Advance Financial Accounting Unit 1 Accounting of Banking Companies

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Advance Financial Accounting Unit 1 Accounting of Banking Companies

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Accounting of Banking Companies

ADVANCE FINANCIAL ACCOUNTING

VERY SHORT TYPES QUESTION & ANSWERS

A. State whether the following statements are True or False:

1. A banking company is now allowed to deal in goods and immovable property.

Ans: True.

2. Non-banking assets should be disposed off within 5 years by a banking company.

Ans: False.

3. The item, bills for collection is written as an income in the balance sheet of a bank.

Ans: False.

4. The reverse repo rate is always higher than repo rate. 

Ans: True.

5. Repo rate is used to control inflation.

Ans: False.

6. The capital of a banking company consists of equity and preference both the shares. 

Ans: False.

7. The contingent liabilities are to be added to other liabilities in schedule 12.

Ans: False.

8. A charge on uncalled capital is invalid.

Ans: True.

9. A floating charge created without the certificate from the RBI is invalid.

Ans: True.

10. The rebate on bills discounted is an income received in advance.

Ans: True.

B. Multiple choice question and answers:

1. The financial statement of banks are prepared in: 

(a) Horizontal form. 

(b) Vertical form.

(c) ‘T’ form.

(d) None of the above.

Ans: (b) Vertical form.

2. The subscribed capital of a bank should not be less than of: 

(a) 25% of authorised capital. 

(b) 50 % of authorised capital. 

(c) 75% of authorised capital.

(d) None of the above. 

Ans: (b) 50 % of authorised capital.

3. Paid up capital of a bank should not be less than of:

(a) 25% of subscribed capital.

(b) 50% of subscribed capital.

(c) 75% of subscribed capital.

(d) None of the above.

Ans: (b) 50% of subscribed capital.

4. Banks show the provision for income tax under the heading:

(a) Contingent liabilities.

(b) Anticipated liabilities.

(c) Other liabilities and Provisions. 

(d) None of the above. 

Ans: (c) Other liabilities and Provisions.

5. The rebate on bills discounted is an: 

(a) Expenditure.

(b) Expenditure incurred in advance.

(c) Income received in advance.

(d) None of the above.

Ans: (c) Income received in advance.

6. Bills for collection is written in balance sheet as:

(a) An income.

(b) An expenditure.

(c) An information.

(d) None of the above.

Ans: (c) An information.

7. As per prudential norms, banks make provision on standard assets also @:

(a) 1%

(b) .50%

(c) .40%

(d) None of the above.

Ans: (c) .40%.

8. The non-banking assets must be disposed off by a banking company within:

(a) One year.

(b) Three years.

(c) Five years. 

(d) Seven years.

Ans: (d) Seven years. 

9. The item, non-banking assets is related to:

(a) Non-Banking Finance Companies.

(b) Residuary Non-Banking Companies.

(c) Non Performing Assets.

(d) None of the above.

Ans: (d) None of the above.

10. A banking company is not allowed to deal in: 

(a) Goods.

(b) Immovable proper.

(c) Bartering.

(d) All of the above.

Ans: (d) All of the above.

SHORT TYPE QUESTIONS & ANSWERS

1. Define bank/banking.

Ans: The Banking Regulation Act 1449 defines banking under Sec 5(6) as under: “Banking” means the accepting. In the purpose of lending or investment of deposit of money from public repayable on demand or otherwise and withdrawable by cheque, draft, under or otherwise.

2. What is the meaning of bank? 

Ans: A bank is a commercial institution, licensed to accept deposits and acts as a safe custodian of the spendable funds of its customers. Banks are concerned mainly with the functions of banking, i.e., receiving, collecting, transferring, buying, lending, investing, dealing, exchanging and sérvicing (safe deposit, custodianship, agency, trusteeship) money and claims to money both domestically and internationally. The principal activities of a bank are operating current accounts, receiving deposits, taking in and paying out notes and coins, and making loans.

3. What are the features of bank accounting system? 

Ans: The following are the main features of a bank’s accounting system are as follows:

(a) Entries in the personal ledgers are made directly from the vouchers.

(b) From such entries in the personal ledgers each day summary sheets in total are prepared which are posted to the control accounts in the general ledger.

(c) The general ledger’s trial balance is extracted and agreed every day.

(d) All entries in the personal ledgers and summary sheets are checked by persons other than those who have recorded entries. It helps in detection of mistakes.

(e) A trial balance of detailed personal ledgers is prepared periodically and gets agreed with the general ledger control accounts.

(f) Two vouchers are prepared for every transaction not involving cash. 

4. What are non-banking Assets?

Ans: A bank cannot acquire certain assets for its own use as mentioned in sec 6(i), but if can always lend against the security of such assets. When the loanees fail to repay the loans the banks may have to take possession of such assets. In that case, assets are shown as non-banking assets.

5. What are Traveller’s Cheques? 

Ans: Travellers Cheques are the cheques issued by a bank to a traveller on his deposits of cash with the bank. The cheques are payable on demand by a branch of the bank anywhere in India. The cheques carry the specimen signature of the customer and the customer has to sign the cheques again in front of the paying banker.

6. What is Letter of credit? 

Ans: A customer may request his bank to issue a letter of credit for which he deposits cash for the required amount.

7. What is performing Assets?

Ans: Performing assets are those assets which generate income regularly for a Bank.

8. What is non-performing Assets of a banks? 

Ans: Non-performing assets are those assets which cease to generate income for the bank. It is defined as a credit facility in respect of which the interest on principal repayment instalment has become over due for 90 days ending on 31st March during the current financial year. Moreover of one of the accounts of the borrower is an NPA under the new norms, all the account of the borrower will be treated on NPAs.

9. Write short note on cash-credit.

Ans: Cash credit is a from of secured advance by a bank. Under this arrangement the bank allows the customer to draw on it upto a certain limit. Cash credit arrangement are made against the security of commodities, by pothecated or pledged with the bank.

10. Write a note on overdraft.

Ans: It is an arrangement under which a customer is allowed to overdraw his current account with or without security up to a certain limit. It is a temporary accommodation granted by a bank to its customer like cash credit, in overdraft also a customer is required to pay interest on the actual amount used by him.

11. What are the advances made by bank?

Ans: Advances made by bank assurance from different form:

(a) Loans.

(b) Cash credits.

(c) Overdrafts.

(d) Bills Purchased and discounted.

12. What is Money at call at short notice according to bank accounting?

Ans: There loans represent short term advances given by one bank to another bank or bill brokers or stock brokers with or without security call loans are repayable as any time the banker recalls them. Which short notice advances are repayable within a short notice, say a notice of 24 hours.

13. When Bills purchased and discounted treated as NPAS? 

Ans: The Bills Purchased and discounted account should be treated as NPA if the bill remain overdue or unpaid for a period of 90 days during the year ended 31st March 2005 and onwards.

4 Which business are restricted by Banking Regulation. Act. 19 do by bank?

Ans: Section 8 of the Banking Regulation Act 1449 impose certain restrictions on the business of a banking company. 

Those are as follows:

(a) No banking company shall directly or indirectly deal in the buying, selling or bartering of goods except in connection with the realisation of security given to or held by it.

(b) No banking company can engage in any trade, or buy, sell or barter goods for others otherwise than is connection with bills of exchange received for collection or negotiation or with such of its business or is referred to in clause (i) of sub-session (i) of section 6.

15. Explain Capital Adequacy Norms in relation to Bank Accounting?

Ans: In July, 1988 Basle Committee adopted minimum capital adequacy standard based on restle assets ratio of system for both balance sheet and off balance sheet business the main object is

(a) To stop reckless lending by banks, thereby strengthening the soundness and stability in the banking system. and

(b) To put banker from different countries on a more even competitive footing.

In 1988 Narasimham committee on Financial System also recommended the capital adequacy norm to be introduced in Indian Banking System in a phased manner. According the Reserve Bank of India introduces a risk-weighted Assets Ratio System for bank in India. According to the System, the paid up capital and reserves of a bank for writing of bad debt should form adequate percentage of the assets of the bank, theirs investments, loans and advances. All these items have been assigned weights according to the prescribed risks. The ratio 80 computed is known as capital Adequacy Ratio which is calculated according to the following formula.

16. What is Profit & Loss A/C?

Ans: Profit and Loss Account is a type of financial statement which reflects the outcome of business activities during an accounting period (i.e. Profit or loss). Reported income and expenses are directly related to an organisation’s are considered to measure the performance in terms of profit & loss. Profit & loss a/c is popularly known as P&LA/c. It is also called as Profit and Loss Statement or income and expense statement. No matter whether how you call profit & loss statement, it reveals money spent or cost incurred in an organisation’s effort to generate revenue, representing the cost of doing business.

17. What are the Objective of Profit & Loss A/c/?. 

Ans: The very purpose of profit and loss account is to ascertain whether the business is making profit or loss for a given period. In other words, Profit & Loss Account reveals money spent or cost incurred in an organisation’s effort to generate revenue, representing the cost of doing business.

1. To Know The Trading Result: Profit and loss account provides trading results by ascertaining net profit or net loss of the business.

2. To Check Profitability: Profit and loss account helps to check profitability of the company for the particular period.

3. To Know The Expenses: Profit and loss account helps to know selling and distribution expenses and office and administrative expenses for the particular period.

4. To Compare The Results: Profit and loss account helps to compare current year’s result (net profit or loss) with the result of previous year.

5. To Control Expenses: Profit and loss account helps to control unnecessary indirect expenses which leads to higher profitability.

18. How to prepare Profit and Loss Statement? 

Ans: Traditionally, to prepare profit and loss statement, set of other statements are prepared that help you gather the data to prepare this statement.

Below are the steps to prepare profit and loss statement:

(i) Prepare ledger accounts: From the journal book, you need prepare an account statement for each ledger to determine the closing balance.

(ii) Create trial balance: Trial balance is a summary of all the ledger accounts. It lists all ledger accounts with closing balance posted from individual ledger accounts statement.

