I.C.S.

COLLEGE OF ARTS, COMMERCE AND SCIENCE,

KHED, RATNAGIRI

Bank Final Accounts

UNIT- VM.COM PART I

 Introduction
 The Banking Regulation Act, 1949, originally called
the Banking Companies act,1949, deals with the
operational aspect of Banking business in India.
Section 5 (b) of the act defines Banking as “ accepting
for the purpose of lending or investment of deposits
of money from the public, repayable on demand or
otherwise, and with drawl by cheque, draft and order
or otherwise.”
 Sec 5 (c) of the act defines a banking company
as “any company which transacts the business
of banking in India.”
 Banking companies , usually maintain the following 2 Books
and 9 Ledgers:-
 BOOKS: a. Receiving counter cash book
b. Paying counter cash book
 LEDGERS: a. Fixed Deposit a/c Ledger
b. Current Deposit a/c Ledger
c. Savings Deposit a/c Ledger
d. Recurring Deposit a/c Ledger
e. Investment Ledger
f. Loan Ledger
g. Cash, Credit Ledger
h. Bill Discounted & Purchase Ledger
i. Customers Acceptance, Endorsements &
Guarantee Ledger.
 In addition to the cash book and general
ledgers, the banking institution, maintains
chief register and memorandum books
such as demand draft register, bill for
collection register, share security register,
safe custody register, jewellery register,
letter of credit register, safe deposit vault
register, standing order register.
Accounting relating to Slip System
of Posting
 Posting is made under Banking Institutions
under this system. The slips are prepared
by the organisation itself which have to be
duly filled in by the customers. There is no
original journal entry or subsidiary book
maintained by the bank. The transactions
are directly posted into ledger a/c with
the help of these slips. So, this system is
known as slip system of posting.
 The main slips used in Banking
Companies are:-
1. Pay in slips
2. Withdrawal slips
3. Recurring deposit slips
4. Current a/c form
5. Demand draft form
6. Cheques etc.,
These slips serves as a base for entering
into ledgers in general ledgers
 The main reasons to accept or adopt this
system of posting by the banks are:-
1. The bank must have customers a/c updated
immediately, for the customer may present
a cheque or operate his ATM at any time.
In other words to know the sufficient
balance in the account.
2. The number of transactions in a bank are
large in number & the adoption of slip
system helps in distribution of work of
posting into ledger a/c among many
persons. In other words, division of work is
possible.
3. It ensures smooth flow of work in updating
of accounts.
Advantages of Slip System of Posting
1. Bank saves a lot of time of the clerical
staff, as slips are duly filled in by the
customers themselves.
2. Subsidiary books are avoided as posting
is done from these slips directly into
ledger accounts, i.e. the burden of bank
employees is reduced
3. Entries can be recorded with minimum
delay as slips can easily be passed from
one hand to another
Disadvantages
1. The slips duly filled in by the customers
may be lost , destroyed or
misappropriated by the customers as
they are loose sheets.
NOTE:-
 Under sec 8 of the Banking Regulation Act
the revised and prescribed form given by the
RBI with regard to preparation of P&L a/c &
B/S with effect from 31/3/1992 should be
strictly followed.
 In the prescribed format- Form A relates to
Balance Sheet & Form B relates to Profit &
Loss Account
 Any item is found to be missing in the
problem should be recorded as per the
Performa & in the amount column it should
be mentioned as Nil.
Banker’s Balance Sheet: Liabilities Side
Sched Current Previous
Capital and Liabilities ule Year Year
No. Amount Amount
1.Capital 1 XX
2.Reserves and Surplus 2 XX
3.Deposits 3 XX
4.Borrowings 4 XX
5.Other Liabilities and 5 XX
Provisions
Total (A) ----------
----------
Assets Side of Banker’s Balance Sheet
Schedule Current Previous
Assets No. Year Year
Amount Amount
1. Cash in Hand and Balance with RBI 6 XX
2. Balances with other banks, Money
at Call and at Short Notice 7 XX
3. Investments
4. Advances
5. Fixed Assets 8 XX
6. Other assets 9 XX
10 XX
Total(B) 11 XX
--------------
Contingent Liabilities --------------
Bills for Collection
12 XX
XX
Profit and Loss Account
Particulars Schedule Current Previous
No. Year Year
Amount Amount
I. Income:
Interest Earned 13 XX
Other Income 14 XX
Total (A) -----------------
II. Expenditure: -----------------
Interest Expended
Operating Expenses 15 XX
Provisions and Contingencies 16 XX
- XX
Total (B) --------------
III Profit/Loss:
Net Profit for the Current Year (A-B) ---------------
Profit/Loss B/F from last year XX
XX
Total (C) --------------
IV Appropriations:
1. Transfer to Statutory Reserve (25% of CYNP) ----------------
2. Transfer to Other Reserve XX
3. Proposed Dividend XX
4. Balance C/F to Balance Sheet XX
XX
Total (D) ----------------

