1.The accountants consider a company as distinct from its owners. This distinct entity works through employees with an ultimate objective of making profits which belong to the owners. The business entity is liable to distribute these profits to the owners and hence profits are considered as a liability by the accountants. Remember, the accountant is writing the books of accounts on behalf of the business entity.

2.The bank sms is on behalf of the banker. You are a customer to your banker and balances in your account are liabilities to the bank. Hence when money gets deposited in your account , the bankers liability increases and he credits your account.Credit in accounts means to write something on the right hand side of the ledger. The rule is simple, crdit increases in all liabilities and vice versa.

3.The terms Cost and Expense have a different connotation when it comes to valuing inventory. Cost is money expended in the making of a product till the time the product is sold, whereas the same money expended is known as expense when the product gets sold. In the manufacturing paradigm, money expended implies money spend in the production portion of the entire value chain.

4.No . Income tax is normally computed on income arrived at by a profit and loss account using the income tax regulations. These regulations are sometimes different from the accounting regulations . Such differences are either permanent or temporary. They give rise to different accounting and income tax profits.

5.In case purchase of raw material is routed through the purchase account, one will need to adjust closing stock in order to follow the matching principle. After all, sales need to be matched with raw material consumed , not the entire purchases. Hence the need of adjustment. However, in case one routes purchase of raw material through the Raw Material account, the balance shall appear in the debit side of the Trial Balance.

6.Administrative expenses incurred in the factory to the extent they facilitate production need be accounted for while valuing inventory.

7.FUTURES A futures contract is standardized. It is an agreement which calls for delivery of a commodity at a specified future date.Financial futures : commodity is a security. Transactions :either on an exchange or through an investment bank . This is known as the over-the-counter market. In a exchange transaction, the clearinghouse of the exchange acts as a mediator between the buyer and the seller. Each exchange has a number of rules governing t ransactions. While the clearinghouse affords the market participant a degree of safety, if the broker should default the participant may be hurt. As in commodities, very few financial futures contracts involve actual delivery at maturity. Buyers and sellers of a contract take offsetting positions to close out the contract. The seller cancels a contract by buying another contract; the buyer, by selling another contract. As a result, only a small percentage of contracts have actual delivery. The open interest is the number of futures contracts outstanding that have not been closed. Features of Futures Markets IRF-Global perspective Interest Rate Futures contracts originated  in the United States on October 29, 1975. Since then, they have become a fundamental risk management tool for financial markets worldwide. They are the most widely traded derivatives instrument in the world. The total turnover during Jan-Mar 2015 for Interest Rate Futures was around USD 3,21,617 billion, which is more than 9 times higher than equity index futures.

8.The three assumptions are rule of law, clean property rights, and a culture of trust. 

9.. In efficient market prices, reflect the true economic values of the assets trading. In such markets, it is not possible to earn returns that are higher than those assigned to that particular risk . Efficient markets are associated with low transaction costs and a very rapid assimilation of new information into prices.

10.. The existence of derivative markets in most modern countries of the world leads to a much higher degree of market efficiency. Individual arbitrageurs work in such a way so that unequal prices of identical goods are arbitraged until they are equal. The presence of large number of arbitrageurs facilitates a quick and efficient process. Large-scale arbitrage makes markets less capable of being manipulated. In addition, markets become less costly to trade in, and therefore more attractive to investors. The market gives investors an opportunity to hedge, which is also an attractive proposition. This does not mean that an economy without derivative markets would be inefficient; however, it would not have the advantage of this arbitrage on a large scale. It is important to note that the derivative markets do not make the world economy any larger or wealthier. The basic wealth remains the same with or without these markets. However, investors get an opportunity to align their risks at low costs and desired levels. This may not necessarily make them wealthier, but to the extent that it makes them more satisfied with their positions, it serves a valuable purpose.

