ACCOUNTING & FINANCE FOR

BANKERS-JAIIB-MODULE D

PRESENTATION BY
S.D.BARGIR
Joint Director-IIBF
 Topics
Partnership accounts
Final accounts of banking companies
Company accounts
Balance sheet equation
Accounting in a Computerized
environment
 Partnership Accounts

Introduction
Definition
Partnership deed
In the absence of partnership deed/if
deed is silent
Profit sharing ratio Equal
No interest on capital
No interest on drawings
interest@6% on loan given by partner
No salary /no commission/ no remuneration
Capital accounts under fluctuating capital
method
 Methods of capital accounts
Fixed
Capital account-transactions relating to
capital
Current account
Other transactions such as Interest, profit,
goodwill, past profits/losses & adjustments
Fluctuating
One account- all transactions
 GOODWILL
Its reputation, super profit earning capacity of a
firm
Necessity
change in profit sharing ratio
Admission, retirement, death
Sale of business
Methods:
Average profit
Super profit
capitalization of profit
 Methods of goodwill
Average profit Super profit Capitalization of
(AP) (SP) profit
AP x Multiplier SP x multiplier (Capitalised
SP = AP less NP value) less
Actual Capital
NP=normal profit

Multiplier is Multiplier is
given given
GOODWILL IMPORTANT ENTRIES
ADMISSION
When goodwill is raised and written off
Debit goodwill and credit old partners capital a/c
(old ratio)
Debit All partners capital a/c & credit goodwill (new
ratio)
RETIREMENT/DEATH
When goodwill is raised and written off
Debit goodwill and credit old partners capital a/c
(old ratio)
Debit Continuing partners capital a/c & credit
goodwill (new ratio)

ADMISSION
revaluation of assets/ liabilities, goodwill,
capital adjustments, balance of reserves, past
losses
RETIREMENT
As per Act of 1932, retirement by consent,
partnership deed provision, at will by giving
proper notice
revaluation of assets/ liabilities, goodwill,
capital adjustments, balance of reserves, past
losses
 Joint life policy
Premium treated as Premium treated as Premium treated as
expenses asset reserves
At the end of each Each year difference difference between SV
year, premium w/o to P between surrender and BV is w/o to Jt.
& L A/c value and Book value Policy Reserve A/c
is w/o to P & L A/c

receipt of policy amt. receipt of policy amt. receipt of policy amt.

Amount received is If amount is > SV, the Policy amount credited
credited to partners excess is credited to to partners
partners
 Types of partners
Active
Sleeping
Quasi
nominal
 FINAL ACCOUNTS OF BANKING
COMPANIES

Definition
Requirements Accounts & audit
Third Schedule annexed to BRA
Form A- Balance sheet
Form B- Profit & Loss Account
Audit
Submission of accounts- RBI- within 3 months
Publication of accounts- within 6 months
Auditor-prior approval of RBI for appt/removal
 Balance sheet-Form A
Capital & Liabilities Assets
1.Capital 6.Cash & Bank Bal. RBI
2. Reserves & surplus 7.Balances with Banks &
Money at call and SN
3.Deposits 8.Investments
4.Borrowings 9Advances
5 Other Liabilities & Provisions 10.Fixed Assets
11.Other Assets
 Demand deposits
Credit balances in OD and CC
Deposits payable at call
Overdue deposits
In-operative current accounts
Matured time deposits
Matured cash certificates
Matured certificate of deposits
 Contingent liabilities
Schedule-12
Claims against bank not acknowledged as debts
Liability for partly paid shares
Liability on account of outstanding forward
exchange contracts
Acceptances ,endorsement & other obligations
Other items for which bank is contingently
liable.
 PROFIT & LOSS ACCOUNT-
FORM B
Income
Interest Earned Schedule.13
Other Income Schedule.14
Expenditure
Interest Expended Schedule.15
Operating Expenses Schedule.16
Provision for contingencies
Profit /Loss
Appropriations
Transfer to Reserves
Proposed dividend
Balance carried to Balance
sheet
 NOTES TO ACCOUNTS

Significant Schedule.17
Accounting
Policies
Notes forming Schedule.18
part of Accounts
 Other Income
Profit on exchange transactions
Profit on sale of investments
Profit on revaluation of investments
Profit on sale of fixed assets
Letting of locker (income from locker
charges )
Misc. income -Godown rent
 Ponder over these points
Govt. securities shown at book value and diff.
between MV and BV is given in the notes
If some fixed assets are w/o on revaluation of
assets/reduction of capital every B/S after wards
should. show the revised figure for next 5 yrs. With
the date & amt. revised
Other fixed assets includes vehicles, furniture and
fixtures. Lockers and safe deposit vaults are
included in furniture
 Ponder over these points
20% to reserve fund before declaring dividend
Gold is treated as investment
Silver is treated as other assets
Income from performing assets is recognized on
accrual basis while in r/o non-performing assets it is
on cash basis
In r/o NPA, if income is already recognized, then
make provision
ASSET CLASSIFICATION ETC
Asset Classification
Performing and
non performing ( remain out of order)
Income Recognition
Performing-accrual basis
Non performing-cash basis
Asset Classification
Std-0.40% (revised from 0.25%)
Sub-Std.<18 months-10%
Doubtful>18 months-usl-100%-secured.3yrs-50%,>1&<3-
30%-upto 1year-20%
Loss assets-100%
 SLR & NON SLR DEPOSITS
Held to maturity Available for Held for trading
sale
Investment should Freedom available Freedom available
not exceed 25% of
total investment
-no marked to market. -Marked to market Marked to market
Profit on sale treated as -profit on sale of
cap. Reserve investment.taken to
P&L a/c

