Professional Documents
Culture Documents
Accounts of Banking Co-1
Accounts of Banking Co-1
BANKING
COMPANIES
DEFINITION
Section 5 of banking regulation act
defines banking as “the accepting,
for the purpose of lending or
investment, of deposit of money
from the public repayable on
demand or otherwise and
withdrawable by cheque, draft,
order or otherwise.
Features of banking company
• The borrowing,raising,or taking up of money.
• The lending or advancing of money either
upon or without security.
• The granting and issuing of letters of
credit,travellers cheques and circular notes.
• The buying and selling of bullion.
• The buying and selling of foreign exchange
including foreign bank notes.
• Contracting for public and private loans
negotiating and issuing the same.
• Undertaking and executing trust.
Continued . . . . .
• The acquisition, constructing, maintenance
and alternation of any building or works
necessary or convenient for the purpose of
the company.
• Carrying on and transacting every kind of
guarantee and indemnity business.
• The collecting and transmitting of money
and securities.
• Undertaking the administration of estates
as executor, trustee or otherwise
General Information
• No banking company can carry on business
in India unless its subscribed capital is not
less than one- half of the authorized capital
and its paid up capital is not less than one –
half of subs.capital.
• A banking company cannot create any
charge upon its uncalled capital.
• Every banking co.shall transfer a sum equal
to 25% of profits to statutory reserve.
• A bank can open a branch only at the
permission or reserve bank
Accounting System
PARTICULARS SCHEDULE
NO. AMOUNT
INCOMES:-
Interest earned 13.
Other incomes 14.
TOTAL(A)
EXPENDITURE:-
Interest expanded 15.
Operating expenses 16.
Provision and contingencies -
TOTAL (B)
PROFIT (A-B)
PROFIT AND LOSS APPROPRIATION ACCOUNT
PARTICULARS AMOUNT
PARTICULARS Amt.
Statutory Reserve
General reserve
Capital reserve
Investment Fluctuation Reserve
Workmen compensation fund
Sinking fund
Surplus ( P/L app. a/c)
Building fund
Depreciation fund
Tax fund
Capital redemption reserve
DEPOSITS ( SCHEDULE NO. 3 )
PARTICULARS AMOUNT
Fixed deposits
Saving deposits
Current account
Recurring deposit
L/C a/c
Other deposits except income tax deposit
Government securities
Bonds
Mutual funds
Equity shares of other companies
Gold etc.
Premises
Furniture
Fixtures
Equipments
Land and building
Plant and machinery
motor vehicles
Computers etc.
OTHER ASSETS ( SCHEDULE NO. 11 )
PARTICULARS AMOUNT
Prepaid expenses
Silver
Non-banking asset
Inter branch adjustment
Accrued incomes
Stamps in hand
CONTINGENT LIABILITIES (SCHEDULE NO. 12 )
PARTICULARS AMOUNT
BR/ bills for collection
Forward exchange transactions
Future contracts
Acceptance, endorsement and guarantee
Liability for bill rediscounted
Disputed liabilities
Income tax under appeal
Income tax deposits
Claims not acknowledged as debt
Liability for partly paid investments
INTEREST EARNED ( SCHEDULE NO. 13 )
PARTICULARS AMOUNT
Bad debts
Provision for doubtful debts
Provision for tax
Provision for contingencies
Provision for depreciation
Other provisions
Explanation of some terms relating to balance sheet
MONEY AT CALL AND SHORT NOTICE :-
This item appears on the assets side of a bank
balance sheet and represents temporary loans to
Bill Brokers and other banks . If the loan is given
for one day, it is called ‘money at call’ and if the
loan cannot be called back on demand and will
require at least a notice of three days for calling
back , it is called ‘ money at short notice ’ . It also
includes deposits repayable within 10 days or less
than 15 days notice lent in the inter bank call
money market . The rate of interest on which
money is lent fluctuate every day , sometimes very
sharply ( more than 30 % ) , depending on the
ADVANCES :-
Advances appear on the Assets side as fourth
head and include loans , cash credits , bank
overdrafts and bills discounted and
purchased . Banks generally advance money
to their customers in the form of loans , cash
credits , overdrafts and purchasing and
discounting of bills .
PROVISIONS IN RESPECT OF DOUBTFUL
ADVANCES ARE DEDUCTED FROM ADVANCES TO
THE EXTENT NECESSARY AND THE EXCESS
PROVISION FOR DOUBTFUL DEBTS IS INCLUDED
UNDER “ OTHER LIABILITIES AND PROVISIONS” .
CASH CREDIT :-
It is an arrangement by which the customer is
granted the right to borrow money from time to
time upto a certain limit . Cash credit is usually
given on hypothecation or pledge of stock . The
bank usually charges a higher bank interest on the
actual amount withdrawn than that charged on
loan because the bank has to keep the amount
allowed as cash credit .
OVERDRAFT :-
This facility is available to a customer who operates
a current account with the bank . This facility is
LOAN :-
Loan is advance of fixed amount to a customer to
be withdrawn in lump sum by him . Interest is
charged on the total amount of the loan agreed to
be paid to a customer whether he uses the full
amount of the loan or not . So , customers prefer to
take cash credit and pay interest at a little higher
rate .
DISCOUNTING OF BILLS :-
Discounting of a bill means making the payment of
the bill before the maturity date of the bill . While
making payment of the bill , the bank deducts the
discount for the unexpired period for the amount of
the bill discounted . The bank keeps the bill with it
PURCHASING AND DISCOUNTING OF BILLS :-
The bank may purchase or discount clean or
documentary bills at the current rate of
interest .
NON-BANKING ASSETS :-
A banking company is not allowed to deal
directly or indirectly in the purchase or sale
or barter of goods except in connection with
its legitimate banking business . But a bank
can always lend against the security of assets .
The bank may have to take possession of the
asset given as a security if the loanee fails to
REBATE ON BILLS DISCOUNTED OR UNEXPIRED
DISCOUNTS :-
This item is like interest received in advance and
represents unearned discounts for those bills which will
mature after the closing of the financial accounts .
INCOME :-
INTEREST EARNED 13 5800
OTHER INCOME 14 1755
TOTAL 7555
EXPENDITURE:-’
INTEREST EXPANDED 15 1300
OPERATING EXPENSES 16 3707
PROVISIONS & CONTINGENCIES 1095
TOTAL 6102
NET PROFIT = 1453
PROFIT AND LOSS APPROPRIATION ACCOUNT
PARTICULARS AMT.
CAPITAL 1 10,000
RESERVE AND SURPLUS 2 13805
DEPOSITS 3 105700
BORROWINGS 4 12200
OTHER LIABILITIES AND PROVISIONS 5 7120
TOTAL 148825
CASH AND BANK BALANCE WITH RBI 6 438
BALANCE WITH BANKS AND MONEY AT CALL 7 8369
INVESTMENTS 8 49900
ADVANCES 9 85700
FIXED ASSTS 10 3500
OTHER ASSETS 11 918
TOTAL 148825
CONTINGENT LIABILITIES 3378