(iii) Preparing trading and profit & loss statement: Here, all the ledger accounts having a nature of the purchase, sales, direct expense and income, indirect expenses and income are posted to profit and loss statement in the structure that we discussed above.

Profit and loss statement being a crucial financial statement and most sought-after statement for decision making, the requirement to view the reports is more frequent than the traditional need of viewing it yearly or half-yearly. As a result, most businesses have automated the process of preparing the profit and loss statement using business management software.

19. How to read a profit and loss statement? 

Ans: Reviewing revenues and expenses by line item and comparing amounts to prior periods helps identify positive or negative trends in the business. To begin, it’s important to know the company’s accounting method: whether it reports on the cash basis (which generally means income is reported when received and expenses reported when paid) or accrual basis (which generally means income and expenses are reported when all the events needed to fix the amount have occurred with reasonable certainty). The accounting method affects how income and expenses are taken into account on the P&L. Once you know this, you can begin to look at the line-by-line entries on the P&L.

20. What is a Balance Sheet?

Ans: A balance sheet can be alternatively known as a position statement. It can give the financial status of an organisation at any given point in time. It includes a list of all assets, liabilities, and equity so that one can quickly determine the amount of working capital available for use by the company. Before delving further, it is essential to learn these terms, which are an integral part of a balance sheet.

(i) Asset: These can be any resources owned by an organisation which can be liquefied for value in terms of money. Assets can be tangible or intangible and can be used in the production cycle or can be liquefied to accumulate funds for the organisation. These are valuable items which a company possesses like cash equivalents, machinery, furniture, patents, property, plant, equipment, etc.

(ii) Liability: By liability, we mean a company has financial debts, loans or obligations to be paid to other entities. An organisation might have several liabilities during its operational period due to several unplanned circumstances or to overcome any financial requirement at that moment.

Therefore, loans, mortgages, accounts payable, accrued expenses, etc. are all part of liability.

(iii) Equity: Equities can be defined as the difference between total – assets to total liabilities. In case the liability is more than the value of the asset, then there is no equity.

Therefore, assets can be represented as the sum of liabilities and equity.

A balance sheet is broadly divided into two sections, assets and liabilities. Both the sections contain several sub-sections under them. For instance, assets are grouped as investments, current assets, fixed assets, etc. These two columns are assessed, and the value of contributor’s equity is calculated.

It helps determine the financial status of an organisation at any given point. If the value of assets is more than the cost of liabilities, then it has enough working capital to carry the day to day business operations else not.

21. What are the differences between Profit and Loss Account Vs Balance Sheet?

Ans: Profit and Loss Account Vs Balance Sheet:

(i) A balance sheet determines if or not a company is financially stable or secure to carry various business operations. This is determined by listing the total value of assets, liquidity, and equity.

(ii) A profit and loss statement doesn’t depict the financial condition of an organisation but its economic production status. It is an estimation of a company’s total expenses and revenues to calculate the accrued profit or loss.

(iii) While the balance sheet is a sheet mentioning the assets and liabilities, profit and loss evaluation is concerned with an account.

(iv) Difference between balance sheet and profit and loss account is that a balance sheet can help determine financial status of the organisation on a particular date and the P&L account is to determine the profit or loss endured by them in a fiscal period.

(v) A balance sheet is prepared on the last day of a financial year while the profit and loss account is maintained for the whole accounting period.

(vi) Value of assets, liabilities, and equity are mentioned in the balance sheet and profit and loss account of a company consisting of expenses and revenues to determine the financial standing.

Subsequently, students will be able to improve their understanding of the balance sheet and profit and loss account of any company by going through these notes and examples.

22. Does a balance sheet always balance? 

Ans: A balance sheet should always balance. The name itself comes from the fact that a company’s assets will equal its liabilities plus any shareholders’ equity that has been issued. If you find that your balance sheet is not truly balancing, it may be caused by one of these culprits:

(i) Incomplete or misplaced data.

(ii) Incorrectly entered transactions.

(iii) Errors in currency exchange rates.

(iv) Errors in inventory.

(v) Miscalculated equity calculations.

(vi) Miscalculated loan amortisation or depreciation.

23. State the special features of bank book-keeping? 

Ans: The special features of bank book-keeping are summarised as follows:

(a) Entries in the personal ledgers are made directly from vouchers and not from the primary books in order to save labour and cost.

(b) After posting the entries to the personal ledgers each day summary sheets in total are prepared on the basis of the slips, cheques and this totals of the summary sheets are posted to the control accounts in the General ledger.

(c) In every bank ledgers are maintained on self balancing system. In the General Ledger where is a separate control Account for cash subsidiary ledger.

(d) The General ledger Trial balance is extracted and agreed every day.

(e) All entries in the personal ledger and summary sheets are checked by a person other than those who have made the entries in order to detect clerical mistakes any.

(f) Two vouchers are prepared for every transaction not involving cash one debit voucher and another credit vouchers.

24. What are the books required by banking company? 

Ans: A banking company is required to maintain a large number of subsidiary books but more important of these are given below:

(a) Receiving cashier’s counter cashbook.

(b) Current Accounts Ledger.

(c) Saving Bank Accounts Ledger.

(d) Fixed Deposit Accounts Ledger.

(e) Bills discounted and purchased ledger.

(f) Investment Ledger.

(g) Loan Ledger.

(h) Cash Credit Ledger.

(i) Customer’s Acceptance, endorsement and Guarantee Ledger.

The principal books of the accounts of a bank are:

(a) Cash book. and

(b) General Ledger.

Defending on the individual needs of the bank. Some of them are mentioned below:

(a) Bills for collection Register.

(b) Demand Draft Register.

(c) Share Security Register.

(d) Jewellery Register.

(e) Safe custody Register.

(f) Letter of Credit Register.

(g) Safe Deposit vault Register.

(h) Standing order Register.

25. Give general instructions for preparing final accounts of Banking Companies. 

Ans: General instructions for preparing final accounts of Banking Companies are:

(i) The formats of balance sheet and profit and loss account cover all items likely to appear in these statements. In case the bank does not have any particular item to report, it may be omitted from the formats.

(ii) corresponding comparative figures for the previous year are to be disclosed as indicated in the formats. The words ‘current year: and ‘previous year’ used in the formats are only to indicate the order of presentation and may not appear in the accounts.

(iii) figures should be rounded off to the nearest thousand rupees. Thus a sum of Rs.19,75,821.20 will appear in the balance sheet as Rs.19.76.

(iv) Unless otherwise indicated, the term bank in these statements will include banking companies, nationalised banks, State bank of India, Associates banks and all other institutions including cooperative carrying on the business of banking, whether or not incorporated or operating in India.

LONG TYPE QUESTIONS & ANSWERS

1. Explain the various types of bank account. 

Ans: Bank Accounts are classified into four different types. They are:

(i) Current Account: Current account is mainly for business persons. firms, companies, public enterprises etc. and is never used for the purpose of investment or savings. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. While, there is no interest paid on amount held in the account, banks charge certain service charges, on such accounts. The current accounts do not have any fixed maturity as these are on continuous basis accounts.

(ii) Savings Account: Savings Account is meant for saving purposes. Any individual either single or jointly can open a savings account. Most of the salaried persons, pensioners and students use. Savings Account. The advantage of having Savings Account is Banks pay interest for the savings. The saving account holder is allowed to withdraw money from the account as and when required. The rate of interest ranges between 4% to 6% per annum in India. There is no restriction on the number and amount of deposits. But withdrawals are subjected to certain restrictions. Some banks recommend to maintain a minimum amount to keep it functioning.

(iii) Recurring Deposit Account: Recurring deposit account or RD account is opened by those who want to save certain amount of money regularly for a certain period of time and earn a higher interest rate. In RD account a fixed amount is deposited every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.

(iv) Fixed Deposit Account: In Fixed Deposit Account (also known as FD Account), a particular sum of money is deposited in a bank for specific period of time. Its onetime deposit and one time take away (withdraw) account. The money deposited in this account cannot be withdrawn before the expiry of period. However, in case of need, the depositor can ask for closing the fixed deposit prematurely by paying a penalty. The penalty amount varies with banks. A high interest rate is paid on fixed deposits. The rate of interest paid for fixed deposits varies according to amount, period and also from bank to bank.

2. Explain the following in relation to the Banking Company:

(a) Slip system of posting and its merits and demerits.

Ans: The bank has to ensure that customers’ (depositors) ledger accounts are up-to-date so that when a cheque is presented to the bank for payment, the bank can immediately decide whether to honour or dishonour the cheque. Thus transactions in the bank are immediately recorded.

For this purpose, the slip system of ledger posting is adopted. Under this system entries are made in the (personal) accounts of customers in the ledger directly from various slips rather than from subsidiary books or journals and then a Day Book is written up. Subsequently, entries in the accounts of the customers are tallied with the Day Book. In this way the posting in the ledger accounts and writing of the day-book can be carried out simultaneously without any loss of time. A slip is also called a voucher. In general, the types of slips used in bank book-keeping are: pay-in-slips, cheques or withdrawals forms.  If these slips are filled by the customers there is much saving of time and labour of the employees of the bank.

Main advantages of the slip system are:

(i) Saving time and labour: The bank saves a lot of time and clerical labour as most of the slips are filled in by its customers.

(ii) No need for subsidiary books: Subsidiary books are avoided as posting is done from slips.

(iii) Minimum delay: Entries can be recorded with minimum delay as slips can easily pass from hand to hand among clerks concerned.

(iv) Division of labour: The slip system enables the division of work of posting among employees due to a large number of transactions in a bank.

(v) Smooth accounting: The writing of the day book and posting of the ledger can be done simultaneously without loss of time.

(vi) Reliable accounting system: Slips system provides a basis for reliable accounting system as most of the slips are prepared by customers themselves. Moreover, each transaction is recorded in different books which are maintained on a self-balancing system.

(vii) Perfect basis of auditing: Individual slips (known as vouchers) are filled up by customers and become a proof for transaction to the satisfaction of the auditor.

(viii) Proper evidence: Slip duly filled by a customer provides evidence of a transaction. When needed slips preserved by the banks can be shown to the customers for their satisfaction.