To be sold within
90 days
 COMPANY ACCOUNTS
Features of a Joint stock Company
Incorporated association
Artificial person
Perpetual succession
Common seal
Limited liability
Separation of management from ownership
Transferability of shares
Separate legal status
Large membership
 Types of companies
On the basis of On the basis of On the basis of
incorporation ownership liability
Chartered Private company Co.limited by
company shares
Statutory Public company Co. Ltd. by
company guarantee
Registered Government Co. with
company company unlimited
liability
Foreign Holding
company company
 SHARE CAPITAL

EQUITY
PREFERENCE
CUMULATIVE
REDEEMABLE
PARTICIPATING
 SHARE CAPITAL
AUTHORISED CAPITAL
ISSUED CAPITAL
SUBSCRIBED CAPITAL
CALLED CAPITAL
PAID UP CAPITAL
 ISSUE OF SHARE AT PAR
-BANK Debited -
- SHARE APPLICATION
- credited
-SHARE APPLICATION Debited -
-SHARE CAPITAL - Credited
Over subscription
-share application Debited -
-share capital - Credited
-bank (refund) - Credited
-share allotment - Credited
 SHARE ALLOTMENT/SHARE CALL
Share allotment a/c Debited -
- Credited
Share capital a/c
Bank a/c Debited -
- Credited
Share allotment a/c
Share call a/c Debited -
- Credited
Share capital a/c
Bank a/c Debited -
- Credited
Share call a/c
Calls in arrears a/c Debited -
- Credited
Share allotment a/c
Share call a/c - Credited
 Issue of shares at premium
Share application/ Debited -
allotment a/c
Share capital A/c - Credited
Share premium A/c - Credited
 Issue of shares at discount
Share allotment A/c Debited -
Discount on issue of Debited -
shares A/c
Share capital A/c - Credited
 Forfeiture of shares
Share capital A/c Debited -
Call in arrears A/c - Credited
Forfeited shares A/c - Credited
 Re-issue of shares
Bank A/c Debited -
Forfeited shares A/c Debited -
Share capital A/c - Credited
Capital reserve A/c - Credited
 Issue of Bonus shares
Cap. Red. Reserve A/c Debited -
Share premium A/c Debited -
Capital reserve A/c Debited -
Gen Reserve A/c Debited -
Profit & Loss A/c Debited -
Bonus to shareholders A/c - credited
Bonus to shareholders A/c Debited -
Equity share capital A/c credited
 Balance sheet equation
LIABILITIES ASSETS

Capital 300.00 Fixed assets 700.00

Reserves 200.00 Current 300.00

assets
Term Loans 300.00

Current 300.00
Liabilities
Total 1000.00 Total 1000.00
 Balance Sheet Equation
Assets = Liabilities

Assets = Liabilities (+) Capital

Liabilities = Assets (-) Capital

Capital = Assets (-) Liabilities

 BALANCE SHEET EQUATION

Assets = Liabilities
Assets = Capital + Liabilities
Assets =Net worth + Liabilities
Net worth = Capital + Reserves& Surplus
Net worth = Assets Less Liabilities
1. The Assets of a business are Rs.500000 and its capital is
Rs.115000. Its liabilities on that date would be------
a) Rs.615000
b) Rs.385000
c) Rs.500000
d) Rs. 115000
2. A had a capital of Rs.750000. He has also purchased goods
of Rs.150000 on credit from Mr. Saha. The value of total
assets of the entity is-----
a) Rs.750000
b) Rs.900000
c) Rs.600000
d) Rs.1050000
 B/s Equation
Examples
(1) If the net worth of the business is Rs.1100,fixed assets are Rs. 600, current
assets Rs.400, investments Rs.300, current liabilities Rs. Nil, what is the
amount of claim to outsiders?
Rs. 1300l
Rs. 500
Rs.200*
Rs. Nil
(2) Identify the wrong pair
Outstanding expenses - Personal Account account*
Profit and Loss Account (Dr. balance) Application of funds
Net worth less reserves & surplus - Balance in P & L Account*
Balance sheet - Financial position
 Computerized accounting
Computer language: cobol, foxpro,unix etc
Analog computers : scientific and mech.
Field
Digital computers: computerized accounting
Data : fact
Record : group of data
Data file: data records
 Computerized accounting
Computer language- Cobol, FoxPro, Unix ..
Analog computers- scientific/ mechanical field
Digital computers- computerized accounting
Data- fact
Record- group of data
File- data record
 Contact details
Website: www.iibf.org.in
Email: sudaaba@iibf.org.in
Phone. 022-22183898
022-22187003/4/5