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Final Accounts of Banking Companies

Final Accounts of Banking Companies

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Published by pushkar
bank accounting and final accounts of banking companies
bank accounting and final accounts of banking companies

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Published by: pushkar on Nov 01, 2009
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11/19/2015

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Accounting treatment of some specific items in the profit and loss account
and balance sheet are as per following.

A. Bad Debts and Provisions for Doubtful Debts

The amount of bad debts and provision for bad debts has to be charged
under heading ‘Provision and Contingencies’ in the Profit and Loss
account. In the Balance Sheet, the advances are shown after deducting

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Project report of accounting in banks and balance sheet

both bad debts and provisions for bad debts. It may be noted the banks
collect from their branches information regarding bad debts and doubtful
debts also. The schedule of Advances to be filled by the branches contains
separate column regarding doubtful debts in respect of ‘bills purchased
and discounted’, cash credits and overdrafts and unsecured loans.
However while consolidating the Schedule of Advances at the head office
level, for balance sheet purposes, the advances are shown net of any bad
or doubtful debts.

B. Provision for Taxation

The amount of provision for taxation has to be charged to the Profit and
Loss account under heading ‘Provisions and Contingencies’ in the Balance
Sheet, it will be shown under the heading ‘Other liabilities and
Provisions’, on the liability side.

C. Rebate on b Bills Discounted

This refers to unexpired discount. A banking company charges discount in
advance for the full period of the bill of exchange or promissory note
discounted with it. The accounting entry made is as follows:

Bills discounted and purchased a/c Dr.
To Customers’ a/c
To Discount a/c

Customer’s account is credited with the net amount remaining after
deducting the amount of discount. The amount credited to discount
account represents the earning of the bank. However it may be possible
that the bills discounted may mature after the close of financial year, It
will be not be appropriate to take to the credit of the Profit and Loss
account, that part of the discount charged, which relates to next year. An
accounting entry is, therefore, passed for unearned discount in the
following manner:

Discount a/c Dr.
To Rebate on Bills Discounted a/c
(with the amount of unearned discount to the next period)

Rebate on bills discounted, if already appears in the trial balance, is taken
to the Balance Sheet on ‘liabilities side’. However, if an adjustment has to
be done after the preparation of the trial balance, in respect on bills
discounted the amount of such rebate (i.e. unearned discount) will be

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Project report of accounting in banks and balance sheet

deducted from the total discount in the profit and loss account and will
also appear as a liability in the balance sheet.

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