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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 Books


It 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 20,00,000
(b) If it has place of business other than in Mumbai or 15,00,000
Kolkata;
2. For Banking Companies Incorporated in India
(a) If it has place of business in Mumbai or Kolkata; or both 10,00,000
(b) If it does not have place of business in Mumbai or Kolkata;
but have place of business
(I) in more than one state 5,00,000
(II) in only one state
- If there is only one place of business 50,000
- If it has more than one place of businesses
For principal place of business 1,00,000
For every other place of business, in the same district Additional 10,000
For every other place of business outside the district Additional 25,000
(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 5,00,000
(II) for each place situated outside the city of Mumbai and Additional 25,000
Kolkata
(The total in this case, however, need not exceed Rs.
10,00,000)

(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)
As on 31.3…. As on 31.3…
Schedule
(Current year) (previous year)
Capital& Liabilities
Capital 1
Reserve & surplus 2
Deposit 3
Borrowings 4
Other liabilities and provisions 5
TOTAL
ASSETS
Cash and balance with Reserve Bank of 6
India
Balances with banks and money at call 7
and short notice
Investments 8
Advances 9
Fixed assets 10
Other assets 11
TOTAL
Contingent liabilities. 12
Bills for collection
SCHEDULE 1- CAPITAL

As on 31.3…. As on 31.3…
(Current year) (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…. As on 31.3…
(Current year) (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…. As on 31.3…
(Current year) (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…. As on 31.3…
(Current year) (previous year)
I. Borrowing in India
II. (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…. As on 31.3…
(Current year) (previous year)
I. Bills Payable
II. Inter – office adjustments (net)
III Interest accrued
IV Others (including provisions)

TOTAL

SCHEDULE 6 – CASH AND BALANCES WITH RESERVE BANK OF INDIA

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Cash in hand
II (Including foreign currency notes)
Balances with Reserve
Bank 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…. As on 31.3…
(Current year) (previous year)
I. 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
II Outside India
(I) In Current Accounts
(II) Money at call and short notice
TOTAL
GRAND TOTAL
SCHEDULE 8 – INVESTMENTS

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Investments in India in
I. Government securities
II. Other approved securities
III. Shares
IV. Debenture and bonds
V. Subsidiaries and/or joint ventures
VI. Others (to be specified)
TOTAL
II. 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…. As on 31.3…
(Current year) (previous year)
A. (I) Bills purchased and discounted
(II) Cash credits, overdrafts and loans
repayable on demand
(III) Term loans
TOTAL
B. (I) Secured by tangible assets
(II) Covered by Bank / Government
Guarantees
(III) Unsecured
TOTAL
C.I Advances in India
(I) Priority sectors
(II) Public sector
(III) Banks
(IV) Others
TOTAL
II Advance outside India
(I) Due from banks
(II) Due from others
(a) bills purchased and discounted
(b) syndicated loans
(c) others
TOTAL
GRAND TOTAL
(C.I & II)

SCHEDULE 10– FIXED ASSETS

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Premises
At cost as on 31st March of the preceding year
Additions during the year
Deductions during the year
Depreciation to date
II Other fixed articles (including furniture &
fixture)
At cost as on 31st March of the preceding year
Additions during the year
Deductions during the year
Depreciation to date
TOTAL
SCHEDULE 11– OTHER ASSETS

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Inter – office adjustments (net)
II Interest accrued
III Tax paid in advance/tax deducted at source
IV Stationary and stamps
V Non-banking assets acquired in satisfaction
claims
VI Others
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…. As on 31.3…
(Current year) (previous year)
I Claims against the bank not acknowledged as
debts
II Liability for partly paid investments
III 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…………………

As on 31.3…. As on 31.3…
Schedule
(Current year) (previous year)
I INCOME
Interest earned 13
Other income 14
TOTAL
II EXPENDITURE
Interest expended 15
Operating expenses 16
Provisions and contingencies
TOTAL
III PROFIT / LOSS
Net profit / Loss (-----) for the year
Profit / loss (-----) brought forward
TOTAL
IV APPROPRIATIONS
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government/Proposed
dividend
Balance carried over to balance
sheet
TOTAL

SCHEDULE 13– INTEREST EARNED

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Interest / discount on advances/bills
II Income on investments
III Interest on balances with reserve bank of
IV India and other inter-bank funds
V Others

TOTAL

SCHEDULE 14– OTHER INCOME

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Commission, exchange and brokerage
II Profit on sale of investments
Less: Loss on sale of investments
III Profit on revaluation of investments
Less: Loss on revaluation of investments
IV Profit on sale of land, buildings and other
assets
Less: loss on sale of land, buildings and other
assets.
V Profit on exchange transactions
Less: Loss on exchange transactions
VI Income earned by way of dividends etc. from
Subsidiaries / companies and / or joint
ventures abroad / in India
VII Miscellaneous Income
TOTAL
Note: Under Items I to V loss figures may be shown
in brackets.

SCHEDULE 15– INTEREST EARNED

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Interest on deposits
II Interest on Reserve Bank of India/inter –
bank borrowing
III Others

TOTAL

SCHEDULE 16– OTHER INCOME

As on 31.3…. As on 31.3…
(Current year) (previous year)
I Payments to and provisions for employees
II Rent, taxes and lighting
III Printing and stationery
IV Advertisement and publicity
V Depreciation on bank’s publicity
VI Directors fees, allowance and expenses
VII Auditors fees, allowances and expenses
(including branch auditors)
VIII Law charges
IX Postage, Telegrams, Telephones, etc.
X Repairs and maintenance
XI Insurance
XII Other Expenditure
TOTAL
Guidelines of RBI for compilation of Financial Statements
Balance Sheet

