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 BooksIt 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 businessesFor 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)

20,00,00015,00,000

10,00,000

5,00,000

50,000

1,00,000Additional 10,000Additional 25,000

5,00,000Additional 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 non-scheduled 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. It cannot grant any loans or advances on the security of its own shares:2. 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)

ScheduleAs on 31.3….(Current year)

As on 31.3…(previous year)

Capital& Liabilities Capital 1Reserve & surplus 2Deposit 3Borrowings 4Other liabilities and provisions 5TOTALASSETSCash and balance with Reserve Bank of India

6

Balances with banks and money at call and short notice

7

Investments 8Advances 9Fixed assets 10Other assets 11TOTALContingent liabilities. 12Bills 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)

As on 31.3…(previous 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.

SCHEDULE 5 – OTHER LIABILITIES AND PROVISIONS

As on 31.3….(Current year)

As on 31.3…(previous year)

I. II. IIIIV

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)

As on 31.3…(previous year)

III

Cash in hand (Including foreign currency notes)Balances with ReserveBank 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)

As on 31.3…(previous year)

I.

II

In India (I) Balance with banks

(a) In Current Accounts (b) In other deposit accounts

(II) Money at call and short notice (a) With banks (b) With other institutions

TOTAL Outside India

(I) In Current Accounts (II) Money at call and short notice

TOTALGRAND TOTAL

SCHEDULE 8 – INVESTMENTS

As on 31.3….(Current year)

As on 31.3…(previous year)

I

II.

Investments in India in I. Government securities

II. Other approved securities III. SharesIV. Debenture and bondsV. 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

SCHEDULE 9– ADVANCES

As on 31.3….(Current year)

As on 31.3…(previous year)

A.

B.

C.I

II

(I) Bills purchased and discounted (II) Cash credits, overdrafts and loans

repayable on demand(III) Term loans

TOTAL (I) Secured by tangible assets (II) Covered by Bank / Government

Guarantees (III) Unsecured

TOTALAdvances in India

(I) Priority sectors(II) Public sector(III) Banks (IV) Others

TOTAL Advance outside India

(I) Due from banks (II) Due from others

(a) bills purchased and discounted (b) syndicated loans (c) others

TOTALGRAND TOTAL(C.I & II)

SCHEDULE 10– FIXED ASSETS

As on 31.3….(Current year)

As on 31.3…(previous year)

I

II

Premises At cost as on 31st March of the preceding yearAdditions during the yearDeductions during the yearDepreciation to date Other fixed articles (including furniture & fixture) At cost as on 31st March of the preceding yearAdditions during the yearDeductions during the yearDepreciation to dateTOTAL

SCHEDULE 11– OTHER ASSETS

As on 31.3….(Current year)

As on 31.3…(previous year)

IIIIIIIVV

VI

Inter – office adjustments (net)Interest accrued Tax paid in advance/tax deducted at source Stationary and stampsNon-banking assets acquired in satisfaction claimsOthers 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)

As on 31.3…(previous year)

I Claims against the bank not acknowledged as debts

II Liability for partly paid investmentsIII Liability on account of outstanding forward

exchange contracts IV Guarantees given on behalf of constitutes

(a) In India(b) Outside India

V Acceptances, endorsements and other obligations

VI Other items for which the bank is contingently liable

TOTAL

Form ‘B’Form of Profit & Loss Account

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

ScheduleAs on 31.3….(Current year)

As on 31.3…(previous year)

I

II

III

IV

INCOME Interest earned Other income TOTAL EXPENDITURE Interest expended Operating expenses Provisions and contingencies TOTAL PROFIT / LOSSNet profit / Loss (-----) for the yearProfit / loss (-----) brought forwardTOTAL APPROPRIATIONSTransfer to statutory reservesTransfer to other reservesTransfer to Government/Proposed dividendBalance carried over to balance sheet TOTAL

1314

1516

SCHEDULE 13– INTEREST EARNED

As on 31.3….(Current year)

As on 31.3…(previous year)

IIIIIIIVV

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)

III

III

IV

V

VI

VII

Commission, exchange and brokerage Profit on sale of investmentsLess: Loss on sale of investments Profit on revaluation of investments Less: Loss on revaluation of investmentsProfit on sale of land, buildings and other assets Less: loss on sale of land, buildings and other assets.Profit on exchange transactions Less: Loss on exchange transactionsIncome earned by way of dividends etc. fromSubsidiaries / companies and / or joint ventures abroad / in IndiaMiscellaneous IncomeTOTAL Note: Under Items I to V loss figures may be shown in brackets.

SCHEDULE 15– INTEREST EARNED

As on 31.3….(Current year)

As on 31.3…(previous year)

III

III

Interest on deposits Interest on Reserve Bank of India/inter – bank borrowing Others

TOTAL

SCHEDULE 16– OTHER INCOME

As on 31.3….(Current year)

As on 31.3…(previous year)

IIIIIIIVVVIVII

VIIIIXXXIXII

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)Law chargesPostage, Telegrams, Telephones, etc. Repairs and maintenance Insurance Other Expenditure

TOTAL

Guidelines of RBI for compilation of Financial StatementsBalance Sheet

Item CoverageNotes and instructions for

compilationCapital Nationalized Banks

Capital (Fully owned by Central Government)

The capital owned by Central 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)

I

II

The amount brought in by banks by way of start up capital as prescribed by RBI should be shown under this head. 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 and Surplus

(I) Statutory Reserves Reserves created in terms of Section 17 or any other section of A Banking Regulation Act must be separately disclosed.

(II) Capital Reserve 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.

(III) Share Premium Premium on issue of share capital may be shown separately under this head.

(IV) Revenue and other Reserves

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.

(V) Balance of Profit 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.

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

(II) From others

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.

(II) Savings Bank Deposits Includes all savings banks deposits (including inoperative savings bank accounts).

(III) Term Deposits (I) From Bank

(II) From others

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.

