In market economy, there are many economic-financial categories, including credit and credit interest rate which are two of the most important ones. Credit activities are borrowing and lending activities. The capital-using relationship between borrowers and lenders bases on the principles of reimbursement. Lenders who are in excess of capital have opportunities not only to preserve but also capital get profit. Borrowers who are short of capital have chances to get additional capital to meet production, business or living needs. Therefore, owing to the credit activities that a large proportion of capital in the economy are mobilized, concentrated and distributed from temporary capital surplus sections to shortage ones to meet different needs of all entities in the economy. Indispensable leverage and tool in credit activities is interest rate. Interest rate of bank credit is the ratio in percentage between income and amount of loan for a certain period. Thus, interest rateContinue reading
Business Finance Terms
Definition of Financial Services
As per section 65(10) of the Finance Act, 1994, “banking and financial services” means the following services provided by a banking company or a financial institution including a non banking financial company, namely; (i) financial leasing services including equipment leasing and hire-purchase by a body corporate; (ii) credit card services; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking; (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial depository and trust services, but does not include cash management; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisition and advice on corporate restructuring and strategy; and vii) provision and transfer of information and data processing. Financial services can be defined as the products and services offered by institutions like banks of various kinds for the facilitation of various financial transactions and otherContinue reading
Hire Purchase System – Concept and Meaning
Purchase and sale of goods under a hire purchase system is different from cash sale and credit sale. In case of cash sale, the buyer pays the lump sum to the seller and immediately ownership is passed along with the goods. While in credit sale the payment is made in future. In these both cases the ownership and possession of goods pass on the buyer. However, hire purchase system is a special system of purchase and sale. In hire purchase system, the buyer acquires the property by promising to pay necessary installment payment of monthly, quarterly, half yearly or any other period. The period of payment has to be fixed while, signing the hire sell agreement. Though, the buyer acquires the asset under hire purchase system after signing the agreement, the title of ownership remains with vendor until the buyer squares up his/her entire liability. When the buyer pays theContinue reading
Installment Purchase System – Meaning and Concept
An installment purchase system is just like a credit purchase and hire purchase system of selling and buying goods. Like hire purchase, in installment purchase system an agreement is made between buyer and seller to purchase and sell of goods. The buyer makes certain down payment at the time of signing agreement and the balance is paying in installment over a period of time. An installment purchase system is a credit sale in which payments are made in installments over a period of time. In this system, the buyer gets the possession as well as ownership of the goods right at the time of signing the agreement. During the course of paying the installment, if the buyer makes default in paying the installment, the vendor cannot responses the goods. In that case, the vendor can sue the buyer for recovery of dues. Like in hire purchase even the paid installmentsContinue reading
Government Accounting – Meaning, Objectives and Features
Accounting is concerned with the processing of financial transactions of an entity. It generates and communicates necessary financial information to its users. It is, therefore, a process of recording, classifying and summarizing the financial transactions and communicating the results of its operations. There are different branches of accounting. One of its branches is government accounting. Government accounting is that branch of accounting, which is used in government institution. The government accounting is different from other branches of accounting such as commercial accounting. The accounting system used in government offices to record and report their financial transactions is known as government accounting. Government accounting is concerned with systematic and scientific recording of government revenues and expenditures. It is the systematic process of collecting, recording, classifying, summarizing and interpreting the financial transactions relating to the revenues and expenditures of government offices. It reveals how public funds have been generated and utilized for theContinue reading
Double Entry Bookkeeping System
Bookkeeping is an act of keeping permanent records of the financial transactions of a business in a systematic and orderly manner. The financial transactions of the business are identified, recorded and classified in different books. In modern entities, records of financial transactions are maintained under a double entry system. The double entry system has been recognized as a systematic and complete system for recording financial transactions. Double entry system recognizes that every financial transactions has two aspects. It then records two aspects of a transaction simultaneously in two separate accounts with equal amounts. It provides the aspects of a transaction with their names of debit and credit. Thereafter, with the help of ledger accounts, profit and loss account and the balance sheet are prepared to ascertain the profit and loss and the financial position of the business. Thus, the double entry system is the most systematic and complete system ofContinue reading