Notes and instructions for


Item Coverage
compilation
Capital Nationalized Banks
Capital (Fully owned by Central The capital owned by Central
Government) 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 I The amount brought in by


outside India banks by way of start up
capital as prescribed by RBI
should be shown under this
head.
II The amount of deposit kept
with RBI, under sub-section 2
of section 11 of the Banking
Regulation Act, 1949 should
also be shown.
Other Banks (Indian) Authorized, issued, subscribed,
Authorised Capital called-up capital should be
(….Shares of Rs. Each) given separately. Calls – in –
Issued Capital (…Share of Rs. arrears will be deducted from
Each) called up capital while the paid
Subscribed capital (..share of Rs. – up value of forfeited shares
....each) should be added thus arriving
Called up capita (…share of at the paid-up capital. Where
Rs….each) necessary, items which can be
Less: calls unpaid Add: Forfeited combined should be shown
shares: Paid up capital) 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 (I) Statutory Reserves Reserves created in terms of Section
Surplus 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 The expression ‘Revenue Reserve’
Reserves 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 Includes all bank deposits repayable
on demand.
(II) From others 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 Includes all types of bank deposits
repayable after a specified term.
(II) From others 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 The total of these two items will
India agree with the total deposits.
(II) Deposits of branches
outside India.
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 Includes borrowing / refinance
India obtained from Reserve Bank of India
(II) Other Banks Includes borrowings / refinance
obtained from commercial banks
(including co-operative banks).
(III) Other institutions and Includes borrowings/refinance
agencies 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)
(II) Borrowings Outside India Includes borrowing of Indian
branches abroad as well as
borrowings of foreign branches.
Secured borrowing included This item will be shown separately,
above. 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 I. Bills Payable Includes drafts, telegraphic transfer,
and provisions traveler Cheque, mail transfers
payable, pay slips, bankers Cheque
and other miscellaneous items.
II. Inter – office adjustments The inter-office adjustments balance,
(net) 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 Includes net provision for income
provisions) 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
‘Others (including
provisions).
Cash and I. Cash in Hand (Including Includes cash in hand including
Balances with foreign currency notes) foreign currency notes and also
the Reserve foreign branches in the case of banks
Bank of India having such branches.

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

(II) Money at call short notice


(a) with banks Includes deposits repayable within
(b) with other 15 days or less than 15 days notice
institutions lent in the inter-bank call money
market.

II. Outside India


(I) Current Accounts Includes balances held by foreign
(II) Deposits Accounts 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.
(III) Money at call and Includes deposits usually classified
short notice in foreign countries as money at call
and short notice.
Investments I. Investments in India
(I) Government Includes central and state
securities 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.
(II) Other approved Securities other than government
securities securities, which according to the
banking regulation act, 1949 are
treated as approved securities,
should be included here.
(III) Shares Investments in shares of companies
and corporations not included in
item (ii) should be included here.
(IV) Debentures and Investments in debentures and books
shares of companies and corporations not
included in item (ii) should be
included here.
(V) Investment in Investments in subsidiaries/joint
subsidiaries/joint ventures (including RRBs) should be
ventures included here.
(VI) Others 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 All foreign government securities
securities (including including securities issued by the
local authorities) local authorities may be classified
under this head.
(II) Subsidiaries and / or All investments made in the share
joint ventures abroad capital of subsidiaries floated outside
India and/or joint ventures abroad
should be classified under this head.
(III) Others All other investments outside India
may be shown under this head.

Advances A. (I) Bills purchased and In classification under section ‘A’,


discounted all outstanding – in India as well as
(II) Cash credits, overdrafts outside – less provisions made, will
and loans repayable on be classified under three heads as
demand indicated and both secured and
(III) Term loans unsecured advances will be included
under these heads, including overdue
installments.
B.
(I) Secured by tangible All advance or part of advances
assets which are secured by tangible assets
may be shown here. The item will
include advances in India and
outside India.

(II) Covered by Bank / Advances in India and outside India


Government to the extent they are covered by
guarantee guarantee of Indian and Foreign
governments and Indian and foreign
banks and DICGC & ECGC are to
be included
(III) Unsecured All advances not classified under (i)
and (ii) will be included here.
C. I. Advance in India
(I) Priority sectors Total of ‘A’ should tally with total of
(II) Public sector ‘B’ advance should be broadly
(III) Banks classified into ‘Advances in India’
(IV) Others and ‘Advances outside India’.
Advances in India will be further
classified on the sartorial basis as
indicated.
C. II. Advances outside India Advances to sectors which for the
(I) Due from Banks time being as classified as priority
(II) Due from others sectors according to the instructions
(a) Bills purchased of the Reserve Bank are to be
and discounted classified under the head ‘Priority
(b) Syndicated loans 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
(c) Others 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 Premises wholly or partly owned by
March of the the banking company for the purpose
preceding year of business including residential
(II) Additions during the premises should be shown against
year ‘premises’. In the case of premises
(III) Deductions during the and other fixed assets, the previous
year balance, additions thereto and
(IV) Depreciation to date 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.

II. Other Fixed Assets Motor vehicles and all other fixed
(Including furniture and fixtures) assets other than premises but
(I) At cost on 31st March including furniture and fixtures
of the preceding year should be shown under this head.
(II) Additions during the
year
(III) Deductions during the
year
(IV) Depreciation to date
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 The amount of tax deducted at
deduced at source 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 Immovable properties/tangible assets
acquired in satisfaction of claims 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 I. Claims against the bank not _____
liabilities acknowledged as debts
II. Liability for partly paid Liabilities on partly paid shares,
Investments. debentures, etc. will be included in
this head.

III. Liability on account of Outstanding forward exchange


outstanding forward contracts may be included here.
exchange contracts.
IV. Guarantees given on behalf Guarantees given for constituents in
of constituents India and outside India may be
(I) In India shown separately.
(II) Outside India This item will include letters of
credit and bills accepted by the bank
V. Acceptances, endorsement and of behalf of customers.
other obligations.