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

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 and provisions

I. Bills Payable Includes drafts, telegraphic transfer, traveler Cheque, mail transfers payable, pay slips, bankers Cheque and other miscellaneous items.

II. Inter – office adjustments (net)

The inter-office adjustments balance, if in credit, should be shown under this head. Only net position of inter-office 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 (including provisions)

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

Cash and balances wit

‘Others (including provisions).

Cash and Balances with the Reserve Bank of India

I. Cash in Hand (Including foreign currency notes)

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 (b) in other deposit

accounts

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

Includes all balances with banks in India (Including co-operative). Balance in current accounts and deposit accounts should be shown separately.

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 inter-branch 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

(VI) Others

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

securities (including local authorities)

(II) Subsidiaries and / or joint ventures abroad

(III) Others

All foreign government securities including securities issued by the local authorities may be classified under this head. All investments made in the share capital of subsidiaries floated outside India and/or joint ventures abroad should be classified under this head. 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

(II) Covered by Bank / Government guarantee

(III) Unsecured

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.

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 non-priority 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 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

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.

Other assets I. Inter – office adjustments (net) The inter-office adjustments balance, if in debit, should be shown under this head. Only net position of inter-office accounts, inland as well as foreign, should be shown here, for arriving at the net balance of inter-office 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 deduced at source

The amount of tax deducted at 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 acquired in satisfaction of claims

Immovable properties/tangible assets 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.

_____

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

Outstanding forward exchange contracts may be included here.

Bills for collection

IV. Guarantees given on behalf of constituents

(I) In India (II) Outside India

V. Acceptances, endorsement and other obligations.

VI. other items for which the bank is contingently liable

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 of behalf of customers.

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

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.

II. Income on investments. Includes all income derived from the investments portfolio by way of interest and dividend

III. Interest on balances with Reserve Bank of India and other inter-bank funds

Includes interest on balance with Reserves banks and other banks, call loans, money market placements etc.

IV. Others Includes any other interest/discount income not included in the above heads.

Other Income I. Commission, exchange and brokerage

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.

II. Profit on sale of investments Less: Loss on sale of investments

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

III. Profit on revaluation of investments Less: Loss on revaluation of investments

Deduction. The net profit/loss on revaluation of assets may also be shown under this item.

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

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.

VII. Miscellaneous Income 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 Includes interest paid on all types of deposits including deposits from banks and other institutions.

II. Interest on Reserve Bank of India/inter-bank borrowings

Includes discount/interest on all borrowings and refinance from Reserve Bank of India and other banks.

III. Others 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

Operating Expenses

I. Payments to and provisions for employees

Wages, allowances, bonus, other staff benefits like provident funds, pension, gratuity, liveries to staff, leave fare concession, staff welfare, medical allowance to staff, etc.

II. Rent, taxes and lighting 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.

III. Printing and Stationary Includes books and forms and stationery used by the bank and other printing charges which are not incurred by way of publicity expenditure.

IV. Advertisement and publicity Includes expenditure incurred by the bank for advertisement and publicity purposes including printing charges of publicity matter.

V. Depreciation on bank’s property

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.

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.

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

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’.

VIII. Law charges All legal expenses and reimbursement of expenses incurred in connection with legal services are to be included here.

IX. Postage, telegrams, telephones etc.

Includes all postal charges like stamps, telegrams, telephone, teleprinter etc.

X. Repairs and maintenance Includes repairs to bank’s property, their maintenance charges etc.

XI. Insurance 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.

XII. Other Expenditure 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) Under “provisions and contingencies” on the expenditure side of profit and loss account; and

(b) 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. Standard assets2. Sub – Standard Assets3. Doubtful assets and4. 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 sub-standard 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) 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.

(b) 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 34,900Interest on fixed deposits 36,500Rebate on bills discounted 4,800Commission charged on customers 910Office expenses 15,500Discount on cash credits 19,400Interest on cash credits 22,400Balance of profit & loss a/c 1,200Rent and taxes 1,800Interest on overdraft 12,800Director’s Remuneration 420Interest on savings deposits accounts 6,900Postal expenses 150Printing and stationery 390Other expenses 180

Solutions: -

Schedule 13: Interest Earned

I. Interest and discount (34,900+19,400+22,400+12,800-4,800) 84,700II. Interest on investments -

III. Interest on RBI deposits -IV. Others -

Total 84,700

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 910II. Profit on sale of investments -

III. Profit on revaluation of investments -IV. Profit on sale of assets -V. Income by way of foreign exchange -

VI. Income by way of dividend on investments -VII. Others -

Total 910

Schedule 15: Interest Expended

I. Interest on deposits (36,500 + 6,900) 43,400II. Interest on borrowings -

III. Others -

Total 43,400

Schedule 16: Operating Expenses

I. Salaries 1,800II. Rent, rates, taxes and lighting 390

III. Printing and stationary -IV. Advertisement and publicity -V. Depreciation 420

VI. Director’s fees -VII. Audit fees -

VIII. Law charges 150IX. Postage, telegram and telephone -X. Repairs and maintenance -

XI. Insurance -XII. Others expenses (180+15,500) 15,680

Total 18,440

Provisions and Contingencies -

Total -

Krishna Bank Ltd.

Profit / Loss Account for the Year Ended

ParticularsSchedule number

Amount (Rs.)

