Banking Companies

2.

General Ledger: General ledger provides details regarding expenses and asset not covered under subsidiary books and also contains the control accounts of subsidiary books.

Subsidiary Ledgers It includes: (a) Receiving Cashier’s Counter Cash Book; (b) Paying Cashier’s Counter Cash Book; (c) Current Accounts Ledger; (d) Savings Bank Accounts Ledger; (e) Fixed Deposit Accounts Ledger (f) Investment Ledger; (g) Cash Credit Ledger; (h) Loan Ledger; (i) Bills Discounted and Purchased Ledger; (j) Recurring Deposit Accounts Ledger; (k) Fixed Deposit Accounts Ledger; (l) Customer’s Acceptance, Endorsement and Guarantee Ledger etc.; Other Registers and Memorandum Books It includes: (a) Bills for Collection Register; (b) Share Security Register; (c) Jewellery Register; (d) Demand Draft Register; (e) Safe Custody Register; (f) Standing Order Register; (g) Dishonored Cheque Register; (h) Letter of Credit Register; (i) Lockers Register etc.; Special Features of Bank Accounting The following are the features of bank accounting; 1. Banking companies have to maintain books of accounts under Double-Entry System. 2. It has to maintain all books of accounts, as required under the provisions of the Banking Regulation Act. 3. The posting of transactions in the ledger will be based on debit/credit slips. (That is, slip system of ledger posting is followed in banking companies). 4. Self-balancing system of ledge is followed in accounting, by banking companies. SOME IMPORTANT PROVISIONS OF THE BANKING REGULATION ACT, 1949 I. Share Capita (a) A banking company can issue only equity shares. (Section 12). (b) The subscribed capital of a banking company (carrying on business in India) must be atleast one-half of the authorised capital; and the paid-up capital must be atleast one-half of the subscribed (Section 12).

(c) The total of paid-up capital and reserves must be atleast the amount specified in Section 11,which have been given below: Minimum Total of Paid-up capital and reserves Rs. 1. For banking companies incorporated outside India (i.e., Foreign Banks) (a) If it has place of business in Mumbai or Kolkata; or both (b) If it has place of business other than in Mumbai or Kolkata; 2. For Banking Companies Incorporated in India (a) If it has place of business in Mumbai or Kolkata; or both (b) If it does not have place of business in Mumbai or Kolkata; but have place of business (I) in more than one state (II) in only one state - If there is only one place of business - If it has more than one place of businesses For principal place of business For every other place of business, in the same district For every other place of business outside the district (The total, in this case however, need not exceed Rs. 5,00,000) (c) If it has place and business in one state and also have place of business in Mumbai or Kolkata; or both (I) for place of business in Mumbai or Kolkata; or both (II) for each place situated outside the city of Mumbai and Kolkata (The total in this case, however, need not exceed Rs. 10,00,000)

20,00,000 15,00,000 10,00,000 5,00,000 50,000 1,00,000 Additional 10,000 Additional 25,000

5,00,000 Additional 25,000

(d) Private banks registered as a pubic limited company under the companies act, 1956, must have a minimum paid – up – capital of Rs. 100 crores. (e) The capital adequacy Ratio (CAR) of all the banks operating in India must be 8%, and it should be 10% by 2002. (Capital Adequacy Ratio Refers to the percentage of capital and reserves [after writing off bad debts] to the assets of the bank). II. Statutory Reserve According to Section 17(1) of the Banking Regulation Act, every banking company, incorporated in India, must transfer at least 25% of its annual profits (before declaring dividends) to Statutory Reserve. Such transfer must be made until the Reserve (along with share premium, if any) exceeds the paid-up capital. III. Cash Reserve (Cash Reserve Ratio) According to Section 42 of the Banking Regulation Act, every scheduled and nonscheduled Bank must deposit with Reserve Bank of India, an amount equal to 3% of its time

and demand liabilities. Presently, the percentage is 8%. RBI has powers to increase the percentage upto 20%. IV. Statutory Liquidity Ratio Every Banking Company must invest 25% of its time and demand liabilities (i.e., total deposits) in God and Securities. The percentage can be increased upto 40% by RBI. This equipments is provided under Section 24 of the Banking Regulation Act. V. Assets in India According to Section 25 of the Banking Regulation Act, every Banking Company must have assets in India, equivalent to at least 75% of its time and demand liabilities, at the close of business on the last Friday of every quarter. VI. Investment in Share and Debentures Other than in exceptional cases provided in Section 19, no banking company shall hold shares and debentures of another company, more than 30% of the concerned company’s paid-up capital or its own paid-up capital. VII. Declaration and Payment of Dividends According to Section 15, no banking company can declare and pay dividends until all capitalized expenses (i.e., preliminary expenses, brokerage, indemnity commission etc.) have been completely written off. VIII. Payment of Commission, Brokerage or Remuneration in respect of Issue of Shares or Discount on issue of Shares According to section 13 of the Banking Regulation Act, such payment or discount cannot exceed 2.5% of the paid-up value of the said shares. IX. Uncalled Capital According to Section 14, a banking company cannot create any charge on uncalled capital. X. Restrictions on Loans and Advances. According to section 20, a banking company is bound by the following restrictions regarding loans and advances: 1. 2.

It cannot grant any loans or advances on the security of its own shares: It cannot enter into any commitment for granting any loan or advance to or on behalf of the following persons; (a) Any of its directors; (b) Any firm in which any of its director is interested as partner, manager, employer or guarantor.

(c) Any company (not being a subsidiary of a banking company or a company registered under section 25 of the companies act, 1956 or a government company) of which any of the directors of the banking company is a director, manager or employee or guarantor or in which he holds substantial interest; (d) Any individual in respect of whom any of its directors is a partner or guarantor. FINAL ACCOUNTSOF BANKING COMPANIES Section 29, schedule III of the banking regulations act, gives the format for the preparation of Final Accounts of Banking Companies. The present format is applicable with effect 1st April, 1991. The final accounts of banking companies include preparation of profit and loss account and balance sheet. The prescribed formats of the two, along with formats of schedules to be prepared are given below: The Third Schedule (See Section 29) Form ‘A’ Form of Balance Sheet Balance sheet of ………………………………….(here enter name of the banking company) Balance sheet as on 31st March (year) As on 31.3…. As on 31.3… Schedule (Current year) (previous year) Capital& Liabilities Capital 1 Reserve & surplus 2 Deposit 3 Borrowings 4 Other liabilities and provisions 5 TOTAL ASSETS Cash and balance with Reserve Bank of 6 India Balances with banks and money at call 7 and short notice Investments 8 Advances 9 Fixed assets 10 Other assets 11 TOTAL Contingent liabilities. 12 Bills for collection

SCHEDULE 1- CAPITAL As on 31.3…. (Current year)

As on 31.3… (previous year)

I. FOR NATIONALISED BANKS Capital (fully owner by Central Government) II. FOR BANKS INCORPORATED OUTSIDE INDIA CAPITAL (I) (The amount brought by banks by way of start –up 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. III. FOR OTHER BANKS Authorised capital (. Shares of Rs. Each) Issued Capital (…Shares Rs. Each) Subscribed Capital (…Shares Rs. Each) Called-up capital (…Shares Rs. Each) Less : Calls unpaid Add : Forfeited Shares TOTAL SCHEDULE 2- RESERVES & SURPLUS As on 31.3…. (Current year)

As on 31.3… (previous year)

I. Statutory Reserves 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. Reserves and Other Reserves Opening Balance Additions During the year Deductions during the year V. Balance in profit and loss amount TOTAL

SCHEDULE 3- DEPOSITS As on 31.3…. (Current year)

As on 31.3… (previous year)

A. I. Demand Deposits (I) From Banks (II) From Others II. Savings Bank Deposits III. Term Deposits (I) From Banks (II) From Others Total B. (I) Deposits of branches in India (II) Deposits of branches outside India TOTAL SCHEDULE 4 – BORROWINGS As on 31.3…. (Current year) I. II.

Borrowing in India (I) Reserve Bank of India (II) Other Banks (III) Other institutions and agencies Borrowings outside India TOTAL Secured borrowing in I & II above Rs.

As on 31.3… (previous year)

SCHEDULE 5 – OTHER LIABILITIES AND PROVISIONS As on 31.3…. (Current year) I. II. III IV

As on 31.3… (previous year)

Bills Payable Inter – office adjustments (net) Interest accrued Others (including provisions) TOTAL SCHEDULE 6 – CASH AND BALANCES WITH RESERVE BANK OF INDIA As on 31.3…. (Current year)

I II

As on 31.3… (previous year)

Cash in hand (Including foreign currency notes) Balances with Reserve Bank of India (I) In Current Account (II) In Other Accounts TOTAL SCHEDULE 7 – BALANCES WITH BANKS & MONEY AT CALL & SHORT NOTICE As on 31.3…. (Current year)

I.

In India (I) (II)

II

Balance with banks (a) In Current Accounts (b) In other deposit accounts Money at call and short notice (a) With banks (b) With other institutions

TOTAL Outside India (I) In Current Accounts (II) Money at call and short notice TOTAL GRAND TOTAL

As on 31.3… (previous year)

SCHEDULE 8 – INVESTMENTS As on 31.3…. (Current year) I

II.

Investments in India in I. Government securities II. Other approved securities III. Shares IV. Debenture and bonds V. Subsidiaries and/or joint ventures VI. Others (to be specified) TOTAL 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

As on 31.3… (previous year)

SCHEDULE 9– ADVANCES As on 31.3…. (Current year) A.

B.

