Accounts Interview questions and answers for Freshers

ABA number -- a number, usually placed near the upper right corner of checks, which identifies the financial institution on which the check is drawn. The number is used in sorting and clearing checks. The ABA coding system was designed by the American Bankers Association.

abatement -- the reduction or cancellation of an assessed tax.

above par -- a higher dollar amount than the face value, or par, of a security. The term is used when a security is sold for a price higher than its face value.

absentee landlord -- a property owner who does not occupy his or her property, but usually rents it to another or leaves it vacant.

absolute title -- a clear title that is free of any liens or judgments. A clear title is normally required before a mortgage is granted.

abstract of title -- a statement usually prepared by an attorney that traces the history of ownership of real property to determine the status of its present title, and includes all items of record that might impair the title, such as liens, charges or encumbrances.

accelerated amortization -- the restructuring of an existing mortgage loan by increasing the monthly payments in order to pay off the loan in a shorter time than the original maturity.

Accelerated depreciation -- the method of speeding up the write-off from income of qualifying investments at a faster than normal rate. Annual tax deductions are higher in the first years and diminish in later years of the write-off.

Acceleration clause -- a clause commonly included in mortgages and bonds that gives the holder the right to demand the entire outstanding balance be paid in the event of default. Without this clause, the mortgagee may have to file separate foreclosure suits as each installment of the mortgage debt falls due and is in default.

Acceptance -- a written agreement, usually in the form of a draft, in which one party, the drawee, accepts the obligation to pay a specified amount of money to another party at a specified place and time. The drawee is also known as the acceptor, and writes the word "accepted" over his or her signature. A bank acceptance is a draft drawn on and accepted by a bank.

Access -- the right to enter and leave a tract of land from a public road, often used when an owners' property is accessible only by crossing property owned by another party.

Access savings account -- a type of savings account in which funds are accessible to the account holder by check, telephone order, debit card or similar device in addition to in-person withdrawals. NOW accounts are a type of access savings account.

Accommodation -- the lending of one person's good name or credit standing to a second person with no compensation in order that the second person may borrow money from a third person. Historically, accommodation meant the making of a loan by one person to a second person who lacks sufficient collateral but has the backing of a third person.

Accommodation check -- a check written by a thrift institution on its account with a bank, payable to a third party named by a customer withdrawing funds to cover the check from his or her account at the thrift institution.

Account -- (1) an on-going business relationship in which a depository institution accepts, holds, invests, processes or disburses funds owned by a customer according to the customer's wishes within a framework of pre-established rules and procedures. (2) any continuing business relationship between two parties in which funds or debt is held and processed to compensate the parties for transactions between them.

Accountant -- a person who performs accounting work.

Account hold -- a warning placed on a savings, loan or other account to indicate the need for special handling when transactions are made.

Accounting -- the process of systematically recording, classifying, verifying and summarizing business transactions, and presenting this information in periodic, interpretative financial statements and reports.

Accounting equation -- the basic equation of double-entry accounting that reflects the relationship of assets, liabilities and net worth (reserves + stockholders equity + retained earnings). The equation may be expressed in its simplest form as: assets = liabilities + net worth.

Accounts payable -- amounts recorded as liabilities on the books of a company, institution or individual that are owed, but have not yet been paid, to a creditor for previously purchased merchandise or services.

Accounts receivable -- amounts recorded as assets on the books of a company, institution or individual that are due, but have not yet been collected, from a debtor for the previous purchase of merchandise or services.

Accrual basis accounting -- a method of accounting whereby income and expense items are recognized and recorded when income is earned and expense is incurred, regardless of when cash is actually received or paid. (See cash basis accounting.)

Accrue -- to increase or accumulate. Commonly used in reference to depreciation, expense, income, interest and other accounting factors.

Accrued expense -- costs that have been incurred during an accounting period but have not yet been paid.

Accrued interest -- interest that has been earned but which has not been paid or credited since the last time that interest was paid.

Acquisition credit -- fees other than interest charged by a thrift institution for making, refinancing or changing a loan or a loan commitment. Acquisition credits are sometimes referred to as loan origination fees.

Acquisition, development and construction (ADC) loan -- a loan package to finance acquiring, developing and constructing real estate.

Acquisition discount -- the difference between the amount of unpaid principal of a mortgage and the price paid for the mortgage in the secondary market.

Acquisition loan -- a loan for purchasing raw, or yet to be developed, land.