Incomes:Interest earned 13 84,700Other incomes 14 910

Total 85,610Expenditure:Interest expended 43,400Operating expenses 18,440Provisions and contingencies

Total 61,840Profit / Loss:Profits for the year 23,770Profits b/d 1,200

Total 24,970Appropriations:Transfer to Statutory Reserve (23,70x25%) 5,942Transfer to other Reserve -

Transfer to Government or proposed dividend -Profits c/d 19,028

Total 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

Rs.Interest on loans 2,59,000Interest on fixed deposits 2,75,000Rebate on bills discounted 49,000Commission charged on customers 8,200Establishment expenses 54,000Discount on bills discounted 1,95,000Interest on cash credits 2,23,000Interest on current account 42,000Rent and taxes 18,000Interest on overdraft 54,000Director’s and audit fees 4,200Interest on savings bank deposits 68,000Postal and telegrams 1,400Printing and advertisement 2,900Sundry charges 1,700

Solutions: -

Schedule 13: Interest Earned

I. Interest and discount (2,29,000+2,23,000+54,000+1,95,000-49,000)

6,82,000

II. Interest on investments -III. Interest on RBI deposits -IV. Others -

Total 6,82,000

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 8,200II. Profit on sale of investments -

III. Profit on revaluation of investments -IV. Profit on sale of assets -

V. Income by way of foreign exchange -VI. Income by way of dividend on investments -

VII. Others -

Total 8,200

Schedule 15: Interest Expended

I. Interest on deposits (2,75,000+42,000+68,000) 3,85,000II. Interest on borrowings -

III. Others -

Total 3,85,000

Schedule 16: Operating Expenses

I. Salaries -II. Rent, rates, taxes and lighting 18,000

III. Printing and stationary 2,900IV. Advertisement and publicity -V. Depreciation -

VI. Director’s fees 4,200VII. Audit fees -

VIII. Law charges -IX. Postage and telegram 1,400X. Repairs and maintenance -

XI. Insurance -XII. Others expenses (54,000+1,700) 55,700

Total 82,200

Provisions and Contingencies -

Total -

Krishna Bank Ltd.

Profit / Loss Account for the Year Ended

ParticularsSchedule number

Amount (Rs.)

Incomes:Interest earned 13 6,82,000Other incomes 14 8,2000

Total 6,90,200Expenditure:Interest expended 15 3,85,000Operating expenses 16 82,200

Total 4,67,200Profit / Loss:Profits for the year 2,23,200Profits b/d -

Total 2,23,200Appropriations:Transfer to Statutory @ 25% 55,700Profits c/d 1,67,250

Total 2,23,000

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 25,90,000Interest on fixed deposits 27,50,000Commission 82,000Establishment charges 5,04,000Interest on cash credits 22,30,000Interest on current account 42,000Discount on bills discounted 14,60,000Interest on current and savings deposits 11,00,000Rent and taxes 1,80,000Interest on overdrafts 15,40,000Director’s fees 30,000Audit Fees 12,000Postal and telegrams 14,000Printing and Stationary 29,000Sundry 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. Interest and discount (2,59,000+22,30,000+14,60,000+15,40,000-40,000)

77,80,000

II. Interest on investments -III. Interest on RBI deposits -IV. Others -

Total 7,80,000

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 82,000II. Profit on sale of investments -

III. Profit on revaluation -IV. Profit on sale of others assets -V. Income by way of foreign exchange -

VI. Income by way of dividend on investments -VII. Others -

Total 82,000

Schedule 15: Interest Expended

I. Interest on deposits (27,50,000+11,00,000) 38,50,000II. Interest on borrowings -

III. Others -

Total 38,50,000

Schedule 16: Operating Expenses

I. Payment to employee -II. Rent, rates and lighting 1,80,000

III. Printing and stationary 29,000IV. Advertisement and publicity -V. Depreciation 30,000

VI. Director’s fees 12,000VII. Audit fees -

VIII. Legal charges 14,000IX. Postage and telegram -X. Repairs and maintenance -

XI. Insurance -XII. 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 4,00,000(ii) Provision for taxation 15,34,500Total 19,34,500

Trimurthy Bank Ltd.

Profit / Loss Account for the Year Ended 31-03-2001

ParticularsSchedule number

Amount (Rs.)

Incomes:Interest earned 13 77,80,000Other incomes 14 82,000

Total 78,62,000Expenditure:Interest expended 15 38,50,000Operating expenses 16 8,22,000Provisions and Contingencies 19,34,500

Total 66,06,500Profit / Loss:Profits for the year 12,55,500Profits b/d -

Total 12,55,500Appropriations:Transfer to Statutory (12,55,000x25%) 3,13,875Profits c/d 9,41,625

Total 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 51,800Interest on fixed deposits 55,800Commission received 1,600Salaries and allowances 10,800Discount on bills discounted 29,200Rebate on bills discounted 9,800Interest on cash credit 44,600Interest on current accounts 8,400Rent and taxes 3,600Interest on overdrafts 30,8001Director’s fees 600Audit Fees 200Interest on Saving Bank deposits 13,600Postal and telegrams 300Printing and Stationary 600Locker rent 200Transfer fees 100Depreciation on Bank properties 1,000Sundry charges 400

Other Information:

(I) Provision for bad debts Rs. 8,000(II) Provision for income tax Rs. 30,000

Solutions: -

Schedule 13: Interest Earned

I. Interest and discount (51,800+29,200+44,600+30,800-9,800) 1,46,600II. Interest on investments -

III. Interest on RBI deposits -IV. Others -

Total 1,46,600

Schedule 14: Other Incomes

I. Commissions, Exchange and Brokerage 1,600II. Profit on sale of investments -

III. Profit on revaluation of investments -IV. Profit on sale of others assets -V. Income by way of foreign exchange -

VI. Income by way of dividend on investments -VII. Others 300

Total 1,900

Schedule 15: Interest Expended

IV. Interest on deposits (55,000+8,400+13,600) 77,000V. Interest on borrowings -

VI. Others -

Total 77,000

Schedule 16: Operating Expenses

I. Payment to employee 10,800II. Rent, rates, taxes and lighting 3,600

III. Printing and stationary 600IV. Advertisement and publicity -V. Depreciation Banks property 1,000

VI. Director’s fees 600VII. Audit fees 200

VIII. Law charges -IX. Postage, telegram & telephone 300X. Repairs and maintenance -

XI. Insurance -

XII. Others (sundry charges) 400

Total 17,500

Provisions and Contingencies -(i) provision for Bad debts 8,000(ii) Provision for income tax 30,000Total 38,000

Mysore Bank Ltd.

Profit / Loss Account for the Year Ended 31-03-2001

ParticularsSchedule number

Amount (Rs.)

