21987582-Final-Accounts-of-Banking-Companies.pdf

Project report of accounting in banks and balance sheet

1. INTRODUCTION

A banking company means and includes any company which carries on business business or which transacts banking business business in India. A banking business is generally governed by the provisions of the Companies Act 1956 and specifically by the anking !egulation Act. "he anking regulation Act of 19#9 came into force on 16 th $arch 19#9 as a result of long%felt need to regulate the banking business in India and protect the interest of number of depositors. "he e&istence of well% organi'ed( regulated and efficient banking system is pre%re)uisite for economic growth. anks are agencies responsible for mobili'ing and channeling of funds in a country. "he ma*or institutions carrying business( in India( include+ ,a- ational ationali'ed i'ed banks banks ,b- /tate bank of India and Associates Associates banks ,c- 0oreign banks banks having branches branches in India India ,d- Co%operative Co%operative banks ,e- !ural !ural banks banks and ,f- rivate rivate sector sector banks banks..

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2. DEFINITION AND FUNCTIONS OF A BANK

anking has been defined by section 5 of the anking !egulation Act and means+ ,a- accepting deposits deposits of money from from public ,b- for the purpose of lending or investment and deposits are repayable on demand or otherwise by che)ue( draft( and order or otherwise. It should be noted that company which is engaged in manufacturing goods and for the purpose of financing business accepts deposits from from the the pu publ blic ic sh shou ould ld no nott be deem deemed ed to tran transa sact ct bu busi sine ness ss of banking.

In addition to banking business( business( a bank is permitted under /ection 6 of the anking !egulation Act to engage in certain class of business which is incidental to the business of banking. /ection 2 of the anking !egulation Act prohibits a bank from buying and selling or dealing in goods e&cept in connection with reali'ation of a security held by it or in connection with the business of collections or negotiating bills of e&change. /ome of the main functions of modern commercial banks are+ ,a- Accepting deposits and providing facilities to depositors of payment by che)ues. che)ues. ,b- 3ranting loans and advances ,cash credits( overdraft( term loans(

etc.-. ,c- 4eal 4ealin ing g in secu securi riti ties es on its its own own acco accoun untt or on beha behalf lf of its its

customers. ,d- pening letters letters of credits. ,e- Issuing guarantees. ,f- 4ealing 4ealing in foreign foreign e&cha e&change. nge. ,g- "ransferring money from one place to another through demand

draft( telegraphic transfers( travelers che)ues( bills( etc. ,h- $erchant banking( i.e. acting as managers to public issues( etc.

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2. DEFINITION AND FUNCTIONS OF A BANK

anking has been defined by section 5 of the anking !egulation Act and means+ ,a- accepting deposits deposits of money from from public ,b- for the purpose of lending or investment and deposits are repayable on demand or otherwise by che)ue( draft( and order or otherwise. It should be noted that company which is engaged in manufacturing goods and for the purpose of financing business accepts deposits from from the the pu publ blic ic sh shou ould ld no nott be deem deemed ed to tran transa sact ct bu busi sine ness ss of banking.

In addition to banking business( business( a bank is permitted under /ection 6 of the anking !egulation Act to engage in certain class of business which is incidental to the business of banking. /ection 2 of the anking !egulation Act prohibits a bank from buying and selling or dealing in goods e&cept in connection with reali'ation of a security held by it or in connection with the business of collections or negotiating bills of e&change. /ome of the main functions of modern commercial banks are+ ,a- Accepting deposits and providing facilities to depositors of payment by che)ues. che)ues. ,b- 3ranting loans and advances ,cash credits( overdraft( term loans(

etc.-. ,c- 4eal 4ealin ing g in secu securi riti ties es on its its own own acco accoun untt or on beha behalf lf of its its

customers. ,d- pening letters letters of credits. ,e- Issuing guarantees. ,f- 4ealing 4ealing in foreign foreign e&cha e&change. nge. ,g- "ransferring money from one place to another through demand

draft( telegraphic transfers( travelers che)ues( bills( etc. ,h- $erchant banking( i.e. acting as managers to public issues( etc.

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7owever( any company which is engaged in the manufacturer of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as manufacturer or trader shal sh alll no nott be deem deemed ed to tran transa sact ct the the bu busi sine ness ss of bank bankin ing. g. It may may be mentioned that the anking !egulation Act( 19#9 is not applicable to a primary agricultural society( a co%operative co%operative land mortgage bank and any other co%operative co%operative society e&cept in the manner and to the e&tent specified in art 8 of the Act. /ome banks are included in the /econd /chedule to the !eserve ank of India Act( 19#: these are called /cheduled anks. "he !eserve ank includes a bank in this schedule if it fulfils certain conditions. conditions. "he !eserve anks gives certain facilities to schedule banks including the following+ ,a- "he purchase( sale( and re%discounting of certain bills of e&change( or promissory promissory notes: ,b- urchase and sale of foreign e&change: ,c- urchase( sale and re%discounting of foreign bills of e&change: ,d- $aking of loans and advances to scheduled banks: ,e,e- $ain $ainte tena nanc ncee of acco accoun unts ts of the the sche schedu dule led d bank bank in its its bank bankin ing g department and issue department: ,f- !emittance of money between different branches of scheduled banks through the offices( branches or agencies of !eserve ank free of cost or at nominal rates. /ection 6 of the anking !egulation Act( 19#9 specifies the forms of business business in which a banking banking company company may engage. engage. "hese are + ,i- borrowing( raising or taking up of money: lending or advancing of mone mo ney: y: draw drawin ing( g( maki making ng(( accep accepti ting ng(( disc discou ount ntin ing( g( bu buyi ying ng(( sell sellin ing( g( collecting and dealing in bills of e&change( hundies( promissory notes( etc.: ,ii- acting as agents for any government or local authority or any other person: ,iii- directing for public and private loans and negotiating and issuing the same: ,iv,iv- effect effecting ing(( insu insurin ring( g( gu guara arante nteein eing( g( un under der%wr %writi iting ng(( partic participa ipatin ting g in managing and carrying out of any issue of shares( stock( debentures etc.: ,v- carrying on and transacting every kind of guarantee and indemnity business: business: ,vi- managing( selling and realising property which may come into the possession possession of the banking banking company company in satisfaction satisfaction of of its claim:

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,vii- ac)uiring and holding and generally dealing with any property or any right( title or interest in such property which may form the security for any loans and advances: ,viii- underwriting and e&ecuting trusts: ,i&- establishing and supporting or aiding in the establishment and support of institutions( funds( trusts etc. ,&- ac)uisition( construction( maintenance and alteration of any building and works necessary for the purpose of the banking company: ,&i- selling( improving( managing( developing( e&changing( leasing( mortgaging( depositing of or turning into account or otherwise dealing with all or any part of the property and rights of the company: ,&ii- ac)uiring and undertaking whole or any part of the business of any person or company: ,&iii- doing all such other things as are incidental or conductive to the promotion or advancement of the business of the banking company: ,&iv- any other business which the Central 3overnment may specify by notification in the fficial 3a'ette. o banking company shall engage in any form of business other than those referred to above.  PROHIBITION OF TRADING (SECTION 8)

A banking company cannot directly or indirectly deal in the buying or selling or bartering of goods. 7owever( it may buy( sell or barter in connection with the bills of e&change received for collection or negotiation or can undertake the administration of estates as e&ecutors( trustees or otherwise.  DISPOSAL OF NON-BANKING ASSETS (SECTION 9)

A banking company can only ac)uire immovable property for its own use. ther immovable properties ac)uired must be disposed off within seven years from the date of ac)uisition. 7owever( in any particular case( the !eserve ank of India may e&tend such period of seven years if it is satisfied( that such e&tension would be in the interest of the depositors of the banking company.  MANAGEMENT (SECTION 10)

;nder section 1<,a-( not less than 51= of the total number of members of the board of directors of a banking company shall consist of persons having special knowledge or practical e&perience in one or more of the following fields + 1. Accountancy: >. Agriculture and rural economy:

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. anking: #. Co%operation: 5. ?conomics: 6. 0inance: @. aw: 2. /mall scale industry. It is also re)uired that not less than two directors should have special knowledge or practical e&perience in respect of agriculture and rural economy and co%operation or small%scale industry. ;nder section 1<, b,1-( every banking company shall have one of its directors as Chairman of its board of directors. "he Chairman is entrusted with the management of the whole of the affairs of the banking company. /uch Chairman is the whole%time employee of the banking company and can hold office for a period not e&ceeding five years. ther directors who are whole%time directors can hold office continuously for a period not e&ceeding eight years.

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3.