(I) (II) (III) TOTAL (I) (II)

As on 31.3… (previous year)

Bills purchased and discounted Cash credits, overdrafts and loans repayable on demand Term loans Secured by tangible assets Covered by Bank / Government Guarantees Unsecured

(III) TOTAL C.I Advances in India (I) Priority sectors (II) Public sector (III) Banks (IV) Others TOTAL II Advance 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 & II)

SCHEDULE 10– FIXED ASSETS As on 31.3…. (Current year) I

II

Premises At cost as on 31st March of the preceding year Additions during the year Deductions during the year Depreciation to date Other fixed articles (including furniture & fixture) At cost as on 31st March of the preceding year Additions during the year Deductions during the year Depreciation to date TOTAL

As on 31.3… (previous year)

SCHEDULE 11– OTHER ASSETS As on 31.3…. (Current year) I II III IV V VI

As on 31.3… (previous year)

Inter – office adjustments (net) Interest accrued Tax paid in advance/tax deducted at source Stationary and stamps Non-banking assets acquired in satisfaction claims Others TOTAL

*in case there is any unadjusted balance of loss the same may be shown under this item with appropriate footnote. SCHEDULE 12– CONTINGENT LIABILITIES As on 31.3…. (Current year) I II III IV V VI

Claims against the bank not acknowledged as debts Liability for partly paid investments Liability on account of outstanding forward exchange contracts Guarantees given on behalf of constitutes (a) In India (b) Outside India Acceptances, endorsements and other obligations Other items for which the bank is contingently liable TOTAL

As on 31.3… (previous year)

Form ‘B’ Form of Profit & Loss Account Profit & Loss account for the year ended 31st March…………………

Schedule INCOME Interest earned Other income TOTAL II EXPENDITURE Interest expended Operating expenses Provisions and contingencies TOTAL III PROFIT / LOSS Net profit / Loss (-----) for the year Profit / loss (-----) brought forward TOTAL IV APPROPRIATIONS Transfer to statutory reserves Transfer to other reserves Transfer to Government/Proposed dividend Balance carried over to balance sheet TOTAL

As on 31.3…. (Current year)

As on 31.3… (previous year)

I

13 14 15 16

SCHEDULE 13– INTEREST EARNED As on 31.3…. (Current year) I II III IV V

As on 31.3… (previous year)

Interest / discount on advances/bills Income on investments Interest on balances with reserve bank of India and other inter-bank funds Others TOTAL SCHEDULE 14– OTHER INCOME As on 31.3…. (Current year)

As on 31.3… (previous year)

I II

Commission, exchange and brokerage 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 transactions VI Income earned by way of dividends etc. from Subsidiaries / companies and / or joint ventures abroad / in India VII Miscellaneous Income TOTAL Note: Under Items I to V loss figures may be shown in brackets.

SCHEDULE 15– INTEREST EARNED As on 31.3…. (Current year) I II III

As on 31.3… (previous year)

Interest on deposits Interest on Reserve Bank of India/inter – bank borrowing Others TOTAL SCHEDULE 16– OTHER INCOME As on 31.3…. (Current year)

I II III IV V VI VII

Payments to and provisions for employees Rent, taxes and lighting Printing and stationery Advertisement and publicity Depreciation on bank’s publicity Directors fees, allowance and expenses Auditors fees, allowances and expenses (including branch auditors) VIII Law charges IX Postage, Telegrams, Telephones, etc. X Repairs and maintenance XI Insurance XII Other Expenditure TOTAL

As on 31.3… (previous year)

Guidelines of RBI for compilation of Financial Statements Balance Sheet Item Capital

Nationalized Banks Capital (Fully owned by Central The capital owned by Central Government) Government as on the date of the balance sheet including contribution from Government, if any, for participating in world bank projects should be shown. Banking companies incorporated outside India

Other Banks (Indian) Authorised Capital (….Shares of Rs. Each) Issued Capital (…Share of Rs. Each) Subscribed capital (..share of Rs. ....each) Called up capita (…share of Rs….each) Less: calls unpaid Add: Forfeited shares: Paid up capital)

Reserves Surplus

Notes and instructions for compilation

Coverage

and (I) Statutory Reserves

I

The amount brought in by banks by way of start up capital as prescribed by RBI should be shown under this head. II The amount of deposit kept with RBI, under sub-section 2 of section 11 of the Banking Regulation Act, 1949 should also be shown. Authorized, issued, subscribed, called-up capital should be given separately. Calls – in – arrears will be deducted from called up capital while the paid – up value of forfeited shares should be added thus arriving at the paid-up capital. Where necessary, items which can be combined should be shown under one head for instance ‘Issued and Subscribed Capital Notes – General The charges in the above item, if any, during the years, say, fresh contribution made by Government, fresh issue of capital, capitalization of reserves, etc. may be explained in the notes. Reserves created in terms of Section 17 or any other section of A Banking Regulation Act must be separately disclosed.

(II) Capital Reserve

(III) Share Premium (IV) Revenue Reserves

and

(V) Balance of Profit

Deposits

The expression ‘capital reserves’ shall not include any amount regarded as free for distribution through the profit & loss account. Surplus revaluation should be treated as Capital Reserves. Surplus on translation of the financial statements of foreign branches (which includes fixed assets also) is not a revaluation reserve. Premium on issue of share capital may be shown separately under this head. other The expression ‘Revenue Reserve’ shall mean any reserve other than capital reserve. This item will include all reserves, other than those separately classified. The expression ‘reserve’ shall not include any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets or retained by way of providing for any known liability. Includes balance of profit after appropriations. In case of loss the balance may be shown as a deduction. Notes – General Movement in various categories of reserves should be shown as indicated in the schedule.

A (I) Demand Deposits (I) From Banks (II)

From others

(II) Savings Bank Deposits

Includes all bank deposits repayable on demand. Includes all demand deposits of the non-bank sectors. Credit balances in overdrafts, cash credit accounts, deposits payable at call, overdue deposits inoperative current accounts, matured time deposits and cash certificates, certificates of deposits, etc., are to be included under this category. Includes all savings banks deposits (including inoperative savings bank accounts).

(III) Term Deposits (I) From Bank (II)

From others

B. (I) Deposits of Branches in India (II) Deposits of branches outside India.

Includes all types of bank deposits repayable after a specified term. Includes all types of deposits of the non-bank sector repayable after a specified term. Fixed deposits, cumulative and recurring deposits, cash certificates, certificates of deposits, annuity deposits, deposits mobilized under various schemes, ordinary staff deposits, foreign currency non-resident deposits accounts, etc. are to be included under this category. The total of these two items will agree with the total deposits. Notes – General (a) Internal Payable on deposits which is accrued but not due should not be included but shown under other liabilities. (b) Matured time deposits and cash certificates, etc. should be treated as demand deposits. (c) Deposits under special schemes should be included under term deposit if they are not payable on demand. When such deposits have matured for payment they should be shown under demand deposits. (d) Deposits from banks will include deposits from the banking system in India, Co-operative banks, foreign banks which may or may not have a presence in India.

Borrowings

(I) Borrowings in India (I) Reserve Bank of India (II) Other Banks (III)

Other institutions and agencies

(II) Borrowings Outside India Secured borrowing included above.

Includes borrowing / refinance obtained from Reserve Bank of India Includes borrowings / refinance obtained from commercial banks (including co-operative banks). Includes borrowings/refinance obtained from commercial banks (including co-operative banks). Includes borrowing / refinance obtained from Industrial Development Bank of India, Export Import Bank of India, National Bank for Agriculture and Rural Development and other institutions, agencies (including liability against participation certificates, if any) Includes borrowing of Indian branches abroad as well as borrowings of foreign branches. This item will be shown separately, includes secured borrowing / refinance in India and outside India. Notes – General (I) The total of I & II will agree with the total borrowings shown in the balance sheet. (II) Inter-office transactions should not be shown as borrowings. (III) Funds raised by foreign branches by way of certificates of deposits, notes, bonds, etc. should be classified depending upon documentations, as ‘deposits’, ‘borrowing’, etc. (IV) Refinance obtained by banks from reserve bank of India and various institutions are being brought under the head ‘Borrowings’. Hence, advance will be shown at the gross amount on the assets side.

Other liabilities I. Bills Payable and provisions

Includes drafts, telegraphic transfer, traveler Cheque, mail transfers payable, pay slips, bankers Cheque and other miscellaneous items. II. Inter – office adjustments The inter-office adjustments balance, (net) if in credit, should be shown under this head. Only net position of interoffice accounts, inland as well as foreign, should be shown here. III. Interest accrued

Includes interest accrued but not due on deposits and borrowings.

IV. Others provisions)

(including Includes net provision for income tax and other taxes like interest tax (less advance payment, tax, deducted at source, etc). surplus in aggregate in provisions for bad debts provision account, surplus in aggregate in provisions for depreciation in securities, contingency funds which are not disclosed as reserve but are actually in the nature of reserves, proposed dividend/transfer to Government, other liabilities which are not disclosed under any of the major head such as unclaimed dividend, provisions and funds kept for specific purposes, unexpired discount, outstanding charges like rent, conveyance etc. certain types of deposits like staff security deposits, margin deposits, etc. where the repayment is not free should also be included under this head. Notes – General (I) For arriving at the balance of inter-office adjustments all connected inter-office accounts should be aggregated and the net balance only will be shown, representing mostly item in transit and unadjusted items. (II) The interest accruing on all deposits, whether the payment is due or not, should be treated as a liability. (III) It is proposed to show only pure deposits under this head ‘deposits’ and hence all surplus provisions for bad and doubtful debts, contingency funds, secret reserves etc. which are netted off against the relative assets, should be brought under the head ‘Others (including provisions).

Cash and I. Cash in Hand (Including Balances with foreign currency notes) the Reserve Bank of India

Includes cash in hand including foreign currency notes and also foreign branches in the case of banks having such branches.

II. Balances with Reserve Bank of India (I) in current account (II) in other account I. In India (I) Balances with banks (a) in current account Includes all balances with banks in (b) in other deposit India (Including co-operative). accounts Balance in current accounts and deposit accounts should be shown separately. (II) Money at call short notice (a) with banks (b) with other institutions II. Outside India (I) Current Accounts (II) Deposits Accounts

(III)

Money at call and short notice

Includes deposits repayable within 15 days or less than 15 days notice lent in the inter-bank call money market. Includes balances held by foreign branches and balances held by Indian branches of the banks outside India. Balance held with foreign branches by other branches of the bank should not be shown under this head but should be included in interbranch accounts. The amount held in ‘current account’ and ‘deposit accounts’ should be shown separately. Includes deposits usually classified in foreign countries as money at call and short notice.