Disadvantages of the slip system are:

(i) Risk of loss or destruction of slips: Slips may be lost, destroyed or misappropriated as these are loose.

(ii) Difficulty in verification: Books cannot be verified if subsidiary books are not kept.

(iii) Inconvenience to customers: This system causes great inconvenience to the illiterate and semi-literate customers as slips are to be filled in (especially the amount in words and figures) with the help of other customers and arrogant bank employees.

(iv) Risk of manipulation and misappropriation: Dishonest employees can embezzle the money by destroying the loose and large number of slips and manipulating the amounts.

(v) Expensive system: Slips system becomes difficult due to the large number of daily transactions in a bank and becomes expensive to keep a date-wise record of such slips.

(b) Rebate on Bills Discounted and its treatment.

Ans: Discounting of bills means making the payment of the bill before the maturity date of the bill. While making payment of the bill, the bank deducts a discount for the unexpired period for the amount of the bill discounted. Such a discount is called a rebate on bills discounted. It is treated as interest received in advance. In a profit and loss account, the closing balance of rebate on bills discounted is deducted and the opening balance of rebate on bills discounted is added with the interest and discount for the year. Closing balance of rebate on discounted bills is shown as liability in the balance sheet under the heading ‘other liabilities’. At the commencement of next year, a reverse entry is passed for the unexpired discount of the previous year expiring this year and treated as income.

Accounting treatment of Rebate on Bill Discounted

(i) At the end of current accounting period:

Discount on Bills A/c                                   Dr.

To Rebate on Bills discounted A/c

(ii) At the beginning of next accounting period:

Rebate on Bills discounted A/c                         Dr.

To Discount on Bills A/c          

(c) NPA.

Ans: NPA indicates Non-Performing asset, it means assets of a bank which ceases to generate income for the bank. Non-performing assets means a credit facility in respect of which interest/or principal repayment instalment is in arrears for more than 90 days.

A non-performing asset (NPA) shall be a loan or an advance where:

(i) Interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan.

(ii) The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC).

(iii) The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted.

(iv) Interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and.

(v) Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

(d) Non-banking Assets.

Ans: A banking company is not allowed to deal directly/indirectly in the purchase/sale/barter of goods except in connection with its legitimate banking business. But banks can always lead against the security of the assets. The banks may have to take possession of the asset given as security if the loanee fails to repay the loan. In that case, the asset acquired in satisfaction of the claim of the bank will be shown as an asset in the Balance Sheet under the heading ‘Other Fixed Assets’. Such assets acquired should be disposed of within seven years as a banking company is not allowed to hold such assets for any period exceeding seven years from the date of their acquisition. P/L on sale of such assets is required to be shown separately in the P/L A/c of the banks.

(e) Form B of the Banking Company.

Ans: 

ParticularsSchedule No.Year ended on 31-3-(Current Year)Year ended 31-3- (Previous Year)
(i) IncomeInterest earned                                Other Income
                             Total:

1314
(ii)  ExpenditureInterest expendedOperating expensesProvisions and contingencies
1516
                            Total:
(iii) Profit/LossNet Profit/Loss (-) for the yearProfit/Loss (-) brought forward
                            Total:
(iv) AppropriationsTransfer to statutory reserveTransfer to other reservesTransfer to Government/Proposed dividendBalance carried over to balance sheet
                            Total:

3. Explain the Types of Bank deposit customers. 

Ans: Banks open accounts for various types of customers like individuals, partnership firm, Trusts, companies, etc. While opening the accounts, the banker has to keep in mind the various legal aspects involved in opening and conducting those accounts, as also the practices followed in conducting those accounts. Normally, the banks have to deal with following types of deposit customers.

(a) Individuals: The depositor should be properly introduced to the bank and KYC norms are to be observed. Introduction is necessary in terms of banking practice and also for the purpose of protection under section 131 of the Negotiable Instruments Act. Usually, banks accept introductions from the existing customers, employee of the bank, a locally well-known person or another bank. A joint account may be opened by two or more persons.

(b) Joint Hindu Families: Joint Hindu Family (JHF) (also known as Hindu Undivided family) is a legal entity and is unique for Hindus. It has perpetual succession like companies; but it does not require any registration. The head of JHF is the Karta and members of the family are called coparceners. The JHF business is managed by Karta.

(c) Partnership Firms: A company is registered under companies Act has a legal status independent of that of the share-holders. A company is an artificial person who has perpetual existence with limited liability and common seal. Memorandum and Articles of Association, Certificate of Incorporation, Resolution passed by the Board to open account, name and designations of persons who will operate the account with details of restriction placed on them are the essentials documents required to open an account.

(d) Limited Liability Companies: A company is registered under companies Act has a legal status independent of that of the share-holders. A company is an artificial person who has perpetual existence with limited liability and common seal. Memorandum and Articles of Association, Certificate of Incorporation, Resolution passed by the Board to open account, name and designations of persons who will operate the account with details of restriction placed on them are the essentials documents required to open an account.

(e) Clubs and Associations: Trusts are created by the settler by executing a Trust Deed. A trust account can be opened only after obtaining and scrutinising the trust deed. The Trust account has to be operated by all the trustees jointly unless provided otherwise in the trust deed. A trustee cannot delegate the powers to other Trustees except as provided for in the Trust Deed. A cheque favoring the Trust shall not be credited to the personal account of the Trustee.

(f) Trusts Account: Trusts are created by the settler by executing a Trust Deed. A trust account can be opened only after obtaining and scrutinising the trust deed. The Trust account has to be operated by all the trustees jointly unless provided otherwise in the trust deed. A trustee cannot delegate the powers to other Trustees except as provided for in the Trust Deed. A cheque favoring the Trust shall not be credited to the personal account of the Trustee.

4. Write the meaning of some important terms of banking. 

Ans: Some important terms particularly related to the accounting of a banking company are discussed here under:

(i) Statutory Reserve [2021]:  According to section 17 of the Banking Regulation Act, it is obligation for a banking company operating in India (including foreign banks) to create a reserve fund and transfer to it at least 25 percent of its profit as disclosed in profit & loss account before any dividend is declared. Such transfer of profits to reserve fund should be continued even after the aggregate amount of reserve fund exceeds its paid up capital. This reserve is called Statutory Reserve. It is to be written in liabilities side of the balance sheet under the head ‘Reserve & Surplus’.

(ii) Unexpired Rebate on Bills Discounted: The amount of discount on bills discounted is to be credited to ‘Discount Received a/c’. There may be some bills which have not been matured or due on the accounting date. Thus, if the maturity date of a bill falls after the end of the accounting year then the amount of discount related to the period falling after the end of the year will be called ‘unexpired Rebate or discount’. In other words, unexpired discount on bills discounted means the discount which has not been earned by the bank till the date of the accounting year or the discount which has been received but related to the coming year. If unexpired discount is given in the trial balance then it will be shown only in the liabilities side of the balance sheet.

(iii) Customer’s Acceptance & Endorsement: The credit of a bank is more acceptable than that of its customers. Hence, a bank is often requested by a customer to accept or endorse a bill of exchange on his behalf or give a guarantee of repayment of a loan raised by the customer. To safeguard its interests the bank may require the customer to deposit a security for an appropriate amount against a guarantee, or an acceptance or endorsement by the bank on behalf of the customer. A record of guarantee given or the particulars of the bill accepted or endorsed as well as the particulars of the security collected from the customer will have to be recorded in different registers. Outstanding amount of acceptances, endorsements and other obligations at the end of the year has to be shown as ‘Contingent Liabilities’ in schedule 12 of the balance sheet of the bank.

(iv) Bills for Collection: A bank receives a large number of bills receivable from its customers for collection on the due date of the bills. The bank keeps these bills with itself till maturity and on realisation credits the amounts to the clients concerned. The bank keeps a systematic record of all such bills in a separate register which is called Bills for Collection

Register. The total amount of all the bills lying with the bank for collection at the end of the year is shown separately at the foot of the balance sheet of the bank.

(v) Restrictions on Loan & Advances: The RBI is authorised to determine the policy in relation to advances to be followed by banks. It may give direction to banks regarding the purposes for which advances may or may not be given. It may lay down the margins to be maintained in respect of secured loans. It may prescribe the amount of advances that may be made to any company, firm or individual. It may fix the rate of interest and other conditions on which advances or other financial accommodation may be made or guarantees may be Given.

(a) on the security of its own shares.

(b) to any of its directors.

(c) to any firm in which any of its directors is interested as partner, manager or guarantor.

(d) to any company of which any of its director is director, manager, employee, guarantor or in which he holds substantial interest.

(e) to any individual in respect of whom any of its director is a partner or guarantor.

(vi) Cash Book: This book gives the summary of the receiving cashier’s counter cash book and paying cashier’s counter cash book. The receipt counter keeps the details of each transaction like – serial the number, depositor’s name and amount received. Similarly, the payment counter keeps the details of each payment like- serial number, payee’s name, amount paid, number of token. The record of the cash book must tally with the sum total of the counters cash books.

(vii) Cash Balance: The cash balance at the close of the day is written in the book which is duly signed by the cashier and the manager.

(viii) Day Book: The day book is written by the cashier or accountant. It records day-to-day transactions relating to cash transfers and clearing etc. Its balancing is done on daily basis.

(ix) Bank Overdraft: A facility offered to current account holders, they are allowed to withdraw more than their balance. It is a short term loan or advance.

(x) Non-banking Asset: An asset charged in favour of the bank and taken in its possession in case of failure the debtor to repay the loan in time.