REQUIRMENTS ACCOUNTS •

OF

BANKING

COMPANIES

AS

TO

Bank Accounting

"he book%keeping system of a banking company is substantially different from that of a trading or manufacturing enterprise. A bank maintains a large number of accounts of various types for its customers. As a safeguard against any payment being made in the account of a customer in e&cess of the amount standing to his credit or a che)ue of a customer being dishonoured due to a mistake in the balance in his account( it is necessary that customers accounts should be kept up%to%date and checked regularly. In many other mercantile enterprises( books of primary entry ,i.e., day books- are generally kept up%to% date while their ledgers including the general ledger and subsidiary ledgers for debtors( creditors etc. are written afterwards. A bank cannot afford to ignore its ledgers particularly those concerning the accounts of its customers and has to enter into the ledgers every transactions as soon as it takes place. In bank accounting( relatively less emphasis is placed on day books. "hese are merely treated as a means to an end%the end being to keep up%to%date detailed ledgers and to balance the trial balance everyday and to keep all control accounts in agreement with the detailed ledgers. In this ;nit( we shall concentrate on accounting system followed in( bank and books of accounts maintained for that purpose. "hat apart( we shall take a stock of the returns which a bank is re)uired to file with the !eserve ank. Another important aspect in the bank accounts is preparation of final accounts. "he third schedule to the anking !egulation Act provides formats for that purpose. 0ormats of bank final accounts are also covered "he tendency of modern accounting is to adapt the books to a business( rather than the business to the books( and this practice is particularly noticeable in bank bookkeeping. /ystems and devices may differ among banks( and even between branches of the same bank( but the basic principles are the same. nce a clear understanding of bank bookkeeping in general is obtained( there will be found little or no difficulty in mastering any of the methods or systems in use by banks. "o grasp thoroly all the underlying principles of bank accounting( it is necessary to bear in mind that practically everything handled by a bank( in the ordinary course of its business( is either money itself( or a written claim or right to money. Conse)uently the cash book in a bank is the principal book( and thru its pages must pass a record of every transaction made by the bank( either in detail or as a total from a supplementary book.

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"hus the cash book gives a birdBs%eye view each day of all the work of the bank. /ome banks still use( in addition to the cash book( a modified form of the old%fashioned *ournal( but it is preferable to make the cash book the only posting medium of the general ledger . It would be )uite possible for a newly%opened branch to conduct its business for the first si& months or so with the aid of a cash book and a ledger( which would serve for all accounts. A register would( however( soon be necessary. As the business grew it would be found convenient to have a special ledger for individual accounts( with the control or key account carried in the original led%ger( and to have the checks and deposits entered in a supplementary cash book ( with only the totals entered in the general cash book. /imilarly( it would be found necessary in time to open up a discount register and a liability ledger to look after the increased number of loans. As the volume of business increases( the deposit ledger is capable of being indefinitely subdivided( either alphabetically or numerically. 3enerally( the ordinary deposit ledger is divided alphabetically and the savings bank ledger numerically. 0rom the above it will be noticed that bank bookkeeping( although based primarily on the cash book and ledger( is susceptible of indefinite e&pansion in any direction to meet increased volume of business or other local e&igencies.  Loose-Leaf Accounting

"he vast increase in the number and volume of commercial transactions during the past twenty years has made the use of loose%leaf ledgers and other books a practical necessity in modern accounting. In Canadian banks( particularly( the system has been in successful operation for many years. "he principal ob*ection urged against loose%leaf ledgers % the )uestion of their validity in a court of law % appears to have died a natural death. "he courts rule so plainly and the logic is so clear( that it is the original entry that counts and not the assembly of entries in the ledger ( that it is now generally conceded that the loose%leaf ledger is *ust as acceptable as evidence in a court as a bound ledger. In fact( with the precautions observed by the banks in their use of loose%leaf books( the evidence might be considered even more competent. "he following rules are generally observed+

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1. "he keys of all loose%leaf ledgers and transfer binders are kept in the custody of the manager or of the accountant or other officer specially authori'ed( by whom blank sheets are inserted as re)uired( and the used sheets removed and filed in the transfer binder. >. After removing the sheets( the officer who has custody of the key must place a paper seal bearing his signature in the sealing device on the front of the ledger( and( when opening the book again( must satisfy himself that his last seal has not been tampered with. . A separate sheet must be used for each account( and each sheet must be signed in the upper right%hand corner by the manager or accountant when the first entry is made. "he officer who signs the sheet must see that the account is properly inde&ed. #. A few blank sheets may be locked in the current ledger for emergency use( but all others must be kept under lock in the custody of the officer who holds the key of the ledger. ound books have not prevented manipulation and fraud( and the above precautions combined with the comprehensive checking system of a bank should practically eliminate the danger of fraudulent substitution of pages. If a man is determined to be dishonest there are easier and less evident methods of defrauding than by switching ledger leaves.

 P!"##$%&' & F%'#'%#* S$#$!+!'$, #' A&'$%'/ D#$!

(S!$%&' 29)

A Company registered under the Companies Act 1956 is required to present its financial statements, i.e. balance sheet and profit and loss account in the format laid down in Schedule ! anne"ed to the Companies Act. Similarly, ban#ing company, $since it is a company% is also required to prepare and submit its accounts in specified format. &he 'an#ing (egulation Act gi)es the format of balance sheet and the profit and loss account in which accounts of ban#s should be presented and this format is gi)en in the third schedule anne"ed to the 'an#ing (egulation Act. ('! has issued guidelines to follow the new form A $proforma balance sheet% and form ' $proforma profit and loss account% by all companies doing ban#ing business in !ndia. &he go)ernment has notified that the boo#s of accounts of the ban#ing companies shall be closed on *1 st +arch e)ery year as against *1 st ecember earlier. !n practice, ban#s also close boo#s on *-th September for internal purpose.

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 A%$ (S!$%&' 30)

Accounts must be audited by a person duly )ualified under any law( for the time being in force( to be an auditor of companies. 7owever every banking company is before appointing( reappointing or removing any auditor( re)uired to obtain the prior approval of !eserve ank of India. S+%,,%&' & A&'$, (S! 31 #' 32)

"hree copies of the balances sheet and profit and loss account prepared under /ection >9 together with auditors report under /ection < must be submitted to the !eserve ank of India within three months from the period to which they refer. 7owever( it can be e&tended up to the period of further three months by !I.

 P*%#$%&' & A&'$,

!ule 15 of the anking !egulating ,Companies- !ules( 19#9 prescribed that accounts and auditors report shall be published in newspaper circulating in a place where a banking company has its principal office( within si& months from the end of period to which they relate.

. SIGNIFICANT FEATURES OF ACCOUNTING SSTEMS OF BANKS

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anks( like most of the other large%si'ed institutions( follow the mercantile system of accounting. "hus( the system of recording classifying and summari'ing the transactions in bank is in substance no different from that followed in other entities having similar volume of operations. 7owever in the case of banks the need for the ledger accounts( especially those of customers( being accurate and up to date is much stronger than most of other types of enterprises. A bank cannot afford to ignore its ledgers particularly those containing the accounts of its customers and has to enter into the ledgers every transaction as soon as it takes place. In the case of banks( relatively lesser emphasis is placed on books of prime entry such as cash books or *ournals. "his is unlike most other types of enterprises where books of prime entry are generally kept up to date while ledgers( including the general ledger and subsidiary books ledgers for debtors( creditors are written up afterwards. anks follow the accounting procedure of voucher posting under which the vouchers are straightway posted to the individual accounts in the subsidiary ledgers. ,nly in case of ersonal edger- At the end of each day( the debit and credit vouchers relating to a particular type of transactions ,e.g. savings bank accounts( current accounts( demand loans cash credit account etc.- are entered on separate vouchers summery sheets and the total thereof is posted to the respective control account in the general ledger. "he general ledger trial balance is prepared every day.

 T"!, & T#',#$%&',

"he transactions in banks are of two types( cash and non%cash. In the case of letter( also called transfer transactions( one or both of account concerned may be of customers or internal accounts of bank. 0or e&le( if A deposits a che)ue drawn in his favor by ( who is also customer of the branch( the accounts of the two customers will be affected. n the other hand( if A deposits a draft drawn on branch the 4raft Account( an internal account of bank( will be debited. ikewise( on payment of interest on deposit accounts( the Interest Account at the branch will be debited and various personal accounts will be credited.

 4&5!,

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oth the debit and credit operations on all accounts( either by customers or by the banks itself( are made by means of vouchers. "here are two kind of vouchers( one( which evidences only debit to an account and which other( which contains both debit and credit in different accounts. 0or the sake of convenience( the latter kinds of vouchers may be called composite vouchers. The debit vouchers are of many kinds, broadly following: 1. Che)ues issued by customers.

