UNIT III

ACCOUNTS OF BANKING COMPANIES

Q: Explain banking company. What are the legal requirements required to a banking company?
Meaning:
Sec.5 of the Banking Regulation Act 1949, defines a banking company as any company which
transacts the business of banking in India. It further says that the world ‘banking’ used with reference to
the above definition of banking company “means the accepting, further the process of lending or
investment, of deposits of money from the public, repayable on demand or otherwise, and with draw able
by cheque, draft, order or otherwise”. Therefore any company which is engaged in the manufacture of
goods or carries on any trade and which accepts deposits of money from the public merely for the
purpose of financing its business as manufacturer or trader is not considered as a banking company.
Legal requirements:
 Licensing:
License from RBI has to be obtained. RBI’s permission is required to open the branches.
 Prohibition of trading:
A banking company is prohibited for dealing directly (or) indirectly in the buying, selling or
bartering of goods, but, it may buy, sell or barer in connection with bills of exchange received for
collection or negotiation.
 Capital and reserve:
Subscribed capital – not less than 50% of authorized capital; Paid up capital – not less 50% of
subscribed capital
 Statutory reserve:
Banking company has to transfer of 20% of profit before declaring any dividend every year to
reserve called ‘statutory reserve’. Compulsory as a compulsory prudential measure, banks have been
asked to transfer 25% net profit to statutory reserve. Banking company may be exempted from this
restriction only on the permission granted by the central government only if the aggregated amount of
reserve and share premium is not less than the paid up capital.
 Statutory liquidity ratio (SLR):
With effect from October 22,1997 in addition to capital reduction reserve banks to maintain 25%
of their not demand and time liabilities in the form of cash, gold and encumbered approved securities.
Non-compliance attracts penalty for the short falls with 3% over the “bank rate”. Bank role is the
rate at which the RBI lends to commercial banks. Under the Banking Regulation Act statutory
liquidity ratio may vary between 25 to 40%.
 Cash reserve ratio:
With effect from June 1, 2002 all banks have required to keep 5% of their net time and demand
 liabilities in the form of cash and current account balance with RBI. This may vary from time to time
with changes in monetary policy.
 Payment of commission, brokerage etc.:
Paying commission, brokerage, discount or remuneration in any form on issue of its shares in
excess of 2½% of the paid up value of such shares is prohibited.
 Payment of dividend:
Banking company can pay dividend on its shares only after all the capitalized expenses (including
share selling commissions, brokerage, amounts of losses incurred, any other item of expenditure at
represented by tangible assets) have been completely written off.
 Disposal of non banking assets:
A banking company can acquire immovable property for its own use. Other immovable property
acquired must be disposed of within 7 years from the date of acquisition. This period may be
extended by RBI if it is in the interest of depositors.
 Restriction on loans and advances:
Lending on the securities of its own shares of the banking company is not permitted. It cannot
enter into any commitment for granting any loan or advance of on behalf of.
 Any of its directors,
 Any firm in which any of its directors is interest has partner, manager, employee or guarantor, and
 Any company other than subsidiary of the banking company, or company registered under Sec.25
of the companies Act or a government company of which any of the directors of the banking
company is a director, manager, employee, or guarantor or in which he holds sub stantial
interest.(Sec.20)
 Q: What do you mean bills for collection and rebate on bills discounted?

Bills for collection:

Customer’s bills are sent for collection at customers’ request. The bank merely acts as an agent of
the customer. On due date it presents the bill and if collected credit the proceeds to customers account. If
the bill dishonoured notify as the customer and proceed further to enforce right. Bills for collection are
entered in ‘Bills for collection register’. No entry is made until collection. After collection customers
account is credited. This was an old practice, now under the new format bill held for collection must be
shown by way of the foot note.
Rebate on bills discounted:
One of the functions of the bank is to purchase or discount bills. When a bill is purchased or
discounted from the customer, the amount of the bill is debited to bills purchased and discounted account
and appears on the asset side of the balance sheet under loan and advances. The discount is credited to
discount on bills account and the balance (the amount of the bill less discount) is credited to customer’s
account and the same appears under deposits. Discount on bills in income and appear under the heading
interest earned in the profit & loss account.

Q: What do you mean by cash credit?