Arrears of cumulative dividends,


VI. other items for which the bills rediscounted underwriting
bank is contingently liable contracts, estimated amounts of
contracts remaining to be executed
on capital account and not provided
for, etc. are to be included here. Bills
Bills for and other items in the course of
collection 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 Includes interest and discount on all


advances/bills 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 Includes interest on balance with
Reserve Bank of India and other Reserves banks and other banks, call
inter-bank funds 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 Includes all remuneration on service
brokerage 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 Includes profit/loss on sale of
Less: Loss on sale of securities, furniture, land and
investments 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 Deduction. The net profit/loss on
investments revaluation of assets may also be
Less: Loss on revaluation of shown under this item.
investments
IV. Profit on sale of land,
buildings and other
assets less: Loss on
sale of land, buildings
and other assets
V. Profit on Exchange Includes profit/loss on dealing in
transaction foreign exchange, all income earned
Less: Loss on by way of foreign exchange,
exchange commission and charges on foreign
transactions. exchange transactions excluding
VI. Income earned by interest which will be shown under
way of dividends etc. interest, only the net position should
from subsidiaries, be shown. If the net position is a
companies, joint loss, it is to be shown as a deduction.
ventures abroad/in
India
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 I. Interest on Deposits Includes interest paid on all types of
expended deposits including deposits from
banks and other institutions.
II. Interest on Reserve Bank of Includes discount/interest on all
India/inter-bank borrowings 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 I. Payments to and provisions for Wages, allowances, bonus, other
Expenses employees 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 Includes depreciation on bank’s own
property property, motor cars and other
vehicles, furniture, electric fitting,
vaults, lifts, leasehold properties,
non-banking assets, etc.
VI. Director’s fees, allowances Includes sitting fees and all other
and expenses. 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 Includes the fees paid to the statutory
(including branch auditors fees auditors and branch auditors for
and expenses) 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, Includes all postal charges like
telephones etc. 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 _____ Includes all provisions made for bad
contingencies 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 assets
2. Sub – Standard Assets
3. Doubtful assets and
4. 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 34,900
Interest on fixed deposits 36,500
Rebate on bills discounted 4,800
Commission charged on customers 910
Office expenses 15,500
Discount on cash credits 19,400
Interest on cash credits 22,400
Balance of profit & loss a/c 1,200
Rent and taxes 1,800
Interest on overdraft 12,800
Director’s Remuneration 420
Interest on savings deposits accounts 6,900
Postal expenses 150
Printing and stationery 390
Other expenses 180

Solutions: -

Schedule 13: Interest Earned

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


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

Total 84,700

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 910


II. 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) 43,400
II. Interest on borrowings -
III. Others -

Total 43,400

Schedule 16: Operating Expenses

I. Salaries 1,800
II. 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 150
.
IX. 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

Schedule
Particulars Amount (Rs.)
number
Incomes:
Interest earned 13 84,700
Other incomes 14 910
Total 85,610
Expenditure:
Interest expended 43,400
Operating expenses 18,440
Provisions and contingencies
Total 61,840
Profit / Loss:
Profits for the year 23,770
Profits b/d 1,200
Total 24,970
Appropriations:
Transfer to Statutory Reserve (23,70x25%) 5,942
Transfer 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 2,59,000
Interest on fixed deposits 2,75,000
Rebate on bills discounted 49,000
Commission charged on customers 8,200
Establishment expenses 54,000
Discount on bills discounted 1,95,000
Interest on cash credits 2,23,000
Interest on current account 42,000
Rent and taxes 18,000
Interest on overdraft 54,000
Director’s and audit fees 4,200
Interest on savings bank deposits 68,000
Postal and telegrams 1,400
Printing and advertisement 2,900
Sundry charges 1,700

Solutions: -

Schedule 13: Interest Earned

I. Interest and discount (2,29,000+2,23,000+54,000+1,95,000- 6,82,000


49,000)
II. Interest on investments -
III. Interest on RBI deposits -
IV. Others -

Total 6,82,000

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 8,200


II. 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) 3,85,000


II. 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 2,900
IV. Advertisement and publicity -
V. Depreciation -
VI. Director’s fees 4,200
VII. Audit fees -
VIII Law charges -
.
IX. Postage and telegram 1,400
X. 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

Schedule
Particulars Amount (Rs.)
number
Incomes:
Interest earned 13 6,82,000
Other incomes 14 8,2000
Total 6,90,200
Expenditure:
Interest expended 15 3,85,000
Operating expenses 16 82,200
Total 4,67,200
Profit / Loss:
Profits for the year 2,23,200
Profits b/d -
Total 2,23,200
Appropriations:
Transfer to Statutory @ 25% 55,700
Profits 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 25,90,000
Interest on fixed deposits 27,50,000
Commission 82,000
Establishment charges 5,04,000
Interest on cash credits 22,30,000
Interest on current account 42,000
Discount on bills discounted 14,60,000
Interest on current and savings deposits 11,00,000
Rent and taxes 1,80,000
Interest on overdrafts 15,40,000
Director’s fees 30,000
Audit Fees 12,000
Postal and telegrams 14,000
Printing and Stationary 29,000
Sundry 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 77,80,000


(2,59,000+22,30,000+14,60,000+15,40,000-40,000)
II. Interest on investments -
III. Interest on RBI deposits -
IV. Others -
Total 7,80,000

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 82,000


II. 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) 38,50,000


II. 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 29,000
IV. Advertisement and publicity -
V. Depreciation 30,000
VI. Director’s fees 12,000
VII. Audit fees -
VIII Legal charges 14,000
.
IX. Postage and telegram -
X. Repairs and maintenance -
XI. Insurance -
XII. Others (Establishment charges & Sundry charges) 5,57,000
(5,40,000+17,000)

Total 8,22,000

Provisions and Contingencies -


(i) Bad debts written off 4,00,000
(ii) Provision for taxation 15,34,500
Total 19,34,500

Trimurthy Bank Ltd.