----------------
Schedule 1-Capital
Current Previous
Particulars Year Year
Amount Amount

Authorised Capital
--------Shares of Rs…….each XX -
Issued & Subscribed Capital
……….Shares of Rs---------each __XX__ -
Called up & Paid up Capital
--------Shares of Rs…….each XX -
(-) Calls Unpaid/Calls in Arrears (+)XX -
(+) Shares Forfeited (-) XX -
----------- -
Total -----------
Schedule 2: Reserves & Surplus
Current Previous
Particulars Year Year
Amount Amount

I. Statutory Reserve XX -
II. Capital reserve XX -
III. Securities Premium Account XX -
IV.Revenue and other Reserves XX -
V. Credit balance in Profit & Loss A/c XX -
_______
Total _______ -
Schedule 3: Deposits
Current Previous
Particulars Year Year
Amount Amount

I. Demand Deposits:
a. From Banks XX -
b. From Others XX -
II. Savings Bank Deposits
XX -
III. Term Deposits
XX -
____
Total ____ -
Schedule 4: Borrowings
Current Previous
Particulars Year Year
Amount Amount

I. Borrowings in India: -
a. RBI XX -
b. Other Banks XX -
c. Other Institutions
XX -
II. Borrowings Outside India
XX -
______
Total ______ -
Schedule 5: Other Liabilities & Provisions
Current Year Previous
Particulars Amount Year
Amount

I. Bills Payable XX -
II.Inter-Office Adjustments XX -
III.Interest Accrued XX -
IV.Others (including
Provisions) XX -
Total ____ -
Schedule 6: Cash in Hand and with RBI
Current Year Previous Year
Particulars Amount Amount

I. Cash in Hand (including foreign XX -

exchange)
II. Balances with Reserve Bank of India
(a) In current account XX -
(b) in other account XX -
------------- _
Total -----------
Schedule 7: Balances with Banks and Money at
Call & at Short Notice
Particulars Current Previous
Year Year
Amount Amount

I. In India:
(a) Balances with Banks:
1. Current Accounts XX -
2. Deposit accounts XX -
(b) Money at Call & at Short Notice
1. With Banks XX -
2. With other Institutions XX -
II. Outside India
1. Current Accounts XX -
2. Deposit Accounts XX -
3. Money at Call & at Short Notice XX -
______
Total ______ -
Schedule 8:Investments
Current Year Previous
Particulars Amount Year
Amount

I. Investments in India
1. Government Securities XX -
2. Other Approved Securities XX -
XX -
3. Shares
XX -
4. Debentures and Bonds
XX -
5. Investment in Subsidiaries xx -
6. Others
II. Investments Outside India: XX -
1. Government Securities XX -
2. Investment in Subsidiaries/Joint Ventures XX -
3.Other Investments ____________
Total ____________ -
Schedule 9: Advances
Current Previous
Particulars Year Year
Amount
Amount
(A)- Types
1. Bills Purchased and Discounted XX -
2. Cash Credits, Overdrafts and Loans XX -
Repayable on Demand
3. Term Loans: XX -
TOTAL (A) XX -
(B) - Security
1. Secured by Tangible Assets XX -
2. Secured by Bank/Government Guarantees XX -
3. Unsecured XX -
TOTAL (B) XX -
(C)- Area
1. Advances in India:
a. Priority Sector XX -
b. Public Sector XX -
c. Banks XX -
 Current Previous
Particulars
Schedule 10: Fixed Assets
Year
Amount
Year
Amount

I. Premises:
Cost+additions
/purchases-sales-
depreciation
XX -
II. Building under
Construction XX -
III.Other Fixed XX -
Assets XX -
_____
Total _____ -
Schedule 11: Other Assets
Current Previous
Particulars Year
Amount
Year
Amount