>. Che)uesD ay orders issued by banks. . Eithdrawal of money by saving bank account holders.

#. 4rafts issued by another branches of banks payable at branch. 5. 4raft issued by another banks on branch( in terms of an approved

arrangement between the two banks. 6. 4ividend D Interest warrants issued by banks customers and

payable by branch in terms of an approved arrangement. @. "ravelers che)ues issued by any branch of the bank which presented to the branch for payment. 2. 4rafts D ay orders issued by the branch itself which are cancelled at the re)uest of customer and amount is refunded to him. 9. etters of authority signed by the customers( containing standing instructions. 1<. Instruments like travelers che)uesDgift che)ues( etc.of other banks

which are paid by branch in terms of an approved arrangement. 11. 4ebit vouchers prepared by the branch on its printed stationary

which are authori'ed by a designated official of the bank and may also carry authority from the customers in some cases to debit his account at the branch. 1>.In respect of reali'ation of collection instrument sent to other branches of the bank( a debit advice ,which may be known by

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different names in different banks- prepared by the other branch may itself as a debit voucher. 1.In case of remittance of funds by one branch to the other branch by means of telegraphic transferor mail transfer( the bank may treat the advice of transfer itself as debit voucher or may prepare a separate debit voucher. The credit vouchers are also of many kinds, broadly the following:

1. ay Fin%slip filled by customers ,depositors as well as borrowersfor deposit the amounts in their accounts. 3enerally( the pay%in% slips are in standard format adopted by the bank but there may be cases of a special kind of pay%in%slips in respect of some customers pursuant a formal agreement between the bank and customer. >. Applications for issue of demand drafts( mail transfer telegraphic

transfer( bankers che)ues( pay orders( gifts che)ues( travelers che)ues( and other similar instruments. /ome of these application may be made on behalf of the branch itself it has to make. . Credit vouchers prepared by the branch on its printed stationary

which are authori'ed by an official of the bank. ormally theses vouchers are signed on behalf of the branch only but there may be some instance where the customer concerned also signs on the voucher as evidence that the transaction actually pertains to him. ?&les are+ deposits of locker charges ,credit to an income account of the bank-( deposits of money for purchase of non% *udicial stamps re)uires for e&ecution of document in favor of the bank( etc. #. Challans for deposit into the account of CentralD/tate 3overnment(

e.g. on account of 4irectDIndirect ta&es or under schemes like public provident fund( etc. 5. n payment of collection instruments from other branches of the

bank( a credit advice ,which may be known by different names in different banks- or copy of the collection schedule received from the other branch may itself be treated as a credit voucher. It may be stated here in case of debits or credits of similar nature to a large no. of accounts in the same ledger or group of ledgers ,e.g. debit on account of periodic interest( inspection charges( etc. or credit on account

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of periodic payment of interest to depositors-( it is a common practice among the banks to prepare a consolidated voucher on their stationary and enclosed thereto a list containing details of accounts debitedDcredited and the amount of debitDcredit. As stated earlier apart from debit vouchers and credit vouchers( there is also category of composite vouchers. "hese vouchers record the particulars of both debit and credit accounts. $ost of the transactions covered by composite vouchers pertain to the internal accounts to the bank( i.e. non%customers accounts. ?&les are+ bills received for collection( letters of credit issued by the branch( guarantee issued by the branch( etc. /uch vouchers may also be prepared to rectify an error while debiting or crediting accounts. 0or e&le( in case of current account is debited in general ledger instead of cash credit account by mistake( the composite vouchers will show debit to cash credit account with corresponding credit to current account. All entries in personal ledgers and the summary sheets are checked by persons other than those who have made entries. $ost clerical errors are thus detected immediately. A trial balance of personal ledgers is prepared periodically( usually every two weeks and agreed with general ledger control accounts. In banking parlance( this e&ercise is referred to as balancing of books.  B#'6!7, B&&6,

According to Section 2 !" of the Banker#s Books $vidence Act, %Bankers Books# include ledgers, day book, cash books, account books and all other books used in ordinary business of a bank&

3enerally the following books are maintained by the bank to keep up%to% date records of its customers.

 C#,5 B&&6

All cash receipts and payments are recorded in the receiving cashiers cash book and paying cashiers cash respectively. After this on the basis of pay% in slips received by receiving cashier and che)ues and withdrawal slips received by paying cashier( these transactions are entered first in the accounts of customers and after that 4ay ook are written. "his is called  Sli' System# of posting.

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 L!/! B&&6

3eneral edger contains the total accounts of each ledger. esides the 3( the following ledger books are maintained+ 1. Current Accounts edger >. 04 Accounts edger . !4 Accounts edger #. oan edger 5. Investment edger 6. ills discounted and purchased edger

 O$5! B&&6,

1. Clearing !egister >. /ecurities !egister . 4raft !egister #. ills for collection !egister 5. 4ishonored che)ues !egister 6. /afe deposit vault !egister @. etter of credit !egister  Teller(s )ecords

"he teller Bs cash book or blotter consists of a skeleton ruling with no printed headings( these being written in daily by the teller according to his re)uirements. Eere the headings printed it would re)uire a specially printed book for each class of teller( and even then it might not be suitably spaced for local re)uirements.

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A teller should arrange his entries( debit( and credit to conform with the general system of the office. Che)ue should be sorted out and entered according to the divisions of the ledger ( thus balancing with the various supplementaries. If the checks are very numerous( separate sheets( suitably ruled( can be used: these can be entered on an adding machine or by an assistant. A tellerBs book is( in reality( a skeleton cash book( and the entries should be so arranged that the books of the various departments should balance with the combined entries of the tellers. All parcels of money received are acknowledged( and entered in a special book. If the advice comes in first it should be at once entered in this book( and the parcel in)uired for if necessary. $oney parcels dispatched are also entered in a book. 3reat care is necessary in handling money parcels. oth sent and received parcels should be counted by two men in each otherBs presence and( in the case of the former( it is necessary to have the parcel in the uninterrupted custody of two men from the time it is counted and sealed until it is delivered to the e&press company or post office. "he relative advices and acknowledgments should be carefully watched and any delay immediately in)uired into.

 Su''lementary *ash Book

In this book are entered all the deposit slips( checks( and other vouchers pertaining to the ordinary deposit and savings bank ledgers. "he ruling is simple( re)uiring no printed headings( and consists of columns for folio( names of customers and amount of vouchers % two sets of columns to a page. "wo pages will easily contain a dayBs entries for a small branch( the first or left%hand column being used for deposits and the remaining three for checks( the latter being much more numerous. "he savings deposits and checks( being comparatively few in number( are entered at the end of the day under their own headings at the foot of the ordinary checks and deposits respectively( though in some small branches they are entered in the general cash book . In offices where it is found necessary to split up the deposit ledger into two or more alphabetical divisions( a special GsupplementaryG is devoted to each division including the savings bank ledger. It is not necessary to open up an account in the general ledger for each division of the deposit ledgers.

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If the savings ledger contains a large number of accounts( it will be found of great advantage to split it up into several sections or blocks of accounts( as this greatly facilitates the location of errors when balancing. A special form of supplementary cash book should be used with a money column for each block of accounts. In the case of a current account which has an unusual number of checks at a certain period of the month or year % for instance( payroll or dividend checks % it is permissible to detail a dayBs checks once( either in the supplementary cash book or ledger( and enter the total only with a reference in the other book. In the larger offices of some of the banks( where the volume of checks is unusually heavy( a loose%leaf form of supplementary cash book is used in connection with the adding machine( the names being typewritten in afterward. Ehere this form is adopted( care should be taken to see that the sheets are consecutively numbered and filed( and that each sheet is signed by the two checking officers. . PRINCIPAL BOOKS OF ACCOUNT

"he principal books of accounts( subsidiary books and statistical records generally maintained by banks are described in the following. It may( however( be emphasi'ed that the e&act nature of such books may differ from one book to another( depending upon the individual re)uirement of each bank.

 G!'!#* L!/!