Cash credit:
The account remains out of order for more than 180 days. An account is out of order if any of the
following conditions is satisfied:
 The outstanding balance remains continuously in excess of sanctioned limit / drawing power.
 Though the outstanding balance is less than the sanctioned limit,
 There are credits continuously for more than 180 days as on the date of balance sheet; or
 Creditors during the fore said period are not enough to cover the interest debited during the same
period.
Q: Write short notes on contingent liabilities.
Contingent liabilities:
A contingent liability is one which is not an actual liability but which will become an actual one
on the happening of some even which is uncertain. Contingent liabilities have two characteristics:
 Uncertainly as to whether amount will be payable at a land
 Uncertainly about the amount involved. It is sufficient for the amount of contingent liability to be
stated on the face of the balance sheet by way of a foot note. It need not be extended to the amount
column on the liabilities side.
Claims against the bank not acknowledged as debt, liability for partly paid investments, liability on
account of outstanding forward exchange contracts etc., come under contingent liabilities in bank. The
details of contingent liability are shown in schedule12.

Q: What do you mean by money at call and short notice?

Money at call and short notice:
This means amount lent should be repayable at call or at short notice. These loans are given to
bill brokers, stock brokers and other banks for a short period. When the banks have surplus money with
them they advance 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 the current money
market condition.

Q: Briefly explain the classification of bank advances.

Classification of bank advances:
The usual practices in all banks was to recognize income from advances on “Accrual basis” &
take credit for interest accrued on all loans, overdraft etc., while closing books for an accounting year.
This was the case even with advances doubtful of recovery because it was helpful in ‘window dressing’
of profits & was considered as a part of “Bottom line management”.
However, in line with international accounting standards, the present practice is to make a
distinction between the treatment of income on different advances by classifying them in to ‘performing’
and ‘non-performing’ assets.
Income from ‘performing assets is recorded on accrual basis’. Income from ‘non-performing
assets’ is recorded only when income from them is received in cash. In this context the exact meaning of
non-performing assets becomes important.
Q: What is non-performing assets?

Meaning of Non-performing Assets (NPA):

Any asset, which generates income, is a ‘performing assets’. An asset becomes ‘non-performing’
when it ceases to generate income for a bank. This happens when interest or installment of principal or
both are not received on due dates and the delay exceeds a ‘stipulated time’. RBI has given clear
guidelines in determining when an asset becomes non-performing which are briefly given below.
 Term loan:
When interest and or installment of principal remains overdue for a period of more than 180 days
 Cash credit and over draft:
The account remains out of order for more than 180 days.
 Bills purchased and discounted:
The bill remains over due for a period of more than180 days.
 Agricultural advances:
Agricultural advances becomes non-performing asset’s if interest and/or installment or principal
remains overdue for two harvest seasons but for a period not exceeding two half years.
 Other accounts:
Amount to be received remains over due for more than a period of 180days.

Q: Explain about creating provision for non-performing assets?

Provision for non-performing assets:
For the purpose of provisioning they are classified in to four board groups, namely, standard
assets, sub-standard assets, doubtful assets and loss assets.
 Standard assets:
Standard assets is one which is not a non-performing assets and does not disclose any problem
nor carry more than normal risk attached to the business. Earlier no provision was required on
standard assets. However from the year ending 31.3.2000 banks are required to make a provision of
0.25% on global loan portfolio basis and not on domestic advance alone.
 Sub-standard assets:
With effect from 31.3.2001, a sub-standard assets is one which has remained non-performing
assets for a period less than or equal to 18 months. In the case of term loans, the installments of
principal are overdue for more than six but less than 18 months. In this case and general provision of
10% is to be made without making allowances for DICGC/ECGC guarantee cover and securities
available.
 Doubtful assets:
With effect from,31.3.2001, an assets is to be classified as doubtful, if it is has remained non-
 performing assets for a period exceeding 18 months, with effect from 31.3.2005, the time frame is
being further reduced to 12 months.
There are two components for provision in respect of doubtful debts. They are:
 Full provision to the extent of unsecured position should be made. In doing so, the realizable
value of the security available to the bank should be determined as a realistic basis.
 For the secured portion of the doubtful assets, provision is required to be made between 20 &
50% depending upon the period for which the asset has remained doubtful.
Period for which the advance has been considered doubtful Percentage of provision
Upto1year 20
1to3year 30
Above3years 50