I. Inter-Office Adjustments XX -
II. Interest Accrued XX -
III.Tax Paid in Advance/TDS XX -
IV.Stationery and Stamps
XX -
V. Non-Banking Assets acquired in
satisfaction of claims XX -
VI.Others XX -
_____
Total _____ -
Schedule 12: Contingent Liabilities
Particulars Current Previous
Year Year
Amount Amount

I. Claims against the Bank not

Acknowledged as Debt XX -
II. Liability for Partly Paid Investments XX -
III. Outstanding Forward Exchange
Contracts XX -
IV. Guarantees Given on behalf of
Customers XX -
V. Acceptances, Endorsement and other
Obligations XX -
VI. Other Contingent Liabilities XX -
_________
Total _________ -
Schedule 13: Interest Earned
Current Previous
Year Year
Particulars Amount Amount

I. (A)Interest on Advances XX -
(B) Discount on Bills Discounted XX -
II. Income on Investment XX -
III.Interest on Balances with
RBI/Other Banks
IV.Others XX -
XX -
_____
Total _____ -
Schedule 14: Other Income
Particulars Current Previous
Year Year
Amount Amount

Commission, Exchange and Brokerage XX -

. Profit on Sale of Investment (-) Loss
I. Profit on Revaluation of Investments (-) Loss XX -
V. Profit on Sale of Land, Building and other Assets XX -
. Profit on Exchange Transactions (-) Loss
I. Income Earned by way of Dividend XX -
II.Miscellaneous Income XX -
XX -
_____
Total _____ -
Schedule 15: Interest Expended
Current Previous
Particulars Year Year
Amount Amount

XX
I. Interest on Deposits -
II. Interest Paid to RBI and other
Banks XX -
III. Others
XX
----------------- -

Total -
-----------------
Schedule 16: Operating Expenses
Particulars Current Previous
Year Year
Amount Amount

I. Staff and Employees 'Remuneration XX -

II. Rent, Taxes and Lighting XX -
III. Printing and Stationery XX -
IV. Advertisement and Publicity XX -
V. Depreciation on Fixed Assets XX -
VI. Directors’ Fees, Allowances and Expenses XX -
VII.Auditors Fees and Expenses XX -
VIII.Law Charges XX -
IX. Postage, Telegrams, Telephone etc XX -
X. Repairs and Maintenance XX -
XI. Insurance XX -
XII.Other Expenditure XX -
_______
Provisions & Contingencies
Current Previous
Particulars Year Year
Amount Amount

1. Bad Debt XX -
2. Provision for Bad Debt XX -
3. Provision for Taxation XX -
4. Provision for Repairs &
Renewals XX -
5. Provision for Diminution in
the value of Investments XX -
____
Total ____ -
NOTE:
 Previous year amount column, will remain blank from
exam point of view, In Form A, B & schedules.
 In the P&L a/c , the total of III & IV will remain same
 Under other income, i.e. schedule 14, if the loss on
sale of investment , loss on revaluation, loss on sale of
fixed asset, loss on exchange transactions exceed the
amount of concerned profit, then, it should be
adjusted or deducted from the grand total of
schedule 14.
 There is no schedule number for provisions &
contingencies, but it has to be prepared similar to
other schedules and the total/ net amount is
recorded under II in form B, i.e P&L a/c , under the
heading Expenditure.
Items Peculiar to Banker’s Balance Sheet