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


Schedule
Particulars Amount (Rs.)
number
Incomes:
Interest earned 13 77,80,000
Other incomes 14 82,000
Total 78,62,000
Expenditure:
Interest expended 15 38,50,000
Operating expenses 16 8,22,000
Provisions and Contingencies 19,34,500
Total 66,06,500
Profit / Loss:
Profits for the year 12,55,500
Profits b/d -
Total 12,55,500
Appropriations:
Transfer to Statutory (12,55,000x25%) 3,13,875
Profits 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 51,800
Interest on fixed deposits 55,800
Commission received 1,600
Salaries and allowances 10,800
Discount on bills discounted 29,200
Rebate on bills discounted 9,800
Interest on cash credit 44,600
Interest on current accounts 8,400
Rent and taxes 3,600
Interest on overdrafts 30,8001
Director’s fees 600
Audit Fees 200
Interest on Saving Bank deposits 13,600
Postal and telegrams 300
Printing and Stationary 600
Locker rent 200
Transfer fees 100
Depreciation on Bank properties 1,000
Sundry 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) 1,46,600


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

Total 1,46,600

Schedule 14: Other Incomes

I. Commissions, Exchange and Brokerage 1,600


II. 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) 77,000


V. Interest on borrowings -
VI. Others -

Total 77,000

Schedule 16: Operating Expenses

I. Payment to employee 10,800


II. Rent, rates, taxes and lighting 3,600
III. Printing and stationary 600
IV. Advertisement and publicity -
V. Depreciation Banks property 1,000
VI. Director’s fees 600
VII. Audit fees 200
VIII Law charges -
.
IX. Postage, telegram & telephone 300
X. 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 30,000
Total 38,000

Mysore Bank Ltd.

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

Schedule
Particulars Amount (Rs.)
number
Incomes:
Interest earned 13 1,46,600
Other incomes 14 1,9000
Total 1,48,500
Expenditure:
Interest expended 15 77,000
Operating expenses 16 17,500
Provisions and Contingencies 38,000
Total 1,32,500
Profit / Loss:
Profits for the year 16,000
Profits b/d -
Total 16,000
Appropriations:
Transfer to Statutory Reserve at 25% 4,000
Profits 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 35,000
Interest on fixed deposits 36,000
Commission received 1,000
Office expenses 15,000
Discount on bills discounted 20,000
Interest on cash credits 23,000
Balance of profit/loss a/c 1,200
Rent and taxes 1,800
Interest on overdrafts 12,900
Director’s remuneration 450
Interest on savings deposits 7,000
Postal expenses 150
Printing and Stationary 400
Other expenses 200

Solutions: -

Schedule 13: Interest Earned

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


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

Total 90,900

Schedule 14: Other Incomes

I. Commissions, Exchange and Brokerage 1,000


II. 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) 43,000


II. 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 400
IV. Advertisement and publicity -
V. Depreciation -
VI. Director’s fees 450
VII. Audit fees -
VIII Legal charges -
.
IX. Postage and telegram 150
X. Repairs and maintenance -
XI. Insurance -
XII. Others (Establishment charges & Sundry charges) 15,200
(5,40,000+17,000)

Total 18,000

Provisions and Contingencies -


Total -

Canara Bank Ltd.

Profit / Loss Account for the Year Ended 2000-2001

Schedule
Particulars Amount (Rs.)
number
Incomes:
Interest earned 13 90,900
Other incomes 14 1,000
Total 91,900
Expenditure:
Interest expended 15 43,000
Operating expenses 16 18,000
Provisions and Contingencies -
Total 61,000
Profit / Loss:
Profits for the year 30,900
Profits b/d 1,200
Total 32,100
Appropriations:
Transfer to Statutory Reserve at 25% (30,900x25%) 7,725
Profits 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 518
Interest on cash credit 446
Discount on bills discounted 390
Interest on overdraft 108
Interest on savings bank deposit 220
Interest on fixed deposits 554
Commission, Exchange and brokerage 16.4
Rent, taxes and lighting 36
Auditor’s fees 2.4
Postage, telegram and telephones 2.8
Sundry charges 2
Advertisement and publicity 1.4
Director’ fess 6
Printing and stationery 0.4
Law charges 1.4
Payment to employees 108
Locker rent 0.7
Transfer fees 1.4
Depreciation 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) 1,364


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

Total 1,364

Schedule 14: Other Incomes

I. Commissions, Brokerage and Exchange 16.4


II. 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) 774


II. Interest on borrowings -
III. Others -

Total 774

Schedule 16: Operating Expenses

I. Salaries 108
II. Rent, rates and lighting 36
III. Printing and stationary 0.4
IV. Advertisement and publicity 1.4
V. Depreciation 10
VI. Director’s fees 6
VII. Audit fees 2.4
VIII Law charges 1.4
.
IX. Postage and telegram 2.8
X. Repairs and maintenance -
XI. Insurance -
XII. Others 2.0

Total 170.4

Provisions and Contingencies -


Bad debts 58
Total 58

P.N. Bank

Profit / Loss Account for the Year Ended 31.03.1998

Schedule
Particulars Amount (Rs.)
number
Incomes:
Interest earned 13 1,364
Other incomes 14 18.50
Total 1,382.50
Expenditure:
Interest expended 15 774
Operating expenses 16 170.4
Provisions and Contingencies 58
Total 1,002.4
Profit / Loss:
Profits for the year 380.1
Profits b/d -
Total 380.1
Appropriations:
Transfer to Statutory Reserve at 25% (30,900x25%) 95
Profits 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 20,000
Local bills discounted 9,00,000 Fixed deposits 20,00,000
Reserve fund 3,85,000 Profit & loss a/c balance (Cr) 1,10,000
Loans, advances 14,00,000 Stamps on hand 5,000
Unpaid dividend 5,000 Cash balance 2,50,000
Overdrafts 23,00,000 Cash balance with other banks 6,50,000
Current 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 A
Indian Banking Corporation
Balance Sheet as on 31st March, 2002