Incomes:Interest earned 13 1,46,600Other incomes 14 1,9000

Total 1,48,500Expenditure:Interest expended 15 77,000Operating expenses 16 17,500Provisions and Contingencies 38,000

Total 1,32,500Profit / Loss:Profits for the year 16,000Profits b/d -

Total 16,000Appropriations:Transfer to Statutory Reserve at 25% 4,000Profits c/d 12,0000

Total 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 35,000Interest on fixed deposits 36,000Commission received 1,000Office expenses 15,000Discount on bills discounted 20,000Interest on cash credits 23,000Balance of profit/loss a/c 1,200

Rent and taxes 1,800Interest on overdrafts 12,900Director’s remuneration 450Interest on savings deposits 7,000Postal expenses 150Printing and Stationary 400Other expenses 200

Solutions: -

Schedule 13: Interest Earned

I. Interest and discount (35,000+20,000+23,000+12,900) 90,900II. Interest on investments -

III. Interest on RBI deposits -IV. Others -

Total 90,900

Schedule 14: Other Incomes

I. Commissions, Exchange and Brokerage 1,000II. Profit on sale of investments -

III. Profit on revaluation -IV. Profit on sale of others assets -V. Income by way of foreign exchange -

VI. Income by way of dividend on investments -VII. Others -

Total 1,000

Schedule 15: Interest Expended

I. Interest on deposits (36,000+7,000) 43,000II. Interest on borrowings -

III. Others -

Total 43,000

Schedule 16: Operating Expenses

I. Payment to employee -II. Rent, rates and lighting 1,800

III. Printing and stationary 400IV. Advertisement and publicity -V. Depreciation -

VI. Director’s fees 450

VII. Audit fees -VIII. Legal charges -

IX. Postage and telegram 150X. Repairs and maintenance -

XI. Insurance -XII. Others (Establishment charges & Sundry charges)

(5,40,000+17,000)15,200

Total 18,000

Provisions and Contingencies -Total -

Canara Bank Ltd.

Profit / Loss Account for the Year Ended 2000-2001

ParticularsSchedule number

Amount (Rs.)

Incomes:Interest earned 13 90,900Other incomes 14 1,000

Total 91,900Expenditure:Interest expended 15 43,000Operating expenses 16 18,000Provisions and Contingencies -

Total 61,000Profit / Loss:Profits for the year 30,900Profits b/d 1,200

Total 32,100Appropriations:Transfer to Statutory Reserve at 25% (30,900x25%) 7,725Profits c/d 24,375

Total 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.

Rs. (in ‘000)Interest on loans 518Interest on cash credit 446Discount on bills discounted 390Interest on overdraft 108Interest on savings bank deposit 220Interest on fixed deposits 554Commission, Exchange and brokerage 16.4Rent, taxes and lighting 36Auditor’s fees 2.4Postage, telegram and telephones 2.8Sundry charges 2Advertisement and publicity 1.4Director’ fess 6Printing and stationery 0.4Law charges 1.4Payment to employees 108Locker rent 0.7Transfer fees 1.4Depreciation on Banks property 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. Interest and discount (518+446+390+108-98) 1,364II. Interest on investments -

III. Interest on RBI deposits -IV. Others -

Total 1,364

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 16.4II. Profit on sale of investments -

III. Profit on revaluation of investments -

IV. Profit on sale of others assets -V. Income by way of foreign exchange -

VI. Income by way of dividend on investments -VII. Others (transfer fees and locker rent) (1.4+0.7) 2.1

Total 18.5

Schedule 15: Interest Expended

I. Interest on deposits (220+554) 774II. Interest on borrowings -

III. Others -

Total 774

Schedule 16: Operating Expenses

I. Salaries 108II. Rent, rates and lighting 36

III. Printing and stationary 0.4IV. Advertisement and publicity 1.4V. Depreciation 10

VI. Director’s fees 6VII. Audit fees 2.4

VIII. Law charges 1.4IX. Postage and telegram 2.8X. Repairs and maintenance -

XI. Insurance -XII. Others 2.0

Total 170.4

Provisions and Contingencies -Bad debts 58Total 58

P.N. Bank

Profit / Loss Account for the Year Ended 31.03.1998

ParticularsSchedule number

Amount (Rs.)

Incomes:Interest earned 13 1,364Other incomes 14 18.50

Total 1,382.50Expenditure:Interest expended 15 774Operating expenses 16 170.4Provisions and Contingencies 58

Total 1,002.4Profit / Loss:Profits for the year 380.1Profits b/d -

Total 380.1Appropriations:Transfer to Statutory Reserve at 25% (30,900x25%) 95Profits c/d 285.1

Total 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.

Rs. Rs.Paid up capital 10,00,000 Furniture 20,000Local bills discounted 9,00,000 Fixed deposits 20,00,000Reserve fund 3,85,000 Profit & loss a/c balance (Cr) 1,10,000Loans, advances 14,00,000 Stamps on hand 5,000Unpaid dividend 5,000 Cash balance 2,50,000Overdrafts 23,00,000 Cash balance with other banks 6,50,000Current and savings deposits 25,00,000 Investments (Cost) 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 AIndian Banking Corporation

Balance Sheet as on 31st March, 2002

Schedule number

Year ended 31-03-2002 Rs.

Capital and Liabilities Capita 1 10,00,000Reserves and Surplus 2 5,45,000Deposits 3 45,00,000Borrowings 4 -Other liabilities and provisions 5 5,000

Total 60,50,000AssetsCash and balances with Reserve Bank of India 6 2,50,000Balances with banks and money at call and short notice 7 6,50,000Investments 8 5,25,000Advances 9 46,00,000

Fixed assets 10 20,000Other assets 11 5,000

Total 60,50,000Contingent Liabilities 12 NIL

As on 31-03-2002 Rs.