"he general edger contains the control accounts of all personal ledgers( the profit and loss account and different asset and liabilities accounts. "here are certain additional accounts also ,known as contra accountswhich are kept with the view to keeping control over transactions which have no direct effect on the asset and liabilities of bank and represent agency business handled by bank on which it earns service charges( ,or commission- e.g. etters of credit opened( bills received or sent for collection( guarantees given( etc.  &ypes of eneral /edger0

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1. ld Style

Although bank book%keeping is supposed to be very simple( there are many ways of doing the same thing and therefore every bank may find something in the methods of some other bank( which would be worth its while to adopt. "he general ledger most often found is the old%fashioned ledger( this ledger needs no e&planation. It is sometimes ruled with two columns on each side( the inside columns being used to bring down the totals from day to day( instead of directly under the dayBs work. "hese additional columns prove a blessing( when an analysis of previous work is desired. "he footings are usually made in a hurry and are often so large and heavy that it is hard to tell them from the actual debits and credits. It should be borne in mind that the general ledger is continually used to prepare statements of all kinds. ?very item of unusual nature should be properly e&plained on the ledger. 0or e&le( the profit and loss account fre)uently contains debits representing loans( discounts( or overdrafts charged off. $oney subse)uently recovered from these losses is credited to this account. "he record on each side should be so plain that any item may be traced back( in order to show both debit and credit without referring to tickets or *ournal of any kind. It is worth while to itemi'e the e&pense account in the same way unless a detailed e&pense account is kept separately. 4o not debit e&pense with G7argood H Co.Bs bill( 1>>.<(G but G /tationery( 1>>.<.G A few years hence the bank may be dealing with another stationer. &hree Column /edger

Another form of ledger has the money columns together( making it much easier to strike the balance. "he debit balances should be struck in red and the credit balances in black ink when using this form.

'oston /edger

A ledger on the style of the oston ledger ( a thorough e&planation of which will follow later( is used in many banks and found satisfactory. In this ledger the names of the accounts are written or printed down the middle or side of the page. "he days are placed side by side( across the page. A small column may be left for remarks beside each of the debit and credit columns as noted in the figure. It is preferable to arrange the asset accounts in proper order on the upper part of the page and the liabilities on

Page17


the lower part. Ehen the postings have been made and the balances struck and proved( a complete daily statement will be made on the ledger it%self. "he ob*ection to this style of general ledger is that an analysis of any account is a very trying task because of the meager e&planations of debits and credits. A large ew Jork bank has adopted a form which does away with this ob*ection. "he front part of the ledger is a two column oston. "he back part of the ledger is ruled like the old style ledger . "he postings are all made first in one section and then in the other. "he bookkeeper takes off a trial balance of the old style section at fre)uent intervals and compares the balances in each account with the balances in his skeleton section. If this duplication of the ledger should seem useless( the desired results can be obtained by keeping a skeleton ledger and an analytical account for such accounts as Gprofit and loss(G Ge&pense(G etc. "he oston ledger and the old style each have their advantages as a general ledger. A union of the two combines all the good points of both( and when bound in the same cover furnishes( with a very small amount of e&tra work( as comprehensive a volume as one could wish. 4ate $emorand a

4ebit Credi t

alance

'alance /edger

Assets

$onday( Kuly 1>( ><<9 $emo.

4r.

$emo.

"uesday( Kuly 1( ><<9 Cr alance .

$emo.

4r.

$emo.

Cr alance .

'oston /edger

A very simple point overlooked by most general ledger keepers using a oston ledger may prove valuable. Ehen closing the books at the end of a fiscal period( enter a trial balance of the ledger in the statement book before any closing entries are made( and another after closing the earning and e&pense accounts into profit and loss. If a statement of earnings and charges is desired( covering a period dating from before the closing of the books to a period after the closing( it may be very easily prepared by simply deducting the balances in the accounts chargeable to profit and loss on the first day of the period from the balances shown as of the closing date( and adding to the differences obtained( the balances in the same accounts on the last day of the period. roper addition must be made to

Page18


each side of the resulting statement for charges and credits made directly to profit and loss account.  P&%$ #' L&,, L!/!

/ome banks maintain a profit and loss account in the general ledger and maintain separate books for each revenue and e&pense headsDsub%heads. /ome banks maintain columnar books having separate columns for each revenue and e&pense headsDsub%heads. "hese books are prepared from vouchers. "he total of debits and credits of each day are posted on profit and loss account in general ledger from voucher summery sheets. In some banks( the revenue accounts too maintained in general ledger itself( while in others( board revenue heads are kept in general ledger and their details are kept in subsidiary ledgers. 0or managerial purpose( the accounts in profit and loss ledgers are more detailed than those shown in published profit and loss accounts of banks. 0or e&le( there are separate accounts for basic salary( dearness allowance( and various others allowances( which are grouped together in published accounts. /imilarly various accounts comparing general charges( interest paid( and interest received( etc. are maintained in the profit and loss ledgers.  S,%%# B&&6,  P!,&'#* *!/!,

?ach control account in the general ledger is supported by a subsidiary ledger ,or more than one subsidiary ledger if the number of accounts is large-. "hus in respect to control accounts relating to accounts relating to accounts of customers( subsidiary ledgers are maintained for+ a8arious types of deposits accounts ,saving bank accounts( recurring account( current accounts( etc- which contains accounts of individuals customers. ?ach account holder is allotted a separate folio in the ledger+ bvarious types of loans and advances related accounts ,cash credit( term loans( demand loans( bills purchased and discounted( letters of credit( bank guarantees issued( etc.- wherein the liability of each customer is reflected. 3enerally there is no separate ledger for overdraft accounts which are granted in current account. 7owever some branches maintain these accounts in separate ledgers depending upon the number of regular borrowers under the facility.

Page19


/eparate registers are maintained to record the particulars of term deposits ,including derivatives like call deposits( certificate of deposits( etc.- anks generally do not allot separate folios to each customer. "he register divided in to various sections( each section for particular period of deposits andDor the rate of interest payable on deposits. As mentioned earlier( postings to these ledgers are made directly from summary sheets. "he voucher summary sheets prepared in the department which originates the transactions( by the persons other than who writes the legers they are subse)uently checked with the vouchers by persons generally unconnected with writing of ledgersDregisters or the voucher summery sheets.

 *urrent +e'osit Ledger

"he ordinary or current deposit ledger is a very active and important book in a bank( and one which calls for both accuracy and dispatch on the part of the clerk in charge( as errors can easily be made( involving the bank in serious loss. "he deposit ledger is invariably a loose%leaf book and ruled as shown in 0igure >>. "his form is invariably used by all the banks. "he so%called oston ledger has been tried several times( but was not found practicable in Canada( owing perhaps to the method of marking or accepting checks by a direct debit to the account. "he accounts are arranged alphabetically( and are therefore self%inde&ing( but an inde& is usually kept on the tagged sheet dividing the alphabet. In small offices there is usually only one current ledger used( A%L. As work increases and becomes too much for one ledger%keeper ( a second ledger can be opened divided A%M and %L. 0or three ledgers the divisions generally run A%3( 7%( and %L( and for four the divisions are A%C( 4%M( %! and /%L. As the ledger is loose%leaf there is no accumulation of dead leaves( but the general regulations regarding loose%leaf ledgers given in /ection  of this chapter should be observed closely.

AM /heet o. ame Address 4ate articulars

Account o.

4ebit

Credit

4r. or Cr.

alance

4ate

articulars

4ebit

Credit

4r. or Cr.

Page20

alance


Current eposit /edger

 B%**, R!/%,$!,

4etails of different types of bills are kept in separate registers which have suitable columns. 0or e&le( bill purchased inward bills for collection: outward bills for collection( etc. are entered serially on a daily basis in separate registers. In the case of bill purchased or discounted party%wise details are also kept in normal ledger form this is done to ensure that sanctioned limits of parties are not e&ceeded. ?ntries in registers are made by reference to the original documents. A voucher of the total amount of the transactions of each day is prepared in respect of each register. "his voucher is entered in the day book. Ehen the bill is reali'ed or returned its original entry in register is marked off. A daily summery of such reali'ation or returns is prepared in separate registers whose totals are taken to vouchers which are posted in day book. In respect of bills for collection( contra vouchers reflecting both sides of transactions are the prepared at the time of the original entry is reversed on reali'ation. utstanding entries are summari'ed at stipulated intervals and their totals agreed with the balance of the respective control accounts in general ledger.  DEPARTMENTAL OURNALS

?ach department of the ank maintains a *ournal to note the transfer entries passed by it. "hese *ournals are memoranda books only( as all the entries made there are also made in the 4ay ook through 8oucher /ummary /heets. "heir purpose is to maintain a record of all the transfer entries originated by each department. 0or e&le( the oans and verdraft /ection will pass transfer entries for interest charged on various accounts every month( and as all these entries will be posted in the *ournal of that department( the office concerned can easily find out the accounts in respect of which the interest entry has been passed. /ince all vouchers passed during the day are entered into the 4ay ook only in a summary form( it may not be possible to get this information from the 4ay ook without looking into the individual vouchers. $oreover( as the number of departments in a banks is )uite large( the 4ay ook may not be accessible at all times to all departments.

