IRFC Assistant (Finance) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Accounting Equation

Assets equal liabilities plus equity. Every transaction changes at least two elements while preserving the equality, which is why total debits always equal total credits in a balanced ledger.

Accrual Concept

Revenue is recognised when the performance obligation is satisfied and expenses when incurred, irrespective of cash timing. It produces matching of costs with the income they helped generate.

Ind AS 115 Core Principle

Revenue is recognised to depict transfer of promised goods or services in an amount reflecting expected consideration. The standard prescribes five steps, beginning with contract identification.

Goodwill on Acquisition

Consideration transferred plus non-controlling interest plus fair value of prior holdings, less fair value of net identifiable assets acquired. It is not amortised but tested annually for impairment.

Net Present Value Rule

Discount all project cash flows at the cost of capital and subtract the initial outlay. A positive NPV adds value and the project should be accepted; higher NPV ranks better among alternatives.

Weighted Average Cost of Capital

The blended required return on a firm's securities, weighting equity and debt costs by market values. Debt cost is taken after tax because interest is tax deductible.

Capital Asset Pricing Model

Expected return equals the risk-free rate plus beta times the market risk premium. Beta captures only systematic risk, since unsystematic risk can be diversified away by investors.

Working Capital Cycle

Inventory days plus receivable days minus payable days. A shorter cycle means cash is tied up for fewer days, releasing funds for operations without additional borrowing.

Value at Risk

An estimate of the maximum loss over a stated horizon at a given confidence level. It does not describe the magnitude of losses occurring beyond that confidence threshold.

Residential Status Test

An individual is resident if present in India 182 days or more in the year, or 60 days in the year plus 365 days in the preceding four years, subject to relaxations.

Advance Tax Instalments

Non-presumptive assessees pay advance tax in four instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March of the financial year.

Input Tax Credit

Credit for GST paid on inputs and input services used for taxable outward supplies. It is claimed in the electronic credit ledger and cannot be used for certain blocked categories.

IGST Utilisation Order

Integrated tax credit is first set off against IGST liability, then against CGST, and finally against SGST. State and central credits have separate prescribed utilisation sequences.

Audit Risk Model

Audit risk equals inherent risk times control risk times detection risk. The auditor assesses inherent and control risk, then designs procedures to reduce detection risk to an acceptable level.

Segregation of Duties

Authorisation, custody of assets, recording and reconciliation are assigned to different people. Combining them allows one person to conceal errors or fraud without detection.

COSO Components

Control environment, risk assessment, control activities, information and communication, and monitoring activities. These five components form the framework for evaluating internal control over financial reporting.

Going Concern Assumption

The entity is assumed to continue operating for the foreseeable future, at least twelve months from the reporting date. Material uncertainty about this requires disclosure in the financial statements.

Bond Price Yield Relationship

Bond prices and yields move in opposite directions. Because of positive convexity, the price gain from a yield fall exceeds the loss from an equal yield rise.

Modified Duration

Approximate percentage change in bond price for a one percentage point change in yield, equal to Macaulay duration divided by one plus yield per period.

Repo Transaction

A collateralised money market borrowing in which the seller sells securities and agrees to repurchase them later at a higher price; the difference expresses the repo rate.

Futures versus Forwards

Futures are exchange-traded, standardised and marked to market daily through a clearing corporation. Forwards are over-the-counter, customised and carry counterparty credit risk.

Simple versus Compound Interest

Simple interest accrues only on principal, computed as P×R×T/100. Compound interest accrues on principal plus accumulated interest, giving a larger amount over multiple periods.

Effective Annual Rate

The true annual cost or yield when compounding occurs more than once a year, computed as (1 + r/n)^n minus one. It exceeds the nominal rate whenever n is greater than one.

Combinations Formula

The number of ways to choose r items from n without regard to order, written nCr and equal to n factorial divided by r factorial times (n minus r) factorial.

Coefficient of Variation

Standard deviation divided by the mean, expressed as a percentage. It measures relative dispersion and allows comparison of series measured in different units or with different means.

Bayes Theorem

The posterior probability of an event equals the prior probability times the likelihood of the evidence, divided by the total probability of that evidence.

Normal Distribution Property

A symmetric bell-shaped distribution centred on its mean. About 68% of observations lie within one standard deviation and about 95% within two standard deviations.

Syllogism Validity Rule

A conclusion follows from the premises only if it holds in every possible Venn diagram consistent with those premises. A single counterexample diagram invalidates it.

Direction Sense Technique

Sketch each movement on a coordinate plane, tracking north-south and east-west displacement separately. Final straight-line distance follows from the Pythagorean theorem.

Subject Verb Agreement

A singular subject takes a singular verb. With either-or and neither-nor constructions, the verb agrees with the subject nearer to it in the sentence.

Affect versus Effect

Affect is usually a verb meaning to influence; effect is usually a noun meaning a result. Confusing them is among the most common errors in formal business writing.

Priority Sector Lending Target

Domestic scheduled commercial banks must deploy 40% of adjusted net bank credit to priority sectors, including sub-targets for agriculture and weaker sections.