Schedule 1 – CapitalAuthorised capital 1,20,000 shares of Rs. 10 each 12,00,000Paid up capital 1,00,000 shares of Rs. 10 each 10,00,000

Total 10,00,000Schedule 2 – Reserves and Surplus Reserve Fund 3,85,000Profit and Loss account 1,10,000Investment reserve (Rs. 5,25,000 – Rs. 4,75,000) 50,000

Total 5,45,000Schedule 3 – DepositsCurrent and savings deposits 25,00,000Fixed deposits 20,00,000

Total 45,00,000Schedule 4 – Borrowings NILSchedule 5 – other liabilities and provisions Unpaid dividend 5,000

Total 5,000Schedule 6 – cash and balance with reserve bank of India 2,50,000Schedule 7 – Balance with other Banks and money at call and Short notice Cash balance with other banks 6,50,000Schedule 8 – Investments Investment at cost 4,75,000Add: Increase in the value of investments 50,000 5,25,000

Total 5,25,000Schedule 9 – Advances Local bills discounted 9,00,000Loans and advances 14,00,000Overdrafts 23,00,000

Total 46,00,000Schedule 10 – Fixed Assets Furniture 20,000

Total 20,000Schedule 11 – Other Assets Stamps on hand 5,000Schedule 12 – Contingent Liabilities NIL

Illustration 15 (Preparation of Balance Sheet)

The following balances, prepare the Balance Sheet of Lucky Bank Ltd., as on 31.03.2002

Rs. Rs.Share capital (2,000 shares) 2,00,000 Money at call 9,00,000Premises 1,00,000 Profit and Loss A/c (Cr.) 45,000Rebate on Bills discounted 5,000 Investments 7,00,000Traveller’s Cheque 2,00,000 Bills Purchased 15,00,000Deposits 56,00,000 Acceptances for customers 5,00,000Loans 22,00,000 Bills for collection 4,00,000Reserves 3,00,000 Depreciation fund on premises 10,000Cash in hand 30,000 Cash with RBI 5,20,000Cash with other banks 4,50,000 Pension Fund 40,000

The following were completely omitted while the above balances were calculated. They should be adjusted suitably.

1. Travellers Cheque paid Rs. 10,0002. Money at call recovered Rs. 20,000

Solution:Form A

Lucky Bank Limited Balance Sheet as on 31st March, 2002

Schedule number

Year ended 31-03-2002 Rs.

Capital and Liabilities Capita 1 2,00,000Reserves and Surplus 2 3,45,000Deposits 3 56,00,000Borrowings 4 -Other liabilities and provisions 5 2,35,000

Total 63,80,000AssetsCash and balances with Reserve Bank of India 6 5,60,000Balances with banks and money at call and short notice 7 13,30,000Investments 8 7,00,000Advances 9 37,00,000Fixed assets 10 90,000Other assets 11 -

Total 63,80,000Contingent Liabilities 12 5,00,000Bills for collection 4,00,000

As on 31-03-2002 Rs.

Schedule 1 – Capital20,000 shares of Rs. 100 each 2,00,000Schedule 2 – Reserves and Surplus Reserves 3,00,000Profit and Loss account 45,000

Total 3,45,000Schedule 3 – DepositsDeposits 56,00,000Schedule 4 – Borrowings NILSchedule 5 – Other liabilities and provisions Bills payable Traveller’s Cheque 2,00,000Less: Paid 10,0000 1,90,000Rebate on Bills 5,000Pension Fund 40,000

Total 2,35,000Schedule 6 – cash and balance with reserve bank of India Money at call received 20,000Cash in hand 30,000Less: Traveller’s Cheque Paid (-) 10,000 40,000Cash with Reserve Bank of India 5,20,000

Total 5,60,000Schedule 7 – balance with banks and money at call and short notice Money at call and short notice 9,00,000Less: Money at call recovered 20,000 8,80,000Cash with Reserve Bank of India 4,50,000

Total 13,30,000Schedule 8 – Investments 7,00,000Schedule 9 – advance Loan 22,00,000Bills purchased 15,00,000

Total 37,00,000Schedule 10 – fixed assetsPremises 1,00,000Less: Depreciation Fund 10,000 90,000

Total 90,000Schedule 11 – Other Assets NILSchedule 12 – contingent liabilities Acceptances for customers 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:

Rs.Share capital 2,00,000Shares of Rs. 100 each full paid 1,20,000Statutory Reserve Fund (Fully invested in 5% Government Securities at par) 12,875Bad debts 1,27,725Establishment expenses 13,65,227Current deposits 7,48,440Interest paid 17,20,000Savings account 47,500Acceptance for customers 4,95,000Discount 8,20,400Profit and loss account (Cr) (1.4.2000) 8,75,000Fixed deposits 2,92,900Commission and exchange 4,80,000Premises 22,650Cash in hand 12,86,400Interest received 92,500Investments in shares (market value Rs. 2,00,000)

Year ended 31-03-2001 Rs.

Schedule 1 – Capital 2,00,000Schedule 2 – Reserves and Surplus Statutory ReservesOpening Balance 1,20,000

Additions during the year 54,503 1,74,503Balance in profit and loss a/c (from appropriate a/c) 9,63,909

Total 11,38,412Schedule 3 – DepositsCurrent Deposits 13,65,227Savings account 17,20,000Fixed deposits 8,75,000

Total 39,60,227Schedule 4 – Borrowings NILSchedule 5 – Other liabilities and provisions Unexpired discount 48,000Provision for Doubtful debts 8,000Provision for Taxation (55/100 x 8,20,400) 4,51,220Add: Surcharge 5/100 x 4,51,220 22,561 4,73,781

Total 5,29,781Schedule 6 – cash and balance with reserve bank of India

Cash in hand 22,650Schedule 7 – balance with banks and money at call and short notice Cash with Banks in India 2,84,500Schedule 8 – Investments 92,5005% Government Securities 1,20,000

Total 2,12,500Schedule 9 – advance Term Loan in India 10,00,000Cash credit hypothecation in India 12,56,000Bills purchased 16,00,000Loans to Employees 40,770

