I V.

D E F I N I T I O N S / T E R M I N O L O G I E S
A. DESCRIPTIONOFMAJOR issued by the federal government are to
COMPONENTSOFASSETS& be reported here.
LIABILITIES FOREIGN CURRENCY (FOREIGN
I.ASSETS CURRENCY NOTES AND COINS)

i. CURRENCY (CASH IN HAND) All foreign currency notes and coins are
Notes and coins that are of fixed liability of the foreign governments or
nominal values and accepted as legal non-resident issuing authorities / central
tender in an economy that are issued by banks. These are claims of the Pakistan
the central bank and/or government. economy upon non-residents (issuing
This category should also include economy).
currency that is no longer legal tender,
but that are commonly exchangeable ii. TRANSFERABLE DEPOSITS
for current legal tender. All demand deposits of financial auxiliaries
Commemorative coins and gold coins, with deposit money institutions (banks) in
not in circulation are excluded. national or in foreign currency i.e.,
NATIONAL CURRENCY (PAKISTANI exchangeable on demand at par without
CURRENCY NOTES AND COINS) penalty or restriction, freely transferable by
PAKISTANI BANK NOTES cheque or otherwise, commonly used to
These are promissory notes (or bank make payments, are known as transferable
notes) issued by the State Bank of deposits. These deposits include special
Pakistan in various denominations, savings accounts with a possibility of
with the promise to pay the said direct payments to third parties, savings
denomination (face value) in Rupee accounts balances subject to automatic
when called for payment. These are transfer to regular transferable deposits,
issued with the guarantee of the and money-market fund that have
Government of Pakistan. unrestricted third-party transferability
PAKISTANI RUPEE COINS privileges.
These are the currency coins issued by Deposits denominated in national currency
the government of Pakistan with should be recorded at book value
various denominations of currency (outstanding amount plus accrued interest).
units (Rupee). All Pakistani currency
coins (including subsidiary coins)

9
iii. OTHER DEPOSITS term and long-term securities other than
These are claims of financial auxiliaries
shares. Examples are; Government
on deposit accepting institutions
treasury bills, Federal government
generated by placing “other than
bonds, Federal investment bonds,
transferable deposits” in national
Pakistan investment bonds, corporate
currency or in foreign currency that are
bonds and debentures, negotiable
represented by evidence of deposits.
certificates of deposits (not negotiable
Other deposits include:
would be categorized under deposits),
o Sight deposits (which permit
commercial paper, TFCs, PTCs,
immediate cash withdrawals but
Modaraba certificates, and negotiable
not direct third-party transfers);
securities backed by loans or other
o Non-transferable savings
assets. Preferred stock or shares that pay
deposits and term deposits;
a fixed income but do not provide for
o Financial corporations’ liabilities
participation in the distribution of
in the form of shares or similar
residual value of an incorporated
evidence of deposits that are
enterprise on dissolution are also
legally or in practice, redeemable
included in this category.
immediately or at relatively short
GOVERNMENT TREASURY BILLS
notice; These are short-term debt instrument
o Shares of money-market funds that issued by the government treasury to
have restrictions on third-party raise funds for the government or to
transferability; regulate money supply through open
o Call money deposits; market operations of the central bank.
Their market transactions are managed
iv. INVESTMENT IN SECURITIES by the State Bank of Pakistan on behalf
OTHER THAN SHARES
Financial auxiliaries’ investments in of the treasury.
financial assets that are normally traded PAKISTAN INVESTMENT BONDS

in the financial markets and that give the These are long term (3, 5, 10, 15 & 20

holders the unconditional right to years’ maturity) debt obligation issued by

receive stated fixed sums on a specified the government, offering a risk free

dates or the unconditional right to fixed investment to the bond holders at

money incomes or contractually premium interest rates depending on the

determined variable money incomes. maturity of the bond.