 Loss assets:
A loss asset is one where loss has been identified by the bank or internal (or) external auditors or
the RBI inspection but the amount has not been written off fully.
 Preparation of Profit & Loss account and Balance Sheet (New Format)
Specimen of profit & loss A/c: (FORM B)
Profit & loss A/c
Particulars Schedule No. Year ending on Year ending
31.3… on 31.3…
(Current year) (Previous
year)
I) Income:
Interest earned 13 XXX
Other income 14 XXX
Total XXX
II) Expenditure:
Interest expended 15 XXX
Operating expenses 16 XXX
Provision & contingency XXX
Total XXX
III) Profit/Loss:
Net profit /loss (-) for the year XXX
Profit / loss (-) brought forward XXX
Total XXX
IV) Appropriation:
Transfer to statutory reserves XXX
Transfer to other reserves XXX
Transfer to government / proposed
dividend XXX
Balance carried over to balance sheet XXX
Total XXX
 Particulars Year ending on Yearendingon
31.3… 31.3…
(Current year) (Previous
year)
Schedule:13 Interest earned
Interest /discount on advances / bills XXX
Income on investment XXX
Interest on balance with RBI & other inter-bank fund XXX
Total XXX
Schedule:14 Other income
Commission, exchange & brokerage XXX
Profit on sales of investment XXX
Less: Loss on sale of investment XXX
Profit on revaluation of investment XXX
Less: Loss on revaluation of investment XXX
Profit on sale of L&B & other assets XXX
Less: Loss on sale of L&B & other XXX
assets XXX
Profit on exchange transaction XXX
Less: Loss in exchange transaction XXX
Income earned by way of dividend etc.,
from subsidiaries / companies and or joint
venture abroad/ in India XXX
Miscellaneous income XXX
Total XXX
Schedule: 15 Interest expended
Interest on deposits XXX
Interest on RBI/ Inter-bank XXX
borrowings Others
Total XXX
 Schedule: 16 Operating expenses
Payment to & provision for employee XXX
Rent, taxes & lighting XXX
Printing & stationery XXX
Advertisement & publicity XXX
Depreciation on bank’s property XXX
Directors’ fees, allowances & expenses XXX
Auditors fees, allowances & expenses XXX
Law charges XXX
Postage, telegram, telephones, etc., XXX
Repairs & maintenance XXX
Insurance XXX
Other expenditure XXX
Total XXX

Specimen of profit & loss A/c: (FORM A)

Balance sheet of M/s… as on 31.3…
Particulars Schedule No. Year ending on Year ending
31.3… on 31.3…
(Current year) (Previous
year)
Capital & liabilities:
Capital 1 XXX
Reserves & surplus 2 XXX
Deposits 3 XXX
Borrowings 4 XXX
Other liabilities & provision 5 XXX
Total XXX
Assets:
Cash & balance with RBI 6 XXX
Balance with banks & money at call &
short notice 7 XXX
Investment 8 XXX
Advances 9 XXX
 Fixed assets 10 XXX
Other assets 11 XXX

Total XXX
Contingent liabilities 12 XXX
Bills for collection XXX

Particulars Year ending on Year ending on

31.3… 31.3…
(Current year) (Previous year)
Schedule: 1 Capital
For nationalized banks XXX
For banks incorporated outside India capital XXX
Total XXX
Schedule: 2 Reserves & surplus
i) Statutory Reserve
Opening balance
Addition during the year
Deduction during the year XXX
ii) Capital reserve
Opening balance
Addition during the year
Deduction during the year XXX
iii)Share premium
Opening balance
Addition during the year
Deduction during the year XXX
iv) Reserve & other reserve
Opening balance
Addition during the year
Deduction during the year XXX
v) Balance in P&L A/c
XXX
Total XXX
Schedule: 3 Deposits
A) I) Demand Deposits:
i) From banks
ii) From others XXX
II) Savings bank deposits XXX
III) Term deposits
i) From banks
ii) From others XXX
Total XXX
B) Deposits of branches in India XXX
Deposits of branches outside India XXX
Total XXX
Schedule: 4 Borrowings
I) Borrowing in India:
i) Reserve Bank of India
ii) Other banks
XXX
iii) Other institution & agencies
XXX
II) Borrowings outside India
Total XXX
Schedule : 5 Liabilities & provisions
Bills payable XXX
Inter-office adjustments (net) XXX
Interest accrued XXX
Other (including provisions) XXX