Schedule Year ended


number 31-03-2002 Rs.
Capital and Liabilities
Capita 1 10,00,000
Reserves and Surplus 2 5,45,000
Deposits 3 45,00,000
Borrowings 4 -
Other liabilities and provisions 5 5,000
Total 60,50,000
Assets
Cash and balances with Reserve Bank of India 6 2,50,000
Balances with banks and money at call and short notice 7 6,50,000
Investments 8 5,25,000
Advances 9 46,00,000
Fixed assets 10 20,000
Other assets 11 5,000
Total 60,50,000
Contingent Liabilities 12 NIL
As on 31-03-
2002 Rs.
Schedule 1 – Capital
Authorised capital
1,20,000 shares of Rs. 10 each 12,00,000
Paid up capital
1,00,000 shares of Rs. 10 each 10,00,000
Total 10,00,000
Schedule 2 – Reserves and Surplus
Reserve Fund 3,85,000
Profit and Loss account 1,10,000
Investment reserve (Rs. 5,25,000 – Rs. 4,75,000) 50,000

Total 5,45,000
Schedule 3 – Deposits
Current and savings deposits 25,00,000
Fixed deposits 20,00,000
Total 45,00,000
Schedule 4 – Borrowings NIL
Schedule 5 – other liabilities and provisions
Unpaid dividend 5,000
Total 5,000
Schedule 6 – cash and balance with reserve bank of India 2,50,000
Schedule 7 – Balance with other Banks and money
at call and Short notice
Cash balance with other banks 6,50,000
Schedule 8 – Investments
Investment at cost 4,75,000
Add: Increase in the value of investments 50,000 5,25,000
Total 5,25,000
Schedule 9 – Advances
Local bills discounted 9,00,000
Loans and advances 14,00,000
Overdrafts 23,00,000
Total 46,00,000
Schedule 10 – Fixed Assets
Furniture 20,000
Total 20,000
Schedule 11 – Other Assets
Stamps on hand 5,000
Schedule 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 9,00,000
Premises 1,00,000 Profit and Loss A/c (Cr.) 45,000
Rebate on Bills discounted 5,000 Investments 7,00,000
Traveller’s Cheque 2,00,000 Bills Purchased 15,00,000
Deposits 56,00,000 Acceptances for customers 5,00,000
Loans 22,00,000 Bills for collection 4,00,000
Reserves 3,00,000 Depreciation fund on premises 10,000
Cash in hand 30,000 Cash with RBI 5,20,000
Cash 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. 10,000


2. Money at call recovered Rs. 20,000

Solution:
Form A
Lucky Bank Limited
Balance Sheet as on 31st March, 2002

Schedule Year ended


number 31-03-2002 Rs.
Capital and Liabilities
Capita 1 2,00,000
Reserves and Surplus 2 3,45,000
Deposits 3 56,00,000
Borrowings 4 -
Other liabilities and provisions 5 2,35,000
Total 63,80,000
Assets
Cash and balances with Reserve Bank of India 6 5,60,000
Balances with banks and money at call and short notice 7 13,30,000
Investments 8 7,00,000
Advances 9 37,00,000
Fixed assets 10 90,000
Other assets 11 -
Total 63,80,000
Contingent Liabilities 12 5,00,000
Bills for collection 4,00,000
As on 31-03-
2002 Rs.
Schedule 1 – Capital
20,000 shares of Rs. 100 each 2,00,000
Schedule 2 – Reserves and Surplus
Reserves 3,00,000
Profit and Loss account 45,000
Total 3,45,000
Schedule 3 – Deposits
Deposits 56,00,000
Schedule 4 – Borrowings NIL
Schedule 5 – Other liabilities and provisions
Bills payable
Traveller’s Cheque 2,00,000
Less: Paid 10,0000 1,90,000
Rebate on Bills 5,000
Pension Fund 40,000
Total 2,35,000
Schedule 6 – cash and balance with reserve bank of India
Money at call received 20,000
Cash in hand 30,000
Less: Traveller’s Cheque Paid (-) 10,000 40,000
Cash with Reserve Bank of India 5,20,000
Total 5,60,000
Schedule 7 – balance with banks and money at call and short notice
Money at call and short notice 9,00,000
Less: Money at call recovered 20,000 8,80,000
Cash with Reserve Bank of India 4,50,000
Total 13,30,000
Schedule 8 – Investments 7,00,000
Schedule 9 – advance
Loan 22,00,000
Bills purchased 15,00,000
Total 37,00,000
Schedule 10 – fixed assets
Premises 1,00,000
Less: Depreciation Fund 10,000 90,000
Total 90,000
Schedule 11 – Other Assets NIL
Schedule 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 2,00,000
Shares of Rs. 100 each full paid 1,20,000
Statutory Reserve Fund (Fully invested in 5% Government Securities at par) 12,875
Bad debts 1,27,725
Establishment expenses 13,65,227
Current deposits 7,48,440
Interest paid 17,20,000
Savings account 47,500
Acceptance for customers 4,95,000
Discount 8,20,400
Profit and loss account (Cr) (1.4.2000) 8,75,000
Fixed deposits 2,92,900
Commission and exchange 4,80,000
Premises 22,650
Cash in hand 12,86,400
Interest received 92,500
Investments in shares (market value Rs. 2,00,000)

Year ended
31-03-2001 Rs.
Schedule 1 – Capital 2,00,000
Schedule 2 – Reserves and Surplus
Statutory Reserves
Opening Balance 1,20,000

