Financial Terminology for Drawing and Disbursing Officers and Financial Executives (Part-2)
-Dr. Lalit Kumar*
In
Government or Public sector, Drawing and Disbursing Officers (DDOs) perform
financial tasks including their ordinary administrative activities. The charge
of DDOs is a very genuine responsibility to verify activities in relation with
the set rules. The DDOs should have knowledge of Service rules regarding
Dismissal, Removal and Suspension of employees, Punishment and Appeal rules,
Conduct rules, Leave rules etc. At their workspace, the rules and regulations
are changed from time to time, therefore it is necessary to update according to
the new environment. It is identified that they should have knowledge of all
financial and administrative tasks to deal their matters easily and
efficiently. Normally they remained unaware about the modified rules and their
working activities are adversely affected due to this awareness. This training
programme is especially designed and organized to fulfill their requirements.
This is a single five days training programme having sessions on topics in
relations with the duties and responsibilities of DDOs.
The
financial reforms are also taking place in the government sector to improve the
efficiency and speed of accounting activities in government offices. The
activities will be changed to a great extent after implementation of Accrual
Base Accounting System. The aim of the course is to enable and improve the
capability of the DDOs in understanding their role and duties for ensuring
transparency and accountability in the government departments.
In
Government Sector, the Drawing and Disbursing Officer is the one of the most
responsible person. His duties are governed by rules and rules comprise
terminology. Let us have an exposure to that terminology:
Financial Terminology
In the present day
dynamic scenario, everyone wants to have some knowledge, if not an intimate
knowledge of the various subjects and areas. Today, Financial knowledge is
required everywhere to manage the organizational tasks with the financial
perspective. For understanding finance, it is required to understand its key
terms firstly. This chapter covers the meanings of many common and relevant
terms of the finance, especially for the managerial employees having no much
financial background.
Account:
In
financial terms account means any of the following : (1) Entries in a ledger
(q.v.) such as capital account, cash account, building account etc. which was
historically a part of the ledger; (ii) A statement or bill requiring payment
for goods or services; (iii) A statement of stewardship such as the financial
accounts of Public Companies to their shareholders, liquidator’s or executor’s
accounts etc.
Accountability:
A
responsibility which makes or obligates a person to explain his actions by
answering the whys and wherefores involving financial matters to others. For
example, the directors of a public company have accountability to their
shareholders at the annual general meetings and therefore, have to answer all
questions put out to them by the shareholders.
Accountant:
A
professional keeper and inspector of accounts (Oxford English Dictionary). A
person qualified in book-keeping and cognate subjects. One who is
concerned with the making up of or analysis of accounts and with their use by
organizations.
Accountant and
Comptroller General:
The
head of the accounts department of the Inland Revenue or customs and excise.
Accumulated Depreciation:
The
total amount of depreciation provided on a fixed asset w.e.f. the date of
purchase to the date when such amount has to be calculated. The figure is
therefore, a sum total of several number of years’ depreciation. The company
law makes it obligatory for a company to show its fixed assets at cost or a
value after deducting the accumulated depreciation. Normally a separate
account is prepared for accumulated depreciation.
Accumulated Fund:
This
is the capital of a non-profit-making organization, shown in the Balance Sheet,
and it is the net investment made by the contributing members of such an
organization. However, it is shown under the head, Accumulated Fund. It
represents the members’ equity and provides the risk finance for the assets
which the organization is holding and for any other operations undertaken. It
often represents the cumulative surplus of subscriptions over expenditure and
contains no item of long-term funding provided explicitly at the organization’s
formation or later.
Allowance:
An
amount permitted to be set off against an income or profit in determining the
taxable amount e.g. Capital allowance in respect of fixed assets.
Annual General Meeting:
A
meeting which is held every year by a Company’s shareholders in order to review
the business transacted, profits or losses made, appoint retire any directors,
auditors etc. or any other such matter which is required to be discussed by the
shareholders.
Appreciation:
An
increase in the value (1) of stocks and shares when their prices rise on the
stock exchange (2) of a currency when its value increases in terms of other
currencies or (3) of stock or inventory held by manufacturers or traders in a
period of rising prices.