Investments

I. Investments in India (I) Government securities

(II)

Other approved securities

(III)

Shares

(IV)

Debentures and shares

(V)

Investment in subsidiaries/joint ventures Others

(VI)

Includes central and state government securities and government treasury bills. These securities should be shown at the book value. However, the difference between the book value and market value should be given in the notes to the balance sheet. Securities other than government securities, which according to the banking regulation act, 1949 are treated as approved securities, should be included here. Investments in shares of companies and corporations not included in item (ii) should be included here. Investments in debentures and books of companies and corporations not included in item (ii) should be included here. Investments in subsidiaries/joint ventures (including RRBs) should be included here. Includes residual investments, if any, like gold, commercial papers and other instruments in the nature of shares / debentures / bonds.

II. Investments outside India (I) Government All foreign government securities securities (including including securities issued by the local authorities) local authorities may be classified under this head. (II) Subsidiaries and / or All investments made in the share joint ventures abroad capital of subsidiaries floated outside India and/or joint ventures abroad should be classified under this head. (III) Others All other investments outside India may be shown under this head. Advances

A. (I) Bills purchased and discounted (II) Cash credits, overdrafts and loans repayable on demand (III) Term loans

In classification under section ‘A’, all outstanding – in India as well as outside – less provisions made, will be classified under three heads as indicated and both secured and unsecured advances will be included under these heads, including overdue installments.

B. (I)

Secured by tangible assets

All advance or part of advances which are secured by tangible assets may be shown here. The item will include advances in India and outside India.

(II)

Covered by Bank / Government guarantee

(III)

Unsecured

Advances in India and outside India to the extent they are covered by guarantee of Indian and Foreign governments and Indian and foreign banks and DICGC & ECGC are to be included All advances not classified under (i) and (ii) will be included here.

C. I. Advance in India (I) Priority sectors (II) Public sector (III) Banks (IV) Others

C. II. Advances outside India (I) Due from Banks (II) Due from others (a) Bills purchased and discounted (b) Syndicated loans

(c) Others

Total of ‘A’ should tally with total of ‘B’ advance should be broadly classified into ‘Advances in India’ and ‘Advances outside India’. Advances in India will be further classified on the sartorial basis as indicated. Advances to sectors which for the time being as classified as priority sectors according to the instructions of the Reserve Bank are to be classified under the head ‘Priority sectors’, such advances should be excluded from item (ii) i.e., advances to public sector. Advances to Central and State Government and other government undertakings including government companies and corporation which are, according to the status, to be treated as public sector companies are to be included in the category ‘Pubic Sector’. All advances to the banking sector including co-operative bank will come under the head ‘Banks’, all the remaining advances will be included under the head ‘other’s and typically this category will include nonpriority and advances to the private, joint and co-operative sectors. Notes – General (I) The Gross amount of advances including refinance and rediscounts but excluding provisions made to the satisfaction of auditors should be shown as advance. (II) Term loan will be loans not repayable on demand. (III) Consortium advances would be shown net of share from other participating banks/institutions.

Fixed Assets

Other assets

I. Premises (I) At cost as on 31st March of the preceding year (II) Additions during the year (III) Deductions during the year (IV) Depreciation to date

II. Other Fixed Assets (Including furniture and fixtures) (I) At cost on 31st March of the preceding year (II) Additions during the year (III) Deductions during the year (IV) Depreciation to date I. Inter – office adjustments (net)

Premises wholly or partly owned by the banking company for the purpose of business including residential premises should be shown against ‘premises’. In the case of premises and other fixed assets, the previous balance, additions thereto and deductions therefrom during the year as also the total depreciation written off should be shown. Where sums have been written off on reduction of capital or revaluation of assets, every balance sheet after the first balance sheet subsequent to the reduction or revaluation should show the revised figures for a period of five years with the date and amount of revision made. Motor vehicles and all other fixed assets other than premises but including furniture and fixtures should be shown under this head.

The inter-office adjustments balance, if in debit, should be shown under this head. Only net position of interoffice accounts, inland as well as foreign, should be shown here, for arriving at the net balance of interoffice adjustment accounts, all connected inter-office accounts should be aggregated and the net balance, if in debit only should be shown representing mostly items in transit and unadjusted items.

II. Interest accrued

Interest accrued but not due on investments and advances and interest due but not collected on investment will be the main components of this item. As banks normally debit the borrowers account with interest due on the balance sheet date, usually there may not be any amount of interest due on advances. Only such interest as can be realized in the ordinary course should be shown under this head. III. Tax paid in advance / tax The amount of tax deducted at deduced at source source on securities, advance tax paid etc. to the extent that these items are not set off against relative tax provision should be shown against this item. IV. Stationery and stamps Only exceptional items of expenditure on stationery like bulk purchase of security paper, loose leaf or other ledgers, etc. which are shown as quasi – asset to be written off over a period of time should be shown here. The value should be on a realistic basis and cost escalation should not be taken into account, as these items are for internal use. V. Non – Banking assets Immovable properties/tangible assets acquired in satisfaction of claims acquired in satisfaction of claims are to be shown under this head. VI. Others This will include items like claims which have not been met, for instance, clearing items, debit item representing addition to assets or reduction in liabilities which have not been adjusted for technical reasons, want to particulars, etc., advances given to staff by a bank as employer and not as a banker, etc. items which are in the nature of expenses which are pending adjustments should be provided for and the provision noted against this items so that only realizable value is shown under this head. Accrued income other than interest may also be included here.

Contingent liabilities

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 (I) In India (II) Outside India

Outstanding forward exchange contracts may be included here.

Liabilities on partly paid shares, debentures, etc. will be included in this head.

Guarantees given for constituents in India and outside India may be shown separately. This item will include letters of credit and bills accepted by the bank V. Acceptances, endorsement and of behalf of customers. other obligations. VI. other items for which the bank is contingently liable

Bills for collection

Arrears of cumulative dividends, bills rediscounted underwriting contracts, estimated amounts of contracts remaining to be executed on capital account and not provided for, etc. are to be included here. Bills and other items in the course of collection and not adjusted will be shown against this item in the summary version only. No separate schedule is proposed.

PROFIT AND LOSS ACCOUNT Interest earned

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

Includes interest and discount on all types of loans and advances like cash credit, demand loans, overdrafts, export loans, term loans, domestic and foreign bills purchased and discounted (including those rediscounted), overdue interest and also interest subsidy, if any, relating to such advances/bills. Includes all income derived from the investments portfolio by way of interest and dividend Includes interest on balance with Reserves banks and other banks, call loans, money market placements etc. Includes any other interest/discount income not included in the above heads.

Other Income

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 transaction Less: Loss on exchange transactions. VI. Income earned by way of dividends etc. from subsidiaries, companies, joint ventures abroad/in India VII. Miscellaneous Income

Includes all remuneration on service such as commission on collection, commission/exchange on remittances and transfers, commission on letters of credit, letting out of lockers and guarantees, commission on government business, commission on other permitted agency business including consultancy and other services, brokerage, etc. on securities. It does not include foreign exchange income. Includes profit/loss on sale of securities, furniture, land and buildings, motor vehicle, gold, silver etc. only the net position should be shown. If the net position is a loss, the amount should be shown as a Deduction. The net profit/loss on revaluation of assets may also be shown under this item.

Includes profit/loss on dealing in foreign exchange, all income earned by way of foreign exchange, commission and charges on foreign exchange transactions excluding interest which will be shown under interest, only the net position should be shown. If the net position is a loss, it is to be shown as a deduction. Includes recoveries from constituents for godown rents, income from bank’s properties, security charges, insurance etc. and any other miscellaneous income. In case any item under this head exceeds one percentage of the total income, particulars may be given in the notes.

Internet expended

I. Interest on Deposits II. Interest on Reserve Bank of India/inter-bank borrowings III. Others

Operating Expenses

I. Payments to and provisions for employees

II. Rent, taxes and lighting

III. Printing and Stationary

IV. Advertisement and publicity

V. Depreciation on bank’s property

Includes interest paid on all types of deposits including deposits from banks and other institutions. Includes discount/interest on all borrowings and refinance from Reserve Bank of India and other banks. Includes discount / interest on all borrowings / refinance from financial institutions. All other payments like interest on participation certificates, penal interest paid, etc. may also be included here. Included staff salaries Wages, allowances, bonus, other staff benefits like provident funds, pension, gratuity, liveries to staff, leave fare concession, staff welfare, medical allowance to staff, etc. Includes rent paid by the banks on buildings and other municipal and other taxes paid (excluding income tax and interest tax). Electricity and other similar charges and levies. House rent allowance and other similar payments to staff should appear under the head payments to and provisions for employees. Includes books and forms and stationery used by the bank and other printing charges which are not incurred by way of publicity expenditure. Includes expenditure incurred by the bank for advertisement and publicity purposes including printing charges of publicity matter. Includes depreciation on bank’s own property, motor cars and other vehicles, furniture, electric fitting, vaults, lifts, leasehold properties, non-banking assets, etc.

VI. Director’s fees, allowances and expenses.

VII. Auditor’s fees and expenses (including branch auditors fees and expenses)

VIII. Law charges

IX. Postage, telegrams, telephones etc. X. Repairs and maintenance XI. Insurance

XII. Other Expenditure

Includes sitting fees and all other items of expenditure incurred on behalf of directors. The daily allowance, hotel charges, conveyance charges etc. which though in the nature of reimbursement of expenses incurred may be included under this head. Similar expenses of local committee members may also be included under this head. Includes the fees paid to the statutory auditors and branch auditors for professional services rendered and all expenses for performing their duties, even though they may be in the nature of reimbursement of expenses. If external auditors and other services the expenses incurred in that context including fees may not be included under this head but shown under ‘other expenditure’. All legal expenses and reimbursement of expenses incurred in connection with legal services are to be included here. Includes all postal charges like stamps, telegrams, telephone, teleprinter etc. Includes repairs to bank’s property, their maintenance charges etc. Includes insurance charges on bank’s property, insurance premia paid to deposit insurance & credit guarantee corporation etc to the extent they are not recovered from the concerned parties. All expenses other than those not included in any of the other heads, like, licence fees, donations, subscriptions to papers, periodicals, entertainment expenses, travel expenses, etc. may be included under this head. In case any particular item under this head exceeds one percentage of the total income particulars may be given in the notes.