(xi) CRR, SLR, Repo Rate & Reverse Repo Rate: The CRR ir cash reserve ratio under which a certain percentage of the total bank. deposits has to be kept in the current account with the RBI. Thus, the bank cannot lend the money to corporate or individual borrowers and bank cannot use the money for investment purposes. The bank does not earn anything on it. The SLR is statutory reserve ratio under which a certain percentage of total bank deposits has to be invested in specified securities predominantly Central Govt. or State Govt. securities. As the money goes into investment as Govt. securities, it earns some amount of interest on the investment. The repo rate is a rate at which banks borrow from RBI for short period up to 7 or 14 days but predominantly overnight. The RBI manages this repo rate which is the cost of credit for a bank. This becomes a floor below which the short term interest rates do not go. The higher the repo rate means the cost of short term money is high. The lower the repo rate means the cost of short term money is low. The higher repo rate may slow down the economy growth and lower the repo rate may enhance economy growth. The reverse repo rate is a rate which the RBI offers to banks when they deposit their surplus cash with the RBI for shorter periods. In other words, it is the rate at which the RBI borrows from the commercial banks. When bank have excess funds but do not have any other lending or investment options, they deposit the surplus funds with the RBI and earn interest on the deposited funds.

The reverse repo rate has an inverse relationship with the money supply in the economy. During high levels of inflation in the economy, the RBI increase the reverse repo rate which encourages the banks to park more funds with the RBI to earn higher returns on idle cash.

5. Explain the following in relation to the Banking Company:

(a) Books maintained by banking companies.

Ans: Books of Accounts maintained by a Banking Company

(1) Principles Books of Accounts:

(i) The General Ledger contains accounts of all personal ledgers, the profit & loss account and different asset accounts. The accounts in the general ledger are arranged in such an order that a balance sheet can be readily prepared there from. There are certain additional accounts known as contra accounts which are a feature of bank accounting. These are kept with a view to keep control over transaction which has no direct effect on the bank’s position e.g. letters of credit opened, bills received or sent for collection, guarantees given, etc.

(ii) Profit and Loss Ledger: Some banks keep one account for profit and loss in the General Ledger and maintain separate books for the detailed accounts. These are columnar books having separate columns for each revenue or expenses head. Other banks maintain separate books for debits and credits. These books are posted from vouchers. The total of debits and credits posted are entered into the Profit and Loss Account in the General Ledger.

(2) Subsidiary Books:

(i) Personal Legers: Separate ledgers are maintained by a bank for different types of accounts. For example, there are separate ledgers for Current Accounts, Fixed Deposits (often further classified by length of period of deposit), Cash Certificates, Loans, Overdrafts, etc.

(ii) Bill Registers: Details of different types of bills are kept in separate registers which have suitable columns. For example, bills purchased, inward bills for collection, outward bills for collection etc. are entered serially on day-to-day basis in separate registers. In case of bills purchased or discounted, party-wise details are also kept in normal ledger form.

(3) Other Subsidiary Registers: There are different registers for various types of transactions. Their number, volume and details will differ according to the individual needs of each bank. For example, there will be registers for:

(i) Demand Drafts, Telegraphic Transfers and Mail Transfers issued on Branches and Agencies.

(ii) Demand Drafts, Telegraphic Transfers and Mail Transfers received from Branches and Agencies.

(iii) Letters of Credit.

(iv) Letters of Guarantee.

(4) Departmental Journals: Each department of the Bank maintains a journal to note the transfer entries passed by it. These journals are memoranda books only, as all the entries made there are also made in the Day Book through Voucher Summary Sheets. Their purpose is to maintain a record of all the transfer entries originated by each department. For example, the Loans and Overdraft Section will pass transfer entries for interest charged on various accounts every month, and as all these entries will be posted in the journal of that department, the office concerned can easily find out the accounts in respect of which the interest entry has been passed.

(5) Other Memorandum Books: Besides the books mentioned above, various departments of the bank have to maintain a number of memoranda books to facilitate their work. Some of the important books are described below:

(a) Cash Department:

(i) Receiving Cashiers’ cash book.

(ii) Paying Cashiers’ cash book.

(iii) Main cash book.

(iv) Cash Balance book

(b) Quick Payment System: Banks introduce different systems so that their customers may receive payment of cash etc. quickly. The most prevalent system is the teller system. Under this system teller keep cash as well as ledger cards and the specimen signature cards of each customer in respect of Current and Saving Bank Accounts.

(c) Outward Clearing: (i) A Clearing Cheque Received Book for entering cheques received from customers for clearing. (ii) Bank wise list of the above cheques, one copy of which is sent to the Clearing House together with the cheques.

(d) Inward Clearing: Cheques received are verified with the accompanying lists. They are then distributed to different departments and the number of cheques given to each department is noted in a Memo Book. When the cheques are passed and posted into ledgers, their number is independently agreed with the Memo Book. If any cheques are found non-payable, they are returned back to the Clearing House. The cheques themselves serve as vouchers.

(e) Loans & Overdraft Departments:

(i) Registers for shares and other securities held on behalf of each customer.

(ii) Summary Books of Securities giving details of Government Securities, shares of individual companies etc.

(iii) Godown registers maintained by the Godown-keeper of the bank.

(iv) Price register giving the wholesale price of the commodities pledged with the bank.

(v) Overdraft Sanction registers.

(vi) Delivery Order books.

(vii) Drawing Power book.

(viii)Storage books.

(f) Deposits Department:

(i) Account Opening & Closing registers.

(ii) For Fixed Deposits, Rate registers giving analysis of deposits according to rates.

(iii) Due Date Diary.

(iv) Specimen signature book.

(g) Establishment Department:

(i) Salary and allied registers, such as attendance register, leave register, overtime register, etc.

(ii) Register of fixed assets, e.g. furniture and fixtures, motor cars, vehicles etc.

(iii) Stationery Registers.

(iv) Old records register.

(h) General:

(i) Signature books of bank’s officers.

(ii) Private Telegraphic Code and Cyphers.

(6) Statistical Books: Statistical records kept by different banks are in accordance with their individual needs. For example, there may be books for recording (i) average balance in loans and advances etc., (ii) Deposits received and amount paid out each month in the various departments, (iii) Number of cheques paid, (iv) Number of cheques, bills and other items collected.

(b) Money at call and short notice (Schedule 7).

Ans: Money at call and Short money means a very short term loan given by a banker for a period ranging from 1 day to 14 days. If the loan is given for one day, it is called ‘money at call’ and if the loan is given for a maximum period of 14 days and cannot be back on demand and will require at least a notice of 3 days for calling back, it is called ‘money at short notice’. These items appear on the assets side of a bank’s balance sheet and represent temporary loans to Bill Brokers, Stock Brokers & other banks. Call money is normally unsecured in our country.

One of the assets that appears in the balance sheet of a bank. It includes funds lent to discount houses, money brokers, the stock exchange, bullion brokers, corporate customers, and increasingly to other banks. ‘At call’ money is repayable on demand, whereas ‘short notice’ money implies that notice of repayment of up to 14 days will be given. After cash, money at call and short notice are the banks’ most liquid assets. They are usually interest-earning secured loans but their importance lies in providing the banks with an opportunity to use their surplus funds and to adjust their cash and liquidity requirements.

(c) Difference between performing and non-performing assets.

Ans: 

Performing Assets Non-performing assets
Performing assets means assets of a bank which generates regular income for the bank. Performing assets includes those loans and advances in respect of which interest and principal are not due for more than 90 days.NPA indicates Non-Performing asset, it means assets of a bank which ceases to generate income for the bank. Non-performing assets means a credit facility in respect of which interest/or principal repayment instalment is in arrears for more than 90 days.

(d) Contingent liabilities. 

Ans: A contingent liability is a potential liability that may occur in the future, such as pending lawsuits or honouring product warranties. If the liability is likely to occur and the amount can be reasonably estimated, the liability should be recorded in the accounting records of a firm.Contingent liabilities are recorded to ensure that the financial statements are accurate and meet requirements of generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). GAAP recognizes three categories of contingent liabilities: probable, possible, and remote.

Pending lawsuits and product warranties are common contingent liability examples because their outcomes are uncertain. The accounting rules for reporting a contingent liability differ depending on the estimated dollar amount of the liability and the likelihood of the event occurring. The accounting rules ensure that financial statement readers receive sufficient information.

(e) SLR and CRR.

Ans: Statutory liquidity ratio refers to the amount that the commercial banks require to maintain in the form of gold or government approved securities before providing credit to the customers.  Statutory Liquidity Ratio is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit. It is determined as % of total demand and time liabilities. Time Liabilities refer to the liabilities, which the commercial banks are liable to pay to the customers after a certain period mutually agreed upon and demand liabilities are such deposits of the customers which are payable on demand. The maximum limit of SLR is 40% and minimum limit of SLR is 15% In India. Present SLR is 18%.

The main objectives for maintaining the SLR ratio are the following:

(i) To control the expansion of bank credit. By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion.

(ii) To ensure the solvency of commercial banks.

(iii) To compel the commercial banks to invest in government securities like government bonds.

All the banks operating in a country, beside, cash in hand also maintain certain cash with the Central Bank of the country. This is called a cash reserve. In fact, maintenance of these cash reserves has been made compulsory by the Law and the Central Bank has been given the power to determine the percentage of cash to be kept as reserves. This is termed as cash reserve ratio. In case of emergency these cash reserve can be utilised by the banks to safeguard their liquidity position.In India, under Sec 42(1) of the Reserve Bank of India Act, 1934, every scheduled bank is required to maintain with the Reserve Bank a minimum cash reserve as percentage of the time and demand liabilities of the banks in India. The rate varies between 3% and 20%. In practice the bank keeps a higher percentage of cash reserve with the RBI then what the RBI prescribes at different times.  

6. Explain some books that are maintained by Bank. 

Or

What are the books of account maintained by Bank? 

Ans: Books of Accounts maintained by a Banking Company: 

(A) Principles Books of Accounts:

(a) The General Ledger: It contains accounts of all personal ledgers, the profit & loss account and different asset accounts. The accounts in the general ledger are arranged in such an order that a balance sheet can be readily prepared there from. There are certain additional accounts known as contra accounts which are a feature of bank accounting. These are kept with a view to keep control over transaction which has no direct effect on the bank’s position e.g. letters of credit opened, bills received or sent for collection, guarantees given, etc.

(b) Profit and Loss Ledger: Some banks keep one account for profit and loss in the General Ledger and maintain separate books for the detailed accounts. These are columnar books having separate columns for each revenue or expenses head. Other banks maintain separate books for debits and credits.