Additions during the year 54,503 1,74,503


Balance in profit and loss a/c (from appropriate a/c) 9,63,909
Total 11,38,412
Schedule 3 – Deposits
Current Deposits 13,65,227
Savings account 17,20,000
Fixed deposits 8,75,000
Total 39,60,227
Schedule 4 – Borrowings NIL
Schedule 5 – Other liabilities and provisions
Unexpired discount 48,000
Provision for Doubtful debts 8,000
Provision for Taxation (55/100 x 8,20,400) 4,51,220
Add: Surcharge 5/100 x 4,51,220 22,561 4,73,781
Total 5,29,781
Schedule 6 – cash and balance with reserve bank of India
Cash in hand 22,650
Schedule 7 – balance with banks and money at call and short notice
Cash with Banks in India 2,84,500
Schedule 8 – Investments 92,500
5% Government Securities 1,20,000
Total 2,12,500
Schedule 9 – advance
Term Loan in India 10,00,000
Cash credit hypothecation in India 12,56,000
Bills purchased 16,00,000
Loans to Employees 40,770
Total 38,96,770
Schedule 10 – Fixed assets
Premises 4,80,000
Schedule 11 – Other Assets
Difference in Trail balance 9,32,000
Schedule 12 – Contingent Liabilities
Acceptance for customers 47,500
Total 47,500
Schedule 13 – Interest Earned
Interest Received 12,86,400
Discount 4,95,000
Total 17,81,400
Schedule 14 – Other Income
Commission and Exchange 2,92,900
Dividend on Investment 8,000 3,00,900
Schedule 15 – Interest Expended
Interest Paid 7,48,440
Schedule 16 – Operating Expenses
Bad Debts 12,875
Establishment Expenses 1,27,725
Salaries Etc: 48,000
Chief Executive remuneration 3,97,467 4,45,467
Total 5,87,067
Note: Provision and Contingencies
Provision for doubtful debts 8,000
Provision for taxation (4,51,220 + 22,561) 4,73,781
Unexpired 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 31 st 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 20,00,000
Profit and loss a/c as on 1-4-2000 80,666
Current account deposits 68,25,658
Fixed deposit accounts 77,91,108
Savings banks deposits 51,36,000
Directors fees 9,960
Audit fees 2,000
Furniture (Cost Rs. 1,00,000) 74,560
Interest and Discount 4,20,466
Commission and exchange 2,04,000
Investment Reserve Fund 70,000
Branch Adjustments (Cr.) 93,788
Postage and Telegrams 2,312
Printing and Stationery 6,780
Rent and Taxes 17,014
Provident fund contribution 20,000
Salaries and allowance 1,04,300
Building (Cost Rs. 6,00,000) 4,10,000
Law charges 3,300
Cash in hand and with RBI 16,32,648
Cash with other Banks 24,10,250
Loans cash credits and overdrafts 1,40,00,000
Bills discounted 28,01,040
Unexpired insurance 874
Stamps in hand 378
Statutory Reserve Fund 1,30,000
Reserve Fund 4,00,000
Contingency Reserve 1,00,000
Investments. 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

Schedule
Capital and Liabilities Amount (Rs.)
number
Capital 1 20,00,000
Reserves and Surplus 2 11,44,416
Deposits 3 1,97,51,766
Borrowings 4 Nil
Other Liabilities and Provisions 5 1,05,588
Total 2,30,02,770
Assets
Cash in Hand and with RBI 6 16,32,648
Cash with other banks and money at call and short notice 7 24,10,250
Investments (cost 17,56,250) 8 17,00,000
Advances 9 1,67,97,060
Fixed assets 10 4,61,560
Other assets 11 1,252
Total 2,30,02,770
Contingent and provisions 12 4,00,000

Profit and Loss Account for the Year Ended 31.3.2001

Schedule Amount
Particulars
Number (Rs.)
Income:
Interest earned 13 4,08,646
Other incomes 14 2,04,000
Total 6,12,646
Expenditure:
Interest Expended 15 Nil
Operating Expenses 16 1,88,666
Provisions and Contingencies 3,980

Total 1,92,646
Profit / Loss:
Profits b/d 80,666
Net profit for the year (I – II) 4,20,000
Total 5,00,666
Appropriations:
Statutory Reserve (25% of 4,20,000) 1,05,000
Special Reserve -
Government -
Others -
Profits and loss (Bal. Fig) 3,95,666
Total 5,00,666
Year ended
31-03-2001 Rs.
Schedule 1 – Capital
Equity share capital in Rs. 100 shares 20,00,000
Schedule 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 11,44,416
Schedule 3 – Deposits
Current Deposits 68,25,658
Fixed Deposits account 77,91,108
Savings Banks Accounts 51,36,000
Total 1,97,52,766
Schedule 4 – Borrowings NIL
Schedule 5 – Other liabilities and provisions
B.P -
Rebate 11,800
Branch Ads 93,78
Total 1,05,588
Schedule 6 – cash and balance with reserve bank of India 16,32,648
Schedule 7 – balance with banks and money at call and short notice 24,10,250
Schedule 8 – Investments
Investment at Market Value 17,00,000
Schedule 9 – advance
1. Bills Discounted and purchased 28,01,040
2. Cash Credit overdraft and loans pay other demand 1,39,96,020
Total 1,67,97,060
Schedule 10 – Fixed assets
Premises at cost 6,00,000
(-) Depreciation upto the date 2,06,000
3,94,000
Furniture at cost 1,00,000
(-) Depreciation upton to date 32,400
67,560
Total 4,61,560
Schedule 11 – Other Assets
Unexpired insurance 874
Stamps in hand 378
Total 1,252
Schedule 12 – Contingent Liabilities
Bills accepted on behalf of customers 4,00,000
Schedule 13 – Interest balanced
Interest and discount 4,20,466
Less: Rebate on bills discounted 11,800
Total 4,08,646
Schedule 14 – Other Income
Commission and Exchange 2,04,000
Schedule 15 – Operating Expenses
1. Payment to and provision for employees 1,24,300
2. Rent, Taxes and Lighting 17,014
3. Printing and stationary 6,780
4. Advertisements and publicity -
5. Depreciation on Banks property 23,000
6. Directors fees and allowances 9,960
7. Auditors fees and allowances 2,000
8. Law Charges 3,300
9. Postage, Telegrams and Telephones 2,312
10. 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 Credit
Subscribed capital (50,000 shares of Rs. 20) 10,00,000
Reserve Fund 3,00,000
Loan and cash credits 29,70,000
Premises 1,00,000
Indian government securities 6,00,000
Current deposits 22,00,000
Fixed deposits 2,50,000
Savings bank deposits 1,00,000
Salaries 56,000
General expenses 54,800
Rent and taxes 4,600
Director fees 3,600
Profit and loss a/c 1.4.2001 32,000
Interest and discount 2,56,000
Telegraphic transfer 1,00,000
Circular note 50,000
Branch adjustments 50,000
Stock of stationery 17,000
Bills purchased and discounted 92,000
Interim dividend paid 34,000
Recurring deposits 40,000
Shares 1,00,000
Cash in hand and RBI 1,86,000
Money at call and short notice 1,60,000
43,78,000 43,78,000

Adjustments:

a) Provide for doubtful debts 5,000


b) Interest accrued on investments 8,000
c) Unexpired discount 380
d) Endorsement on behalf of customers 1,15,000
e) Premises added during the year 20,000
Depreciation premises at 5% on opening balance. Prepare bank final accounts.