These securities are classified as short-

10
FEDERAL INVESTMENT BONDS NEGOTIABLE CODS
This is a long term (3, 5 & 10 years’ A deposit instrument; a receipt issued by
maturity) debt obligation issued by the a bank as an evidence of a deposit
government from June 1991, offering a specifying the amount, the period of the
risk free investment to the bond holders deposit, and the rate of the interest.
at premium interest rates was fixed as There are several types of deposit
13%, 14% and 15% depending on the certificates issued in domestic or foreign
maturity of the bond. currency; since certificate of deposits
OTHER FEDERAL GOVERNMENT BONDS / are negotiable instruments, these are
SECURITIES freely traded in secondary money
This category would include the bonds / market. The CODs that are not
securities issued by the federal negotiable would be treated as other
government not covered anywhere else. deposits.
PROVINCIAL GOVERNMENT SECURITIES / NEGOTIABLE LOANS
BONDS / PERMANENT LOANS Loans that have become negotiable de
This category includes any type of facto (securitization of mortgage loans,
provincial governments’ debt claims on credit card holders and other
obligations/ bonds and negotiable loans) are known as negotiable loans
certificates etc. DEBENTURES
LOCAL GOVERNMENT SECURITIES / BONDS Long-term securities that give the
All type of certificates issued by the holders the unconditional right to one or
local/ city governments, which are both of: (a) a fixed or contractually
evidence of debt on which the issuer determined variable money income in
promises to pay the holder a specified the form of coupon payments, i.e.
amount of interest for a specified length payment of interest is not dependent on
of time, and to repay the loan on its earnings of the debtors, (b) a stated
maturity. fixed sum as a repayment of principal on
COMMERCIAL PAPERS
a specified date or dates when the
Unsecured promissory notes of
security is redeemed.
relatively low risk and short maturity of
WAPDA BONDS
3 to 6 months, issued by highly rated Certificates issued by WAPDA
large corporations who usually maintain promising to pay the holder a specified
backup credit lines with their banks to amount of interest for a specified length
ensure payment at maturity; like notes,
bills, and acceptances
11
 of time, and to repay the loan on its accrued interest (i.e., interest earned but
maturity. not yet due for payment). Such valuation
PARTICIPATION TERM CERTIFICATES is herein referred to as the book value of
A certificate or note evidencing a loan.
ownership by the holder, but without The loan valuation is not adjusted for
voting rights of a stated percentage of a expected losses. The value of a loan
"package" or "pool" of mortgages which portfolio should be adjusted downward
pays interest at a stated rate. The term only when (1) loans are actually written
finance certificates are redeemable in off as un-collectible or (2) when the
quarterly / half yearly instalments. outstanding amount of the loan has been
INVESTMENT IN FOREIGN SECURITIES reduced through formal debt
Investments in bonds/ financial assets reorganization.
issued by the non-residents that are Loans are categorized as short-term and
normally traded in the financial markets long-term loans.
and that give the holders the
unconditional right to receive stated fixed vi. SHARES AND OTHER EQUITY (ASSETS)
sums on a specified dates or the All instruments and records
unconditional right to fixed money acknowledging claims to the residual
incomes or contractually determined value of companies / corporations, after
variable money incomes. the claims of all creditors have been met
are categorized as shares and other
v. LOANS EXTENDED equity. Stock or share most commonly
Financial asset resulting from the refers to a share of ownership in a
delivery of cash or other assets by an company that entitles the owner of that
financial auxiliary to its employees, share to literally a share in the
agents etc in return for an obligation to ownership of the company, including
repay on a specified date or dates, or on the right to a fraction of the assets of the
demand, usually with mark-up or company, a fraction of the decision-
interest. making power, and potentially a fraction
The value of a domestic currency loan of the profits, which the company may
should be the amount of the creditor’s issue as dividends. Preferred stocks or
outstanding claim (equal to the debtor’s shares are included in this category.
obligation), which comprises the Mutual funds and NIT units are also to
outstanding principal amount plus any be included under this category, for the