Articles of Association:
A
set of rules that govern the internal working of a company. They cover things
like the issue and transfer of shares, the procedure for calling general
meetings, shareholder’s voting rights etc. This document has to be
registered with the registrar of companies.
Assessment:
A
statement showing a person’s tax liability for tax and the method of its
calculation.
Asset:
The
goods, property and resources of all kinds of a company, firm or an individual
which are available for the payment of debts and liabilities. When a
balance sheet of a company its drawn-up everything it owns at that time, that
has a money value is listed as an asset. Assets are categorized as fixed
or tangible assets e.g. machinery, building etc. Intangible or fictious
assets such as goodwill and current assets such as cash, stock, debtors, bill
receivable etc.
Auction:
A
sale of a commodity for which bids are made by prospective buyers and the
commodity is to be sold to the highest bidder. The completion of the auction is
signified by the auctioneer (often by a hammer blow) and there is then a valid
contract between the highest bidder and the seller. Prior to the sale, the
seller, usually a broker acting on behalf of the owner arranges for the
commodity to be made available for inspection and sampling by prospective
buyers. It is a common method of selling items of a unique or unusual
nature, such as large houses, works of art, antique furniture etc.
Audit:
The
examination, usually yearly or half-yearly, of books of account, by a person
specially appointed as the auditor for the purpose of ascertaining the
correctness of the books and to give a true and fair view. Under the
Companies Acts this is compulsory for limited companies.
Auditing Standards:
These
are statements that prescribe the conduct of audits, and are issued by the
Companies Act or Auditing Practices Committee or such bodies that have been set
up as professional accountancy bodies and whose members have the statutory
right to audit the accounts of limited companies.
Auditor:
A
person who conducts an audit.
Auditors’ Report:
An
annual report from auditors of company is required by its shareholders along
with the financial statements or final accounts for the accounting year.
The auditors are supposed to give a true and fair view of the financial
operations of the company. They are also supposed to give a full account
of any reservations that they have in the form of a Qualified auditors report.
Authorized Capital:
The
capital of a company as authorized by its memorandum of association. It is also
called the ‘norminal’ and ‘registered’ capital. The actual amount of
capital issued may be less than this, and so the company, if it should wish,
will be able to increase its capital at a later date upto the full amount
authorized without further application to the Registrar of Companies, Whenever
a new company is formed it has to state its authorized capital in order to be
registered with the Registrar of Companies.
Automated Teller Machine:
This
is a robot which dispenses cash and, in some cases, deals with certain other
basic banking transactions of a kind which traditionally would have been
handled by a cashier or teller over a bank counter.
Average:
A
single figure representing a group of figures. Arithmetic mean, Geometric
mean, Median, Mode etc. are measures of an average. A term used in marine
insurance, as the amount payable by the owner of a ship and by the cargo
owners, in proportion to their individual interests, to make good any loss
caused by throwing part of the cargo overboard or cutting away the masts or
such similar things, in order to prevent the loss of the ship and the rest of
the cargo.
Bad Debt:
A
debt that is difficult or impossible to collect. This is an amount
legally owed to the business, but unlikely to be paid because of bankruptcy or
dishonesty or any other reason.
Bailment:
The
delivery of goods or chattels to another person for a particular purpose other
than on a sale. The law of bailment is derived from the Roman law on the
subject, but it touches and concerns a number of aspects of business
life. For example, auctioneers common carriers, pawnbrokers, dry-cleaners
and bankers are all involved in contracts of bailment. In the financial
world, the principal examples of bailment are safe custody and hire-purchase.
Balance:
An
outstanding amount on any account not closed anything a debit or credit.
Balance Sheet:
A
balance sheet shows the assets and liabilities at a point of time of a company
or other incorporated body or of a private person. It is usually a
picture of trading enterprise, but can be a statement drawn up by a charity,
club, or a partnership. It reflects the position of assets and
liabilities on a particular date. It is a ‘stock’ statement, unlike the
‘flow’ statements like the Profit and Loss account or trading account, which
reflects a firm’s business operations for a particular period i.e. throughout
the accounting period.
Bank Charges:
This
is the commission charged by a bank to a customer for managing or maintaining
its account. This term is often used lossely to describe interest charges
on bank loans and overdrafts. Today bank charges account for nearly
thirty per cent of the total cost of the banking services.