Acre -- a tract of land containing 43,560 square feet, or 0.0016 square miles of land. An acre measures 208.71 feet on each side. In the metric system, one acre equals 0.4047 hectare or 40.47 acres.

Actualize -- physical or cash commodities, as distinguished from commodity futures contracts.

Actual thrift investment percentage (ATIP) -- a ratio whose numerator is housing-related investments, called qualified thrift investments, and whose denominator is portfolio assets. The ratio is used to determine whether a savings association meets the qualified thrift lender test.

Add-on interest -- a procedure in which the interest payable during the term of the loan is added to the principal of the loan. The borrower signs a note promising to repay principal plus interest, although only the principal is initially disbursed to the borrower.

Adjustable rate mortgage (ARM) -- a loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a preselected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan.

Adjusted basis -- the original cost of a property plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.

Administrative law -- law that is formulated by a government agency responsible for carrying out statute law.

Administrative law judge -- an attorney appointed to conduct administrative hearings brought by federal agencies in civil cases. Such hearings are often held when a federal agency seeks to decide a contested issue or impose a directive or civil penalty on an individual or an institution. In most cases after conducting the hearing, the administrative law judge sends recommended findings and conclusions to the head of the federal agency, who makes the final decision. The agency head considers the recommendations of the administrative law judge and any briefs submitted by the agency staff and the respondent. The hearings are conducted under rules established by the Administrative Procedures Act. Federal agencies either have their own administrative law judges on staff or borrow them from other agencies when they need to conduct a hearing. The Office of Personnel Management assigns administrative law judges to other agencies upon request. Administrative law judges formerly were called hearing examiners.

Ad valorem taxes -- property taxes on the assessed value of a property. Ad valorem is Latin for "according to value."

Advance -- a loan made by a Federal Home Loan Bank to a member financial institution.

Advance package -- see preliminary examination response kit.

Adverse opinion -- an opinion issued by an independent auditor when the financial statements of a financial institution do not fairly present the institution's financial condition. See qualified opinion.

Adverse possession -- a claim to acquire the title to another owner's property by an occupant who has openly and peaceably occupied that property continuously for a period of time (usually 20 years) without being challenged by the original owner.

Affidavit -- a sworn statement in writing before an authorized official, usually a notary.

Affiliated company -- a company that exercises a significant influence over another company. Any direct or indirect common ownership.

Affiliated person -- as defined by OTS regulations, an affiliated person is: (1) a director, officer, or controlling person of a thrift institution; (2) a spouse of a director, officer or controlling person of a thrift institution; (3) a member of the immediate family residing in the same household as a director, officer or controlling person of a thrift institution; (4) a corporation of which a director, officer or controlling person: (a) is chief executive officer, chief financial officer, or a person performing similar functions of a thrift institution, (b) is a general partner in a partnership with a thrift institution, (c) is a limited partner in a partnership with a thrift institution and (i) directly or indirectly, either alone or with members of his immediate family who are also affiliated persons, owns an interest of 10 percent or more in the partnership based on the value of his capital contribution, or (ii) directly or indirectly with other directors, officers and controlling persons, and their family members who are also affiliated persons, owns an interest of 25 percent or more of any class of equity securities; or (5) any trust or other estate in which a director, officer, or controlling person or the spouse of such person has a substantial beneficial interest or as to which such person or his spouse serves as trustee or in a similar fiduciary capacity.

Affirmative lending -- the practice of actively marketing and making loans in areas of particular need: inner-city, low- and moderate-income, minority and/or older neighborhoods in need of rehabilitation.

Affordable Housing Program -- a program established by FIRREA, under which each Federal Home Loan Bank uses a portion of its net income to make grants and advances to member institutions, which in turn use the funds to make loans for low- and moderate-income housing on below market terms.

Agencies -- slang for securities issued by an agency of the federal government, or a corporation chartered by Congress, such as the FHLMC, FNMA or GNMA. See agency issues.

Agency basis -- the sale of securities by a broker acting as an agent for others and charging customers a commission for services. On an agency basis, the broker assumes no risk of holding the securities directly, but merely handles the buying and selling for others. See principal basis.

Agency issues -- debt securities issued by agencies of the federal government or corporations chartered by Congress. With the exception of the Government National Mortgage Association (Ginnie Mae), these issues are backed by the issuing agency but not by the full faith and credit of the U.S. Government. See agencies.

Agent -- a person who acts for or in place of another with authority delegated by the other person.