12
reason that they give rise to the equity of yield and appreciation in value. A mutual
issuing institution. Financial auxiliaries’ fund is a diversified portfolio of
investment in shares and other equity as investment, managed by fund manager,
assets are to be reported separately as who has necessary expertise of
quoted and non-quoted. investment. Investment is made in types
QUOTED SHARES - ORDINARY of securities (equity or debt) according to
Shares are usually traded on a stock the investment policies laid down in the
exchange, where people and prospectus/offering document.
organisations may buy and sell shares in There are two types of mutual funds,
a wide range of companies. A given which are:
company will usually only trade its o Open-end mutual funds
shares in one market, and it is said to be o Closed-end mutual funds
quoted, or listed, on that stock exchange. OPEN-ENDED MUTUAL FUND
However, some large, multinational Open-end mutual funds are those where
corporations are listed on more than one subscription and redemption of shares
exchange. They are referred to as inter- are allowed on continues basis. In
listed shares. Pakistan there exists only four open
NON-QUOTED SHARES - ORDINARY ended mutual funds; National Investment
The shares those are not traded on a (Unit) Trust (NIT) in the public sector
stock exchange are defined as non- and Pakistan Stock Market Fund (PSM),
quoted shares. Pakistan Income Fund (PIF) and Unit
PREFERRED STOCKS / SHARES Trust of Pakistan (UTP) in private sector.
Preferred stocks are shares of a CLOSED-END MUTUAL FUND
corporation, which represent ownership Closed-end mutual funds are those where
in a corporation with the distinction that the shares are initially offered to the
if company earnings are sufficient, and public and are then traded in the
dividends are to be paid, dividends must secondary market. These include:
be first paid to these holders of stock. o Growth funds
Preferred shares have priority over o Balanced funds
common shares in the distribution of o Income funds
dividends and assets. INVESTMENT IN SHARES OUTSIDE
MUTUAL FUNDS PAKISTAN
These are pooling together the savings of An investment of financial auxiliaries in
large number of investors for attractive the companies outside Pakistan, which

13
makes the investor a part-owner of that policyholders and form part of the
company whose shares it has bought. insurance technical reserves. Total
Financial auxiliaries are rewarded with premium paid for the subsequent period
annual dividends if the non-resident less premium consumed during the
company makes sufficient profits; and reporting period would be reported.
capital growth in the value of their shares OUTSTANDING INSURANCE CLAIMS
if the company attracts other interested These are the amounts that financial
investors. These assets of financial auxiliaries expect to receive in respect
auxiliaries should be reported under non- of claims that are not yet settled or
residents category. claims that may be disputed with
insurance companies.
vii. INSURANCE TECHNICAL
RESERVES viii. OTHERS ACCOUNTS RECEIVABLE
These are current claims of Financial assets consisting of
policyholders and beneficiaries rather dividends receivable, settlement
than net equity of insurance accounts, items in the process of
corporations. Generally these are collection, accrued income, head
classified as under:- office / inter-branch adjustment,
o Prepayments of premiums, and expenditure account, suspense items
o Reserves against outstanding and miscellaneous asset items.
claims with insurance companies DIVIDENDS RECEIVABLE

PRE PAID INSURANCE PREMIUM Dividends receivable on corporate

These are prepayments of premium shares arise from the recording of
paid by financial auxiliaries (including dividends when the dividends are
automobile, health, term life, declared, rather than when the
accident/injury, income maintenance, dividends are paid.
and other forms of non-life insurance). SETTLEMENT ACCOUNTS

At the end of the accounting period Settlement accounts should be used to

when the balance sheet is drawn up, account for differences in the time of

parts of the insurance premium payable recording of (1) purchases or sale of

during the accounting period are financial assets, on the trade dates

intended to cover risks in the when change of ownership occurs and

subsequent period. These prepayments (2) the subsequent payments for the

of premiums are assets of the financial assets on the settlement dates.