Total XXX
Schedule : 6 Cash & Balance with RBI
I) Cash in hand (include foreign currency note) XXX
II) Balance with RBI
i) In current account
ii) In other account XXX
Total XXX
Schedule :7 Balance with bank & money at call & short
notice
I) In India
i) Balance with banks
ii) Money at call & short notice XXX
II) Outside India
i) In current A/c
ii) In other deposits A/c
iii) Money at call & short notice XXX
Total XXX
Schedule :8 Investments
I) Investment in India in
i) Government securities
ii) Other approved securities
iii) Shares
 iv) Debentures & bonds
v) Subsidiaries &/or joint venture
vi) Other investments XXX
Total XXX
II) Investment outside India in
i) Government securities
ii) Subsidiaries &/or joint venture abroad
iii) Other investments XXX
Total XXX
Grand total XXX
Schedule : 9 Advances
A) i) Bills purchased & discounted XXX
ii) Cash credits, overdraft & loans repayable on
demand XXX
iii) Term loans XXX
Total XXX
B) i) Secured by tangible assets XXX
ii) Covered by bank/government guarantee XXX
iii) Unsecured XXX
Total XXX
c) I) Advances in India:
i) Priority sectors,
ii) Public sectors,
iii) Banks sectors,
iv) Others XXX
Total XXX
II) Advances outside India:
i) Due from banks
ii) Due from others
Bills purchased & discounted,
Syndicated loans, Others XXX
Total XXX
Grand total XXX
Schedule :10 Fixed assets
 Premises XXX
Other fixed assets XXX
Total XXX
Schedule :11 Other assets
Inter-office adjustment (net) XXX
Interest accrued XXX
Tax paid in advance/tax deducted at
sources XXX
Stationery & stamps XXX
Non-banking assets acquired satisfaction of claims XXX
Others XXX
Total XXX
Schedule :12 Contingent liabilities
Claims against the bank not acknowledged as XXX
debts
Liabilities for partly paid investment XXX
Liabilities on account of outstanding forward exchange XXX
contracts
Guarantees given on behalf of constituents
(a) India
XXX
(b) Outside India
XXX
Acceptance endorsements & other obligations
Other items for which the bank in contingent liability XXX
Total XXX

Rebate on bills discount:

PROBLEM: 1
On31.3.95, the books of Madura bank had the following account balances: Rebate on bills discounted (1.4.95)
`2,50,000; Discount received `50,00,000.On closing the books it was found that the discount received
includes unexpired discount to be carried to the next year `3,00,000.Show the amount to be credited to
P&L A/c under discount earned for the year 1994-95. Also give journal entries required to adjust the
above mentioned amounts.
PROBLEM: 2
On 31st March1997, the book of Ravi bank had the following account balances: Rebate on bills
discounted (1.4.96) `42,000; Discount received `3,40,000. On closing the books, it is found that the
discount received includes unexpired discount of `61,000 to be carried to the next year. Show the amount
to be credited to P&L A/c under discount earned for the year 1996-97.Also give journal entries and
ledger accounts required for the above.

PROBLEM: 3
Calculate Rebate on bills discounted as on 31s tMarch1995.
Date of bill Amount Period Rate of discount
20.1.1995 80,000 5 months 16%
10.2.1995 40,000 4 months 18%
15.3.1995 60,000 2 months 15%

PROBLEM: 4
The Moon bankers had the following bills in its advances portfolio on 31st March 1993. The rate of
discount is 10%. You are required to calculate the rebate on bills discounted and give the necessary
journal.
Date of bill Amount Period Date of maturity
Feb11 5,000 4 June14,1994
Feb16 6,000 3 May19,1994
Mar7 4,000 4 July10,1994

PROBLEM: 5
Given below is an extract from the Trial balance of Mayura Bank Ltd., as on 31-12-1987.
Particulars Dr.(`) Cr.(`)
Bills discounted 15,00,000 --
Rebate on bills discounted on 1-1-1987 -- 5,340
Interest and discount -- 91,473

An analysis of the bills discounted shows the following

Amount(`) Due date Rate of discount
1,45,000 6thMarch 5%
4,31,000 15thMarch 6%
2,90,000 21stMarch 4%
3,98,000 14thApril 3.5%
2,36,000 24thApril 4.5%

Show with the aid of workings how the relevant items will appear in the bank’s balance sheet as on 31-
12-1987 and in the profit and loss account for the same period.
PROBLEM: 6
The following is an extract from the Trial balance of a bank as on 31stMarch 1997
Particulars Dr.(`) Cr.(`)
Bills discounted 51,50,000 --
Rebate on bills discounted on 1-4-1996 -- 30,501
Discount received -- 1,45,500
An analysis of the bills discounted as mentioned above shows the following:
Date of bill Amount(`) Period Rate of discount
13.1.97 7,50,000 4 18%
17.2.97 6,00,000 3 18%
6.3.97 4,00,000 4 16%
16.3.97 2,00,000 2 15%
Calculate the amount of discount to be credited to P&L A/c, Pass journal entries for the same. Show also
how these items appear in the balance sheet.