Total 38,96,770Schedule 10 – Fixed assetsPremises 4,80,000Schedule 11 – Other AssetsDifference in Trail balance 9,32,000Schedule 12 – Contingent LiabilitiesAcceptance for customers 47,500

Total 47,500Schedule 13 – Interest EarnedInterest Received 12,86,400Discount 4,95,000

Total 17,81,400Schedule 14 – Other IncomeCommission and Exchange 2,92,900Dividend on Investment 8,000 3,00,900Schedule 15 – Interest ExpendedInterest Paid 7,48,440Schedule 16 – Operating ExpensesBad Debts 12,875Establishment Expenses 1,27,725Salaries Etc: 48,000Chief Executive remuneration 3,97,467 4,45,467

Total 5,87,067Note: Provision and Contingencies Provision for doubtful debts 8,000Provision for taxation (4,51,220 + 22,561) 4,73,781Unexpired Discount 48,000

Total 5,29,781

Illustration 28 (Profit and Loss Account and Balance Sheet)

From the following balances of Vinayaka Bank Ltd., Bangalore as on 31st March 2001. prepare the profit and loss account for the year ended 31st March 2001 and a Balance Sheet as on that date.

Rs.Equity Share capital in Rs. 100 Shares 20,00,000Profit and loss a/c as on 1-4-2000 80,666Current account deposits 68,25,658Fixed deposit accounts 77,91,108Savings banks deposits 51,36,000Directors fees 9,960Audit fees 2,000Furniture (Cost Rs. 1,00,000) 74,560Interest and Discount 4,20,466Commission and exchange 2,04,000Investment Reserve Fund 70,000Branch Adjustments (Cr.) 93,788Postage and Telegrams 2,312Printing and Stationery 6,780Rent and Taxes 17,014Provident fund contribution 20,000Salaries and allowance 1,04,300Building (Cost Rs. 6,00,000) 4,10,000Law charges 3,300Cash in hand and with RBI 16,32,648Cash with other Banks 24,10,250Loans cash credits and overdrafts 1,40,00,000Bills discounted 28,01,040Unexpired insurance 874Stamps in hand 378Statutory Reserve Fund 1,30,000Reserve Fund 4,00,000Contingency Reserve 1,00,000Investments. 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

Capital and LiabilitiesSchedule number

Amount (Rs.)

Capital 1 20,00,000Reserves and Surplus 2 11,44,416Deposits 3 1,97,51,766Borrowings 4 NilOther Liabilities and Provisions 5 1,05,588

Total 2,30,02,770AssetsCash in Hand and with RBI 6 16,32,648Cash with other banks and money at call and short notice 7 24,10,250Investments (cost 17,56,250) 8 17,00,000Advances 9 1,67,97,060Fixed assets 10 4,61,560Other assets 11 1,252

Total 2,30,02,770Contingent and provisions 12 4,00,000

Profit and Loss Account for the Year Ended 31.3.2001

ParticularsSchedule Number

Amount(Rs.)

Income:Interest earned 13 4,08,646Other incomes 14 2,04,000

Total 6,12,646Expenditure:Interest Expended 15 NilOperating Expenses 16 1,88,666Provisions and Contingencies 3,980

Total 1,92,646Profit / Loss:Profits b/d 80,666Net profit for the year (I – II) 4,20,000

Total 5,00,666Appropriations:Statutory Reserve (25% of 4,20,000) 1,05,000Special Reserve -Government -Others -Profits and loss (Bal. Fig) 3,95,666

Total 5,00,666

Year ended 31-03-2001 Rs.

Schedule 1 – CapitalEquity share capital in Rs. 100 shares 20,00,000Schedule 2 – Reserves and Surplus 1. Statutory Reserves sec. 17 (1,30,000 + 1,05,000) 2,35,000 Addition during the year

2. Revenue and other Reserves: Reserve Fund 4,00,000 Contingency Reserve 1,00,000 Investment Reserve Fund (70,000 – 56,250) 13,750 P & L a/c 3,95,666

Total 11,44,416Schedule 3 – DepositsCurrent Deposits 68,25,658Fixed Deposits account 77,91,108Savings Banks Accounts 51,36,000

Total 1,97,52,766Schedule 4 – Borrowings NILSchedule 5 – Other liabilities and provisions B.P -Rebate 11,800Branch Ads 93,78

Total 1,05,588Schedule 6 – cash and balance with reserve bank of India 16,32,648Schedule 7 – balance with banks and money at call and short notice 24,10,250Schedule 8 – Investments Investment at Market Value 17,00,000Schedule 9 – advance 1. Bills Discounted and purchased 28,01,0402. Cash Credit overdraft and loans pay other demand 1,39,96,020

Total 1,67,97,060Schedule 10 – Fixed assetsPremises at cost 6,00,000(-) Depreciation upto the date 2,06,000

3,94,000Furniture at cost 1,00,000(-) Depreciation upton to date 32,400

67,560Total 4,61,560

Schedule 11 – Other AssetsUnexpired insurance 874Stamps in hand 378

Total 1,252Schedule 12 – Contingent LiabilitiesBills accepted on behalf of customers 4,00,000Schedule 13 – Interest balanced

Interest and discount 4,20,466Less: Rebate on bills discounted 11,800

Total 4,08,646Schedule 14 – Other IncomeCommission and Exchange 2,04,000Schedule 15 – Operating Expenses1. Payment to and provision for employees 1,24,3002. Rent, Taxes and Lighting 17,0143. Printing and stationary 6,7804. Advertisements and publicity -5. Depreciation on Banks property 23,0006. Directors fees and allowances 9,9607. Auditors fees and allowances 2,0008. Law Charges 3,3009. Postage, Telegrams and Telephones 2,31210. Repairs and Maintenances -11. Insurance -12. General Expenses -

Total 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 CreditSubscribed capital (50,000 shares of Rs. 20) 10,00,000Reserve Fund 3,00,000Loan and cash credits 29,70,000Premises 1,00,000Indian government securities 6,00,000Current deposits 22,00,000Fixed deposits 2,50,000Savings bank deposits 1,00,000Salaries 56,000General expenses 54,800Rent and taxes 4,600Director fees 3,600Profit and loss a/c 1.4.2001 32,000Interest and discount 2,56,000Telegraphic transfer 1,00,000Circular note 50,000Branch adjustments 50,000Stock of stationery 17,000Bills purchased and discounted 92,000Interim dividend paid 34,000Recurring deposits 40,000Shares 1,00,000Cash in hand and RBI 1,86,000Money at call and short notice 1,60,000

43,78,000 43,78,000

Adjustments:

a) Provide for doubtful debts 5,000b) Interest accrued on investments 8,000c) Unexpired discount 380d) Endorsement on behalf of customers 1,15,000e) Premises added during the year 20,000

Depreciation premises at 5% on opening balance. Prepare bank final accounts.