 Rebate on Bills Discounted: The amount of discount

pertaining to the unexpired period
 Treatment -As a Trial Balance Item: Should be shown on
the liabilities side under the head, "Other Liabilities &
Provisions” [Schedule 5]
 As an adjustment Item:
a. Deduct it from Discount included in “Interest
Earned” in the Profit & Loss Account[Sch. 13]
b. Show it on the Liabilities side under the head
"Other Liabilities & Provisions” [Schedule 5]
Inter-branch Adjustment
 Transactions between the branches arising out of
remittances create inter-branch indebtedness
 It is shown as Inter-branch Adjustment
 It is shown on the Assets Side of the Balance Sheet,
if it has a debit balance[Sch.No.11-Other Assets]
 It is shown on the Liabilities side, if has a credit
balance[Sch.5-Other Liabilities]
Non-Banking Assets
 Assets acquired by a Bank in the process of
lending i.e., selling off the tangible property of
the borrowers in case of default in the payment
of loan or interest
 Shown on the Assets side of the Balance Sheet
[Sch.No.11-Other Assets]
 Statutory Reserve
 Sec 17-At least 25% of the profits prior to
declaration of dividend must be transferred to
Reserve Fund
 It should be done even if the problem does not
make any mention of it
(Hidden Mandatory Adjustment)
 Bills Purchased and Discounted
 These are bills of exchange purchased by the
Bank from the customers or discounted by it.
For the Bank, these are assets. The Bank holds
them as Holder for Value and not as agents of
the customers
 They are part of Advances and hence shown
under Schedule 9 on the Assets side of the
balance Sheet
Travellers’ Cheques
 Cheques issued to the Travelling Customers against
payment of cash. Any person can pay the money and
request the Bank to issue TC. He can encash it at
other branches or other banks. They are treated as
Bills Payable and shown under Schedule 5 [Other
Liabilities and Provisions]
 TCs encashed given as adjustment should be
treated as Deduction from Bills Payable on the
Liabilities side and Cash in Hand on the Assets side
Letters of Credit
 Importers deposit money and get the LC
issued to their name. On the basis of that,
the customer can draw a Bill of Exchange
and the Banker accepts it
 Like TC, this is Bills Payable and hence
shown under Schedule 5 [Other
Liabilities and Provisions] on the Liabilities
side of the Balance Sheet
 Bills for Collection
 These are Bills of Exchange received by the
Bank from the customers as Agent for
Collection. They are neither assets nor
Liabilities
 Hence they are shown as Footnote to the
Balance Sheet by way of information
Acceptances, Endorsements and Other
Obligations
 The bank undertakes certain liabilities on behalf of
the customers like accepting a Bill of Exchange or
endorsing it. As long as the customer is solvent,
there is no problem for the banker. If the customer
becomes insolvent, it becomes a liability for the
banker. Therefore, it is a Contingent Liability and
shown below the Balance Sheet as an information
Payment of Dividend
 A bank can pay dividend only after it writes off
all the capitalised expenses [as shown under
the heading, ’Miscellaneous Expenditure’ in
case of a joint stock company] like Preliminary
Expenses
Bad Debt and RBD
 They are treated in the same way as in the case of a
joint stock company
 Bad Debt is shown under Provisions and
Contingencies under Expenditure in Profit and Loss
A/c. New RBD is to be added to Bad Debt and the
old RBD is to be deducted.
 The New RBD is shown as a deduction from
Advances on the Asset side of the Balance Sheet
[Schedule 9]
Provision for Taxation
 New Provision for Taxation, given in the adjustment
should be deducted from Interest and Discount in
Schedule 13 in Profit and Loss Account and again
shown under Other Liabilities and Provisions
[Schedule 5]
 Income Tax Paid, Old Provision and New Provision
should be adjusted to Interest and Discount under
Schedule 13- The rule is
IT + New Provision-Old Provision. Positive balance
should be deducted and negative balance is to be
added
Advance Income Tax Paid
 This is to be treated as any prepaid
expense. It is shown under Assets side
under the heading,” Other Assets
[Schedule No.11]
Tax Deducted at Source
 TDS may have debit balance or credit balance
 The debit balance shows the deduction made by
others while paying the interest or dividend. It is
shown under Other Assets [Schedule 11]
 The credit balance indicates Tax Deducted by the
Bank while crediting or paying the interest to
others. It is a liability and hence shown under the
heading’ Other Liabilities and Provisions’
[Schedule 5]
THANK YOU
 Notes on company final accounts balance sheet

1. Share capital
Authorized Capital xxxxx
Issued capital xxxxx
Subscribe and Paid up capital xxxxx
(-) Calls in arrears xxxx
_____
Xxxxx
(+) Forfeited share a/c xxxxx
______ xxxxx

2. Reserves and surplus

General reserve (opening) xxxxx
(+) addition during the year xxxx
______ xxxxx
Securities/share premium xxxxx
(-) Prem. On redemption of Pref.shares xxxxx
_______ xxxxxx
Capital redemption reserve (CRR) XXXXX
Capital reserve(CR) XXXXX
Debenture redemption reserve (DRR) XXXXX
Surplus: Profit /loss (opening) xxxxxx
(+) Profit for the current year xxxxxx
______
XXXXX
 Less: Appropriations
Transfer to general reserve xxxxx
Final dividends /Interim/proposed xxxxx
Corporate dividends tax @ 17% xxxxx
______ XXXXX

4.Long term borrowing :