PROBLEM: 7 (Non-performing assets)

On31stMarch1998, Bharat Commercial Bank Ltd., finds its advances classified as follows:
Standard assets 14,91,300 Doubtfulforoneyearto3years 15,640
Sub-Standard assets 92,800 Doubtfulformorethan3years 6,580
Doubtful assets(secured): Loss assets 10,350
Doubtful for one year 25,660
Calculate the amount of provision to be made by the bank against the above mentioned advances.
PROBLEM: 8
While closing its books of accounts, a commercial bank has its advances classified as follows: (`in lakhs)
Standard assets 16,000 Doubtful for one year to 3 years 400
Sub-standard assets 1,300 Doubtful for more than 3 years 200
Doubtful assets(secured): Loss assets 500
Doubtful for one year 700
You are required to calculate the amount of provision to be made by the bank, assuming that all the
doubtful assets are secured.

PROBLEM: 9
While closing its books of accounts, a commercial bank has its advances classified as follows: (`in lakhs)
Standard assets 48,000 Doubtful for one year to 3 years 1,200
Sub-standard assets 2,400 Doubtful for more than 3 years 800
Doubtful assets (secured): Loss assets 1,800
Doubtful for one year 1,600
You are required to calculate the amount of provision to be made by the bank, assuming that all the
doubtful assets are secured.
PROBLEM: 10
From the following information, find out the amount of provision to be shown in the profit and loss
account of a commercial bank:
Standard assets 8,000 Doubtful for one year to 3 years 1,600
Sub-standard assets 6,000 Doubtful for more than 3 years 400
Doubtful assets(secured): Loss assets 1,200
Doubtful for one year 1,000

PROBLEM: 11 (Preparation of Profit & loss account)

From the following particulars, prepare the profit and loss account of X Bank Ltd., for the year ending
31stMarch, 1996
Interest on loans 34,900 Rent and taxes 1,800
Interest on fixed deposits 36,500 Interest on over drafts 12,800
Rebate on bills discounted 4,800 Director’s remuneration 420
Commission charged on customers 910 Interest on savings deposit
accounts 6,900
Office expenses 15,500 Postal expenses 150
Discount on bills discounted 19,400 Printing and stationery 390
Interest on cash credits 22,400 Other expenses 180
Amount charged against current A/c 1,200
PROBLEM: 12
From the following particulars, prepare P&L A/c of Ashok bank Ltd., for the year ending
31stMarch1995.
Interest on cash credit, over draft & Director’s remuneration 90,000
loans 6,00,000
Discount on bills 4,50,000 Amount charged against current A/c 70,000
Office expenses 2,40,000 Interest on deposits 6,40,000
Rebate on bills discounted (1.4.94) 46,000 Printing & stationery 16,000
Rent & taxes 1,40,000 Commission, exchange and brokerage 1,80,000

Adjustments: (a) Rebate on bills discounted`58,000; (b) Provision required for bad debts`40,000.
PROBLEM: 13
From the following balances prepare profit & loss A/c of Ashok bank Ltd., for the year ending 31.3.94.
Postage & telegram 14,000 Interest on cash credit 2,00,000
Printing & stationery 26,000 Interest on overdrafts 1,50,000
Other expenditure 30,000 Interest on loans 15,00,000
Salaries to staff 1,20,000 Discount on bills discounted 3,00,000
Repairs and maintenance 15,000 Commission and brokerage 60,000
Advertisement 40,000 Profit on sale of land 40,000
Auditors fees 10,000 Miscellaneous income 30,000
Law charges 15,000 Income on investments 15,000
Depreciation of bank property 1,40,000 Interest on bank borrowings 60,000
Interest on fixed deposits 3,00,000 Profit on sale of investments 15,000
Interest on current accounts 2,00,000 Issued and subscribed capital 10,00,000
Interest on savings deposits 1,00,000

Adjustments:1) Bad debts written off amounted to`1,00,000; 2) Proposed dividend 10% on paid up capital;3)
Provision for taxation at 50%.

