Basic Accounting Interview Questions and Answers - 3

16. Primary vs. Secondary Capital Markets

New stocks and bonds are created and sold to investors in the primary capital market, while securities are traded by investors on the secondary capital market. It is also referred to as the stock market. The New York Stock Exchange (NYSE), London Stock Exchange, and Nasdaq are secondary markets. Small investors have a much better chance of trading securities on the secondary market.

Companies that issue securities through the primary capital market may hire investment bankers to obtain commitments from large institutional investors to purchase the securities when first offered.

17. What is Demat Account? What is the use Of It?

It is an account with which a person can trade in security market. A Demat Account is an account that allows investors to hold their shares in an electronic form.

18. What is Bull Market?

A financial market of a group of securities in which prices are rising or are expected to rise. It refers to a market in which share prices are rising, encouraging buying.

19. What is a Deferred Tax Liability?

Deferred tax liability is a tax expense amount reported on an income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future.

20. What Is Treasury Bills?

Treasury Bills are money market instruments to finance the short term requirements of the Government of India. These are discounted securities and thus are issued at a discount to face value.

When the government is going to the financial market to raise money, it can do it by issuing two types of debt instruments – treasury bills and government bonds. Treasury bills are issued when the government need money for a shorter period while bonds are issued when it need debt for more than say five years.

21. What is the difference between costing and cost accounting?

Costing is the process of ascertaining costs whereas cost accounting is the process of recording various costs in a systematic manner, in order to prepare statistical date to ascertain cost.

22. What do you understand by the term debentures?

Debentures are the promissory notes issued to the debenture holders for a fixed period of time and at a fixed rate of interest. Companies issue debentures to raise capital or funds. Debentures are not secured by collateral but are backed only by the creditworthiness of issuer.