14
ITEMS IN THE PROCESS OF COLLECTION ix. NON-FINANCIAL ASSETS
Items in process of collection include Entities from which their owners may
cheques or other types of transferable derive economic benefits by holding
items. them or using them over a period of
MISCELLANEOUS ASSET ITEMS time are called non-financial assets.
These include claims, damages, Non-financial assets consist of
accruals for miscellaneous fees, fines, tangible assets, both produced and
forfeitures, penalties, other prepaid non-produced, and intangible assets
expenses, receivable from brokers, for which no corresponding liabilities
receivable from government under are recorded. Produced assets
VHS (voluntary golden hand shake) comprise non-financial assets that
scheme, stationary and stamps on hand have come into existence as outputs
etc, etc. from production processes.
SUSPENSE ACCOUNT Produced assets consist of:
It is a temporary holding account for i. Fixed assets—assets that are
errors and omissions i.e., claims for used repeatedly, or continuously,
which proper classification has not yet in production processes for more
been determined, claims for which than one year and that may be
verifications, notifications, instructions, tangible (dwellings, other
or other documentations are required buildings and structures,
for completing the transactions, and machinery and equipment, and
claims that are under litigation or cultivated assets, such as
otherwise in dispute. livestock for breeding and
PREPAYMENT OF TAXES
plantations) or intangible
Prepaid taxes for the subsequent
(mineral exploration, computer
periods are classified under this
software, and entertainment,
category.
literary, or artistic originals),
PREPAYMENT OF RENT
ii. Inventories (materials and
Rent prepaid for the subsequent periods
supplies, work-in-progress,
is classified under this category.
finished goods, and goods for
DEFERRED COST/PRELIMINARY
resale), and
OPERATING EXPENSES
iii. Valuables (assets that are
This relates to the cost incurred for
acquired and held primarily as
subsequent periods, which are reflected
stores of value).
as ASSETS.
15
Non-produced non-financial assets RESIDENTIAL BUILDING / DWELLINGS
are those that occur in nature and over ON LEASE HOLD LAND

which ownership may be enforced and Dwellings on leasehold land are

transferred. These are both tangible and buildings on leasehold land that are

intangible assets that come into used entirely or primarily as

existence other than through processes residences, including any associated

of production. structures, such as garages, and all

Tangible non-produced assets include permanent fixtures customarily

land, subsoil assets, water resources, installed in residences; movable

etc structures, such as caravans, used as

Intangible non-produced assets include principal residences of households are

patents, and purchased goodwill etc. included.

RESIDENTIAL BUILDING / DWELLINGS OTHER BUILDING AND STRUCTURES ON

ON FREE HOLD LAND LEASEHOLD LAND (CAPITAL WORK IN

Dwellings on freehold land are PROGRESS - CIVIL WORKS)

buildings on freehold land that are used The other buildings and structures on

entirely or primarily as residences, leasehold land category consist of

including any associated structures, non-residential buildings and other

such as garages, and all permanent structures, such as civil engineering

fixtures customarily installed in works on freehold land.

FURNITURE AND FIXTURE
residences; movable structures, such as
All type of furniture and fixtures other
caravans, used as principal residences
than those acquired under financial
of households are included.
leases for the purpose of business
OTHER BUILDINGS AND STRUCTURES ON
FREEHOLD LAND (CAPITAL WORK IN
ELECTRICAL, OFFICE AND COMPUTER
EQUIPMENTS
PROGRESS - CIVIL WORKS)

The other buildings and structures on All office equipments other than those

freehold land category of non- acquired through financial leases used

financial, produced, tangible fixed for the business including counting and

assets consists of non-residential computing equipments, printers,

buildings and other structures, such as scanners, photocopiers, fax machines

civil engineering works on freehold etc.

OTHER MACHINERY AND EQUIPMENT
land.
The other machinery and equipment
category of non-financial, produced,
16
tangible fixed assets other than those ELECTRICAL, OFFICE AND COMPUTER
acquired through financial leases EQUIPMENTS UNDER FINANCE LEASE

consists of machinery and equipment All office equipments acquired

assets not classified as “transport through financial leases for use in the

equipment” and “office equipment”. business including counting and

computing equipments, printers,
VEHICLES scanners, photocopiers, fax machines
Vehicles (as assets) other than those etc
acquired through financial leases OTHER MACHINERY AND EQUIPMENT
consist of equipment for moving people UNDER FINANCE LEASE