Page21


As has been mentioned earlier( two vouchers are generally made for each transaction by transfer entry( one for debit and the other for credit. "he vouchers are generally made by and entered into the *ournal of the department which is affording credit to the other department. 0or e&le( if any amount is to be transferred from Current Account of a customer to his /aving ank Account( the voucher will be prepared by the Current Accounts 4epartment and entered in the *ournal of that department .

 O$5! R!/%,$!,:R!&,

"here are different !egistersD!ecords to record the detail particulars of various types of transactions. "hese !egistersD!ecords do not from part of the books of accounts but support the entriesDbalances in the various accounts some of the important !egistersD!ecords relate to the following+ 4rat issued ,separated registers may be maintained for drafts issued by the branch on other branches of same bank and those on the branch of its correspondents in India or abroad-. 4epending upon the value of business( some branches may have separated registers on some other basis also like weather the draft issued advised is prepared or not( registers e&clusively for some high volume customers of the bank( the range( within which amount of draft falls( e.g. below !s. 1 lakh( !s 1%1< lakh( !s 1< %1<< lakhs( etc. ,a-

,b4rafts paid ,separate registers may be maintained on the same pattern as an in case of draft issued,c-

Issue and payment of+ 1.

"elephonic transfers

>.

$ail transfers

. ankers che)ues

che)uesDay

#.

etters of credit.

5.

etters of guarantee

ordersDtravelers

che)uesD3ift

Page22


?ntries in these registers are made from original documents which are also summari'ed on vouchers every day. "hese vouchers are posted in 4ay book. utstanding entries are summari'ed at stipulated intervals and their totals are agreed with respective control accounts in the ledger. "here are fre)uent transactions amongst the branch of bank which are settled through the mechanism of inter%office accounts. "he e&les of such transaction include paymentDreali'ation of billsDche)ues( etc. sent for the collection by one branch to other e.g. for government related business. All such transfers of funds are canali'ed through nodal account ,this has different names in different banks such as 7ead%office account( Inter% office account( and so on.-. "his is a circular account for the banks as well as the auditors for two reasons+ first many funds have been prepared on banks through this account and second( banks are now re)uired to make provision for entries routed through this account which remain unreconciled beyond a time period specified by !eserve ank of India. anks maintain a /uspense edger to record various suspense accounts. As mentioned earlier a trial balance is prepared in banks every day. /ometimes due to clerical errors e.g. preparing the voucher summery sheet balance and the trial balance may not tally. In such situation the difference is temporarily transferred to a suspense account ,in case of short debit- or to sundry deposits account ,in case of short credit-. /imilarly transaction of transitory nature e.g. travel advance to employees( Are also recorded in suspense account pending their ad*ustment related incomeDe&penses account. /ome banks maintains separate ledger for suspense account and sundry deposit accounts. "he amounts lying in theses accounts need regular monitoring to clear them. /uitable registers with back%up registers to record classification under numerous sub%heads are maintained for+ a-

?stablishment e&penses

b-

Interest and discount income

c-

Incomes by way of commission

de-

Interest e&penditure rovision for interest accrued but not due on deposits

Page23


f-

0i&ed Assets

g-

/tationary consumedDin hand

Interest payable to and receivable from head office( in respect of advances and depositors respectively. A peculiar feature of accounting systems in banks is that the branches( nationally( have no funds of their own. All deposits accepted at branch are deemed to have been passed on banks head office and all loans made at branch are deemed to have been made out of funds received from the head office. "he head office pays interest to branch for its deposits and charges interest from the branch for its loans and advances. "he rates of such interest charged and paid by head office are decided by the head office during the course of the year and are an important factor in calculating profit and loss of branch. "he mechanism may be known by different names in different banks. All calculation in this regard is done at the branches only and suitable entries are passed( generally at year end. "hese entries however get offset in the process of consolidation of accounts and have no effect on financial statement of the bank as a whole. h-

Instruments received from customers for paymentDcollection by branch. Clearing of locally payable instruments is an important function of banks. /ome banks maintains separate registers to maintain details of various types of instruments lodged by customers where as some other banks use a common book to record all kind of instruments lodged by customers. i-

/eparate !egisters are maintained to record summaries the transactions relating to a particular head of account like Current Account( /aving ank Account( Cash Credit( "erm loans. /uch books may be called og ooks( 4ay ook( etc. "he totals of these books are carried over to Cash book. /ome other registers may be+ /top ayment !egister( ocker Access !egister( 4emat !egister( 4rawing ower !egister used for monitoring of CC Accounts etc.

 OTHER MEMORANDA BOOKS

Page24


esides the books mentioned above( various departments of the bank have to maintain a number of memoranda books to facilitate their work. /ome of the important books are described below+% Cash 4epartment ,a- !eceiving Cashiers cash book ,b- aying Cashiers cash book ,c- $ain cash book ,d- Cash alance book "he main Cash ook is maintained by persons other than the cashiers. ?ach cashier keeps a separate cash book. Ehen cash is received( it is accompanied by pay%in%slip or other similar document. "he cashier makes the entry in this book "his book contains a record of all the vouchers and entries representing the transactions of each day. "heoretically( the particulars of every item in the cash book should be entered in detail( but owing to the wide e&tension of banking facilities and the constantly increasing volume of checks and other entries( it has been found necessary to use supplementary books for recording particulars of any class of items whose volume is sufficient to warrant a separate book % only the dayBs totals are carried into the general cash book. "he ma*ority of entries( especially in a large office( are therefore in the form of totals( and very few detailed entries have to be made: but all entries( when made( should be definite as to source and sufficiently self%e&planatory to be understood by any one at any time % ten years after( if necessary. In the larger offices( the officers in charge of the different departments after balancing their books hand to the cash%book clerk the totals in the form of a signed memorandum( and even in the smaller offices it is advisable to have the clerks entering up the various supplementary books( give a similar memorandum of their totals. "his limits the responsibility and adds to the efficiency of the staff. 4ebit and credit entries for cash book( other than the totals referred to above( are represented by vouchers giving the necessary particulars( signed by the manager ( accountant or other authori'ed officer( and it should be an imperative rule that any slip( which does not contain sufficient particulars or which lacks the necessary signature( should be refused by the cash%book clerk and referred back to the teller for completion. In order to facilitate the sorting and checking of these

Page25


vouchers( distinctive colored paper or printing should be used: for instance( yellow( debit slips and white( credit slips. It should constantly be borne in mind that as the cash book and its supplementary books are recogni'ed in a court of law as the books of original entry( faulty or meager particulars might cause serious trouble. 8erbal e&planation( even if available( would not be admitted. ?&amine a bank cash book of twenty or thirty years ago+ there could be no better ob*ect lesson of what a cash book should be. Copper%plate writing and ample particulars are characteristic. 2uic# 3ayment System % anks introduce different systems so that their customers may receive payment of cash etc. )uickly. "he most prevalent system is the teller system. ;nder this system tellers keep cash as well as ledger cards and the specimen signature cards of each customer in respect of Current and /aving ank Accounts. A teller is authorised to make payment up to a particular amount( say( !s. 1(<<<. n receipt of the che)ue( he checks it( passes it for payment( enters it in the ledger card and makes the payment to customer. "he teller also receives cash deposited in these accounts. utward Clearing0

,a- A Clearing Che)ues !eceived ook for entering che)ues received from customers for clearing. ,b- ank wise list of the above che)ues( one copy of which is sent to the Clearing 7ouse together with the che)ues. A person checks the vouchers ,foil of pay%in slips- and lists with the Clearing Che)ue !eceived ook. "he vouchers are then sent to appropriate departments( where customers accounts are immediately credited. If any che)ue is received back unpaid the entry is reversed. ormally( no drawings are allowed against clearing che)ues deposited on the same day but e&ceptions are often made by the manager in the case of established customers. !nward Clearing

Che)ues received are checked with the accompanying lists. "hey are then distributed to different departments and the number of che)ues given to each department is noted in a $emo ook. Ehen the che)ues are passed

Page26


and posted into ledgers( their number is independently agreed with the $emo ook. If any che)ues are found unplayable( they are returned back to the Clearing 7ouse. "he che)ues themselves serve as vouchers. ook which is checked by the chief cashier. "he pay%in%slip then goes to the $ain Cash ook writer who makes an entry in his books. "he cash book checker checks the entry with the slip and then the counter%foil of the slip is returned back to the customer and the foil is sent to the appropriate department for entering into the ledger. "he foil is used as a voucher. Cash is paid against a che)ue or other document ,e.g. travellers che)ue( demand draft( pay order( etc.- after it has been duly passed and entered in the appropriate account in the ledger. Che)ues( demand drafts( pay orders( etc. are themselves used as vouchers. /oans 4 )erdraft epartments

,a- !egisters for shares and other securities held on behalf of each customer. ,b- /ummary ooks of /ecurities giving details of 3overnment securities( shares of individual companies etc. ,c- 3odown registers maintained by the godown%keeper of the bank. ,d- rice register giving the wholesale price of the commodities pledged with the bank. ,e- verdraft /anction registers. ,f- 4rawing ower book. ,g- 4elivery rder books. ,h- /torage books. eposits epartment

,a- Account pening H Closing registers. ,b- 0or 0i&ed 4eposits( !ate registers giving analysis of deposits according to rates. ,c- 4ue 4ate 4iary. ,d- /pecimen signature book. stablishment department

,a- /alary and allied registers( such as attendance register( leave register( overtime register( etc. ,b- !egister of fi&ed assets( e.g.( furniture and fi&tures( motor cars( vehicles( etc. ,c- /tationery registers. ,d- ld records register.