These books are posted from vouchers. The total of debits and credits posted are entered into the Profit and Loss Account in the General Ledger.

(B) Subsidiary Books:

(a) Personal Ledgers: Separate ledgers are maintained by a bank for different types of accounts. For example, there are separate ledgers for Current Accounts, Fixed Deposits (often further classified by length of period of deposit), Cash Certificates, Loans, Overdrafts, etc.

(b) Bill Registers: Details of different types of bills are kept in separate registers which have suitable columns. For example, bills purchased, inward bills for collection, outward bills for collection etc. are entered serially on day-to-day basis in separate registers. In case of bills purchased or discounted, party-wise details are also kept in normal ledger form.

(C) Other Subsidiary Registers: There are different registers for various types of transactions. Their number, volume and details will differ according to the individual needs of each bank. For example, there will be registers for:

(a) Demand Drafts, Telegraphic Transfers and Mail Transfers issued on Branches and Agencies.

(b) Demand Drafts, Telegraphic Transfers and Mail Transfers received from Branches and Agencies.

(c) Letters of Credit.

(d) Letters of Guarantee.

(D) Departmental Journals: Each department of the Bank maintains a journal to note the transfer entries passed by it. These journals are memoranda books only, as all the entries made there are also made in the Day Book through Voucher Summary Sheets. Their purpose is to maintain a record of all the transfer entries originated by each department. For example, the Loans and Overdraft Section will pass transfer entries for interest charged on various accounts every month, and as all these entries will be posted in the journal of that department, the office concerned can easily find out the accounts in respect of which the interest entry has been passed.

(E) Other Memorandum Books: Besides the books mentioned above, various departments of the bank have to maintain a number of memoranda books to facilitate their work. Some of the important books are described below:

(a) Cash Department:

(i) Receiving Cashiers’ cash book.

(ii) Paying Cashiers’ cash book.

(iii) Main cash book.

(iv) Cash Balance Book.

(b) Quick Payment System: Banks introduce different systems so that their customers may receive payment of cash etc. quickly. The most prevalent system is the teller system. Under this system tellers keep cash as well as ledger cards and the specimen signature cards of each customer in respect of Current and Saving Bank Accounts.

(c) Outward Clearing:

(i) A Clearing Cheque Received Book for entering cheques received from customers for clearing.

(ii) Bank wise list of the above cheques, one copy of which is sent to the Clearing House together with the cheques.

(d) Inward Clearing: Cheques received are verified with the accompanying lists. They are then distributed to different departments and the number of cheques given to each department is noted in a Memo Book. When the cheques are passed and posted into ledgers, their number found is independently agreed with the Memo Book. If any cheques are non-payable, they are returned back to the Clearing House.

The cheques themselves serve as vouchers. 

(e) Loans & Overdraft Departments:

(i) Registers for shares and other securities held on behalf of each customer.

(ii) Summary Books of Securities giving details of Government Securities, shares of individual companies etc.

(iii) Godown registers maintained by the godown-keeper of the bank. 

(iv)  Price register giving the wholesale price of the commodities pledged with the bank. 

(v) Overdraft  Sanction registers.

(vi) Delivery Order books.

(vii) Drawing Power book. 

(viii) Storage books.

(f) Deposits Department: 

(i) Account Opening & Closing registers. 

(ii) For Fixed Deposits, Rate registers giving analysis of deposits according to rates. 

(iii) Due Date Diary.

(iv) Specimen signature book.

(g) Establishment Department:

(i) Salary and allied registers, such as attendance register, leave register,overtime register, etc.

(ii) Register of fixed assets, e.g. furniture and fixtures, motor cars, vehicles etc.

(iii) Stationery Registers.

(iv) Old records register.

(h) General:

(a) Signature books of bank’s officers. 

(b) Private Telegraphic Code and Cyphers.

Statistical Books: Statistical records kept by different banks are in accordance with their individual needs. For example, there may be books for recording:

(i) average balance in loans and advances etc.

(ii) Deposits received and amount paid out each month in the various departments.

(iii) Number of cheques paid.

(iv) Number of cheques, bill and other items collected.

7. Explain the Classification of Advances by Banks. 

Ans: The most important asset for banks is “loans and advances” comprising cash credits and overdrafts, bills discounted and purchased and term loans. The banks have to classify their advances as follows in order to arrive at the amount of the provision to be made against them, into the following groups:

(a) Standard Assets: Standard assets are those which do not pose any problems and which do not carry more than normal risk attached to the business. They are non-performing assets (NPA). No provision is required to be made against them. However, banks have been asked to make provision at the rate of 0.25% on their standard advances also from the year ending 31st March, 2000.

(b) Sub-Standard Assets: Sub-standard assets are those which have been classified as NPA for a period not exceeding 18 months. In such cases, the security available to the bank is inadequate and there is a distinct possibility that the bank will suffer some loss, if deficiencies are not corrected. Provision has to be made at the rate of 10% of the total outstanding amount of sub-standard assets.

However, in respect of accounts where there are potential threats of recovery on account of erosion in the value of security or non-availability of security and existence of other factors, such as frauds committed by borrowers, it will not be prudent for banks to classify them first as sub-standard and then as doubtful after expiry of two years from the date the account has become NPA. Such accounts should straightaway be classified as doubtful assets, or loss asset, as appropriate, irrespective of the period for which it has remained as NPA.

(c) Doubtful Assets: Doubtful assets are those which have remained NPA for a period exceeding 18 months. This period of two years is being reduced to 18 months by 31st March, 2001. These assets are so weak that their collection or liquidation in full is considered highly improbable. A loan classified as doubtful has all the weaknesses inherent in the classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, high questionable and improbable, on the basis of currently known facts, condition and values.

In order to arrive at the amount provision to be made against doubtful assets, the unsecured portions and the secured portions of these assets have to be considered separately. The unsecured portion has to be fully provided for, i.e., provision has to be made equal to 100% of the amount by which the advance is not covered by the realisable value of the security.

(d) Loss Assets: Loss assets are those where loss has been identified by the bank or internal or external auditors or RBI inspectors but the amount has not been written off wholly or partly. These assets are uncollectible and, therefore, they must be written off even though there may be a remote possibility of recovery of some amount.

Provision of 100% of the outstanding balance should be made. 

Provision for Loss: A bank is required to make a provision for loss in respect of different classes of its advances as follows:

(a) Standard Assets: Provision has to be made as follows: 

Rate of Provision
(i) On direct advances to agricultural and SME0.25
(ii) On advances to Commercial Real Estate (CRE) sector1.00
(iii) On all other loans and advances not covered by (i) and (ii) above
0.40

(b) Sub-standard Assets: Provision has to be on the following lines:

Rate of Provision
(i) On secured exposures15
(ii) On unsecured exposures25
(iii) On unsecured exposures in respect of infra- structure loan accounts where certain safeg-uards such as escrow accounts are available
20

(c) Doubtful Assets: Full provision to the extent of the unsecured portion should be made. In doing so, the realisable value of the security available to the bank should be determined on a realistic basis.

DICGC/ ECGC cover is also taken into account. In case the advance covered by CGTSI guarantee becomes non-performing, no-provision need be made towards the guaranteed portion but the amount outstanding in excess of the guaranteed portion should be provided for as per the guidelines on provisioning for non-performing advances.

Additionally, 25%-100% of the secured portion should be provided for, depending upon the period for which the advance has been considered as a doubtful asset, as detailed below:

(d) Loss Assets: The entire amount should be written off or full provision should be made for the amount outstanding.

8. Give in brief the various provisions of the Banking Regulation Act, 1949 relating to the annual accounts of the banking company.

Ans: The provisions of the Banking Regulation Act relating to annual accounts and audit of a banking company are given in Section 29-34A and are as follows:

(i) Preparation of Annual Accounts: On 31st March each and every banking company incorporated in India, in respect of all business transacted by it, and every banking company incorporated outside India, in respect of all business transacted through its branches in India shall prepare with reference to that year a Balance Sheet and Profit and Loss Account as on the working of the year in the Forms set out in third schedule or as near thereto as circumstances admit. Form A in third schedule is the Balance Sheet and Form B is the Profit and Loss Account. Forms A and B have been revised w.e.f. 1st April, 1991. In other words, the annual accounts for the year ending 31st March 1992 and onwards are to be prepared in the new formats as given in the book. The requirements of the Companies Act relating to the Balance Sheet and Statement of Profit and Loss of a company shall, is so far as they are not inconsistent with the Banking Companies Act, apply to the Balance Sheet and Profit and Loss Account of a banking company.

(ii) Audit of Accounts: The Balance Sheet and the Profit and Loss Account of a banking company is required to be audited by a Chartered Accountant. The appointment of the auditor of a banking company is made as per the provisions of the Companies Act. His powers, duties and liabilities are also governed by the Companies Act, but the auditor’s report on the accounts of a banking company must include certain additional particulars. Every banking company is required to take previous approval of the Reserve Bank of India before appointing or reappointing auditors. In addition, the Reserve Bank can order special audit of the banking companies Accounts if it thinks fit in the public interest of the banking company or its depositors.

(iii) Filing of Accounts: Three copies of the audited Balance Sheet and Profit and Loss Account together with the auditors’ report shall be furnished as returns to the Reserve Bank of India within three months from the end of the accounting year to which they relate. This period of three months can be extended by the Reserve Bank for a further period upto three months. Reserve Bank is authorised to call for any further information as it may think proper from a banking company relating to the business of such company. A banking company is also required to send to the Registrar of Companies three copies of its audited Balance Sheet and Profit and Loss Account and Auditor’s Report and when the Reserve Bank requires any additional information in connection with the accounts, a copy of any such additional information shall also be sent to the Registrar.

(iv) Publication of Accounts: The Balance Sheet, Profit and Loss Account and the Auditor’s Report of every banking company shall be published in any newspaper circulating at the place where it has principal office, within six months from the end of the accounting year.