Provisions and contingencies

_____

Includes all provisions made for bad and doubtful debts, provision for taxation, provision for diminution in the valve of investments, transfer to contingencies and other similar items.

9. Investments Investments by bank could be in Government Securities, Shares, Debentures, Bonds, Units of UTI and Mutual Funds, Gold etc. These items must be shown under Schedule 8 – “Investments” on the assets side of the Balance Sheet. 10. Loans and Advances Banks advance loans in different nomenclatures like cash credits, overdrafts, bills discounted/purchased, term loans etc. These items must be show under Section 9 – “Advances” on the assets side of the Balance Sheet. 11. Closing Balance of Stationery and Stamps This must be shown under Schedule 11 – “Other Assets” on the assets side of the Balance Sheet. 12. Contingent Liabilities These are items which become liabilities on the happening of some event. This include claims against the banks not acknowledged as debts, liability for partly investments, liabilities on account of outstanding forward exchange contracts, guarantees given on behalf of customers, acceptances, endorsements and other obligations etc. these are not found in trial balance. If found in adjustments, they should be shown under Schedule 12 – “Contingent Liabilities”. However, the contingent liabilities must be shown outside the Balance Sheet, since it does not form a part of the total of balance sheet, not being actual liabilities. 13. Bills for Collection, being Bills Receivable This also is not a trial balance item. Even is given in trial balance, it will have both debit and credit balances. This item should be shown as a footnote to the Balance Sheet. 14. Provision and Contingencies Any provisions like provisions for bad and doubtful debts, provision for tax etc., and contingencies found in trial balance will be shown under Schedule 5 – “Other Liabilities” on the liabilities side of the Balance Sheet. If these items are found in additional information (i.e., adjustments) they should be shown in two places; (a) (b)

Under “provisions and contingencies” on the expenditure side of profit and loss account; and Under Schedule 5 – “Other Liabilities and Provisions” on the liabilities side of the Balance Sheet.

15. Non – Banking Assets They refer to those assets acquired from customers for non-repayment of loan. They must be shown under schedule 11 – “Other Assets” on the assets side of the Balance Sheet.

16. Acceptances, Endorsements and other obligations This refers to the bills accepted by the bank or endorsed by the bank on behalf of its customer. This is a contingent liability, since if the person for whom the bank stands as a guarantor, dishonours the payments, the acceptance becomes as actual liability. This is not a trial balance item. However, even if given in trail balance, It will be found with both debit and credit balance. This must be shown under Schedule 12 -“Contingent liabilities”. 17. Money at Call and Short Notice This consists of loans (a) at call and (b) at short notice. These loans are given to fill brokers, stock stockers and other banks for a short period. When the banks have surplus money with them, they advances their surplus to another banker under this category. At any time, or by giving a short notice, the money will be repaid by the borrower. The rate of interest will depend on current money market condition. This lender is shown as the asset side of the Balance Sheet under Schedule – 7 “Balance with banks and money at call and short notice.” 18. Non – Performing Assets Banks advances can be classified as performing assets and non-performing assets (NPA). An assets becomes non-performing when income form it is not received in the bank for a certain period. The RBI has issued certain guidelines to banks regarding classification of advances into performing and non-performing assets. The NPA is defined as any credit facility in respect to which interest remained unpaid for a period of four quarters during the year ending 31st March, 1993, three quarters during the ending 1994, and two quarters during the year ending 31st Mach 1995 on wards. CLASSIFICATION OF BANK ADVANCES Bank advances are broadly classified into four groups: 1. 2. 3. 4.

Standard assets Sub – Standard Assets Doubtful assets and Loss Assets

The classification is done after taken into consideration the extent of dependence on the collateral security for realization to dues the degree of well defined credit weakness. 1. Standard Assets Those assets which do not cause any problem and do not carry more than normal risk attached to the business are called standard assets. 2. Sub – Standard Assets Where Installments of term loans are overdue for a period exceeding one year should be treated as sub-standard assets. Where term of loan agreement regarding interest and

principal are rescheduled after commencement of production should be classified as substandard and should remain in such category at least for two years of satisfactory performance under the rescheduled terms. Thus, an asset which has remained as NPA for less than two years is also classified as sub-standard assets. The bank should make provision of 10% the total outstanding against sub-standard assets. 3. Doubtful Assets Where installments of term loans are overdue for a period exceeding two years must be treated as doubtful assets. The bank must make provision for doubtful debts as follows: (a) (b)

100% of the extent of which the advance is not covered by the realizable value of the security in the possession of the bank. The reasonable value is estimated on realistic basis. Over and above them (i) above, depending on the period for which the assets remained doubtful, 20% to 50% of the secured position. The realizable value of outstanding is estimated at upto one year, 20% of provision, are to three years, 30% of provision and more than three years, 50% of provision.

4. Loss Assets When the loss on an asset is identified by the bank but the amount has not been written off wholly or partly is known as loss assets. Such as asset is uncollectable and is of such little value that it is not desirable to show it as banks in assets though it may have some salvage or recovery value. The banks should make provisions against loss assets as follows. The entire assets should be written off. If the assets are to remain in the books for any reason, then 100% of the outstanding should be provided.

Key Points to be remembered in preparation of final accounts of Banking Companies. 1.

When trial balance is not given in the problem, it is advisable to prepare trial balance before preparation of final accounts.

2.

When trial balance shows any difference (i.e. if the credit and debit totals of trial balance does not tally), the balance should be shown in Balance Sheet. When credit column of trial balance is more, the difference in trial balance should be shown under schedule 5- “Other Liabilities and Provisions” and when debit column of trial balance is more, the difference in trial balance should be shown under Schedule 11 – “Other Assets”.

3.

Before preparation of Profit and Loss A/c, and Balance Sheet, identify the adjustments given for items in trial balance and mark the adjustment number, next to the respective item in trial balance, for easy identification while solving the problem.

4.

Keep ready the formats of Profit and Loss A/c and Balance Sheet (with Schedule Numbers), along with Schedules. Schedules need not be completely written. Keep ready till the schedules only with their numbers and headings.

5.

Begin with items in trial balance – remember, each item in trial balance appears only once. Identify the schedule under which the item has to appear, and enter the item under the schedule.

6.

When the item has any adjustment, it has to appear twice. Again, identify the two schedules in which the item has to be adjusted and enter them under the respective schedules.

7.

After all items in trial balance are entered, check if any adjustments are yet to be considered. If so show the entries for the adjustments in the relevant schedules.

8.

On completion of all entries, close the schedules pertaining to Profit and Loss A/c and transfer the balances to P&L A/c.

9.

Close Profit and Loss A/c and transfer the relevant balances to relevant schedules.

10.

Close the other schedules and transfer the relevant balances to relevant schedules.

11.

Enter the difference, if any, in trial balance under the relevant head. With this, the Balance Sheet must tally.

12.

While solving the problem in exams, it is not Mandatory to show all schedules. Hence, only those schedules under which items in the problem would appear should be prepared.

13.

The column relating to “Previous Year” figures can be excluded in final accounts and also in schedules, for working purposes.

Illustration 4(Problem of Profit and Loss Account) From the following particulars, prepare profit and loss account of Krishna Bank Ltd. for 1999-2000. Rs. Interest on loans Interest on fixed deposits Rebate on bills discounted Commission charged on customers Office expenses Discount on cash credits Interest on cash credits Balance of profit & loss a/c Rent and taxes Interest on overdraft Director’s Remuneration Interest on savings deposits accounts Postal expenses Printing and stationery Other expenses

34,900 36,500 4,800 910 15,500 19,400 22,400 1,200 1,800 12,800 420 6,900 150 390 180

Solutions: -

Schedule 13: Interest Earned I. II. III. IV.

Interest and discount (34,900+19,400+22,400+12,800-4,800) Interest on investments Interest on RBI deposits Others

84,700 -

Total

84,700 Schedule 14: Other Incomes

I. II. III. IV. V. VI. VII.

Commissions, Brokerage and Exchange Profit on sale of investments Profit on revaluation of investments Profit on sale of assets Income by way of foreign exchange Income by way of dividend on investments Others

910 -

Total

910 Schedule 15: Interest Expended

I. II. III.

Interest on deposits (36,500 + 6,900) Interest on borrowings Others

43,400 -

Total

43,400 Schedule 16: Operating Expenses

I. II. III. IV. V. VI. VII. VIII . IX. X. XI. XII.

Salaries Rent, rates, taxes and lighting Printing and stationary Advertisement and publicity Depreciation Director’s fees Audit fees Law charges

1,800 390 420 150

Postage, telegram and telephone Repairs and maintenance Insurance Others expenses (180+15,500)

15,680

Total

18,440

Provisions and Contingencies

-

Total

Krishna Bank Ltd. Profit / Loss Account for the Year Ended Particulars

Incomes: Interest earned Other incomes

Schedule number 13 14

Total Expenditure: Interest expended Operating expenses Provisions and contingencies Total Profit / Loss: Profits for the year Profits b/d Total Appropriations: Transfer to Statutory Reserve (23,70x25%)

Amount (Rs.) 84,700 910 85,610 43,400 18,440 61,840 23,770 1,200 24,970 5,942

Transfer to other Reserve Transfer to Government or proposed dividend Profits c/d Total

19,028 24,970

Illustration 5(Problem of Profit and Loss Account) From the following particulars, prepare profit and loss account of Lakshmi Bank Ltd. for the year ended Interest on loans Interest on fixed deposits Rebate on bills discounted Commission charged on customers Establishment expenses Discount on bills discounted Interest on cash credits Interest on current account Rent and taxes Interest on overdraft Director’s and audit fees Interest on savings bank deposits Postal and telegrams Printing and advertisement Sundry charges

Rs. 2,59,000 2,75,000 49,000 8,200 54,000 1,95,000 2,23,000 42,000 18,000 54,000 4,200 68,000 1,400 2,900 1,700

Solutions: -

Schedule 13: Interest Earned I. II. III. IV.