11.The main fundamental difference between options and futures lies in the obligations they put on their buyers and sellers. An option gives the buyer the right, but not the obligation to buy (or sell) a certain asset at a specific price at any time during the life of the contract. A futures contract gives the buyer the obligation to purchase a specific asset, and the seller to sell and deliver that asset at a specific future date, unless the holder's position is closed prior to expiration. Aside from commissions, an investor can enter into a futures contract with no upfront cost whereas buying an options position does require the payment of a premium. Compared to the absence of upfont costs of futures, the option premium can be seen as the fee paid for the privilege of not being obligated to buy theunderlying in the event of an adverse shift in prices. The premium is the maximum that a purchaser of an option can lose.Another key difference between options and futures is the size of the underlying position. Generally, the underlying position is much larger for futures contracts, and the obligation to buy or sell this certain amount at a given price makes futures more risky for the inexperienced investor. The final major difference between these two financial instruments is the way the gains are received by the parties. The gain on a option can be realized in the following three ways: exercising the option when it is deep in the money, going to the market and taking the opposite position, or waiting until expiry and collecting the difference between the asset price and the strike price. In contrast, gains on futures positions are automatically 'marked to market' daily, meaning the change in the value of the positions is attributed to the futures accounts of the parties at the end of every trading day - but a futures contract holder can realize gains also by going to the market and taking the opposite position. 

12.Repo is a money market instrument, which enables collateralized short term borrowing and lending through sale/purchase operations in debt instruments. Under a repo transaction, a holder of securities sells them to an investor with an agreement to repurchase at a predetermined date and rate.

13.A reverse repo is the mirror image of a repo. For, in a reverse repo, securities are acquired with a simultaneous commitment to resell . Hence whether a transaction is a repo or a reverse repo is determined only in terms of who initiated the first leg of the transaction. When the reverse repurchase transaction matures, the counterparty returns the security to the entity concerned and receives its cash along with a profit spread. One factor which encourages an organisation to enter into reverse repo is that it earns some extra income on its otherwise idle cash. 

14.If an individual anticipates the price of a stock falling, he can attempt to capture a profit by selling short. He would first borrow the stock from a broker and sell that stock in the marketplace. If the price of the stock then indeed fell, he would buy back the stock at a lower price. This would allow him to capture a profit and repay the shares to the broker. Short selling creates a liability in that the short seller is obligated to someday buy back the stock and return it to the broker; however, the short seller does not know how much he will have to pay to buy back the shares.

15.Broadly, there are four types of repos available in the international market when classified with regard to maturity of underlying securities, pricing, term of repo etc. They comprise buy-sell back repo, classic repo bond borrowing and lending and tripartite repos. Under a buy-sell repo transaction the lender actually takes possession of the collateral . Here a security is sold outright and bought back simultaneously for settlement on a later date. In a buy-sell repo the ownership is passed on to the buyer and hence he retains any coupon interest due on the bonds. The forward price of the bond is set in advance at a level which is different from the spot clean price by actually adjusting the difference between repo interest and coupon earned on the security. The spot buyer/borrower of securities in effect earns the yield on the underlying security plus or minus the difference between this and the repo interest rate. Classic repo is an initial sale of securities with a simultaneous agreement to repurchase them at a later date. In the case of this type of repo the start and end prices of the securities are the same and a separate payment of "interest" is made. Classic repo makes it explicit that the securities are only collateral for the loan of the cash . Here the coupon income will be accrued to the seller of the security. Under a hold in custody repo the counterparties enter into an agreement whereby the securities sold are held in custody by the seller for the buyer until maturity of the repo thus eliminating the settlement requirements. In a bond lending/borrowing transaction, the customer lends bonds for an open ended or fixed period in return for a fee. The fee charged would depend on the type of underlying instrument, size and term of the loan and the credit rating of the counterparty. The transaction would be taken care of by an agreement on securities lending and cash or other securities of equal value could be provided as collateral in the transaction. Under a Tripartite repo a common custodian /clearing agency arranges for custody, clearing and settlement of repos transactions. They operate under a standard global master purchase agreement and provides for DVP(delivery vs payment) system, substitution of securities, automatic marking to market, reporting and daily administration by single agency which takes care of the risk on itself and automatic roll over’s while does not insist on disclosing the identities by counterparties. The system starts with signing of agreements by all parties and the agreements include Global Master Repurchase and Tripartite Repo Service Agreements. This type of arrangement minimises credit risk and can be utilised when dealing with clients with low credit rating. 