Welcome Bank Ltd


Balance Sheet as on 31.3.2002

Schedule
Capital and Liabilities Amount (Rs.)
number
Capital 1 10,00,000
Reserves and Surplus 2 4,33,620
Deposits 3 25,90,000
Borrowings 4 -
Other Liabilities and Provisions 5 2,05,380
Total 42,29,000
Assets
Cash and balance with Reserve Bank 6 1,86,000
Balance with banks and money at call and short notice 7 1,60,000
Investments 8 7,00,000
Advances 9 30,62,000
Fixed assets 10 96,000
Other assets 11 25,000
Total 42,29,000
Contingent liabilities 12 1,15,000

Welcome Bank Ltd..


Profit and Loss Account for the Year Ended 31.3.2002

Schedule Amount
Particulars
Number (Rs.)
Income:
Interest earned 13 2,55,620
Other incomes 14 8,000
Total 2,63,620
Expenditure:
Interest Expended 15 -
Operating Expenses 16 1,23,000
Provisions and Contingencies 5,000

Total 1,28,000
Profit / Loss:
Profits b/d 32,000
Net profit for the year (I – II) 1,35,620
Total 1,67,620
Appropriations:
Statutory Reserve (sec. 17) (134620 x 20%) 33,905
Interim Dividend 34,000
Others 99,715
Profits and loss c/d 1,67,620
Notes on account 17 -

Year ended
31-03-2002 Rs.
Schedule 1 – Capital
Subscribed Capital (50,000 shares of Rs. 20) 10,00,000
10,00,000
Schedule 2 – Reserves and Surplus
Statutory Reserve 33,905
Profit and loss a/c 99,715
4,33,620
Schedule 3 – Deposits
Current Deposits 22,00,000
Fixed Deposits account 2,50,000
Savings Banks Accounts 1,00,000
Recurring Deposits 40,000
Total 25,90,000
Schedule 4 – Borrowings NIL
Schedule 5 – Other liabilities and provisions
Branch advance 50,000
Telephone Transfer 1,00,000
Circular Note 50,000
Rebate on Bills 380
Pro : for DD 500
Total 2,05,380
Schedule 6 – cash and balance with reserve bank of India 1,86,000
Schedule 7 – balance with banks and money at call and short notice 1,60,000
Schedule 8 – Investments
Indian Govt Securities 6,00,000
Shares 1,00,000
Total 7,00,000
Schedule 9 – advance
Loans and cash credits 29,70,000
Bills purchased and discounted 92,000
Total 30,62,000
Schedule 10 – Fixed assets
Premises 1,00,000
(-) Depreciation 4,000
Total 96,000
Schedule 11 – Other Assets
Stock of Stationary 17,000
Interest Accrued on Investment 8,000
Total 25,000
Schedule 12 – Contingent Liabilities
Endorsement on behalf of customers 1,15,000
Total 1,15,000
Schedule 13 – Interest & Discount
Interest and discount 2,56,000
Less: Unexpired discount 380
Total 2,55,620
Schedule 14 – Other Income
Interest accrued on Investments 8,000
Total 8,000
Schedule 15 – Operating Expenses
Interest paid Nil
Schedule 16 – Operating Expenses
Salaries 56,000
General Exp 54,800
Rent and Taxes 4,600
Directors Fees 3,600
Depreciation 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 Credit
Share capital
20,000 shares of Rs. 100 each 20,00,000
Bad debts 1,28,710
Reserve fund investments 10,00,000
Reserve fund 10,00,000
General expenses 1,82,420
Current accounts 2,02,44,22
0
Interest paid 1,60,520
Deposit accounts 69,20,230
P & L A/c (Cr) 1-4-2000 2,29,340
Acceptance and guarantee 15,42,820
Discount 2,43,760
Endorsement and guarantee 74,020
Commission 44,240
Cash 2,26,540
Interest received 5,32,260
Cash with RBI 20,12,100
Endorsement guarantee (Control) 74,020
Owing by foreign correspondents 2,00,440
Customers liabilities for acceptances 15,42,820
Short loans 64,82,060
Loans and advances 1,54,56,70
0
Investments 98,82,540
Bills discounted 62,28,240
Premises 22,17,900
3,93,12,95 3,93,12,95
0 0

Adjustments:

1. Reserve Rs. 64,380 for rebate on bills discounted.


2. Provide for taxation Rs. 20,000
3. 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 Ltd


Balance Sheet as on 31.3.2001

Schedule
Capital and Liabilities Amount (Rs.)
number
Capital 1 20,00,000
Reserves and Surplus 2 12,71,780
Deposits 3 2,71,64,450
Borrowings 4 64,82,060
Other Liabilities and Provisions 5 84,380
Total 3,70,02,670
Assets
Cash and balance with Reserve Bank 6 22,38,640
Balance with banks and money at call and short notice 7 -
Investments 8 1,08,82,540
Advances 9 2,18,85,380
Fixed assets 10 19,96,110
Other assets 11 -
Total 3,70,02,670
Contingent liabilities and bills for collection 12 16,16,840

Global Bank Ltd..