9. Mention the types of business which can be carried by a bank under the Banking Regulation Act 1449. 

Ans: As per the provision of section 6 of the Banking Regulation Act 1949, a banking company may engage in any one or more of the following forms of business, in addition to the business of banking-

(a) Acting as agents for any Government or local authority or any other person or persons the carrying on of agency business of any description including the clearing and forwarding of goods.

(b) Contracting for public and private loans and negotiating and issuing the same.

(c) The effecting insuring guaranteeing, underwriting participating in managing and carrying out of any issue, public on private of state, municipal or other loans or shares, stock debentures or debenture stock of any company corporation on association and the lending of money for the purpose of any such issue.

(d) Carrying on and transacting every kind of guarantee and indemnity business.

(e) Managing selling and realising any property which may come into the profession of the company is satisfactory of or part satisfaction of any of its claims.

(f) Undertaking and executing trusts.

(g) Undertaking and administration of estates as executive, trustee, or otherwise.

(h) The acquisition, construction, maintenance and alteration of building or works necessary or convenient for the purpose of the company.

(i) Selling, improving, managing, developing, exchanging, leasing, disposing of or turning into account, or otherwise dealing with all or any part of the property and rights of the company.

(j) Doing all such other things as are incident or conductive to the promotion or advancement of the business of the company.

10. How to prepare a basic Balance Sheet?

Ans: Here are the steps you can follow to create a basic balance sheet for your organisation. Even if some or all of the process is automated through the use of an accounting system or software, understanding how a balance sheet is prepared will enable you to spot potential errors so that they can be resolved before they cause lasting damage.

(a) Determine the Reporting Date and Period: A balance sheet is meant to depict the total assets, liabilities, and shareholders’ equity of a company on a specific date, typically referred to as the reporting date. Often, the reporting date will be the final day of the reporting period. Most companies, especially publicly traded ones, will report on a quarterly basis. When this is the case, the reporting date will most usually fall on the final day of the quarter: March 31, June 30, September 30, December 31.

Companies that report on an annual basis will often use December 31st as their reporting date, though they can choose any date. It’s not uncommon for a balance sheet to take a few weeks to prepare after the reporting period has ended.

(b) Identify Your Assets: After you’ve identified your reporting date and period, you’ll need to tally your assets as of that date. Typically, a balance sheet will list assets in two ways: As individual line items and then as total assets. Splitting assets into different line items will make it easier for analysts to understand exactly what your assets are and where they came from; tallying them together will be required for final analysis. Assets will often be split into the following line items:

Current Assets:

(i) Cash and cash equivalents.

(ii) Short-term marketable securities.

(iii) Accounts receivable.

(iv) Inventory.

(v) Other current assets.

Non-current Assets:

(i) Long-term marketable securities. 

(ii) Property.

(iii) Goodwill.

(iv) Intangible assets.

(v) Other non-current assets.

(vi) Current and noncurrent assets should both be subtotal, and then totaled together.

(c) Identify Your Liabilities: Similarly, you will need to identify your liabilities.

Again, these should be organised into both line items and totals, as below:

Current Liabilities:

(i) Accounts payable.

(ii) Accrued expenses.

(iii) Deferred revenue.

(iv) Current portion of long-term debt.

(v) Other current liabilities.

Non-Current Liabilities:

(i) Deferred revenue (non-current).

(ii) Long-term lease obligations.

(iii) Long-term debt.

(iv) Other non-current liabilities.

(v) As with assets, these should be both subtotaled and then totaled together.

(d) Calculate Shareholders’ Equity: If a company or organisation is privately held by a single owner, then shareholders’ equity will generally be pretty straightforward. If it’s publicly held, this calculation may become more complicated depending on the various types of stock issued.

Common line items found in this section of the balance sheet include:

(i) Common stock. 

(ii) Preferred stock. 

(iii) Treasury stock. 

(iv) Retained earnings. 

(e) Add Total Liabilities to Total Shareholders’ Equity and Compare to Assets: To ensure the balance sheet is balanced, it will be necessary to compare total assets against total liabilities plus equity. To do this, you’ll need to add liabilities and shareholders’ equity together.

PRACTICAL

1. From the following particulars obtained from the books of UTI Bank Ltd., Prepare Profit and Loss Account for the year ended 31st March 2008 as per the form of the Banking Regulation Act 1449.

Interest on loansRs. 25,000
Interest on saving A/cRs. 15,000
Interest on cash creditRs. 18,000
Interest on fixed depositRs. 17200
Interest on overdraftRs. 19800
Amount charged against currents A/cRs. 4100
Rebates on bill discountedRs. 1400
Establishment expensesRs. 12000
Discount on bill discounted (Net)Rs. 4800
RentRs. 460
Dearness allowanceRs. 2800
Commissions and brokerageRs. 1200
Chairman’s travelling expensesRs. 1100
Contribution to start providend FundRs. 900

Bad debt on non performing assets has to be written off Rs. 800. Provision for taxation to be made of 30%

Solution: 

UTI Bank

Profits & Loss Account for the year ended 31st March 2008

Scheduledas on 31.3.2008
(a) Income: 
Interest earned
Other Income


13
14


676005300
72900
(b) Expenditure:
Interest expended
Opening expenses
Provision & contingency


1516


32200646010832
49492
(c) Profit/Loss (I-II)
Profit brought forwards


23408
23408
(d) Appropriation
Transfer to statutory reserve @25% on 23408
Balance carried over tobalance sheet


585217556
23408

Schedule 13-Interest carried

(a) Interest / Discount on advances/ bills (note 3)67600
67600

Schedule 14-other Income

(a) Commission, exchange and brokerage1200
(b) Miscellaneous Income (Note 5)4100
5300

Schedule-15 Interest expends

(a) Interest on saving deposit15000
Interest on fixed deposit17200
32200

Scheduled 16-Operating expenses

(a) Payment to and provisions for employee (Note 6)4900
(b) Rents, tax and lighting460
(c) Director’s fees, allowaance and an expenses (Note-7)1100
6460

Working Note:

(a)Interest on advances:
Interest on loan
Interest on cash credit
Interest on overdraft
Rs.
25,00018,00019,800
62,800
(b)Discount on bills:
Discount on bill discounted (Net) adds: Rebate on bill discount 
Discount on bill descounted (Gross) 6200 Less: Rebate on bill discounted


480014001400
4800
(c) Interest/Discount on advance/bill:
Interest on advance bill (1)
Discount on bill (2)


628004800
67600
(d)Interest on deposit:
Interest on saving A/C
Interest on fixed deposit


1500017200
32200
(e) Other Income:
Commission and brokerage Amount charged against Current A/C


12004100
5300
(f)Payment to and provisions for employee:
Dearness allowance
contribution to staff provident fund
Establishment expenses



28009001200
4900
(g)Director’s fees allowances and:
expenses chairman’s travelling expenditure


1100
1100
(h)Provision and contengenesis:
Bad debt
Provision for Income Tax


80010032
10832
(I)Provision for Income Tax:
Interest carriedOther Income
Less: Interest expended          32200Operating expense                  6460
Less: Bad Debt


67600530072900
3866034240    800
33440

Provison for tax (30% on 33440) = 10032

2. From the following information prepare the profit & loss account of Vasavi Bank Ltd. the period ended-31st March 2009.


Interest on loans
Rs.
300
Interest on fixed deposits275
Commission10
Exchange and brokerage20
Salaries and allowance150
Discount on Bills152 (Gross)
Interest on cash credits240
Interest on temporary overdraft iscurrent accounts30
Interest on savings bank deposits87
Postage, telegrams & stamps10
Printing & Stationery20
Sundry expenses10
Rent15
Taxes & license10
Audit fees10
Director’s fees & allowance20
ADDITIONAL INFORMATION

(a) Rebate on bill discounted Rs. 30,000

(b) Provision for bad debt Rs.. 30,000

(c) Provision for income taxes is to be made @35%

(d) Interest of Rs. 4000 on doubtful debt was wrongly credited interest on loan A/C total investments in Govt. and other securiting Rs. 10,00,000 (Market value Rs. 9,90,000)

Solution:

Vasavi Bank Ltd.

Profit & Loss account for the year ended 31st March 2009

Schedule 31.3.2009
(a)Income:
Interest earnedOther Income

1314

6,88,00030,000
7,18,000
(b)Expenditure:
Interest expended 
Operating expenses Provisions and contingencies

1516

3,62,0002,55,00061,350
6,78,350
(c)Profit / Loss (I-II)
Net profit for the yearProfits brought forward


39,650
(d)Appropriations:
Statutory Revenues 39650 @ 25%
Balance carried over to balance-sheet


9,91329,737
39,600

Schedule 13 – Interest earned 31.3.2009

(a) Interest/discount on advances / bills (Note 3)6,88,000
6,88,000

Schedule 14 – Other Income

(a) Commission, exchanges and brokerage (Note 4)30,000
30,000

Schedule 15 – Interest expanded.

(a) Interest on deposit (Note 5)3,62,000
3,62,000

Schedule 16 – Operating expenses

(a) Payment to provisions for employees1,50,00
(b) Rent, taxes and Lighting15,00
(c) Printing and Stationery20,00
(d) Director’s fees, allowances and expenses30,00
(e) Auditor’s fees and expenses10,00
(f) Postage, telegrams and telephone10,00
(g) Other expenditure (Note 6)20,000
2,55,000

Working notes:

(a) Interest on advance Interest on Loans
3,00,000
Less: Interest on doubtful debts2,96,000
Interest on cash credit2,40,000
Interest on temporary overdrafts is current accounts30,000
5,66,000
(b) Discount on bills discounted11,52,000
Less: Rebate on bill discounted30,000
11,22,000
(c) Interest / Discount on Advances/bills5,66,000
Interest on advances1,22,000
6,88,000
(d) Commission, exchange and brokerage 
Commission10,000
exchange & brokerage20,000
30,000
(e) Interest on deposits 
Interest on fixed deposits 2,75,000
Interest on saving bank deposits87,000
3,62,000
(f) Other expenditure
Sundry charges10,000
Taxes & licenses10,000
20,000
(g) Provision for Income Tax
Interest earned                          6,88,000
Add. Other Income                        30,000
7,18,000
Less: Interest expanded            3,62,000
Operating expenses                   2,55,000
Provision for bad debt                   30,000
Provision for depreciation on Interest 10,0006,57,000
61,000

3. Prepare the profit and loss account of City banking Co. Ltd. for the year ended 31st March 2006 from the following particulars.