Page27


eneral

,a- /ignature book of banks officers. ,b- rivate "elegraphic Code and Cyphers.

 STATISTICAL BOOKS

/tatistical records kept by different banks are in accordance with their individual needs. 0or e&le( there may be books for recording ,i- Average balance in loans and advances etc. ,ii- 4eposits received and amount paid out each month in the various departments( ,iii- umber of che)ues paid( ,i)- umber of che)ues( bills and other items collected. "he above is not an e&haustive list of accounting records kept by a bank . ;.

PREPRATION AND PRESANTATION STATEMENTS OF BANKS

OF

FINANCIAL

A banking company is not re)uired to prepare financial statements in accordance with /chedule 8I of the Companies Act( 1956. 0orm A of third schedule gives the format of a balance sheet and form  gives the format of a profit and loss account. "hese formats have been revised w.e.f. 1st April 1991 and the profit and loss account and balance sheet of banking company for the year ended 1 st $arch 199> and onwards have to be prepared in new form as discussed below.

<. FORMS OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT

Page28


Eith the nationalisation of ma*or commercial banks and changes brought about in the economic and financial policies by the 3overnment( the environment in which the banks operate has undergone a complete change. 7owever( there was little effort to bring about a change in the financial statements of banks to reflect the reality of the impact of the environment. "here were suggestions emphasising a need for revising formats in which banks publish their financial statements as prescribed under the anking !egulation Act( 19#9. A Committee under the Chairmanship of /hri A. hosh( 4eputy 3overnor( !I( was constituted to e&amine( inter alia the desirability of greater or full disclosure in the published accounts of banks having regard to the need for disclosure( public accountability of banks( re)uirement and maintenance of confidentiality between banker and customer and the re)uirement of maintaining the reputation and credit%worthiness of banks. "he Committee after due deliberation has suggested suitable changesDamendments in the forms of balance sheet and profit and loss account of banks( having regard to + 1. eed for better disclosure >. ?&pansion of banking operations both area%wise and sector%wise over the period( eed for improving the presentation of accounts etc. "he revised formats are given below which include 0orm A for alance /heet( 0orm  for rofit and oss Account and eighteen other schedules of which two relates to notes and accounting policies.

THIRD SCHEDULE= FORM A

Page29


0orm of balance sheet B#*#'! S5!!$ #, &' 31,$ M#5>>>..

,<<<s omitted ) P#$%*#,

S5!*! N&.

A, &' 31.3.

A, &' 31.3.

(!'$ !#)

("!%&, !#)

CAPTIAL AND LIABILITES

Capital !esaves and surplus $inorities Interest 4eposits orrowings ther iabilities and rovision

1 > >A  # 5

TOTAL ASSETS

Cash and balance with !I alance with banks and money at call and short notice

6 @

Investments Advances 0i&ed Assets ther Assets

2 9 1< 11

TOTAL

Contingent liabilities

1>

T5! F&**&?%'/ ,5!*!, #! !@%! $& ! '%,5! ?%$5 T5! B#*#'! S5!!$ & B#'6%'/ C&+"#'%!,=

Page30


PARTICULARS S5!*! 1 C#"%$#*

RS.

I. 0or nationali'ed banks Capital ,fully owned central government-

R,.

N

II. 0or banks incorporated outside India i- Capital , the amount brought in by banks by way of start%up capital prescribed by !I should be shown under this headii- Amount of deposit kept with !I under /ection 11,>of "he anking !egulation Act( 19#9.

N

N

"otal

N

III.0or other banks+ Authori'ed capital ,N shares of !s. N each Issued capital ,N shares of !s. N each /ubscribed capital ,N shares of !s. N each Call%up capital ,N shares of !s. N eachess+ Calls unpaid Add+ 0orfeited shares

N N N N N N

"otal

N

S5!*! 2 R!,!!, #' S"*,

I

II

/tatutory !eserves pening balance Additions during the year 4eductions during the year

N N N

N

Capital !eserves pening balance Additions during the year 4eductions during the year

N N N

N

III /hare premium pening balance Additions during the year

N N

Page31


4eductions during the year

N

N

I8 !evenue and the other reserves pening balance Additions during the year 4eductions during the year

N N N

N

8

alance in rofit and oss Account

N

"otal , I O II O III O I8 O 8 -

N

S5!*! 3 D!"&,%$,

A I. 4emand 4eposits 0rom banks 0rom others II. /avings banks accounts III. "erm 4eposits 0rom banks 0rom others "otal , I( II( and III

i- 4eposits of branches in India ii- 4eposits of branches outside India

N N

N N

N N

3rand total , A and  -

N N

N N

N N

S5!*!  B&&?%'/,

I. orrowings in India i- !eserve ank of India ii- ther anks iii- ther institutions and agencies

N N N

N

II. orrowings outside India

N

"otal , I and II /ecured borrowings in I and II above

N N

S5!*!  O$5! *%#%*%$%!, #' "&%,%&',

i- ills payable

N

Page32


ii- Inter office ad*ustment ,netiii- Interest accrued iv- thers , including provisions-

N N N

"otal

N

S5!*! ; C#,5 #' #'6 ?%$5 RBI

I. Cash in hands , including foreign currency notesII. alance with !I in+ i- Current Account ii- ther Accounts

N N N

"otal I and II

N

S5!*! < B#*#'! ?%$5 #'6, #' M&'! #$ C#** #' S5&$ '&$%!

I. In India i- alance with banks+ a- in Current Accounts b- in ther Accounts ii- $oney at call and /hort notice a- Eith banks b- Eith other institutions "otal , i and ii -

N N N N

N

N N

II. utside India i- In Current Accounts ii- In other 4eposits Accounts iii- $oney at Call and /ort notice "otal , i( ii( and iii-

N N N N

3rand "otal , I and II-

N

S5!*! 8 I'!,$+!'$

I. Investments in India in i- 3overnment /ecurities ii- ther approved /ecurities iii- /hares

N N N

Page33


iv- 4ebentures and onds v- /ubsidiaries andDor *oint ventures vi- thers to be specified "otal

N N N N

II. Investments outside India in i- 3overnment /ecurities , including local authorities - N ii- /ubsidiaries andDor *oint ventures abroad N iii- ther investment , to be specifiedN "otal

N

3rand "otal , I and II-

N

S5!*! 9 A#'!,

A i- ills 4iscounted and urchased ii- Cash Credits( verdraft( and oans payable on 4emand iii- "erm loans "otal

N N

 i- /ecured by tangible Assets ii- Covered by bankD3ovt. guarantees iii- ;nsecured "otal

N N N

C I Advances in India i- riority /ector ii- ublic /ector iii- anks iv- thers "otal II Advances out side India i- 4ue from banks ii- 4ue from others+ a- ills purchased discounted b- /yndicate oans c- thers "otal 3rand "otal , CI. and C II-

N N

N

N N N N N

N N N N N N N

Page34


S5!*! 10 F%! A,,!$,

I remises At cost as on 1st $arch of the preceding year Additions during the year 4eduction during the year 4epreciation to date II ther fi&ed assets , incl. furniture and fi&turesAt cost as on 1st $arch of the preceding year Additions during the year 4eduction during the year 4epreciation to date "otal , I and II -

N N N

N

N N N N

S5!*! 11 O$5! A,,!$,

I. Inter office ad*ustment ,netN II. Interest acrrude N III. "a& paid in advanceD "a& deducted at source N I8. /tationary and stamps. N 8. on%banking assets ac)uired in satisfaction of claims N 8I. thersP N "otal N P In the case there is any unad*usted balance of loss ,i.e. when the loss e&ceeds the aggregate of capital( reserves and surplus-( the same may be shown under appropriate footnote. S5!*! 12 C&'$%'/!'$ *%#%*%$%!,