Interest and discount (2,29,000+2,23,000+54,000+1,95,00049,000) Interest on investments Interest on RBI deposits Others

6,82,000

Total

6,82,000

-

Schedule 14: Other Incomes I. II. III.

Commissions, Brokerage and Exchange Profit on sale of investments Profit on revaluation of investments

8,200 -

IV. V. VI. VII.

Profit on sale of assets Income by way of foreign exchange Income by way of dividend on investments Others

-

Total

8,200 Schedule 15: Interest Expended

I. II. III.

Interest on deposits (2,75,000+42,000+68,000) Interest on borrowings Others

3,85,000 -

Total

3,85,000 Schedule 16: Operating Expenses

I. II. III. IV. V. VI. VII. VIII . IX. X. XI. XII.

Salaries Rent, rates, taxes and lighting Printing and stationary Advertisement and publicity Depreciation Director’s fees Audit fees Law charges

18,000 2,900 4,200 -

Postage and telegram Repairs and maintenance Insurance Others expenses (54,000+1,700)

1,400 55,700

Total

82,200

Provisions and Contingencies

-

Total

Krishna Bank Ltd. Profit / Loss Account for the Year Ended Particulars

Incomes: Interest earned Other incomes

Schedule number 13 14

6,82,000 8,2000 6,90,200

15 16

3,85,000 82,200

Total Expenditure: Interest expended Operating expenses

Amount (Rs.)

Total

4,67,200

Total

2,23,200 2,23,200

Appropriations: Transfer to Statutory @ 25% Profits c/d Total

55,700 1,67,250 2,23,000

Profit / Loss: Profits for the year Profits b/d

Illustration 6(Problem of Profit and Loss Account) From the following particulars, prepare profit and loss account of Trimurthy Bank Ltd for the year ended 31-03-2001. Rs. Interest on loans 25,90,000 Interest on fixed deposits 27,50,000 Commission 82,000 Establishment charges 5,04,000 Interest on cash credits 22,30,000 Interest on current account 42,000 Discount on bills discounted 14,60,000 Interest on current and savings deposits 11,00,000 Rent and taxes 1,80,000 Interest on overdrafts 15,40,000 Director’s fees 30,000 Audit Fees 12,000 Postal and telegrams 14,000 Printing and Stationary 29,000 Sundry charges 17,000 Bad debts to be written off amounted to Rs. 4,00,000. provide for taxation at 55%. Rebate on bills discounted Rs. 40,000. Solutions: -

Schedule 13: Interest Earned I. II. III. IV.

Interest and discount (2,59,000+22,30,000+14,60,000+15,40,000-40,000) Interest on investments Interest on RBI deposits Others

77,80,000 -

Total

7,80,000 Schedule 14: Other Incomes

I. II. III. IV. V. VI. VII.

Commissions, Brokerage and Exchange Profit on sale of investments Profit on revaluation Profit on sale of others assets Income by way of foreign exchange Income by way of dividend on investments Others

82,000 -

Total

82,000 Schedule 15: Interest Expended

I. II. III.

Interest on deposits (27,50,000+11,00,000) Interest on borrowings Others

38,50,000 -

Total

38,50,000 Schedule 16: Operating Expenses

I. II. III. IV. V. VI. VII. VIII . IX. X. XI. XII.

Payment to employee Rent, rates and lighting Printing and stationary Advertisement and publicity Depreciation Director’s fees Audit fees Legal charges

1,80,000 29,000 30,000 12,000 14,000

Postage and telegram Repairs and maintenance Insurance Others (Establishment charges & Sundry charges) (5,40,000+17,000)

5,57,000

Total

8,22,000

Provisions and Contingencies (i) Bad debts written off (ii) Provision for taxation Total Trimurthy Bank Ltd. Profit / Loss Account for the Year Ended 31-03-2001

4,00,000 15,34,500 19,34,500

Particulars Incomes: Interest earned Other incomes

Schedule number 13 14

77,80,000 82,000 78,62,000

15 16

38,50,000 8,22,000 19,34,500 66,06,500

Total Expenditure: Interest expended Operating expenses Provisions and Contingencies Total Profit / Loss: Profits for the year Profits b/d Total Appropriations: Transfer to Statutory (12,55,000x25%) Profits c/d Total

Amount (Rs.)

12,55,500 12,55,500 3,13,875 9,41,625 12,55,500

Illustration 7(Problem of Profit and Loss Account) From the following particulars, prepare profit and loss account of Mysore Bank Ltd for the year ended 31-03-2001. Rs. Interest on loans Interest on fixed deposits Commission received Salaries and allowances Discount on bills discounted Rebate on bills discounted Interest on cash credit Interest on current accounts Rent and taxes Interest on overdrafts Director’s fees Audit Fees Interest on Saving Bank deposits Postal and telegrams Printing and Stationary Locker rent Transfer fees Depreciation on Bank properties Sundry charges Other Information:

51,800 55,800 1,600 10,800 29,200 9,800 44,600 8,400 3,600 30,8001 600 200 13,600 300 600 200 100 1,000 400

(I) (II)

Provision for bad debts Rs. 8,000 Provision for income tax Rs. 30,000

Solutions: -

Schedule 13: Interest Earned I. II. III. IV.

Interest and discount (51,800+29,200+44,600+30,800-9,800) Interest on investments Interest on RBI deposits Others

1,46,600 -

Total

1,46,600 Schedule 14: Other Incomes

I. II. III. IV. V. VI. VII.

Commissions, Exchange and Brokerage Profit on sale of investments Profit on revaluation of investments Profit on sale of others assets Income by way of foreign exchange Income by way of dividend on investments Others

1,600 300

Total

1,900 Schedule 15: Interest Expended

IV. V. VI.

Interest on deposits (55,000+8,400+13,600) Interest on borrowings Others

77,000 -

Total

77,000 Schedule 16: Operating Expenses

I. II. III. IV. V. VI. VII. VIII . IX.

Payment to employee Rent, rates, taxes and lighting Printing and stationary Advertisement and publicity Depreciation Banks property Director’s fees Audit fees Law charges Postage, telegram & telephone

10,800 3,600 600 1,000 600 200 300

X. XI. XII.

Repairs and maintenance Insurance Others (sundry charges)

400

Total

17,500

Provisions and Contingencies (i) provision for Bad debts (ii) Provision for income tax Total

8,000 30,000 38,000

Mysore Bank Ltd. Profit / Loss Account for the Year Ended 31-03-2001 Particulars Incomes: Interest earned Other incomes

Schedule number 13 14

1,46,600 1,9000 1,48,500

15 16

77,000 17,500 38,000 1,32,500

Total Expenditure: Interest expended Operating expenses Provisions and Contingencies Total Profit / Loss: Profits for the year Profits b/d Total Appropriations: Transfer to Statutory Reserve at 25% Profits c/d Total

Amount (Rs.)

16,000 16,000 4,000 12,0000 16,000

Illustration 8(Problem of Profit and Loss Account) From the following particulars, prepare profit and loss account of Canara Bank Ltd for 2000-2001 Rs. Interest on loans Interest on fixed deposits Commission received Office expenses Discount on bills discounted

35,000 36,000 1,000 15,000 20,000

Interest on cash credits Balance of profit/loss a/c Rent and taxes Interest on overdrafts Director’s remuneration Interest on savings deposits Postal expenses Printing and Stationary Other expenses

23,000 1,200 1,800 12,900 450 7,000 150 400 200

Solutions: -

Schedule 13: Interest Earned I. II. III. IV.

Interest and discount (35,000+20,000+23,000+12,900) Interest on investments Interest on RBI deposits Others

90,900 -

Total

90,900 Schedule 14: Other Incomes

I. II. III. IV. V. VI. VII.

Commissions, Exchange and Brokerage Profit on sale of investments Profit on revaluation Profit on sale of others assets Income by way of foreign exchange Income by way of dividend on investments Others

1,000 -

Total

1,000 Schedule 15: Interest Expended

I. II. III.

Interest on deposits (36,000+7,000) Interest on borrowings Others

43,000 -

Total

43,000 Schedule 16: Operating Expenses

I. II. III. IV.

Payment to employee Rent, rates and lighting Printing and stationary Advertisement and publicity

1,800 400 -

V. VI. VII. VIII . IX. X. XI. XII.

Depreciation Director’s fees Audit fees Legal charges

450 -

Postage and telegram Repairs and maintenance Insurance Others (Establishment charges & Sundry charges) (5,40,000+17,000)

150 15,200

Total

18,000

Provisions and Contingencies Total

-

Canara Bank Ltd. Profit / Loss Account for the Year Ended 2000-2001 Particulars Incomes: Interest earned Other incomes Total Expenditure: Interest expended Operating expenses Provisions and Contingencies Total Profit / Loss: Profits for the year Profits b/d Total Appropriations: Transfer to Statutory Reserve at 25% (30,900x25%) Profits c/d Total

Schedule number

Amount (Rs.)

13 14

90,900 1,000 91,900

15 16

43,000 18,000 61,000 30,900 1,200 32,100 7,725 24,375 32,100

Illustration 11(Problem of Profit and Loss Account) From the following information, your are required to prepare the profit and loss account of P.N.Bank for the year ended 31.03.1998 under the provisions of the act applicable thereto. Interest on loans Interest on cash credit Discount on bills discounted Interest on overdraft Interest on savings bank deposit Interest on fixed deposits Commission, Exchange and brokerage Rent, taxes and lighting Auditor’s fees Postage, telegram and telephones Sundry charges Advertisement and publicity Director’ fess Printing and stationery Law charges Payment to employees Locker rent Transfer fees Depreciation on Banks property

Rs. (in ‘000) 518 446 390 108 220 554 16.4 36 2.4 2.8 2 1.4 6 0.4 1.4 108 0.7 1.4 10

Supplementary Information: (i) Rebate on bills discounted Rs. 9,800 (ii) Provide for bad debts Rs. 58,000 Solutions: -

Schedule 13: Interest Earned I. II. III. IV.