Welcome Bank LtdBalance Sheet as on 31.3.2002

Capital and LiabilitiesSchedule number

Amount (Rs.)

Capital 1 10,00,000Reserves and Surplus 2 4,33,620Deposits 3 25,90,000Borrowings 4 -Other Liabilities and Provisions 5 2,05,380

Total 42,29,000AssetsCash and balance with Reserve Bank 6 1,86,000Balance with banks and money at call and short notice 7 1,60,000Investments 8 7,00,000Advances 9 30,62,000Fixed assets 10 96,000Other assets 11 25,000

Total 42,29,000Contingent liabilities 12 1,15,000

Welcome Bank Ltd.. Profit and Loss Account for the Year Ended 31.3.2002

ParticularsSchedule Number

Amount(Rs.)

Income:Interest earned 13 2,55,620Other incomes 14 8,000

Total 2,63,620Expenditure:Interest Expended 15 -Operating Expenses 16 1,23,000Provisions and Contingencies 5,000

Total 1,28,000Profit / Loss:Profits b/d 32,000Net profit for the year (I – II) 1,35,620

Total 1,67,620Appropriations:Statutory Reserve (sec. 17) (134620 x 20%) 33,905Interim Dividend 34,000Others 99,715Profits and loss c/d 1,67,620Notes on account 17 -

Year ended 31-03-2002 Rs.

Schedule 1 – CapitalSubscribed Capital (50,000 shares of Rs. 20) 10,00,000

10,00,000Schedule 2 – Reserves and SurplusStatutory Reserve 33,905Profit and loss a/c 99,715

4,33,620Schedule 3 – Deposits

Current Deposits 22,00,000Fixed Deposits account 2,50,000Savings Banks Accounts 1,00,000Recurring Deposits 40,000

Total 25,90,000Schedule 4 – Borrowings NILSchedule 5 – Other liabilities and provisions Branch advance 50,000Telephone Transfer 1,00,000Circular Note 50,000Rebate on Bills 380Pro : for DD 500

Total 2,05,380Schedule 6 – cash and balance with reserve bank of India 1,86,000Schedule 7 – balance with banks and money at call and short notice 1,60,000Schedule 8 – Investments Indian Govt Securities 6,00,000Shares 1,00,000

Total 7,00,000Schedule 9 – advance Loans and cash credits 29,70,000Bills purchased and discounted 92,000

Total 30,62,000Schedule 10 – Fixed assetsPremises 1,00,000(-) Depreciation 4,000

Total 96,000Schedule 11 – Other AssetsStock of Stationary 17,000Interest Accrued on Investment 8,000

Total 25,000Schedule 12 – Contingent LiabilitiesEndorsement on behalf of customers 1,15,000

Total 1,15,000Schedule 13 – Interest & DiscountInterest and discount 2,56,000Less: Unexpired discount 380

Total 2,55,620Schedule 14 – Other IncomeInterest accrued on Investments 8,000

Total 8,000Schedule 15 – Operating ExpensesInterest paid NilSchedule 16 – Operating Expenses

Salaries 56,000General Exp 54,800Rent and Taxes 4,600Directors Fees 3,600Depreciation 4,000

Total 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 CreditShare capital20,000 shares of Rs. 100 each 20,00,000Bad debts 1,28,710Reserve fund investments 10,00,000Reserve fund 10,00,000General expenses 1,82,420Current accounts 2,02,44,220Interest paid 1,60,520Deposit accounts 69,20,230P & L A/c (Cr) 1-4-2000 2,29,340Acceptance and guarantee 15,42,820Discount 2,43,760Endorsement and guarantee 74,020Commission 44,240Cash 2,26,540Interest received 5,32,260Cash with RBI 20,12,100Endorsement guarantee (Control) 74,020Owing by foreign correspondents 2,00,440Customers liabilities for acceptances 15,42,820Short loans 64,82,060Loans and advances 1,54,56,700Investments 98,82,540Bills discounted 62,28,240Premises 22,17,900

3,93,12,950 3,93,12,950

Adjustments:

1. Reserve Rs. 64,380 for rebate on bills discounted.2. Provide for taxation Rs. 20,0003. Depreciate premises at 10%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 LtdBalance Sheet as on 31.3.2001

Capital and LiabilitiesSchedule number

Amount (Rs.)

Capital 1 20,00,000Reserves and Surplus 2 12,71,780Deposits 3 2,71,64,450Borrowings 4 64,82,060Other Liabilities and Provisions 5 84,380

Total 3,70,02,670AssetsCash and balance with Reserve Bank 6 22,38,640Balance with banks and money at call and short notice 7 -Investments 8 1,08,82,540Advances 9 2,18,85,380Fixed assets 10 19,96,110Other assets 11 -

Total 3,70,02,670Contingent liabilities and bills for collection 12 16,16,840

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

ParticularsSchedule Number

Amount(Rs.)

Income:Interest earned 13 7,11,640Other incomes 14 44,240

Total 7,55,880Expenditure:Interest Expended 15 1,60,520Operating Expenses 16 4,04,210Provisions and Contingencies (see note) 1,48,710

Total 7,13,440Profit / Loss:Profits b/d [2,29,340 + 2,00,000] 4,29,340Net profit for the year (I – II) 42,440

Total 4,71,780Appropriations:Statutory Reserve (25% of 42,440) 10,610Interim Dividend 2,00,000Profits and loss c/d 2,61,170

Total 4,71,780Notes on account 17 -

Year ended 31-03-2001 Rs.