Air lot -- a legal description for a condominium unit, containing both horizontal and vertical dimensions. The air lot generally extends to the inner faces of the walls, floors and ceiling of the condominium unit.

Air rights -- the ownership rights of everything above the physical surface of the land.

Air space -- a two- or three-dimensional space located above ground level. All condominiums above the first floor are located in, and represent title to, air space.

Alienate -- to transfer the title to a property from one party to another.

All savers certificate -- a one-year certificate of deposit account, with a fixed rate tied to new Treasury bills, issued from October 1, 1981, through December 31, 1982, with a minimum deposit of $500. The saver received a once-in-a-lifetime exemption from federal income taxes for ASC earnings of up to $1,000 ($2,000 on a joint return). All savers certificates were authorized by the Economic Recovery Tax Act of 1981 as a means of attracting funds primarily to thrift institutions.

Alternative mortgage instruments (ATI) -- all mortgage plans that differ from the conventional fixed rate, fixed term, fixed monthly payment, fully amortized mortgage.

Amenity -- any feature that makes a property more attractive or valuable. Amenities include such items as off-street parking, a swimming pool, tennis courts, and proximity to good schools, transportation and shopping facilities.

American Bankers Association (ABA) -- a national trade organization of the banking industry formed in 1875.

American Council of State Savings Supervisors (ACSSS) -- a national organization of state savings institution regulators. It was formerly called the National Association of State Savings & Loan Supervisors (NASS&LS).

American Savings and Loan League -- a thrift institution trade organization primarily representing minority-owned savings and loan associations. It is affiliated with America's Community Bankers.

America's Community Bankers -- a national trade association representing savings institutions and community banks. It was formed on June 1, 1992, through the merger of the United States League of Savings Institutions and the National Council of Community Bankers. At that merger, its original name was Savings & Community Bankers of America. The name was changed to America's Community Bankers on January 29, 1995.

AMMINET -- Automated Mortgage Market Information Network. A nationwide electronic quotation system developed by the Federal Home Loan Mortgage Corporation, and operated by a non-profit corporation. The system provides market information to subscribers on buy and sell orders for various types of mortgages and mortgage-backed securities.

Amortization -- the repayment of a loan calculated so that the principal will be paid in full through monthly payments of principal and interest for a predetermined period of time. Many home mortgages are fully amortized in 15, 20 or 30 years.

Amortizing swap -- a swap in which the notional amount of the agreement declines over time according to an amortization schedule. The rate of amortization may be preset or may be determined by interest rates.

Annual percentage rate (APR) -- the rate required by Truth in Lending laws. It is designed to show customers the total cost of credit, including the stated interest rate plus certain finance and service charges.

Annual report -- a report prepared by management once each year describing the financial and organizational condition of the company, institution or agency and describing the activities that were engaged in during the past year.

Annuity -- (1) a payment of funds, often at a minimum guaranteed amount, made yearly, monthly or at other regular intervals. (2) a type of policy offered by insurance companies in which the policy holder makes payments for a fixed period or until a stated age, and then receives annuity payments from the insurance company.

Apartment -- a complete and separate rental living unit in a building containing other units.

Appellant -- the party that appeals a decision of a lower court. See appellee.

Appellee -- the party that is the defendant in an appeal of a lower court decision. See appellant.

Applications Tracking System (ATS) -- an electronic system employed by the Office of Thrift Supervision to keep track of the processing and status of thrift industry applications requiring regulatory approval.

Appraisal -- an estimate of the market value of a piece of property by a qualified appraiser.

Appraised equity capital -- the amount of the difference between the book value of certain thrift institution assets such as land, buildings and equipment, and the higher market value of such assets.

Appreciation -- the increase in value of an item, specifically the increase in market value of real estate.

Appurtenance -- anything attached to the land and therefore part of the property and subject to being passed to a new owner if the property is sold. An appurtenance may be something tangible, such as a barn, garage, driveway or septic system, or abstract, such as an easement.

Arbitrage -- a transaction in which an investor buys commodities, funds, mortgages, futures contracts, mortgage-backed securities or other securities in one market and simultaneously sells them in a different market in order to profit from differences in price between the two markets.

Are -- a metric unit of land measuring 10 meters by 10 meters, or 100 square meters. An are is also 0.1 of a hectare and is 119.60 square yards.

ARM -- see adjustable rate mortgage.

Arm’s length transaction -- a transaction in which the parties involved act independently of each other, and in which the mechanics of the transaction are handled as they would be between strangers. Sometimes the transaction is conducted by a mutually agreed upon third party, to ensure that one of the principal parties does not influence the other.