Interest and discount (518+446+390+108-98) Interest on investments Interest on RBI deposits Others

1,364 -

Total

1,364 Schedule 14: Other Incomes

I. II. III.

Commissions, Brokerage and Exchange Profit on sale of investments Profit on revaluation of investments

16.4 -

IV. V. VI. VII.

Profit on sale of others assets Income by way of foreign exchange Income by way of dividend on investments Others (transfer fees and locker rent) (1.4+0.7)

2.1

Total

18.5 Schedule 15: Interest Expended

I. II. III.

Interest on deposits (220+554) Interest on borrowings Others

774 -

Total

774 Schedule 16: Operating Expenses

I. II. III. IV. V. VI. VII. VIII . IX. X. XI. XII.

Salaries Rent, rates and lighting Printing and stationary Advertisement and publicity Depreciation Director’s fees Audit fees Law charges

108 36 0.4 1.4 10 6 2.4 1.4

Postage and telegram Repairs and maintenance Insurance Others

2.8 2.0

Total

170.4

Provisions and Contingencies Bad debts Total

58 58 P.N. Bank

Profit / Loss Account for the Year Ended 31.03.1998 Particulars Incomes: Interest earned Other incomes

Schedule number 13 14

1,364 18.50 1,382.50

15 16

774 170.4

Total Expenditure: Interest expended Operating expenses

Amount (Rs.)

Provisions and Contingencies Total Profit / Loss: Profits for the year Profits b/d Total Appropriations: Transfer to Statutory Reserve at 25% (30,900x25%) Profits c/d Total

58 1,002.4 380.1 380.1 95 285.1 380.1

Illustration 14 (Preparation of Balance Sheet) The following balances have been taken from the books of Indian Banking Corporation on 31st March, 2002. Paid up capital Local bills discounted Reserve fund Loans, advances Unpaid dividend Overdrafts Current and savings deposits

Rs. 10,00,000 9,00,000 3,85,000 14,00,000 5,000 23,00,000 25,00,000

Furniture Fixed deposits Profit & loss a/c balance (Cr) Stamps on hand Cash balance Cash balance with other banks Investments (Cost)

Rs. 20,000 20,00,000 1,10,000 5,000 2,50,000 6,50,000 4,75,000

The directors of the bank have instructed that the investment should be shown in the Balance Sheet at the Market Value of Rs. 5,25,000 The authorized capital of the Bank war Rs. 12,00,000 in Rs. 10 Shares. Prepare the balance sheet of the bank, as on 31st March 2002 Form A Indian Banking Corporation Balance Sheet as on 31st March, 2002 Schedule number Capital and Liabilities Capita Reserves and Surplus Deposits Borrowings Other liabilities and provisions Total Assets Cash and balances with Reserve Bank of India Balances with banks and money at call and short notice Investments

Year ended 31-03-2002 Rs.

1 2 3 4 5

10,00,000 5,45,000 45,00,000 5,000 60,50,000

6 7 8

2,50,000 6,50,000 5,25,000

Advances Fixed assets Other assets

9 10 11

46,00,000 20,000 5,000 60,50,000 NIL As on 31-032002 Rs.

Total Contingent Liabilities

12

Schedule 1 – Capital Authorised capital 1,20,000 shares of Rs. 10 each Paid up capital 1,00,000 shares of Rs. 10 each

12,00,000 10,00,000 10,00,000

Total Schedule 2 – Reserves and Surplus Reserve Fund Profit and Loss account Investment reserve (Rs. 5,25,000 – Rs. 4,75,000)

3,85,000 1,10,000 50,000 Total

5,45,000

Schedule 3 – Deposits Current and savings deposits Fixed deposits

25,00,000 20,00,000 45,00,000 NIL

Total Schedule 4 – Borrowings Schedule 5 – other liabilities and provisions Unpaid dividend Total Schedule 6 – cash and balance with reserve bank of India Schedule 7 – Balance with other Banks and money at call and Short notice Cash balance with other banks Schedule 8 – Investments Investment at cost Add: Increase in the value of investments

5,000 5,000 2,50,000 6,50,000 4,75,000 50,000 Total

5,25,000 5,25,000

Total

9,00,000 14,00,000 23,00,000 46,00,000

Total

20,000 20,000

Schedule 9 – Advances Local bills discounted Loans and advances Overdrafts Schedule 10 – Fixed Assets Furniture Schedule 11 – Other Assets Stamps on hand Schedule 12 – Contingent Liabilities

5,000 NIL

Illustration 15 (Preparation of Balance Sheet) The following balances, prepare the Balance Sheet of Lucky Bank Ltd., as on 31.03.2002 Share capital (2,000 shares) Premises Rebate on Bills discounted Traveller’s Cheque Deposits Loans Reserves Cash in hand Cash with other banks

Rs. 2,00,000 1,00,000 5,000 2,00,000 56,00,000 22,00,000 3,00,000 30,000 4,50,000

Money at call Profit and Loss A/c (Cr.) Investments Bills Purchased Acceptances for customers Bills for collection Depreciation fund on premises Cash with RBI Pension Fund

Rs. 9,00,000 45,000 7,00,000 15,00,000 5,00,000 4,00,000 10,000 5,20,000 40,000

The following were completely omitted while the above balances were calculated. They should be adjusted suitably. 1. Travellers Cheque paid Rs. 10,000 2. Money at call recovered Rs. 20,000 Solution: Form A Lucky Bank Limited Balance Sheet as on 31st March, 2002 Schedule number Capital and Liabilities Capita Reserves and Surplus Deposits Borrowings Other liabilities and provisions Total Assets Cash and balances with Reserve Bank of India Balances with banks and money at call and short notice Investments Advances Fixed assets Other assets Total Contingent Liabilities Bills for collection

Year ended 31-03-2002 Rs.

1 2 3 4 5

2,00,000 3,45,000 56,00,000 2,35,000 63,80,000

6 7 8 9 10 11

5,60,000 13,30,000 7,00,000 37,00,000 90,000 63,80,000 5,00,000 4,00,000

12

As on 31-032002 Rs. Schedule 1 – Capital 20,000 shares of Rs. 100 each Schedule 2 – Reserves and Surplus Reserves Profit and Loss account

2,00,000

Total Schedule 3 – Deposits Deposits Schedule 4 – Borrowings Schedule 5 – Other liabilities and provisions Bills payable Traveller’s Cheque Less: Paid Rebate on Bills Pension Fund

56,00,000 NIL 2,00,000 10,0000 Total

Schedule 6 – cash and balance with reserve bank of India Money at call received Cash in hand Less: Traveller’s Cheque Paid Cash with Reserve Bank of India

3,00,000 45,000 3,45,000

20,000 30,000 (-) 10,000

Total Schedule 7 – balance with banks and money at call and short notice Money at call and short notice 9,00,000 Less: Money at call recovered 20,000 Cash with Reserve Bank of India Total Schedule 8 – Investments Schedule 9 – advance Loan Bills purchased Total Schedule 10 – fixed assets Premises 1,00,000 Less: Depreciation Fund 10,000 Total Schedule 11 – Other Assets Schedule 12 – contingent liabilities Acceptances for customers

1,90,000 5,000 40,000 2,35,000

40,000 5,20,000 5,60,000 8,80,000 4,50,000 13,30,000 7,00,000 22,00,000 15,00,000 37,00,000 90,000 90,000 NIL 5,00,000

Illustration 27 From the following information relating to Lakshmi Commercial Bank Ltd., prepare the Profit and Loss Account and the Balance Sheet as at the end of the Financial year 200 – 01 in the appropriate form: Share capital Shares of Rs. 100 each full paid Statutory Reserve Fund (Fully invested in 5% Government Securities at par) Bad debts Establishment expenses Current deposits Interest paid Savings account Acceptance for customers Discount Profit and loss account (Cr) (1.4.2000) Fixed deposits Commission and exchange Premises Cash in hand Interest received Investments in shares (market value Rs. 2,00,000)

Schedule 1 – Capital Schedule 2 – Reserves and Surplus Statutory Reserves Opening Balance Additions during the year Balance in profit and loss a/c (from appropriate a/c)

Year ended 31-03-2001 Rs. 2,00,000 1,20,000 54,503 Total

Schedule 3 – Deposits Current Deposits Savings account Fixed deposits Total Schedule 4 – Borrowings Schedule 5 – Other liabilities and provisions Unexpired discount Provision for Doubtful debts Provision for Taxation (55/100 x 8,20,400) Add: Surcharge 5/100 x 4,51,220 Schedule 6 – cash and balance with reserve bank of India

Rs. 2,00,000 1,20,000 12,875 1,27,725 13,65,227 7,48,440 17,20,000 47,500 4,95,000 8,20,400 8,75,000 2,92,900 4,80,000 22,650 12,86,400 92,500

1,74,503 9,63,909 11,38,412 13,65,227 17,20,000 8,75,000 39,60,227 NIL 48,000 8,000

4,51,220 22,561 Total

4,73,781 5,29,781

Cash in hand Schedule 7 – balance with banks and money at call and short notice Cash with Banks in India Schedule 8 – Investments 5% Government Securities Total Schedule 9 – advance Term Loan in India Cash credit hypothecation in India Bills purchased Loans to Employees Total Schedule 10 – Fixed assets Premises Schedule 11 – Other Assets Difference in Trail balance Schedule 12 – Contingent Liabilities Acceptance for customers Total Schedule 13 – Interest Earned Interest Received Discount Total Schedule 14 – Other Income Commission and Exchange 2,92,900 Dividend on Investment 8,000 Schedule 15 – Interest Expended Interest Paid Schedule 16 – Operating Expenses Bad Debts Establishment Expenses Salaries Etc: 48,000 Chief Executive remuneration 3,97,467 Total Note: Provision and Contingencies Provision for doubtful debts Provision for taxation (4,51,220 + 22,561) Unexpired Discount Total

