person may refuse to accept the
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payment. In India, coins are limited
legal tender. A person can pay 50 paise
coins up to ‘ 10 only.
(b) Unlimited Legal Tender : It refers
to that legal tender of money where
no person can r efuse to accept
payment. In India, all paper notes have
unlimited legal tender feature. Under
this, payment is protected by law.
Thus, legal tender of money, are those
currencies that is backed by law and
must be accepted as medium for
exchange and payment of debt.
(MICR)
It is a charact er recognit ion
technology used mainly in banking
industry t o ease the process of
clearance of cheques and ot her
documents.
MICR Code
Usually MICR code is nine digit code
which shows information about the
bank and the transaction. Nine digit
is divided into 3 parts, the first three
digit shows bank city name, next
three digit shows Bank name and the
last three digit shows bank branch
code. This code is written on the
bottom of the cheques and vouchers.
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Marginal Standing Facility (MSF) :
Marginal standing facility is Liquidity
Adjustment Facility (LAF) introduced
by Reserve Bank of India in its
Monetary Policy in May 2011. MSF rate
is the rate at which banks are able to
borrow funds for overnight from RBI in
exchange of approved government
bonds and securities. Commercial
banks use this tool during certain
emergency situations or severe cash
shortage, RBI charges higher rate in
compare to repo rate.
Under this credit facility, banks
can borrow funds for overnight up to
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1 % of their NDTL (Net Demand and
Time liabilities). NDTL shows bank’s
deposits and borrowings from others.
The minimum amount which can be at
borrowed through MSF is `1 crore and
in multiples thereof. Banks can
borrow maximum up to 2 % of its
NDTL.
Net Electronic Funds Transfer (NEFT)
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System :
NEFT is a nation-wide funds transfer
system which facilitates transfer of
funds from any bank’s branch to any
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bank’s branch. In NEFT, the
transactions are operates on deferred
Net settlement. The transactions are
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per tain to kept on hold and
accumulated then processed together
in batches. There is no limit to
minimum and maximum transaction
value in NEFT. NEFT can’t be used for
foreign transactions.
Primary Market (New Issue Market) :
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The market which deals with newly
issued securities i.e. the securities
which was never issued before is
known as primary market or new
issue market. It is the market for
raising fresh capital by issuing shares
and debentures.
Economy
The market deals with issue of new
securities such as equity shares,
pref erence shares and debt
inst rument s by corporates,
government (both central & state
government), PSUs etc. Primary
market mobilizes savings and provides
fresh capital to companies. Primary
Market provides platform to enterprise
to raise amount for future expansion
and development. The new offerings
by the company are made either as
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IPO or right issue.
Prime lending Rate :
PLR is the rate at which commercial
banks giv e loans to t heir most
creditworthy customers. PLR are the
rate which decides capital market as
it is the minimum rate at which
funds are lended. PLR is replaced by
Base rate by Reserve bank of India
from July 2010. PLR is also known by
different names in different countries.
In America it is known as Feds Funds
Rate, in Germany, it is FIBOR, in
Japan, it is TIBOR, in London, it is
LIBOR, etc.
Quick Assets:
Quick Assets are those assets that
can be converted into cash quickly. In
includes cash, gold, marketable
securities etc.
Real Time Gross Settlement (RTGS)
System:
RTGS is a centralized payment system
by which interbank payment is settled
on ‘Gross’ basis on ‘Real’ time. In
other words, under RTGS, the
transactions are settled as and when
happen. Each participant bank is
required to open dedicated settlement
account for putting its RTGS
transactions. The minimum amount
for RTGS is ` 2 lakh and no maximum
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 limit for the transaction. RTGS is used
by the banks to settle inter-bank
transactions as well as customers’
transactions. To operate RTGS, it uses
Indian Financial Network (INFINET).
Reflation:
To curb the effects of deflation,
reflation policy is adopted by the Govt.
such as reducing taxes, lowering
interest rates etc. It also includes
increase in the money supply by the
Govt.
Repo rate :
Repo rate is the rate of interest at
which the Central Bank grants short
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ter m loans (overnight also) to
commercial banks against collateral
securities. In Repo rate, the sale of
securities to the central bank, on
repurchase agreement i.e. to buyback
the securities at predetermined rate
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on any future date. Repo rate is
normally lower than the bank rate.
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Reverse Repo Rate :
When commercial banks kept their
excess money with central bank, then
central bank provides some interest
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to the bank, such interest rate is
called Reverse Repo Rate. It is one of
the tools to control liquidity in the
economy. When there is too much
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liquidity floating in an economy
commercial banks park their funds
with RBI. It prevents banks from
future insecurities. Reverse Repo Rate
signifies the rate at which RBI
(Central Bank) absorbs liquidity from
economy (banks).
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Stagflation:
An economic situation where there is
slow economic growth and relatively
high unemployment, such situation is
called as Stagflation. Inflation rate is
also very high in stagflation.
Economy
Statutory Liquidity Ratio :
Commercial Banks are required to
maintain highly liquid assets in the
form of cash, gold and government
securities not more than 40 % of their
total demand and time liabilities. The
objective behind maintaining SLR is
to restrict the expansion of credit of
banks, increasing banks investment
in government securities and
ensuring solvency of the banks. This
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reserve is kept by the bank itself. SLR
is one of major tool of monetary policy
controlling inflationary or deflationary
situations of the economy.
Tangible Assets :
Tangible Assets are those assets
which can be touched, feel or seen.
For example, plant and machinery,
furniture, inventory, etc. Tangible
assets include both fixed assets and
current assets such as inventory.
Term Deposit rate :
The rate at which interest is being
paid by the banks to the public on the
maturity date on specified amount of
money kept as Term deposit is term
as Term deposit rate. This rate is
generally carrying fixed rat e of
interest. Term deposit rate is usually
higher than the demand deposit rate.
Trade Discount :
The discount which is given to buyer
on bulk purchase is called Trade
Discount. These discounts are given
to attract the buyers to purchase more
and more. There are no accounting
transactions for trade discount. Trade
discounts are given on credit purchase
also.
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Unearned Income/Income received in
Advance :
There are various incomes which are
received in advance by the business.
These incomes are not related with
cur rent f inancial year of the
business, such income is called
unearned income. These incomes are
liability for the business and until the
services are provide in exchange of
that unearned income. Proper entry
should be passed and be shown in
Liability side of Balance Sheet.

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Economy 109