Schedule 1 – Capital20,000 shares of Rs. 100 each 20,00,000

20,00,000Schedule 2 – Reserves and SurplusStatutory Reserve 10,610R/F 10,00,000Profit and loss a/c 2,61,710

12,71,780Schedule 3 – DepositsDeposits Accounts 69,20,230Current Accounts 2,02,44,220

Total 2,71,64,450Schedule 4 – Borrowings Short Loans 64,82,060

Total 64,82,060Schedule 5 – Other liabilities and provisions Rebate on Bills 64,380Provision for Tax 20,000

Total 84,380Schedule 6 – cash and balance with reserve bank of India Cash 2,26,540Cash with RBI 20,12,100

Total 22,38,640Schedule 7 – balance with banks and money at call and short notice NilSchedule 8 – Investments Investments 98,82,540Add: Reserve Fund Investment 10,00,000

Total 1,08,82,540Schedule 9 – advance Loans and advance 1,54,56,700Add: Bills discounted 62,28,240Owing by foreign correspondents 2,00,440

Total 2,18,85,380Schedule 10 – Fixed assetsPremises 22,17,900(-) Depreciation 2,21,790

Total 19,96,110Schedule 11 – Other Assets Nil Schedule 12 – Contingent LiabilitiesAcceptances for customers 15,42,820Endorsements and Guarantees 74,020

Total 16,16,840Schedule 13 – Interest & Discount

Interest received 5,32,260Discount 2,43,760

7,76,020(-) Rebate 64,380

Total 7,11,640Schedule 14 – Other IncomeCommission 44,240

Total 44,240Schedule 15 – Interest ExpendedInterest paid 1,60,520

Total 1,60,520Schedule 16 – Operating ExpensesGeneral Expenses 1,82,420Depreciation 2,21,790

Total 4,04,210Note : Provision and Contingencies Reserve for Bad Debt 1,28,710Provision for Tax 20,000

Total 1,48,710

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.

Rs.Interest on fixed deposits 2,70,000Interest on loans 2,50,000Commission charged to customers 8,000Establishment expenses 40,000Discount on bill discounted 2,05,000Interest on cash credits 2,20,000Interest on current account 40,000Rent and taxes 15,000Interest on overdrafts 60,000Director’s fees 4,000Audit Fees 2,000Interest on S.B. Deposits 60,000Postage and telegrams 1,200Printing and Stationary 2,000Sundry charges 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

Rs. (in ‘000)Interest on loans 2,590Interest on fixed deposits 3,170Commission 82Payment to employees 540Discount on bills discounted 1,060Interest on cash credit 2,230Rent, tax and lighting 180Interest on overdraft 1,540Director’s fees, allowance and expenses 30Auditor’s fees and expenses 12Interest on savings bank deposits 680Postage, telegram and telephones 14Printing and stationery 29Sundry charges 17

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.

Illustration 16

Following is the trial balance of Dhanalakshmi Bank Ltd., as on 31.3.2000

Debit CreditSubscribed Capital 50,000 equity shares of Rs. 10 each Reserve FundLoans, Cash credit and overdraft Premises Indian Government Securities Current Deposit Fixed DepositSavings Bank Deposit SalariesGeneral ExpensesRent, Rates and TaxesDirector’s FeesProfit and Loss A/c 1.4.99Interest and DiscountStationary and Stamps (Stock of)Bill Purchased and Discounted Interim Dividend paidRecurring DepositsSharesCash in hand and with RBIMoney at Call and Short Notice

2,85,00050,000

4,00,000

28,00027,4002,3001,800

8,50046,00017,000

50,0001,93,000

80,000

5,00,0002,50,000

1,00,0001,25,000

50,000

16,0001,28,000

20,000

11,89,000 11,89,000

Additional Information

1. Provision for bad and doubtful debts required is Rs. 5,000/-2. Interest accrued on investments is Rs. 8,000.3. Unexpired discount amounts to Rs. 3804. Interim dividend declared was 4% actual5. Rs. 10,000 were added to the premises during the year.6. Endorsement made on behalf of customers totaled Rs. 1,15,0007. 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 CreditShare capital 1,50,000General reserve 61,500Profit and loss a/c 60,000Money at call and short notice 22,500Deposits 8,89,500Cash in hand 30,000Cash with RBI 45,000Borrowings 90,000Bills payable 24,000Staff security deposits 10,500Investments 96,000Buildings 68,400Balance with other banks 57,000Cash credits 7,95,000Interest on deposits and borrowings 1,18,500Bills purchased 1,80,000Discount on bills 15,000Commission and brokerage 13,500Interest on loans 1,75,500Income from investments 8,700Salary and other expenses 72,000Audit fees 5,100Postage, printing and stationery 6,300Depreciation on assets 2,400

14,98,200 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.

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 CreditInterest and Discount 2,60,000Share capital 6,00,000Reserve Fund 3,00,000Deposits 8,00,000Telegraphic transfer 2,00,000Travelers letter of credit 3,00,000Gift cheques 60,000Pension fund 1,00,000Borrowings from bank 75,000Unclaimed dividend 25,000Rent 20,000Commission 50,000Profit/Loss A/c on 1.4.2001 40,000Bills payable 10,000Building 2,50,000Money at call and short notice 2,75,000Furniture 40,000Cash in hand 2,75,000Cash at bank 3,25,000Investments 1,75,000Loan, cash credit and overdrafts 11,40,000Interest on deposits 1,75,000Audit fees 10,000Salaries 50,000Director’s fees 5,000Printing and stationary 5,000Depreciation 7,500Non – banking assets 1,00,000Other Expenditure 7,500

28,40,000 28,40,000

Adjustments:

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

Prepare Bank accounts.