22,650 2,84,500 92,500 1,20,000 2,12,500 10,00,000 12,56,000 16,00,000 40,770 38,96,770 4,80,000 9,32,000 47,500 47,500 12,86,400 4,95,000 17,81,400 3,00,900 7,48,440 12,875 1,27,725 4,45,467 5,87,067 8,000 4,73,781 48,000 5,29,781

Illustration 28 (Profit and Loss Account and Balance Sheet) From the following balances of Vinayaka Bank Ltd., Bangalore as on 31 st March 2001. prepare the profit and loss account for the year ended 31st March 2001 and a Balance Sheet as on that date. Equity Share capital in Rs. 100 Shares Profit and loss a/c as on 1-4-2000 Current account deposits Fixed deposit accounts Savings banks deposits Directors fees Audit fees Furniture (Cost Rs. 1,00,000) Interest and Discount Commission and exchange Investment Reserve Fund Branch Adjustments (Cr.) Postage and Telegrams Printing and Stationery Rent and Taxes Provident fund contribution Salaries and allowance Building (Cost Rs. 6,00,000) Law charges Cash in hand and with RBI Cash with other Banks Loans cash credits and overdrafts Bills discounted Unexpired insurance Stamps in hand Statutory Reserve Fund Reserve Fund Contingency Reserve Investments.

Rs. 20,00,000 80,666 68,25,658 77,91,108 51,36,000 9,960 2,000 74,560 4,20,466 2,04,000 70,000 93,788 2,312 6,780 17,014 20,000 1,04,300 4,10,000 3,300 16,32,648 24,10,250 1,40,00,000 28,01,040 874 378 1,30,000 4,00,000 1,00,000 17,56,250

Additional Information: (1) The authorised capital consists of 40,000 equity shares of Rs. 100 each all of which have been subscribed but only 50% has been called up. (2) The bank has accepted Rs. 4,00,000 worth bills on behalf of customers the securities lodged against which amount to Rs. 6,00,000 (3) Provide depreciation on Buildings Rs. 16,000 and on furniture Rs. 7,000. Provide for doubtful debts Rs. 3,980. (4) Rebate on bills discounted to Rs. 11,800 (5) The Market value of Investments amount to Rs. 17,00,000. Show investment of its market value.

Solution: Balance Sheet of Srinidhi Bank Ltd. as on 31.3.2003 Schedule number 1 2 3 4 5

Capital and Liabilities Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions Total Assets Cash in Hand and with RBI Cash with other banks and money at call and short notice

Investments (cost 17,56,250) Advances Fixed assets Other assets

6 7 8 9 10 11

Total Contingent and provisions

12

Amount (Rs.) 20,00,000 11,44,416 1,97,51,766 Nil 1,05,588 2,30,02,770 16,32,648 24,10,250 17,00,000 1,67,97,060 4,61,560 1,252 2,30,02,770 4,00,000

Profit and Loss Account for the Year Ended 31.3.2001 Schedule Number

Particulars Income: Interest earned Other incomes

13 14

4,08,646 2,04,000 6,12,646

15 16

Nil 1,88,666 3,980

Total Expenditure: Interest Expended Operating Expenses Provisions and Contingencies Total Profit / Loss: Profits b/d Net profit for the year (I – II) Total Appropriations: Statutory Reserve (25% of 4,20,000) Special Reserve Government Others Profits and loss (Bal. Fig) Total

Amount (Rs.)

1,92,646 80,666 4,20,000 5,00,666 1,05,000 3,95,666 5,00,666

Year ended 31-03-2001 Rs. Schedule 1 – Capital Equity share capital in Rs. 100 shares Schedule 2 – Reserves and Surplus 1. Statutory Reserves sec. 17 (1,30,000 + 1,05,000) Addition during the year

20,00,000 2,35,000

2. Revenue and other Reserves: Reserve Fund Contingency Reserve Investment Reserve Fund (70,000 – 56,250) P & L a/c Total Schedule 3 – Deposits Current Deposits Fixed Deposits account Savings Banks Accounts Total Schedule 4 – Borrowings Schedule 5 – Other liabilities and provisions B.P Rebate Branch Ads Total Schedule 6 – cash and balance with reserve bank of India Schedule 7 – balance with banks and money at call and short notice Schedule 8 – Investments Investment at Market Value Schedule 9 – advance 1. Bills Discounted and purchased 2. Cash Credit overdraft and loans pay other demand Total Schedule 10 – Fixed assets Premises at cost (-) Depreciation upto the date

68,25,658 77,91,108 51,36,000 1,97,52,766 NIL 11,800 93,78 1,05,588 16,32,648 24,10,250 17,00,000 28,01,040 1,39,96,020 1,67,97,060

Total

6,00,000 2,06,000 3,94,000 1,00,000 32,400 67,560 4,61,560

Total

874 378 1,252

Furniture at cost (-) Depreciation upton to date Schedule 11 – Other Assets Unexpired insurance Stamps in hand Schedule 12 – Contingent Liabilities Bills accepted on behalf of customers Schedule 13 – Interest balanced

4,00,000 1,00,000 13,750 3,95,666 11,44,416

4,00,000

Interest and discount Less: Rebate on bills discounted Total Schedule 14 – Other Income Commission and Exchange Schedule 15 – Operating Expenses 1. Payment to and provision for employees 2. Rent, Taxes and Lighting 3. Printing and stationary 4. Advertisements and publicity 5. Depreciation on Banks property 6. Directors fees and allowances 7. Auditors fees and allowances 8. Law Charges 9. Postage, Telegrams and Telephones 10. Repairs and Maintenances 11. Insurance 12. General Expenses

4,20,466 11,800 4,08,646 2,04,000

Total

1,24,300 17,014 6,780 23,000 9,960 2,000 3,300 2,312 1,88,666

Illustration 29 (Problem on profit and loss account and balance sheet) Following is the trial balance of Welcome Bank Ltd. as on 31.03.2002 Debit Subscribed capital (50,000 shares of Rs. 20) Reserve Fund Loan and cash credits Premises Indian government securities Current deposits Fixed deposits Savings bank deposits Salaries General expenses Rent and taxes Director fees Profit and loss a/c 1.4.2001 Interest and discount Telegraphic transfer Circular note Branch adjustments Stock of stationery Bills purchased and discounted Interim dividend paid Recurring deposits Shares Cash in hand and RBI Money at call and short notice

Credit 10,00,000 3,00,000

29,70,000 1,00,000 6,00,000 22,00,000 2,50,000 1,00,000 56,000 54,800 4,600 3,600 32,000 2,56,000 1,00,000 50,000 50,000 17,000 92,000 34,000 40,000 1,00,000 1,86,000 1,60,000 43,78,000

43,78,000

Adjustments: a) b) c) d) e)

Provide for doubtful debts 5,000 Interest accrued on investments 8,000 Unexpired discount 380 Endorsement on behalf of customers 1,15,000 Premises added during the year 20,000 Depreciation premises at 5% on opening balance. Prepare bank final accounts. Welcome Bank Ltd Balance Sheet as on 31.3.2002

Capital and Liabilities Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions

Schedule number 1 2 3 4 5

Amount (Rs.) 10,00,000 4,33,620 25,90,000 2,05,380

Total Assets Cash and balance with Reserve Bank

42,29,000 6 7 8 9 10 11

Balance with banks and money at call and short notice

Investments Advances Fixed assets Other assets Total Contingent liabilities

12

1,86,000 1,60,000 7,00,000 30,62,000 96,000 25,000 42,29,000 1,15,000

Welcome Bank Ltd.. Profit and Loss Account for the Year Ended 31.3.2002 Particulars Income: Interest earned Other incomes Total Expenditure: Interest Expended Operating Expenses Provisions and Contingencies Total Profit / Loss: Profits b/d Net profit for the year (I – II) Total Appropriations: Statutory Reserve (sec. 17) (134620 x 20%) Interim Dividend Others Profits and loss c/d Notes on account

Schedule Number

Amount (Rs.)

13 14

2,55,620 8,000 2,63,620

15 16

1,23,000 5,000 1,28,000 32,000 1,35,620 1,67,620

17

33,905 34,000 99,715 1,67,620 -

Year ended 31-03-2002 Rs. Schedule 1 – Capital Subscribed Capital (50,000 shares of Rs. 20) Schedule 2 – Reserves and Surplus Statutory Reserve Profit and loss a/c Schedule 3 – Deposits

10,00,000 10,00,000 33,905 99,715 4,33,620

Current Deposits Fixed Deposits account Savings Banks Accounts Recurring Deposits Total Schedule 4 – Borrowings Schedule 5 – Other liabilities and provisions Branch advance Telephone Transfer Circular Note Rebate on Bills Pro : for DD Total Schedule 6 – cash and balance with reserve bank of India Schedule 7 – balance with banks and money at call and short notice Schedule 8 – Investments Indian Govt Securities Shares Total Schedule 9 – advance Loans and cash credits Bills purchased and discounted Total Schedule 10 – Fixed assets Premises (-) Depreciation Total Schedule 11 – Other Assets Stock of Stationary Interest Accrued on Investment Total Schedule 12 – Contingent Liabilities Endorsement on behalf of customers Total Schedule 13 – Interest & Discount Interest and discount Less: Unexpired discount Total Schedule 14 – Other Income Interest accrued on Investments Total Schedule 15 – Operating Expenses Interest paid Schedule 16 – Operating Expenses

22,00,000 2,50,000 1,00,000 40,000 25,90,000 NIL 50,000 1,00,000 50,000 380 500 2,05,380 1,86,000 1,60,000 6,00,000 1,00,000 7,00,000 29,70,000 92,000 30,62,000 1,00,000 4,000 96,000 17,000 8,000 25,000 1,15,000 1,15,000 2,56,000 380 2,55,620 8,000 8,000 Nil