Arrears -- (1) the state of a debt that remains unpaid following the date of maturity. The term is commonly used in connection with mortgages, installment payments and other obligations that are due and payable on specified dates. (2) the money that is past due but unpaid.

Asked price -- the price at which a security is offered for sale.

Assessed valuation -- the value that a taxing authority places on real or personal property for the purpose of calculating taxes.

Assessment -- (1) an estimate of the value of a piece of real property for the purpose of levying taxes; also called assessed valuation. (2) a charge against real property levied by a public governing body for a local improvement, such as a sewer repair or street paving.

Assessment rolls -- the public record of taxable property within the jurisdiction of the taxing authority.

Assessor -- a public official who evaluates property for the purpose of determining the taxable value of property.

Asset -- anything owned by an individual or company that has commercial usefulness or value if sold. An asset may be physical property or items, or enforceable claims against others. Loans made by a thrift institution are assets of that institution. Assets also include real estate, equipment, cash, investments in stocks and bonds, and any other resource that can be converted into cash. See liability.

Asset/liability management -- a plan or program to control the difference (also known as spread or net interest margin) between the rate of interest or earnings received on assets and the rate of interest due on liabilities. In addition to selecting the mix of complimenting assets and liabilities, a key part of such a plan is timing the maturity of matched assets and liabilities. When they come due at the same time, assets can be reinvested and balancing liabilities can be repurchased at new interest rates that maintain the desired spread.

Asset turnover -- total gross income divided by total assets.

Assignee -- the person or institution to whom an agreement, contract, or interest in real property is transferred.

Assignment -- the transfer in writing of some or all ownership rights to real or personal property from one party to another.

Assignment of rents -- a legal document that assigns all rents and income from a property to the mortgagee if a mortgagor defaults.

Assignor -- a person or institution from whom an agreement, contract or property is transferred to another.

Assisted merger -- the takeover of a troubled savings institution by another savings institution with financial assistance provided from the federal deposit insurance fund.

Associate broker -- a person who has qualified as a real estate broker but who works for a principal broker licensed by the state.

Assumable mortgage -- a mortgage contract that gives the mortgagor the option of transferring primary liability for payment of the mortgage to a buyer if the property is re-sold with interest rates and other terms of the original mortgage remaining in effect.

Assumption -- the transfer of primary liability for payment of an existing mortgage (or deed of trust) from the seller to the buyer of a property. The seller remains secondarily liable unless specifically released by the lender.

Assumption fee -- a fee paid to a lender, usually by the purchaser of a property, upon the assumption of a mortgage.

ATM -- see automated teller machine.

Attached house -- any low-rise residential structure attached to another by a shared wall, such as a row house or town house.

Attachment -- a seizure of a defendant's property by court order with the property held as security for any judgment the plaintiff may recover in a legal action.

Attest -- to witness or testify; to affirm that a document is genuine.

At the market -- an order to buy or sell securities, executed by a broker at the best price available, rather than at a predetermined price.

At the money option -- an option purchased by an investor to buy or sell, with a strike price equal to the current market price of the underlying cash or futures contract. In this instance, the intrinsic value of the option is zero. Its value reflects the premium paid for the additional time the holder has to decide whether or not to exercise the option, in especially in times of price volatility.

Attractive nuisance -- a structure or object on a property that might entice others, especially young children, into danger, such as a vacant building or swimming pool

Audit -- a periodic or continuous official examination of a thrift institution's account records, policies and procedures, confirmation of account balances and tests of the accuracy of transactions to verify the stated assets and liabilities of the institution.

Automated clearing house (ACH) -- a computer-based clearing and settlement facility established to process the exchange of electronic transactions between participating depository institutions. Such electronic transactions (or wire transfers) take the place of paper checks.

Automated teller machine (ATM) -- a machine that permits customers to gain access to their accounts through the use of a magnetically encoded plastic card and by pushing appropriate buttons on a computer terminal. ATMs dispense cash, transfer funds from one account to another, accept deposits, perform other functions, and are generally available 24 hours a day.

Automatic deposit -- see direct deposit.

Automatic transfer service (ATS) account -- a depositor's savings account from which funds may be transferred automatically to the same depositor's checking account to cover a check written or to maintain a minimum balance.

Average rate of return -- the return on an investment calculated by totaling the cash flow over the years during which earnings are received and dividing that amount by the number of years that the investment is outstanding.