Interest on loans2,59,000
Interest on fixed deposits2,75,000
Rebate on bills discounted49,000
Commission charged to customer8,200
Establishment expenses54,000
Discount on bill discounted1,95,000
Interest on current Account42,000
Interest on Cash Credit Account2,23,000
Rent & Taxes18,000
Interest on overdraft54,000
Directors and Auditor’s fees4,200
Interest on saving bank deposits68,000
Postage1,400
Printing and Stationery2,900
Sundry charges1,700

Solution:

City Banking Co. Ltd.

Profit & Loss Account for the year ended 31st

March 2006

ParticularScheduleCurrent year
(a)Income: Interest earnedOther Income
Total
13146,82,0008200
6,90,200
(b)Expenditure
Interest expendedOperating expenses
Total


1516


3,85,00082,200
4,67,200
(c)Profits & Loss (I-II)2,23,000
(d)Appropriation:
Statutory Reserve @ 25% on  Rs. 2,23,000
Balance carried over to balance sheet



55,7501,67,250
2,23,000

Schedule 13 Interest earned

(a)Interest/Discount and advances/bills/(Note 3)6,82,000
6,82,000

Schedule 14-Other Income

(a)Commission charged to customer8,200
8,200

Schedule 15-Interest expended

(a)Interest on deposits (Note 4)3,85,000
3,85,000

Schedule 16-Operating expenses

(a)Payment to and provision for employee54,000
(b)Rent and taxes18,000
(c)Director’s and Auditor fees4,200
(d)Postage1,400
(e)Printing & Stationery2,900
(f)Sundry charges1,700
82,200

Workings:

(a)Interest on advances:
Interest on loan
Interest on cash credit A/C
Interest on overdraft


2,59,0002,23,00054,000
5,36,000
(b)Discount on bills discounted:
Discount on bills discounted
Less: Rebate on bills discounted


1,95,00049,000
1,46,000
(c)Interest/Discount on advances/bills (1+2):
Interest on advance
Discount on bills discounted



5,36,0001,46,000
6,82,000
(d)Interest on deposits:
Interest on fixed deposit
Interest on Current Account
Interest on Saving Bank deposit


2,75,00042,00068,000
3,85,000

4. From the following information, prepare a Balance Sheet as on 31.3.2016:

(Rs. In lakhs)

DetailsDr. Amount (Rs.)Cr. Amount (Rs.)
Share Capital: Equity Shares @ Rs. 500 each6,000
Statutory Reserve5750
Net profit before Appropriations3750
Profit & Loss Account10,250
Fixed Deposit Accounts13000
Savings Deposit Accounts11250
Current Accounts75013000
Bills Payable25
Cash Credit20325
Borrowing from other Banks2750
Cash in Hand4000
Cash with RBI2000
Cash with other Banks3900
Money at Call and at Short Notice5250
Gold1375
Government Securities2750
Premises3900
Furniture1750
Term Loan19775
6577565775
ADDITIONAL INFORMATION
Rs.
Bills for Collection5,00,00,000
Acceptances & Endorsements3,75,00,000
Claims against the bank not acknowledges as Debts15,00,000

Depreciation Charges:

Promises25,00,000
Furnitures20,00,000

50% of the Term Loans are secured by Government Guarantees 10% of cash Credit is unsecured.

Solution:

Balance Sheet

As on 31s March, 2016

ParticularsSchedule No.Current Year (Rs.)Previous Year (Rs.)
Liabilities:
Capital
Reserve and Surplus
Deposits
Borrowings
Other Liabilities and Provisions


1
2
3
4
5


6,000
19750
37,250
2750
25
65,775
Assets:
Cash and Balance with RBI
Balance with Banks and Money at Call and at short Notice 
Investments


6


7

8


6,000


9150

4125
Advances
Fixed AssetsOther Assets
9
1011
40,850
5,650Nill
65,775
Contingent LiabilitiesBills for Collection12390500
890
Schedules:(Rs. in lakh)
Schedule 1: Capital
12,00,000 Shares of Rs 500 each6,000.00

Schedule 2: Reserves & Surplus

I. Statutory reserve Opening balance5750.00
Add: Additional during the Year (25% of Rs. 3,750.00)937.50
6,687.50
Less: Deductions during the yearNil
6,687.50
II. Capital Reserves__
III. Securities Premium__
IV. Revenue and other reserves__
V. Balance in Profit & Loss A/c (10,250.00 + 2,812.50)13,250.50
19750.00
Schedule 3: DepositsRs.
I. Demand Deposits i.e., Current Account13,000
II. Savings Bank Deposits11,250
III. Term Deposits i.e., Fixed Deposit Accounts13,000
37,250

Schedule 4: Borrowinge

I. In India:
(i) RBI___
(ii) Other Banks2,750
(iii) Other Institutions and Agencies___
II. Outside India___
2,750

Schedule 5: Other Liabilities & Provisions

I. Bills Payable25
II. Interoffice Adjustments (Net)___
III. Interest Accrued___
IV. Other Liabilities (including Provisions)___
25

Schedule 6: Cash and Balances with RBI

I. Cash in Hand4,000
II. Cash Balance with RBC2,000
6,000

Schedule 7: Balance with Banks and Money at Call and at Short Notice

I. In India
(i) Cash with other Banks3,900
(ii) Money at Call and at Short Notice5,250
9,150

Schedule 8: Investments

I. In India
(i) Govt. Securities2,750
(ii) Others, i.e., Gold1,375
II. Outside India___
4,125

Schedule 9: Advances

(A) I. Bills Discounted and Purchased___
II. Cash Credit, Overdrafts and Loans:___
Payable on Demand:
Cash Credits20,325
Cash Credits750
Overdrafts19,775
III. Term Loans40,850
(B) I. Secured by Tangible AssetsRs.
(90% of Rs. 20,325 + 50% of Rs. 19,775)28,180.0
II. Covered by Bank/ Govt. Guarantees (50% of Rs. 19,775)9,887.5
III. Unsecured (10% of Rs. 20,325 + 100% of Rs. 75,000)2,782.5
40,805

Schedule 10: Fixed Assets

I. Premises3,900
II. Other Fixed Assets (including Furniture)1,750
5,650
Schedule 11: Other AssetsNil

Schedule 12: Contingent Liabilities

I. Claims against the Bank (not acknowledged as Debts)15
II. Acceptances and Endordement375
390

5. From the following Ledger Balances, prepare Balace Sheet 05. of LM Bank ltd. as on 31.3.2016:

DetailsDr AmountCr. Amount
Share Capital
24,00,000 Shares @ Rs. 50 (paid-up)12,00,00,000
Statutory Reserve2,40,00,000
Net Profit (Before Appropriation)1,80,00,000
Profit & Loss A/c4,32,00,000
Fixed Deposit5,40,00,000
Savings Deposit4,80,00,000
Current Accounts28,00,0005,30,00,000
Borrowing from other Banks1,10,00,000
Bills Payable and Provisions20,000
Cash Credits8,12,30,000
Cash in Hand1,60,25,000
Cash with RBI46,50,000
Cash with other Banks1,47,50,000
Money at Call and at Short Notice2,10,32,000
Gold55,17,000
Government securities1,10,40,000
Premises2,05,80,000
Furniture (including Computers)82,00,000
Term Loans18,53,96,000
37,12,20,00037,12,20,000
ADDITIONAL INFORMATION

1. Bills for Collection Rs. 14,30,000.

2 Acceptances and Endorsements Rs. 12,40,000.

3. Claims against Bank not acknowledged as debts Rs. 5,50,000

4. Depreciation Charged: Premises: Rs. 1,20,000 Furniture Rs. 80,000.

5. 50% of Term Loans are secured by Government Guarantees 10% of Cash Credits are unsecured. Other portion is secured by tangible assets.

6 Transfer 20% of current year’s profit to Statutory Reserve.

Solution:

Balance Sheet of LM Bank Ltd. As on 31st March, 2016

ParticularsSchedule No.Current Year(Rs.)
Capital and Liabilities:
Share capital11,20,000
Reserves and Surplus28,52,00
Deposits315,50,00
Borrowings41,10,001
Other liabilities and provisions520
Total37,12,20
Assets:
cash and Balance with RBI62,06,75
Balance with Banks and Money at Call at Short Notice73,57,82
Investments81,65,58
Advances926,94,25
Fixed Assets102,87,80
Other Assets11Nil
Total37,12,20
Contingent Liabilities1217,90
Bills for Collection14,30

Schedules:

Schedule 1: CapitalRs.
Called up and Paid up Capital (24,00,000 × Rs. 50)1,20,000

Schedule 2: Reserves and Surplus

Statutory Reserve:24,000
Opening Balance3,600
Additional made during the year (20% of 1,80,00,000)27,600
Balance in Profit & Loss A/c57,600
85,200

Schedule 3: Deposits

I. Demand deposits
(i) From BanksNil
(ii) From Others53,000
II. Savings Bank Deposits48,000
III. Fixed deposits54,000
1,55,000

Schedule 4: Borrowings

I. In India
(i) RBINil
(ii) Other Banks11,000

Schedule 5: Other Liabilities and Provisions

Other Liabilities and Provisions20

Schedule 6: Cash and Balances with RBI

I. Cash in Hand16,025
II. Balances with RBI
(i) In Current Account4,650
20,675

Schedule 8: Investments

I. In IndiaRs.
(i) Govt. Securities11,040
(ii) Others: Gold5,517
16,557

Schedule 9: Advances:

A. (i) Cash Credit and Overdrafts Rs. (81,230+2,800)84,030
(ii) Term Loans1,85,396
Total2,69,426
B. (i) Secured by Tangible Assets (Balancing figure)1,65,805
(ii) Secured by Bank/ Government Guarantees92,698
(iii) Unsecured (10% of Cash Credit + Overdraft)10,923
2,69,426