I. Capital against the bank not acknowledged as debts II. iability for partly paid investment III. iability on Account of outstanding forward ?&change contracts I8. 3uarantees given on behalf of constituents In India utside India 8. Accepts endorsements and other obligation 8I. ther items for which the bank is contingently iable "otal

N N N N N N

2. C&++!'$, &' B#*#'! S5!!$ %$!+,

Page35

N N .. N


S5!*! 1 = C#"%$#*

!. ationali7ed 'an#s

a- Capital ,fully owned by central government- + "he capital owned by the Central 3overnment as on the date of the balance sheet including the contribution on from government( if any. 0or the participating in the Eorld ank pro*ects should be shown. b- anking companies incorporated outside India+ i- "he amount brought in by banks by way of start%up capital as prescribed by !I should shown under this head. ii- "he amount deposit kept with !I( under the subsection > of /ection 11 of anking !egulation Act 19#9 should also be shown. !!. thers 'an#s $!ndian%

Authori'ed( issued( subscribed( called up capital should be given separately. Calls%in%Arrears will be deducted from the called up capital while the paid up value of forfeited shares should be added thus arriving at the paid Fup capital. Ehere necessary items which can be combined should be shown under on head for instance Issued and subscribed Capital otes eneral + "he changes in above items( if any( during the year say( fresh contribution made by the government( fresh issue of capital capitali'ation of reserves etc. may be e&plained the notes. S5!*! 2 = R!,!!, #' ,"*,

I. Statutory reser)es0 !eserves created in terms of /ection 1@( or other /ection of anking !egulation Act must be separately disclosed. II. Capital (eser)es0 "he e&pression Capital !eserves shall not include any amount regarded as free for distribution through the profit and loss account. /urplus on revaluation should be treated as a capital reserves. /urplus on translation of financial statements of foreign branch ,which includes fi&ed assets also- is not a revaluation reserve. III. Share premium0 remium on issue of shares capital may be shown separately under this head.

Page36


I8. (e)enue and other reser)es0 "he e&pression !eserve !evenue shall mean any reserve other than capital reserve. "his item will include all reserves other than those separately classified. "he e&pression reserve shall not include any amount written Foff or retained by providing for any known liability. 8. 'alance of profit0 Includes balance of profit after appropriations. In case of loss balance may be shown as deduction. S5!*! 3 = D!"&,%$,

AI emand deposits0 i- 0rom banks ii- 0rom others+ includes all bank deposits( repayable on demand( of non%bank sectors. Credit balance in overdraft( 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. AII Sa)ings 'an#s Accounts0 Includes all savings banks deposits including inoperative savings bank accounts. AIII &erm eposits+ i- 0rom banks+ Includes all type of bank deposits repayable after specified term ii- 0rom others+ Includes all types of deposits of non banks sector repayable after specified term. 0i&ed deposit( cumulative and recurring deposits( cash certificates( certificates of deposits( foreign currency non resident deposits accounts( annuity deposits( deposits mobili'ed under various schemes( ordinary staff deposits( etc. are to be included under this category. I 4eposits of branches in India. II

4eposits of branches outside India "he total of two A and  will agree with total 4eposits of bank.

N&$!,= eneral0

Page37


a- Interest payable on deposits which is accrued in but should not show under others liability. b- $atured time deposits and cash certificates( etc. should be treated as demand deposits. c- 4eposits under special scheme should be included under term deposits if they are not payable on demand. Ehen such deposits are matured for payment they should be shown under demand deposits. d- 4eposits from banks will include deposits from the banking system in India( co%operative banks( foreign banks( which may or may not have presence in India.

S5!*!  = B&&?%'/,

I 'orrowings in !ndia0 (eser)e ban# of !ndia0 Includes the borrowingsDrefinance obtained by !eserve ank of India. ther ban#s0 Includes the borrowingsDrefinance obtained by commercial banks ,including cooperative banksther institutions and agencies0 Includes the borrowingsDrefinance obtained by Industrial 4evelopment ank of India( ?&port Import ank of India( ational ank for Agriculture and !ural 4evelopment of India and other institutions( agencies ,including liability against participation certificate( if any-

II 'orrowings out side !ndia0 It includes the borrowing of Indian branches abroad as well as borrowing from foreign branches. /ecured borrowings included above. "his item will be separately shown Includes secured borrowingsDrefinance in India and outside India.

N&$!,= eneral0

Page38


a- "he total of I and II will agree with the total of borrowing shown in the balance sheet. b- Inter Foffice transactions should not be shown as borrowings. c- 0unds raised by foreign branches by way of certificates of deposits notes: bonds( etc. should be classified depending upon documentation( as deposits( borrowings etc. d- !efinance obtained by banks from !eserve ank of India and various institutions are being brought under the head borrowing( hence advances will be shown at the gross amount on the assets side. S5!*!  = O$5! *%#%*%$%!, #' "&%,%&',

I 'ills payable0 the bank provides the facility remitting funds from one place to another by means of bank drafts( telegraphic transfer( circular notes( pay orders etc. the person including to remit the money with the bank and get a pay order or bank draft in e&change money deposited. Alternatively he may re)uest the bank for making a telegraphic transfer from his account to the account of the person to whom he want to remit the money. "he paying bank reimbursed by the bank who issues such draft or institutions. "he banks also issue travelers che)ues and gift che)ues for carrying or remitting money .If any such drafts( che)ues( etc. remain uncashed on day of the preparation final accounts of final accounts( they are shown under the heading ills ayable in the alance /heet. II !nter ffice $or 'ranch% Ad8ustment $et%0 "his item represents the difference on account of incomplete recording of transactions between one branch and another branch or one branch and head office. It may have a debit or a credit balance. In case of credit balance: it should be shown under this head It may be noted that only net portion is to be shown of inter office accounts( inland as well foreign. III !nterest Accrued0 It includes accrued but not due on deposits and borrowings I8 thers $!ncluding pro)isions% 0 It includes net provision for income ta& and other ta&es like interest ta& ,less advance payments( ta& deducted at source( etc.- surplus aggregate in provisions for bad debts provision account( surplus in aggregate in provisions for depreciation in securities contingency funds( which are not disclosed are reserves but are actually in the nature of reserves(

Page39


proposed dividendDtransfer to 3overnment( other liabilities which are not disclosed under any of many heads such as unclaimed dividend provisions and funds kept for specific purpose( une&pired discount( out standing 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.

N&$!,= eneral0

a-

0or arriving at the net balance of inter%office ad*ustments all connected inter%office accounts should be aggregated and the net balance only will be shown( representing mostly items in transit and unad*usted items. b- "he interest accruing all deposits( whether the payment is due or not( should be treated as a liability. c- It is proposed to show only pure deposits under this head 4eposits and hence all surplus provisions for bad and doubtful debts contingency funds( secret reserves( etc. which are not netted off against the relative assets( should be brought under the head thers ,including provisions-. S5!*! ; = C#,5 #' B#*#'! ?%$5 R!,!! B#'6 & I'%#

I Cash in hand ,including foreign currency notes-: II alance with !I+ a- in current account: b- in other accounts. Includes cash in hand foreign currency notes and also foreign branches in case of banks having such branches. S5!*! < = B#*#'! ?%$5 O$5! #'6, #' M&'! #$ C#** #' ,5&$ '&$%!

I !n !ndia0 i- 'alance with ban#s a- In current accounts: b- In order to deposit accounts+ include all balance with banks in India ,including co%operative banks-. alance in current accounts and deposit accounts should be shown separately.

Page40


ii- +oney at Call and Short notice a- Eith banks b- Eith other institutions. "his item mainly represents the loans given by one bank to another for a short period Call loans are repayable at any time the bankers recalls them while short notice advances are repayable within a short notice of ,say- ># hours. "he ma&imum notice period is for two weeks. "his includes deposits repayable within fifteen days or less than fifteen days notice lent in the inter%bank call money market. II utside !ndia0 i- Currents accounts and ii- eposits accounts0 Includes balance held by Indian branches of the banks outside India. alance held with the foreign branch by other branches of bank should not shown under this head but should be included in inter%branch accounts. "he amounts held in Current Accounts and 4eposits Accounts should be shown separately. iii- +oney at Call and Short notice0 Includes deposits usually classified in foreign countries as money at call and short notice.