Salaries General Exp Rent and Taxes Directors Fees Depreciation Total

56,000 54,800 4,600 3,600 4,000 1,23,000

Illustration 30 (Problem on profit and loss account and balance sheet) The following are the ledger balances of Global Bank Ltd. From the given trial balance prepare profit and loss account and balance sheet as at 31-3-2001 Debit Share capital 20,000 shares of Rs. 100 each Bad debts Reserve fund investments Reserve fund General expenses Current accounts Interest paid Deposit accounts P & L A/c (Cr) 1-4-2000 Acceptance and guarantee Discount Endorsement and guarantee Commission Cash Interest received Cash with RBI Endorsement guarantee (Control) Owing by foreign correspondents Customers liabilities for acceptances Short loans Loans and advances Investments Bills discounted Premises

Adjustments: 1. Reserve Rs. 64,380 for rebate on bills discounted. 2. Provide for taxation Rs. 20,000 3. Depreciate premises at 10%

Credit 20,00,000

1,28,710 10,00,000 10,00,000 1,82,420 2,02,44,22 0 1,60,520 69,20,230 2,29,340 15,42,820 2,43,760 74,020 44,240 2,26,540 5,32,260 20,12,100 74,020 2,00,440 15,42,820 64,82,060 1,54,56,70 0 98,82,540 62,28,240 22,17,900 3,93,12,95 0

3,93,12,95 0

4. The profit and loss account balance is the balance left on the account after the payment of interim dividend amounting to Rs. 2,00,000 Global Bank Ltd Balance Sheet as on 31.3.2001 Schedule number 1 2 3 4 5

Capital and Liabilities Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions Total Assets Cash and balance with Reserve Bank

6 7 8 9 10 11

Balance with banks and money at call and short notice

Investments Advances Fixed assets Other assets Total Contingent liabilities and bills for collection

12

Amount (Rs.) 20,00,000 12,71,780 2,71,64,450 64,82,060 84,380 3,70,02,670 22,38,640 1,08,82,540 2,18,85,380 19,96,110 3,70,02,670 16,16,840

Global Bank Ltd.. Profit and Loss Account for the Year Ended 31.3.2002 Schedule Number

Particulars Income: Interest earned Other incomes

13 14

7,11,640 44,240 7,55,880

15 16

1,60,520 4,04,210 1,48,710

Total Expenditure: Interest Expended Operating Expenses Provisions and Contingencies (see note) Total

7,13,440

Total

4,29,340 42,440 4,71,780

Profit / Loss: Profits b/d [2,29,340 + 2,00,000] Net profit for the year (I – II) Appropriations: Statutory Reserve (25% of 42,440) Interim Dividend

Amount (Rs.)

10,610 2,00,000

Profits and loss c/d

2,61,170 4,71,780 -

Total Notes on account

17

Year ended 31-03-2001 Rs. Schedule 1 – Capital 20,000 shares of Rs. 100 each

20,00,000 20,00,000

Schedule 2 – Reserves and Surplus Statutory Reserve R/F Profit and loss a/c

10,610 10,00,000 2,61,710 12,71,780

Schedule 3 – Deposits Deposits Accounts Current Accounts Total

69,20,230 2,02,44,220 2,71,64,450

Total

64,82,060 64,82,060

Total

64,380 20,000 84,380

Schedule 4 – Borrowings Short Loans Schedule 5 – Other liabilities and provisions Rebate on Bills Provision for Tax Schedule 6 – cash and balance with reserve bank of India Cash Cash with RBI Total Schedule 7 – balance with banks and money at call and short notice Schedule 8 – Investments Investments Add: Reserve Fund Investment Total Schedule 9 – advance Loans and advance Add: Bills discounted Owing by foreign correspondents Total Schedule 10 – Fixed assets

2,26,540 20,12,100 22,38,640 Nil 98,82,540 10,00,000 1,08,82,540 1,54,56,700 62,28,240 2,00,440 2,18,85,380

Premises (-) Depreciation Total Schedule 11 – Other Assets Schedule 12 – Contingent Liabilities Acceptances for customers Endorsements and Guarantees

22,17,900 2,21,790 19,96,110 Nil

Total

15,42,820 74,020 16,16,840

Total

5,32,260 2,43,760 7,76,020 64,380 7,11,640

Total

44,240 44,240

Total

1,60,520 1,60,520

Total

1,82,420 2,21,790 4,04,210

Total

1,28,710 20,000 1,48,710

Schedule 13 – Interest & Discount Interest received Discount (-) Rebate Schedule 14 – Other Income Commission Schedule 15 – Interest Expended Interest paid Schedule 16 – Operating Expenses General Expenses Depreciation Note : Provision and Contingencies Reserve for Bad Debt Provision for Tax

Illustration 9(Problem of Profit and Loss Account) From the following particulars, prepare profit and loss account of City Bank Ltd for the year ended 31-03-2001. Interest on fixed deposits Interest on loans Commission charged to customers Establishment expenses Discount on bill discounted Interest on cash credits Interest on current account Rent and taxes Interest on overdrafts Director’s fees Audit Fees Interest on S.B. Deposits Postage and telegrams Printing and Stationary Sundry charges

Rs. 2,70,000 2,50,000 8,000 40,000 2,05,000 2,20,000 40,000 15,000 60,000 4,000 2,000 60,000 1,200 2,000 1,500

Illustration 12(Problem of Profit and Loss Account) From the following information, prepare profit and loss account of Thifty Bank for the year ended 31.03.1998 Interest on loans Interest on fixed deposits Commission Payment to employees Discount on bills discounted Interest on cash credit Rent, tax and lighting Interest on overdraft Director’s fees, allowance and expenses Auditor’s fees and expenses Interest on savings bank deposits Postage, telegram and telephones Printing and stationery Sundry charges Additional Information: (i) Provide for contingencies Rs. 2,00,00 (ii) Transfer Rs. 15,57,000 to Reserve Fund (iii) Transfer Rs. 2,00,000 to Central Government.

Rs. (in ‘000) 2,590 3,170 82 540 1,060 2,230 180 1,540 30 12 680 14 29 17

Illustration 16 Following is the trial balance of Dhanalakshmi Bank Ltd., as on 31.3.2000 Debit Subscribed Capital 50,000 equity shares of Rs. 10 each Reserve Fund Loans, Cash credit and overdraft Premises Indian Government Securities Current Deposit Fixed Deposit Savings Bank Deposit Salaries General Expenses Rent, Rates and Taxes Director’s Fees Profit and Loss A/c 1.4.99 Interest and Discount Stationary and Stamps (Stock of) Bill Purchased and Discounted Interim Dividend paid Recurring Deposits Shares Cash in hand and with RBI Money at Call and Short Notice

Credit 5,00,000 2,50,000

2,85,000 50,000 4,00,000 1,00,000 1,25,000 50,000 28,000 27,400 2,300 1,800 16,000 1,28,000 8,500 46,000 17,000 20,000 50,000 1,93,000 80,000 11,89,000

11,89,000

Additional Information 1. 2. 3. 4. 5. 6. 7.

Provision for bad and doubtful debts required is Rs. 5,000/Interest accrued on investments is Rs. 8,000. Unexpired discount amounts to Rs. 380 Interim dividend declared was 4% actual Rs. 10,000 were added to the premises during the year. Endorsement made on behalf of customers totaled Rs. 1,15,000 Market value of Government of India Securities was Rs. 3,90,000

Prepare Profit and Loss A/c for the year ended 31.3.2000 and Balance Sheet as at the date in prescribed form.

Illustration 18 From the Following balances extracted from the books of Srinidhi Bank Ltd., prepare Profit and Loss account and balance sheet as at 31.03.2003 Debit Share capital General reserve Profit and loss a/c Money at call and short notice Deposits Cash in hand Cash with RBI Borrowings Bills payable Staff security deposits Investments Buildings Balance with other banks Cash credits Interest on deposits and borrowings Bills purchased Discount on bills Commission and brokerage Interest on loans Income from investments Salary and other expenses Audit fees Postage, printing and stationery Depreciation on assets

Credit 1,50,000 61,500 60,000

22,500 8,89,500 30,000 45,000 90,000 24,000 10,500 96,000 68,400 57,000 7,95,000 1,18,500 1,80,000 15,000 13,500 1,75,500 8,700 72,000 5,100 6,300 2,400 14,98,200

Adjustments: a) Provide Rs. 10,000 for rebate on bills discounted. b) Bills for collection Rs. 1,50,000 and endorsement Rs. 1,40,000. c) Provide Income Tax @40% of Net Profits.

14,98,200

Illustration 21 (Problem on profit and loss account and balance sheet) Following is the trial balance of Canara Bank Ltd. as on 31.03.2002 Debit Interest and Discount Share capital Reserve Fund Deposits Telegraphic transfer Travelers letter of credit Gift cheques Pension fund Borrowings from bank Unclaimed dividend Rent Commission Profit/Loss A/c on 1.4.2001 Bills payable Building Money at call and short notice Furniture Cash in hand Cash at bank Investments Loan, cash credit and overdrafts Interest on deposits Audit fees Salaries Director’s fees Printing and stationary Depreciation Non – banking assets Other Expenditure

2,50,000 2,75,000 40,000 2,75,000 3,25,000 1,75,000 11,40,000 1,75,000 10,000 50,000 5,000 5,000 7,500 1,00,000 7,500 28,40,000

Adjustments: a) b) c) d) e) f) g)

Provide Rs. 5,000 for rebate on bills discounted. Bills for collection amounted to Rs. 10,500. Provide Rs. 1,1250 for bad debts. Provide Rs. 2,500 for income tax. Liabilities on bills rediscounted Rs. 7,500 Liabilities outstanding on forward exchange contract Rs. 3,000 Directors propose 5% dividend on share capital.

Prepare Bank accounts.

Credit 2,60,000 6,00,000 3,00,000 8,00,000 2,00,000 3,00,000 60,000 1,00,000 75,000 25,000 20,000 50,000 40,000 10,000

28,40,000