PROBLEM: 14
The following are the figures extracted from the books of Indian bank Ltd., as on 31stMarch1995:
Interest and discount received 12,50,000 Rent & taxes paid 24,000
Interest paid on deposit 6,50,000 Printing and stationery 12,000
Commission, exchange and brokerage 2,40,000 Postage & telegram 5,000
 Rent received 40,000 Other expenses 4,000
Profit on sale of investments 20,000 Audit fee 3,000
Loss on sale of investments 5,000 Depreciation on bank’s property 15,000
Salaries and allowances 3,60,000 Balance of profit as on1stApril1994 2,40,000
Director’s fees 30,000

Other information: 1) Provide`15,000 for doubtful debts; 2) Provide`60,000 for taxation; 3) Rebate on bills
discounted on 31.3.95` 40,000; 4) Provide 10% dividend proposed on the paid up capital of`10,000.

PROBLEM: 15
From the following information, prepare P&L A/c of Ravi bankers Ltd., for the year ending 31stMarch
1990.
Interest on loans 3,00,000 Interest on savings bank deposits 87,000
Interest on fixed deposits 2,75,000 Postage & telegram 10,000
Commission 10,000 Printing & stationery 20,000
Exchange and brokerage 20,000 Sundry expenses 10,000
Salaries and allowances 1,50,000 Rent 15,000
Discount on bills (gross) 1,52,000 Taxes and licenses 10,000
Interest on cash credits 2,40,000 Audit fees 10,000
Interest on temporary overdrafts in current
A/c 30,000

Additional information:
1) Rebate on bills discounted`30,000; Bad debts`40,000; 2) Salary to managing director `30,000; 3)
Provision for income tax is to be made @ 55% (round off to the nearest thousand); 4) Interest
of`4,000 on doubtful debts was wrongly credited to interest on loan account.
PROBLEM: 16 (Preparation of Profit & loss A/c and Balance sheet)
The following is the trial balance extracted from the books of Town Bank Ltd.
Debit balances ` Credit balances `
Balances with banks 46,350 Share capital 3,00,000
Investment in government bonds 1,94,370 Security deposit of employees 15,000
Other investments 1,55,630 SB Accounts 7,420
Gold bullion 15,130 Current accounts 97,000
Interest accrued on investments 24,620 Fixed deposits 1,13,050
Silver 2,000 Reserve fund 1,40,000
Constituent’s liability for Borrowings from banks 77,230
acceptance 56,500
Building 65,000 Profit & Loss A/c 6,500
Furniture 5,000 Bills for collection 43,500
Money at call 26,000 Acceptances and endorsements 56,500
Loans 2,00,000 Interest 72,000
Bills discounted 12,500 Commission 25,300
Interest 7,950 Discounts 42,000
Bills for collection 43,500 Rent 600
Audit fees 5,000 Profit on bullion 1,200
Loss on sale of furniture 1,000 Miscellaneous income 2,700
Director’s fees 1,200 Accumulated depreciation on building 20,000
Salaries 21,200
Postage 50
Managing director’s remuneration 12,000
Loss on sale of investments 30,000
Cash in hand 25,000
Cash with RBI 50,000
Branch adjustment A/c 20,000
10,20,000 10,20,000

You are required to prepare the profit and loss account and balance sheet after taking into
consideration the following: Bad debts `500, Rebate on bills `1,000, Current year’s depreciation on
building `2,000, Some current accounts are overdrawn to the extent of` 25,000 and total of credit
balanceis`1,22,000.

PROBLEM: 17
From the following, you are required to prepare the profit and loss A/c and the balance sheet of Madras
Bank Ltd., as on 31.12.1980 according to banking regulation Act1949.
Debit balances Debit` In thousands Credit` In thousands
20,000 shares of`10 each -- 2,000
Money at call and short notice 800 --

Reserve fund -- 700

650 --
Cash in hand
-- 2,500
Deposits
950 --
Cash at bank
-- 500
Borrowings from SBI
Investments in Government
securities 900 --
Secured loans 1,500 --
Cash credits 500 --
Premises less depreciation 580 --

Furniture less depreciation 120 --

5 60
Rent
-- 800
Interest and discount
-- 70
Commission & brokerage
300 --
Interest paid on deposits
--
Salary and allowances paid to staff
150 --
Interest paid on borrowings 50 --
Audit fees 10 --
Director’s fees 8
Non-banking assets 80 --
Depreciation on bank’s property 13 --
Printing 3 --
Advertisement 1 --
Stationery 5 --
Postage and telegrams 2 --
Other expenses 3 --
6,630 6,630

Adjustments:
1) Provide`20,000 for Doubtful debts; 2) Provide`10,000 on bills discounted but not matured
on 31.12.1980; 3) Acceptances and endorsement on behalf of customers amounting
to`4,00,000 4) Provide`60,000 for taxes.