and objects, other than any such The other machinery and equipment

equipment acquired by households for category of non-financial, produced,

final consumption. tangible fixed assets acquired through

GOLD (VALUED AT PRICE NOT financial lease consists of machinery
EXCEEDING CURRENT MARKET PRICE) and equipment assets not classified as
Gold, held primarily as a store of “transport equipment” and “office
value. Gold coins not in active equipment”.
circulations will be reported in this VEHICLES UNDER FINANCE LEASE
category. Vehicles (as assets) acquired through
OTHER VALUABLES financial leases consists of equipment
Valuables are produced assets that are for moving people and objects, other
not used primarily for production or than any such equipment acquired by
consumption, that are expected to households for final consumption.
appreciate or at least not to decline in Transport equipments such as motor
real value, that do not deteriorate over vehicles, trailers, ships, aircrafts,
time under normal conditions and that motorcycles, bicycles etc.
are acquired and held primarily as OTHER TANGIBLE FIXED ASSETS
stores of value. These also include (PRODUCED)

commemorative coins, paintings and Consists other tangible produced assets

sceneries etc. not specified elsewhere. Produced

FURNITURE AND FIXTURES UNDER assets are non-financial assets that have
FINANCE LEASE come into existence as outputs from
All type of furniture and fixtures those production processes.
acquired through financial leases for
the purpose of business
17
OTHER TANGIBLE NON-PRODUCED or commercial purposes, communal
ASSETS grazing land, land surrounding
Any other tangible non-produced assets dwellings in excess of those yards and
not specified elsewhere are covered in gardens deemed an integral part of
this category. farm and non-farm dwellings.
COMPUTER SOFTWARE LEASEHOLD LAND UNDERLYING
Computer software is an asset BUILDING AND STRUCTURE
consisting of computer programs, Value of leasehold land on which
program descriptions and supporting dwellings, non-resident buildings and
materials for both systems and structures are constructed or into which
applications software; included are their foundation are dug, including
purchased software and software yards and gardens deemed an integral
developed on own account, if the part of dwellings.
expenditure is large. LEASEHOLD LAND - RECREATIONAL
FREE HOLD LAND (AT COST) Recreational leasehold land that is used
UNDERLYING BUILDING AND STRUCTURE as privately owned amenity land,
Value of freehold land on which parklands and pleasure grounds and
dwellings, non-resident buildings and publicly owned parks and recreational
structures are constructed or into areas.
which their foundation are dug, LEASEHOLD LAND- OTHER THAN
including yards and gardens deemed UNDERLYING BUILDING AND STRUCTURE

an integral part of dwellings. Leasehold land other than leasehold

RECREATIONAL FREEHOLD LAND land underlying buildings and
Recreational freehold land that is used structures consist of land not elsewhere
as privately owned amenity land, classified, including private gardens
parklands and pleasure grounds and and plots not cultivated for subsistence
publicly owned parks and recreational or commercial purposes, communal
areas. grazing land, land surrounding
FREE HOLD LAND- OTHER THAN dwellings in excess of those yards and
UNDERLYING BUILDING AND STRUCTURE gardens deemed an integral part of
Freehold land other than freehold land farm and non-farm dwellings.
underlying buildings and structures PURCHASED GOODWILL
consist of land not elsewhere Purchased goodwill is the difference
classified, including private gardens between the value paid for an
and plots not cultivated for subsistence enterprise as a going concern and the
18
sum of its assets less the sum of its or the conveyance of some economic
liabilities, each item of which has been benefit to a third party.
separately identified and valued; the ACCUMULATED DEPRECIATION ON NON-
value of goodwill includes anything of FINANCIAL ASSETS

long-term benefit to the business that Accumulated depreciation on non-

has not been separately identified as an financial assets means total reduction in

asset value of non-financial assets at the end

ENTERTAINMENT, LITERARY OR of the accounting period resulting from
ARTISTIC ORIGINALS (INTANGIBLE physical deterioration, normal
FIXED ASSETS) obsolescence or normal accidental
Entertainment, literary or artistic damage etc.
originals are the original films, sound ACCUMULATED AMORTIZATION ON
recordings, manuscripts, tapes, models, OTHER INTANGIBLE FIXED ASSETS

etc, on which drama performances, Accumulated reduction/ normal

radio and television programming, obsolescence in the value of other
musical performances, sporting events, intangible fixed assets
literary and artistic output, etc, are
recorded or embodied.
OTHER INTANGIBLE FIXED ASSETS
(PRODUCED)
Other intangible fixed assets are new
information, specialized knowledge,
etc, not elsewhere classified, whose
use in production is restricted to the
units that have established ownership
rights over them or to other units
licensed by the latter.
OTHER INTANGIBLE NON-PRODUCED
ASSETS