Debentures xxxx
Bonds xxxx
Term loans xxxx
Public deposits xxxxx
Other loans and advances xxxxx
_____
XXXXX
______
5. Deferred tax Liabilities(net)
Accounting Income xxxxx
Taxable Income xxxxx
______
XXXXX
_______
6. Other long term liabilities
Premium payable on pref. shares xxxxx
Premium payable on debenture xxxxx
______
XXXXX
______
7.Long term Provisions:
Provisions for retirement benefits payable
To employees xxxxx
Provision for warranty claims xxxxx
_____
XXXXX
_____
8.Short terms borrowings:
Bank over draft xxxxx
Cash credit from the banks xxxxx
Short terms deposits xxxxx
Loans from other parties’ xxxxx
_____
XXXXX
______
9. Trade payables
Trade creditors xxxxx
Sundry creditors xxxxx
Bills payables xxxxx
______
XXXXX
_______
10. Other current liabilities
O/s Interest on loan xxxxx
O/s Interest on Debentures xxxxx
O/s Expenses xxxxx
Unpaid dividends xxxxx
Income received in advance xxxxx
 Calls in advance xxxxx
PF payable xxxxx
ESI payable xxxxx

VAT Payable xxxxx

Central tax/sales tax payable xxxxx

_____

XXXXX

______

11. Short term Provision

Provision for tax xxxxx

Proposed dividends xxxxxx

Provision for expenses xxxxx

Other provisions xxxxxx

________

XXXXXX

________
 ASSETS

12. Tangible assests

Land and building xxxxx

(-) dep xxxx xxxxx

plant and machinery xxxxx

furniture and fixture xxxxx

vehicles xxxxx

office equipments xxxxx

vehicles xxxx

others xxxx

_______

XXXXX

________

13. Intangible assets

Goodwill xxxxx

Trademarks xxxxxx

Computer software xxxxxx

Copyright and patents xxxxxx

License and franchise xxxxxxx

XXXXXX
14. Capital work-in-progress XXXX

15. Intangible assets under development XXXX

16. Non current investment

Shares, Debentures and bonds xxxxx

Investment in property xxxxxx

Mutual funds xxxxx

Govt securities (long term) xxxxxx

Investment in Pvt firms xxxxx

______

XXXXX

______

17. deferred tax assets (net) XXXXX

18 . Long term loans and advances XXXXX

19. Other non-current assets XXXXX

20. Current investment XXXXX

21. Inventories

Closing stock of

Raw material xxxxx

Work-in progress(WIP) xxxxx

Finished goods xxxxx XXXXX

 Stores and spares xxxxx

Loose tools (net) xxxxx

Goods in transit xxxxx

XXXX

22. Trade receivable

Bills receivable xxxxx

Debtors xxxxx

(-) Prov. For Bad debts xxxx xxxx

XXXX
_____
 FORM OF BALANCE SHEET

Name of company
Balance Sheet of ……. As on ……

Note no Amount

I. EQUITY AND LIABILITIES

Shareholders’ funds
(a) Share capital 1 Xxxxxxxx
(b) Reserves and surplus 2 Xxxxxxxx
(c) Money received against share warrants 3 Xxxxxxxx

Non – current liabilities

(a) Long – terms borrowing 4 Xxxxxxx
(b) Deferred tax liabilities(net) 5 Xxxxxxx
(c) Other long term liabilities 6 Xxxxxxx
(d) Long term provision 7 Xxxxxxxx

Current liabilities
(a) Short – term borrowing 8 Xxxxxxx
(b) Trade payables 9 Xxxxxxxx
(c) Other current liabilities 10 Xxxxxxxx
(d) Short terms provisions 11 Xxxxxxx

Total
XXXXXX

II. ASSETS

Non- current assets

(a) Fixed assets
Tangible assets 12 Xxxxxx
Intangible assets 13 Xxxxxx
Capital WIP 14 Xxxxxxx
Intangible assets under development 15 Xxxxxxx
(b) Non - current investments 16 Xxxxxxx
(c) Deferred tax assets(net) 17 Xxxxxxx
 (d) Long-term loan and advances 18 Xxxxxxx
(e) Other non-current assets 19 Xxxxxxx

Current assets
(a) Current investment 20 Xxxxxxx
(b) Inventories 21 Xxxxxxx
(c) Trade receivables 22 Xxxxxxx
(d) Cash and cash equivalents 23 Xxxxxxx
(e) Short-terms loans and advances 24 Xxxxxxx
(f) Other current assets 25 Xxxxxxx
XXXXXX
Total
____________