16.There are a variety of advantages repos can provide to the financial market in general, and debt market, in particular as under: • An active repo market would lead to an increase in turnover in the money market, thereby improving liquidity and depth of the market; • Repos would increase the volumes in the debt market, as it is a tool for funding transactions. It enables dealers to deal in higher volumes. Thus, repos provide an inexpensive and most efficient way of improving liquidity in the secondary markets for underlying instruments. Debt market also gets a boost as repos help traders to take a position and go short or long on security. For instance, in a bullish scenario one can acquire securities and in a bearish environment dispose them of thus managing cash flows taking advantage of flexibility of repos. • For institutions and corporate entities repose provide a source of inexpensive finance and offers investment opportunities of borrowed money at market rates thus earning a good spread; • Tripartite repos will offer opportunities for suitable financial institutions to intermediate between the lender and the borrower. • A large number of repo transactions for varying tenors will effectively result in a term interest rate structure, especially in the interbank market. It is well known that absence of term money market is one of the major hindrances to the growth of debt markets and the development of hedging instruments. • Central banks can use repo as an integral part of their open market operations with the objective of injecting/withdrawing liquidity into and from the market and also to reduce volatility in short term in particular in call money rates. Bank reserves and call rates are used in such instances as the operating instruments with a view to ultimately easing /tightening the monetary conditions

17.OPTION STRATEGIES STRATEGY 1- Covered Call Aside from purchasing a naked call option, you can also engage in a basic covered call or buy-write strategy. In this strategy, you would purchase the assets outright, and simultaneously write (or sell) a call option on those same assets. Your volume of assets owned should be equivalent to the number of assets underlying the call option. Investors will often use this position when they have a short-term position and a neutral opinion on the assets, and are looking to generate additional profits (through receipt of the call premium), or protect against a potential decline in the underlying asset's value. STRATEGY 2 -Married Put In a married put strategy, an investor who purchases (or currently owns) a particular asset (such as shares), simultaneously purchases a put option for an equivalent number of shares. Investors will use this strategy when they are bullish on the asset's price and wish to protect themselves against potential short-term losses. This strategy essentially functions like an insurance policy, and establishes a floor should the asset's price plunge dramatically. STRATEGY 3- Bull Call Spread In a bull call spread strategy, an investor will simultaneously buy call options at a specific strike price and sell the same number of calls at a higher strike price. Both call options will have the same expiration month and underlying asset. This type of vertical spread strategy is often used when an investor is bullish and expects a moderate rise in the price of the underlying asset. STRATEGY 4- Bear Put Spread In this strategy, the investor will simultaneously purchase put options as a specific strike price and sell the same number of puts at a lower strike price. Both options would be for the same underlying asset and have the same expiration date. This method is used when the trader is bearish and expects the underlying asset's price to decline. It offers both limited gains and limited losses. STRATEGY 5- Protective Collar A protective collar strategy is performed by purchasing an out-of-the-money put option and writing an out-of-the-money call option at the same time, for the same underlying asset (such as shares). This strategy is often used by investors after a long position in a stock has experienced substantial gains. In this way, investors can lock in profit without selling their shares. STRATEGY 6- Long Straddle A long straddle options strategy is when an investor purchases both a call and put option with the same strike price, underlying asset and expiration date simultaneously. An investor will often use this strategy when he or she believes the price of the underlying asset will move significantly, but is unsure of which direction the move will take. This strategy allows the investor to maintain unlimited gains, while the loss is limited to the cost of both options contracts. STRATEGY 7- Long Strangle In a long strangle options strategy, the investor purchases a call and put option with the same maturity and underlying asset, but with different strike prices. The put strike price will typically be below the strike price of the call option, and both options will be out of the money. An investor who uses this strategy believes the underlying asset's price will experience a large movement, but is unsure of which direction the move will take. Losses are limited to the costs of both options; strangles will typically be less expensive than straddles because the options are purchased out of the money. STRATEGY 8- Butterfly Spread All the strategies up to this point have required a combination of two different positions or contracts. In a butterfly spread options strategy, an investor will combine both a bull spread strategy and a bear spread strategy, and use three different strike prices. For example, one type of butterfly spread involves purchasing one call (put) option at the lowest (highest) strike price, while selling two call (put) options at a higher (lower) strike price, and then one last call (put) option at an even higher (lower) strike price. STRATEGY 9-Iron Condor An even more interesting strategy is the iron condor. In this strategy, the investor simultaneously holds a long and short position in two different strangle strategies. The iron condor is a fairly complex strategy that definitely requires time to learn, and practice to master. STRATEGY 10- Iron Butterfly In this strategy, an investor will combine either a long or short straddle with the simultaneous purchase or sale of a strangle. Although similar to a butterfly spread, this strategy differs because it uses both calls and puts, as opposed to one or the other. Profit and loss are both limited within a specific range, depending on the strike prices of the options used. Investors will often use out-of-the-money options in an effort to cut costs while limiting risk.