Bills of Exchange:
An
unconditional order in writing, addressed by one person to another signed by
the person giving it, requiring the addressee to pay on demand or at a stated
future date a sum of money to a certain person or to the order of that person
or to the bearer. It is negotiable instrument requiring one person to pay
a sum of money to another on a specific date on the order of a third person.
Blue chips:
Shares
of successful progressive by the shareholders of a public or private limited
company primarily for planning and policy making in addition to other
functions.
Board of Directors:
A
committee elected by the shareholders of a public or private limited company
primarily for planning and policy making in addition to other functions.
Bonus:
An
additional sum or payment than the amount agreed or contracted for e.g. in Life
Insurance where policies are ‘with profits’, the insured receives an annual
addition, known as bonus which is determined on the basis of profits earned by
the insurance company. Manufacturing industries often give bonus to their
workers in addition to wages, worked out on different principles or systems of
bonus, such as the productivity bonus or task bonus system.
Bonus Shares:
Share
issued on a pro-rata basis to the existing shareholders by a company free of
charge. These are usually issued out of capital or revenue
reserves. This is capitalization of reserves or undistributed profits by
a company. The main aim of a bonus issue is to bring the capital of a
company more closely in line with the level of the company’s assets.
Book Keeping:
A
systematic method of maintaining records of business transactions. It is
keeping an account of what comes in and what goes out on a transactional
day-to-day basis. A record of financial dealings.
Book Value:
The
value of the assets appearing in books of accounts on the debit side.
This is usually the price at which an asset has been acquired by a firm or
company. The book value after the asset is in use would be the value
after deducting the depreciation to date.
Branch Accounts:
A
system of maintaining accounts of business activities at places other than the
main or head office, by a person known as a manager who is given a considerable
number of powers.
Break Even:
A
point or stage of business where there is neither a profit nor loss. It
is also known as the point from where profits begin. Break-even analysis
entrails the categorization of costs into fixed, variable and
semi-variable. A break-even chart shows the trend of total costs and
revenues graphically and also indicates the break-even point.
Broker:
An
agent acting on behalf of a principal, except in the case of the bill broker,
who usually acts on his own account. Simply, a person who buys and sells goods,
bills, stocks etc. on behalf of another person.
Brokerage:
The
charge or commission charged by brokers to clients on whose behalf they are
carrying out the business transactions.
Budget:
The
word was derived from the French word, “Bougette” which means “Little Bag”, or
a receptacle of documents and accounts. A budget is a statement of
intentions or a plan of stating expected incomes and expenses under a given set
of operating conditions. It is also defined as an “overall financial plan
for future activities.” It can be viewed as a plan for the utilization and
coordination of materials, labour and other resources.
Business expenses:
Expenses
incurred by a company in the course of its business activities or related to
the business activities.
Business Income:
At
current costs valuation, the total income that accrues to a firm or company
during a particular accounting period. This is arrived at after making
several adjustments to sales income.
Capacity:
The
highest output of a firm or industry at a given time with its available stock
of production factors. This capacity can be increased by introduced new
machinery or equipment and adding on more of the needed factors of production
e.g. labour, capital etc.
Capital:
The
total resources employed in a business, such as, shareholders’s Capital or
Partners Capital or Owners Capital. In simple words it is the networth of
a business firm, company or an individual. Net worth is the difference
between the total assets and liabilities. In a company, it is the sum
subscribed by the members of the company viz. the shareholders. There are
various categories of capital in a company such, as ‘Authorised Capital’,
Issued Capital,Paid-up Capital etc.
Capital expenditure:
An
expenditure that increases net fixed assets or on items that will be depreciated
or amortized during the subsequent years.
Capital Gain:
The
difference between the proceeds from the sale of a capital asset and the
purchase cost less any depreciation previously allowed.
Capital Markets:
The
market for medium term and long-term loans, in contrast to the money market
which is the market for very short-term loans. Money Markets serve the
needs of discount markets, whereas, Capital Markets serve the needs of discount
markets, whereas, Capital Markets serve the needs of Industry and Commerce,
Governments, and Local authorities. Limited Companies often borrow from
capital markets through the means of debentures, while the Government or a
local authority may issue new stock.