Other intangible non-produced assets

not elsewhere classified that are
constructs of society. They are
evidenced by legal or accounting
actions, such as the granting of patent

19
II. LIABILITIESANDOWNERSEQUITY benefit, are liabilities of the financial
auxiliaries.
i. DEPOSITS ii. SECURITIES OTHER THAN SHARES
Generally, financial auxiliaries do not (LIABILITIES)
accept transferable deposits. All claims Securities other than shares are
on the financial auxiliaries other than negotiable instruments serving as
transferable deposits in national evidence that units have obligations to
currencies that are represented by settle by means of providing cash, a
evidence of deposits and restricted in financial instrument, or some other
nature like, employees provident fund item of economic value. These may be
accounts, staff pension funds, commercial papers, TFCs, debentures;
employees’ security deposit, staff participation terms certificates,
guarantees fund and similar types of modaraba certificates, negotiable
deposits related to, security deposits, CODs, negotiable loans and other
margin deposits and sundry deposits securities. Preferred stock or shares
etc. that pay a fixed income but do not
EMPLOYEES PROVIDENT FUND ACCOUNT provide for participation in the
These are compulsory savings deposits
distribution of residual value of an
of employees arising from an official
incorporated enterprise on dissolution
requirement that a share of a worker’s
are included in this category.
earnings be placed in a deposit account
that can be accessed only after a
iii. LOANS (BORROWINGS)
specified period or from which
Financial liabilities of financial
withdrawals may be made only for
auxiliaries are created when creditors
specified purposes.
(financial institutions) directly lend
STAFF PENSIONS FUNDS
funds to them. This includes financial
Liability of the financial auxiliaries in
leases, subordinated loans, and other
the form of staff pensions funds
loans from financial and non-financial
whether contributed by the employee
corporations etc. Borrowings are
or the company itself.
further classified by short-term and
EMPLOYEE’S SECURITY DEPOSITS/
long-term. The creditor’s outstanding
STAFF GUARANTEE FUND
claims at any time should equal to the
Securities / guarantees if held from the
debtor’s obligation, which comprises
employees or on behalf of employees
against employment, or for any other
20
the outstanding principal amount plus engaged in the floatation and
any accrued interest. management of Modaraba, having
paid-up capital of not less two and half
FINANCIAL LEASES AND SIMILAR million rupees.
ARRANGEMENTS BORROWINGS FROM ASSOCIATED
Goods acquired for disposal from a UNDERTAKINGS
bank/NBFI that purchases these goods All types of borrowings from
and receives rentals to cover all or associated undertakings are to be
virtually all costs including interests covered here.
over the period of contract. BORROWINGS FROM DIRECTORS
The entire risks and rewards of Loans and borrowings from the
ownership are de facto transferred to directors of the financial auxiliaries
from the legal owner of the goods BORROWINGS FROM CHIEF EXECUTIVE
(lesser bank/NBFI) to the user of the Borrowings from chief executives of
goods (lessee financial auxiliary) of an the financial auxiliaries
asset. Title may or may not eventually SUBORDINATED LOANS FROM

be transferred. This de facto change in SUBSIDIARY COMPANIES

ownership is financed by a financial Funds raised by the financial

claim, which is the asset of the lesser auxiliaries from subsidiary companies,

bank/NBFI and liability of the lessee. managed modarabas, associated

At the time of ownership change the undertakings, director or chief

market value of the asset is recorded as executives with the provision that all

liabilities of the lessee. For subsequent other liability holders have priority in

periods principal payments will be the event of failure of the institution.