Schedule 10: Fixed Assets

I. Premises
At cost on 31.3.201620,700
Less: Depreciation to Date(120)20,580
II. Other Fixed Assets:
Furniture’s Cost on 31.3.20168,280
Less: Depreciation to Date(80)8,200
Total28,780
Schedule 11: Other AssetsNil

Schedule 12: Contingent Liabilities

I. Claims against the Bank not acknowledged as debts550
II. Acceptances, Endorsements1,420
Total1,970
Calculation of Balance in Profit & Loss A/c (31-3-2016)(Rs.in 000)
Net profit for 2015-1618,000
Profit & Loss A/c b/d (1-4-2015)43,20061,200
Less: Transfer to Statutory Reserve @ 20% of18,0003,600
Balance in Profit & Loss A/c on 31-3-201657,600

6. Give a proforma of Profit and Loss Account of Banking Company.

Ans: Format of Profit and Loss Account of Banking Company: Banks are required to prepare final accounts for each financial year, i.e., its books are closed each year on 31st March. But for internal purpose, banks usually close their books on 30th September. A banking company is required to prepare its Profit and Loss Account according to Form B in the Third Schedule to the Banking Regulation Act, 1949. From B is in a summary form and the details of the various items are given in the schedules. From B is given as follows:

From ‘B’

FORM OF PROFIT AND LOSS ACCOUNT

For the year ended 31st March, (Year)

Particulars NoScheduleYear ended on 31-3- (Current Year)Year ended 31-3- (Previous Year)
I. Income
Interest earned
Other Income


13
14
Total:
II. Expenditure
Interest expended Operating expenses Provisions and contingencies



15
16
Total:
III.Profit/Loss
Net Profit/Loss (-) for the year Profit/Loss (-)brought forward
Total:
IV. Appropriations
Transfer to statutory reserve Transfer to other reserves Transfer to Government/Proposed dividend Balance carriedover to balance sheet
Total:

SCHEDULE 13 – INEREST EARNED

Year ended on 31-3- (Current Year)Year ended 31-3- (Previous Year)
I. Interest/discount on advances/bills
II. Income on investments
III. Interest on balances with Reserve Bank of India and other inter-bank funds
IV. Others
Total:

SCHEDULE 14 – OTHER INCOME

Year ended on 31-3- (Current Year)Year ended 31-3- (Previous Year)
I. Commission, exchange and brokerage
II. Profit on sale of investments
Less: Loss on sale of investments
III. Profit on revaluation of investments
Less: Loss on revaluation of investments
IV. Profit on sale of land, buildings and other assets
Less: Loss on sale of land, buildings and other assets
V. Profit on exchange transactions
Less: Loss on exchange transaction
VI. Income earned by way of dividends etc. from subsidiaries/companies and/or joint ventures abroad/in India
VII.Miscellaneous Incomes
Total:

SCHEDULE 15 – INTEREST EXPENDED

Year ended on 31-3- (Current Year)Year ended 31-3- (Previous Year)
I. Interest on deposits
II. Interest on Reserve Bank of India/Interbank borrowings
III. Others
Total:

SCHEDULE 16 – OPERATING EXPENSES

Year ended on 31-3(Current Year)Year ended 31-3(Previous Year)
I. Payments to and provisions for employees
II. Rent, taxes and lighting
III. Printing and stationery
IV. Advertisement and publicity
V. Depreciation on bank’s property
VI. Directors’ fees, allowances and expenses
VII. Auditors’ fees, allowances and expenses (including branch auditors)
VIII. Law charges
IX. Postage, telegrams, telephone, etc.
X. Repairs and maintenance
XI. Insurance
XII. Other expenditure
Total:

7. Give a proforma of Profit and Loss Account of Banking Company.

Ans: Format of Balance Sheet of a Banking Company Preparation of Balance Sheet: The Balance sheet of a banking company is to be prepared in Form A given in third schedule to the Act. Unlike the previous form the present one is devoid of details, the latter being shown in the schedules. RBI has given guidelines for compiling the balance sheet. Below are given From A, the schedules there under and the instructions of RBI and in that order.

C. THE THIRD SCHEDULE

(See Section 29)

From ‘A’

FORM OF BALANCE SHEET

Balance Sheet of …………… (Here enter name of the Banking Company)

Balance Sheet as on 31st March (Year)

ScheduleAs on 31.3.20……As on 31.3.20…..
Capital & Liabilities
Capital1
Reserves & Surplus2
Deposits3
Borrowings4
Other liabilities and provisions5
Total:
Assets
Cash and balance with Reserve
Bank of India6
Balances with banks and money at call and short notice7
Investments8
Advances9
Fixed Assets10
Other Assets11
Total:
Contingent Liabilities
Bills for collection12

SCHEDULE 1 – CAPITAL

As on 31.3.20……As on 31.3.20……
I. For Nationalised Banks
Capital (Fully owned by Central Government)
II. For Banks Incorporated Outside India
Capital
(i) (The amount brought in by banks by way of startup capital as prescribed by RBI should be shown under this head)
(ii) Amount of deposit kept with the RBI under Section 11(2) of the Banking Regulation Act, 1949.
Total
III. For Other Banks
Authorised Capital (Shares of Rs. Each)
Issued Capital (shares of Rs. Each)
Subscribed capital (Shared of Rs. Each)
Called-up Capital (Shares of Rs. Each)
Less: Called unpaid
Add: Forfeited shares.

SCHEDULES 2 – RESERVE & SURPLUS

As on 31.3.20……As no 31.3.20.….
I. Statutory Reserve
Opening Balance
Additions during the year
Deductions during the year
II. Capital Reserves
Opening Balance 
Additions during the year
Deductions during the year
III. Share Premium
Opening Balance
Additions during the year
Deductions during the year
IV. Revenue and other Reserves
Opening Balance
Additions during the year
Deductions during the year
V. Balance in Profit and Loss Account
Total:

SCHEDULE 3 – DEPOSITS

As on 31.3.20……As on 31.3.20……
A. I Demand Deposits
(i) From banks
(ii) From others
II. Saving Bank Deposits
III.Term Deposits
(i) From banks
(ii) From others
Total:
(I, II and III)
B. (i) Deposits of branches in India
(ii) Deposits of branches outside India
Total:

SCHEDULE 4 – BORROWINGS

As on 31.3.20…..As on 31.3.20…..
1. Borrowings in India
(i) Reserve Bank of India
(ii) Other banks
(iii) Other institutions and agencies
II. Borrowings outside India
Total
(I and II)Secured borrowings in I & II above – Rs.

SCHEDULE 5 – OTHER LIABILITIES AND PROVISIONS

As on 31.3.20……As on 31.3.20……
I. Bills Payable
II. Inter-office adjustment (net)
III. Interest accrued
IV. Other (including provisions
Total

SCHEDULE 6 – CASH AND BALANCES WITH RESERVE BANK OF INDIA

As on 31.3.20……As on 31.3.20……
I. Cash in hand (including foreign currency notes)
II. Balances with Reserve Bank of India
(i) In Current Account
(ii) In other Accounts
Total: (I & II)

SCHEDULE 7 – BALANCES WITH BANKS & MONEY AT CALL & SHORT NOTICE

As on 31.3.20……As on 31.3.20……
I. In India
(i) Balances with Banks
(a) in Current Accounts
(b) in other Deposit Accounts
(ii) Money at call and short Notice
(a) With banks
(b) With other institutions
Total (I & II)
II. Outside India
(i) in Current Accounts
(ii) in other Deposit Accounts
(iii) Money at call and short notice
Total:
GRAND TOTAL: (I & II)

SCHEDULE 8 – INVESTMENTS

As on 31.3.20……As on 31.3.20……
I. Investments in India In
(i) Government securities
(ii) Other approved securities
(iii) Shares
(iv) Debentures and Bonds
(v) Subsidiaries and/or joint ventures
(vi) Other (to be specified)
Total:
II. Investments outside India in
(i) Government securities (including local authorities)
(ii) Subsidiaries and/or joint ventures abroad
(iii) Other investments (to be specified)
Total:
GRAND TOTAL: (I & II)

SCHEDULE 9 – ADVANCES

As on 31.3.20……As on 31.3.20……
A. (i) Bills purchase and discounted
(ii) Cash credits overdrafts and Loans repayable on demand
(iii) Term Loans
Total:
B. (i) Secured by tangible assets
(ii) Covered by Bank / Government Guarantees
(iii) Unsecured
Total:
C. I. Advances in India
(i) Priority Sectors
(ii) Public Sector
(iii) Banks
(iv) Others
Total:
II. Advances Outside India
(i) Due from banks
(ii) Due from others
(a) Bills purchased and discounted
(b) Syndicated Loans
(c) Others
Total:
Grand Total (C.I and II)

SCHEDULE 10 FIXED ASSETS

As on 31.3.20……As on 31.3.20……
I. Premises
At cost as on 31st March of the preceding year
Additions during the year
Deductions during the year
Depreciation to date
II. Other Fixed Assets
(including Furniture and Fixtures)
At cost as on 31st March of thepreceding year
Additions during the Year
Deductions during the year 
Depreciation to date
Total: (I & II)
TOTAL

SCHEDULE 11 – OTHER ASSETS

As on 31.3.20……As on 31.3.20……
I. Inter-office adjustment (net)
II. Interest accrued
III. Tax paid in advance/tax deducted at source
IV. Stationery and Stamps
V. Non-banking assets acquired in satisfaction of claims
VI. Others
Total

SCHEDULE 12 – CONTINGENT LIABILITIES

As on 31.3.20……As on 31.3.20……
I. Claims against the bank not acknowledged as debts
II. Liability for partly paid investments
III. Liability on account of outstanding forward exchange contracts
IV. Guarantees given on behalf of constituents
(a) In India
(b) Outside India
V. Acceptances endorsements and other obligations
Vi. Other items for which the bank is contingently liable
Total

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