Profit and Loss Account for the Year Ended 31.3.2002

Schedule Amount
Particulars
Number (Rs.)
Income:
Interest earned 13 7,11,640
Other incomes 14 44,240
Total 7,55,880
Expenditure:
Interest Expended 15 1,60,520
Operating Expenses 16 4,04,210
Provisions and Contingencies (see note) 1,48,710

Total 7,13,440
Profit / Loss:
Profits b/d [2,29,340 + 2,00,000] 4,29,340
Net profit for the year (I – II) 42,440
Total 4,71,780
Appropriations:
Statutory Reserve (25% of 42,440) 10,610
Interim Dividend 2,00,000
Profits and loss c/d 2,61,170
Total 4,71,780
Notes on account 17 -

Year ended
31-03-2001 Rs.
Schedule 1 – Capital
20,000 shares of Rs. 100 each 20,00,000
20,00,000
Schedule 2 – Reserves and Surplus
Statutory Reserve 10,610
R/F 10,00,000
Profit and loss a/c 2,61,710
12,71,780
Schedule 3 – Deposits
Deposits Accounts 69,20,230
Current Accounts 2,02,44,220
Total 2,71,64,450
Schedule 4 – Borrowings
Short Loans 64,82,060
Total 64,82,060
Schedule 5 – Other liabilities and provisions
Rebate on Bills 64,380
Provision for Tax 20,000
Total 84,380
Schedule 6 – cash and balance with reserve bank of India
Cash 2,26,540
Cash with RBI 20,12,100
Total 22,38,640
Schedule 7 – balance with banks and money at call and short notice Nil
Schedule 8 – Investments
Investments 98,82,540
Add: Reserve Fund Investment 10,00,000
Total 1,08,82,540
Schedule 9 – advance
Loans and advance 1,54,56,700
Add: Bills discounted 62,28,240
Owing by foreign correspondents 2,00,440
Total 2,18,85,380
Schedule 10 – Fixed assets
Premises 22,17,900
(-) Depreciation 2,21,790
Total 19,96,110
Schedule 11 – Other Assets Nil
Schedule 12 – Contingent Liabilities
Acceptances for customers 15,42,820
Endorsements and Guarantees 74,020
Total 16,16,840
Schedule 13 – Interest & Discount
Interest received 5,32,260
Discount 2,43,760
7,76,020
(-) Rebate 64,380
Total 7,11,640
Schedule 14 – Other Income
Commission 44,240
Total 44,240
Schedule 15 – Interest Expended
Interest paid 1,60,520
Total 1,60,520
Schedule 16 – Operating Expenses
General Expenses 1,82,420
Depreciation 2,21,790
Total 4,04,210
Note : Provision and Contingencies
Reserve for Bad Debt 1,28,710
Provision 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 2,70,000
Interest on loans 2,50,000
Commission charged to customers 8,000
Establishment expenses 40,000
Discount on bill discounted 2,05,000
Interest on cash credits 2,20,000
Interest on current account 40,000
Rent and taxes 15,000
Interest on overdrafts 60,000
Director’s fees 4,000
Audit Fees 2,000
Interest on S.B. Deposits 60,000
Postage and telegrams 1,200
Printing and Stationary 2,000
Sundry 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 2,590
Interest on fixed deposits 3,170
Commission 82
Payment to employees 540
Discount on bills discounted 1,060
Interest on cash credit 2,230
Rent, tax and lighting 180
Interest on overdraft 1,540
Director’s fees, allowance and expenses 30
Auditor’s fees and expenses 12
Interest on savings bank deposits 680
Postage, telegram and telephones 14
Printing and stationery 29
Sundry 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 Credit
Subscribed Capital
50,000 equity shares of Rs. 10 each 5,00,000
Reserve Fund 2,50,000
Loans, Cash credit and overdraft 2,85,000
Premises 50,000
Indian Government Securities 4,00,000
Current Deposit 1,00,000
Fixed Deposit 1,25,000
Savings Bank Deposit 50,000
Salaries 28,000
General Expenses 27,400
Rent, Rates and Taxes 2,300
Director’s Fees 1,800
Profit and Loss A/c 1.4.99 16,000
Interest and Discount 1,28,000
Stationary and Stamps (Stock of) 8,500
Bill Purchased and Discounted 46,000
Interim Dividend paid 17,000
Recurring Deposits 20,000
Shares 50,000
Cash in hand and with RBI 1,93,000
Money at Call and Short Notice 80,000
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. 380
4. Interim dividend declared was 4% actual
5. Rs. 10,000 were added to the premises during the year.
6. Endorsement made on behalf of customers totaled Rs. 1,15,000
7. 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 Credit
Share capital 1,50,000
General reserve 61,500
Profit and loss a/c 60,000
Money at call and short notice 22,500
Deposits 8,89,500
Cash in hand 30,000
Cash with RBI 45,000
Borrowings 90,000
Bills payable 24,000
Staff security deposits 10,500
Investments 96,000
Buildings 68,400
Balance with other banks 57,000
Cash credits 7,95,000
Interest on deposits and borrowings 1,18,500
Bills purchased 1,80,000
Discount on bills 15,000
Commission and brokerage 13,500
Interest on loans 1,75,500
Income from investments 8,700
Salary and other expenses 72,000
Audit fees 5,100
Postage, printing and stationery 6,300
Depreciation 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 Credit
Interest and Discount 2,60,000
Share capital 6,00,000
Reserve Fund 3,00,000
Deposits 8,00,000
Telegraphic transfer 2,00,000
Travelers letter of credit 3,00,000
Gift cheques 60,000
Pension fund 1,00,000
Borrowings from bank 75,000
Unclaimed dividend 25,000
Rent 20,000
Commission 50,000
Profit/Loss A/c on 1.4.2001 40,000
Bills payable 10,000
Building 2,50,000
Money at call and short notice 2,75,000
Furniture 40,000
Cash in hand 2,75,000
Cash at bank 3,25,000
Investments 1,75,000
Loan, cash credit and overdrafts 11,40,000
Interest on deposits 1,75,000
Audit fees 10,000
Salaries 50,000
Director’s fees 5,000
Printing and stationary 5,000
Depreciation 7,500
Non – banking assets 1,00,000
Other 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. 7,500
f) Liabilities outstanding on forward exchange contract Rs. 3,000
g) Directors propose 5% dividend on share capital.

Prepare Bank accounts.