subtracted for determining the Such debts are created by a

outstanding liability. subordination agreement under which a

BORROWINGS FROM SUBSIDIARY creditor acknowledges that his claim is

COMPANIES secondary to the claim of other
Borrowings other than subordinated creditors, such as depositors.
loans from companies that are owned/ BORROWING FROM SBP

controlled by the financial auxiliaries Funds raised under any arrangement

BORROWINGS FROM MANAGED from SBP will be reported by the
MODARABAS financial auxiliaries under this head
Any type of borrowing from managed
modarabas i.e., the companies solely
21
iv. OTHER ACCOUNTS PAYABLE rent, and accrued taxes, credit
These accounts consist of provision for balances in the cash credit,
loan losses, provision for other losses, certificates, margin on guarantees, and
adjustment for head office / branch, other liabilities items not specified
dividends payable, settlement accounts, elsewhere.
suspense accounts, deferred tax SUSPENSE ACCOUNTS
liabilities, accrued wages, rent, social An account that is used to store short-
contributions, accrued taxes, mark-up/ term funds or securities until a
return/ interest payable, mark-up on permanent decision is made about
NPL & investment, income account, their allocation.
miscellaneous liability items. PROVISION FOR EXPECTED COSTS

PROVISION FOR LOSSES Various types or expected costs such

Setting aside a part of financial as those arising from the expectation
auxiliaries’ income to cover anticipated of an unfavourable judgement in a
losses. lawsuit or plans for restructuring an
BRANCH ADJUSTMENT ACCOUNT enterprise’s operations or
All adjustments made with head offices managements etc.
or branches and are payable. DEFERRED TAX LIABILITIES
UN-REMITTED HEAD OFFICE EXPENSES Deferred tax liabilities arise from
Expenses made by head office on your timing difference between recognized
behalf, which have not yet been tax liabilities in financial auxiliaries’
remitted. account and tax liabilities reported to
SETTLEMENT ACCOUNTS the tax authorities; the tax amount due
A settlement account is any account in one period but deferred for payment
you wish to have funds settled into at in another period.
the end of the transaction. Settlement ACCRUED WAGES
accounts within other accounts payable Wages and salaries, which have not
should show financial auxiliaries’ been paid and are outstanding at the
obligations for payments on future end of the accounting period
settlement dates for assets that were ACCRUED RENT
purchased on trade dates. In finance, rent is a fixed income /
MISCELLANEOUS LIABILITY ITEMS expenditure per period from property,
Includes suspense accounts, provision land or any real estate. It is also a
for expected costs, deferred tax contractual amount paid for the use of
liabilities, accrued wages, accrued
22
 machinery or equipment such as than cash. Preferred stocks or shares,
transport vehicles. which also provide for participation in
SUNDRY DEPOSITS the distribution of the residual value on
Various type of deposits for which dissolution of an incorporated
claimant is not available, e.g., dormant enterprise (preferred in distribution
accounts of non-operative accounts etc. over ordinary shareholders), are
ADVANCE RECEIPTS included.
Amounts received in advance for any PAID-UP CAPITAL UNQUOTED/NOT-
contract but the contract has not yet LISTED

fully materialized. These are unquoted shares of the

CURRENT TAXATION (PROVISIONS LESS financial auxiliaries’, which are not
PAYMENTS) ACCRUED TAX traded on stock exchanges or other
Taxes chargeable to an accounting organized financial markets.
period but not yet paid. OTHER EQUITY
SOCIAL CONTRIBUTIONS The portion or part of equity that is not
These are the actual or imputed paid-up capital (shares) will be treated
payments to social insurance schemes as other equity. This item would
to make provisions for social insurance include financial auxiliaries’ retained
benefits to be paid or to the employees’ earnings, current year result, general &
benevolent funds. special reserves and revaluation
adjustments.
v. SHARES & OTHER EQUITY RETAINED EARNINGS
Shares and other equity comprise all The category of retained earnings
instruments and records shows all earnings (after-tax profit)
acknowledging, after the claims of all from the overall operations of the
creditors have been met, claims on the financial auxiliaries less any amount
residual value. allocated to general and special
PAID-UP CAPITAL reserves, which is established as a
The term, Paid-up capital (share capital cushion to cover operational
capital) or Shares would the used and financial risks.
synonymously for the money raised CURRENT YEAR RESULT
through sale of stocks. It includes (UNAPPROPRIATED PROFIT/LOSS)
financial auxiliaries’ shares fully paid This constitutes accumulated revenues
in cash, issued as bonus shares and less expenses for the current year if
shares issued for consideration other
23
 such profit or loss has not been Punjab provincial cooperative banks in
included in retained earnings. Pakistan fall under this category.
Accumulated revenues during the year ii. FOREIGN CONTROLLED
minus expenditures minus taxes minus CORPORATIONS

retained earnings minus general and Foreign controlled non-financial

special reserves minus dividend corporations are resident non-financial
payable are the current year result. corporations controlled by non-
GENERAL AND SPECIAL RESERVES residents. It is difficult to determine the
General and special reserves are degree of effective control in a
capital redemption reserve, profit prior corporation that has majority
to incorporation, share premium, ownership shares; the general rule is
statutory reserves and appropriations that owners should exercise majority
of retained earnings. General and control in the form of greater than 50%
Special reserves should be valued as the voting shares.
the nominal amount of earnings that
have been retained. iii. PUBLIC ENTERPRISES
VALUATION ADJUSTMENT Resident corporations controlled by
Valuation adjustment represents the the government. Control may be
net counterpart of all changes (Surplus exercised through ownership of more
/ deficit on revaluation) in the values than half the voting shares, legislation,
of assets and liabilities on the balance decree, or regulations that establish
sheets except for valuation changes specific corporate policy or allow the
recorded in the profit and loss government to appoint the directors.
accounts.
B. SECTORAL DEFINITIONS iv. OTHER DEPOSIT ACCEPTING
i. DEPOSIT MONEY INSTITUTIONS INSTITUTIONS
These consist of resident depository These consist of resident depository
corporations and quasi corporations, corporations and quasi corporations,
which have any liabilities in the form which have any liabilities in the form
of deposits payable on demand, of deposits that may not be readily
transferable by cheques or otherwise transferable or in the form financial
useable for making payments. instruments such as short-term
Scheduled banks, specialized banks and certificates of deposits, which are
close substitutes for deposits.

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 v. OTHER FINANCIAL determined by their costs of production
INTERMEDIARIES and which are sufficiently high to have
Corporations engaged in financial a significant influence on the demand
intermediation, which raise funds on of their services, but any surpluses
financial markets, but not in the form must be retained within these entities as
of deposits, and use them to acquire their status as “NPI”.
other kind of financial assets. These
include discount houses, venture viii. NPIS (NON-MARKET)
capital companies, mutual funds, Non-market producers that provide
housing finance companies and most of their output free or at prices
cooperative banks except Punjab that are not economically significant
provincial cooperative bank etc. (i.e., at prices that do not significantly
influence amounts supplied or amounts
vi. FINANCIAL AUXILIARIES purchased). NPIs engaged mainly in
This sub-sector of the financial sector non-market production fall into two
includes financial institutions that main groups:
engage in activities closely related to i. The NPIs that are mainly
financial intermediation but do not act controlled and financed by the
as intermediaries. The examples are government
financial auxiliaries, public exchanges ii. Those NPIs providing non-
and securities markets brokers and market goods and services to
agents, financial guarantees households and financed mainly
corporations, loan brokers, floatation by transfers from non-
corporations, insurance brokers etc. government sources –
and also corporations which arrange households, corporations, or non-
hedging instruments such as swaps, residents etc. These are
options, and futures or other commonly termed as NPISHs, a
instruments which are continually separate sector of the economy.
being developed as a result of wide-
ranging financial innovation. ix. EMPLOYERS
The employers' are self-employed
vii. NPIS (MARKET) persons with paid employees.
NPIs engaged in market production are
classified as entities, which charge fees

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 x. OWN ACCOUNT WORKERS
The employers' are self-employed
persons without paid employees.

xi. EMPLOYEES
These are persons, which receive
income from their employers.

xii. RECIPIENT OF PROPERTY AND

TRANSFER INCOMES

These are persons, which receive

income from property or transfers as
the largest source.

xiii. ACCUMULATED DEPRECIATION:

Accumulated depreciation is that has
taken place on a particular asset up to
the present time.

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