S5!*! 8 = I'!,$+!'$

I !n)estments in !ndia0 i- o)ernment securities0 Includes Central and /tate 3overnment treasury bills. "heses securities should be shown at the book value. 7owever( the difference the book value and market value should be given in notes to balance sheet ii- ther appro)ed Securities0 /ecurities other than 3overnment /ecurities which are according to anking !egulation Act( 19#9 are treated as approved securities( should be including here. iii- Shares0 Investments in shares of companies and corporations not included in the b above should be included here. iv- ebentures and bonds0 investment in debentures and bonds of companies and corporations not included in the b above should be included here. v- !n)estment in Subsidiaries:oint )entures0 Investment in /ubsidiariesD *oint ventures ,including !!s- should be included here. vi- thers0 Includes residual investment( if any( like gold( commercial papers( and other instruments in nature of sharesDdebenturesDbonds. II !n)estments out side !ndia0

Page41


a- o)ernment Securities $including local authorities%0 All foreign 3overnment securities issued by local authorities may be classified under this head. b- Subsidiaries andor :oint )entures abroad0 All investment made in share capital of subsidiaries floated outside India andDor *oint ventures abroad can be classifies under this head. c- thers0 All other investments outside India may be shown under this head. S5!*! 9 = A#'!,

A i- 'ills iscounted and 3urchased0 "he banks also give advances to their customers by discounting their bills. et amount after deducting the amount of discount is credited to the account of customer. "he banks may discount the bills with or without security from the debtor in addition to one or more persons are already liable on the bill. ii- Cash;credit, )erdrafts and /oans (epayable on emand0 Cash;credit0 A cash credit is an arrangement by which a bankers allows his customer to borrow money up to certain limit. Cash credit arrangements are usually made against the security of commodities hypothecated or pledged with the bank.

In case of a cash credit facility the borrower need not borrow at once the whole of the amount he is likely to re)uire( but draw such amounts as when re)uired. 7eDshe can put back any surplus amount which he may find with him for the time being. Interest on cash credit account has to be paid on the amount actually drawn at any time and not on the full amount of the credit allowed. )erdrafts0 "he customer may be allowed to overdraw hisDher current account with or without security if heDshe re)uires temporary accommodation. "hese arrangements is like cash credit is advantageous from the customers point of view( as heDshe is re)uire to pay interest on the actual amount used by himDher. /oans0 A loan is kind of advance made with or without security. In case of loan the banks makes a lump sum payment to the borrower or

Page42


credits his deposits account with the money advanced. !epayments may be made in installments or or at the e&piry of the certain period. "he customer has to pay interest on the total advance whether he withdraws the money from his account ,credited with the loan- or not. A loan once repaid full or in part cannot be drawn again by the borrower unless the banker sanctions as fresh loan.

&erm loans0 A loan may be in form of demand loan 4emand loan is payable on demand It is usually for a short period not e&ceeding a year. Ehile term loans are given for a fi&ed term usually e&ceeding a year.

In classification under /ection A all outstanding%in India as well as outside%less provisions made( will be made under three heads indicated above and both secured and unsecured advances will be included under these heads "erm loans should be mentioned including overdue installments.

 i- Secured by &angible Assets0 All advances or part advances which are secured by tangible assets may be shown here. "he item will include advances in India and outside India. ii- Co)ered by 'an# o)ernment uarantee Advances in India and utside India( to e&tent they are covered by the guarantees of Indian and foreign 3overnments and Indian and foreign anks( 4IC3C( ?C3C( Indian and foreign banks are to be included. iii-
Page45


6- thers0 "his will include items like claims which have not been met( for instance( clearing items debit items representing additions to assets or reduction in liabilities which have not been ad*usted for technical reasons( want of particulars( etc.( advances given to the staff by a bank as employer and not as a banker( etc. Items which are in the nature of e&pense( which are pending ad*ustments( should be provided for and provision netted against this item so that only the reali'able value is shown under this head. Accrued income other than the interest may also be included here. S5!*! 12 = C&'$%'/!'$ *%#%*%$%!,

1- Claims against ban# not ac#nowledge as debt >- /iability of partly paid installments0 iabilities on partly paid shares( debentures( etc. will be included in this head. - /iquidity on account of outstanding forward contracts0 utstanding forwards e&change contracts may be include here. #- uarantees gi)en on behalf of constituents0 a- In India b- utside India: 3uarantees given on behalf of constituents in India and utside India may be shown separately. 5- Acceptance, ndorsement, ther obligations0 "his item will include letters of credit and bills accepted by the bank on behalf of customers. In such cases the bank takes upon itself the responsibility for payment. In order to keep a paper record of such liability( the bank maintains customer acceptances( endorsement and guarantee register. All obligations undertaken by the bank as a result of guarantees( endorsement( acceptance( etc. are recorded here. At the end of the accounting year if some of these obligations remain undisbursed they are to be shown as contingent liabilities under this head. 6- ther !tems >or 'an# is Contingent /iable0 Arrears of cumulative dividends( bills rediscounted under underwriting contracts remaining to be e&ecuted on capital account and not provided for( etc. are to be include here.

B%**, & &**!$%&'

A banking company receives a large number of bills of e&change for collection purpose. /o in order to keep a systematic record of such bills( it maintains a book called ills for Collection !egister. n receipt of bill

Page46


for collection( an entry is made in this register. n collection of e&change( besides making a note of this fact in the bills for collection register( following accounting is also passed by the banker+ Cash account ,with the amount of bill collected- 4r NNN. "o Customers Account NNN. ,with the amount of bill collected less commission charges"o Commission NNN.

Account

At the end of accounting period the amount of bills yet to be collected is ascertained from the bills for collection register. the total amount of such bill is shown here. C&+"*,& !"&,%$,

In case certain persons are re)uired to make compulsory deposits with a bank as per income ta&( e&cise rules( etc. these deposits have been received by the concerned bank on behalf of the concerned authority. "hey may be include in the category of 4emand 4eposits and shown in the alance /heet accordingly. N&$!, #' %',$$%&', & &+"%*#$%&' G!'!#* I',$$%&',

1- "he format of balance sheet and profit loss account cover all items likely to appear in these statements. In case bank doesnt have any particular item to report( it may be omitted from formats. >- Corresponding comparative figures of the previous year are to be disclosed as indicated in the formats. "he words current year and previous year used in the formats are only to indicate the order of presentation and may not appear in accounts. - 0igures should be rounded off to the nearest thousand rupees. "hus( a sum of !s. 19(@5(9#<.@2 will appear in balance sheet as !s. 19.@6.

Page47


PREPARATION OF PROFIT AND LOSS ACCOUNT F&+ B T5% S5!*!

Page48


F&+ & P&%$ #' L&,, A&'$ P&%$ #' L&,, A&'$ & $5! !# !'! 31 ,$ M#5 >> P#$%*#, S5!*! !# !'! N+! (R,.) I. I'&+!=

Interest ?arned ther income

1 1#

N. N.

15 16 N

N. N. N.

II. E"!'%$!=

Interest ?&pended perating ?&penses rovisions and Contingencies III. P&%$:L&,,=

et rofitD,oss- of the year "otal

N. N.

I4. A""&"%#$%&',=

"ransfer to /tatutory !eserves "ransfer to other !eserves "ransfer to 3overnment roposed 4ividend alance Carried over to alance /heet "otal

N.. N. N. N. N.

S5!*!, $& ! #''!! ?%$5 P&%$ #' L&,, A&'$ P#$%*#,

R,.

S5!*! 13= I'$!!,$ E#'!

,I- InterestD 4iscounts on AdvancesDills ,II- Income on Investments ,III- Interest on balances with !I and other inter bank funds ,I8- thers "otal

... N N N N

S5!*! 1= O$5! I'&+!,

,I- Commission( ?&change and rokerage ,II- rofit on /ale of investment ess+ oss on /ale of investment ,III- rofit on revaluation of Investment ess+ oss on revaluation of Investment ,I8- rofit on /ale of andDuilding and ther Assets ess+ oss on /ale of andDuilding and ther Assets

Page49

N


,8- rofit on ?&change transactions ess+ oss on ?&change transactions ,8I- Income earned by way of dividend( etc.( from subsidiaries Companies andDor *oint ventures abroadDin India. ,8II- $isc. Income "otal N&$!= ;nder items II to 8 loss figures be shown in brackets S5!*! 1 = I'$!!,$ E"!'!

,I- Interest on 4eposits ,II- Interest on !IDInter%ank 4eposits ,III- thers "otal S5!*! 1;= O"!#$%'/ E"!',!,

,I- ayment to and rovisions for ?mployees ,II- !ent( "a&es and ighting ,III- rinting and /tationary ,I8- Advertisement and ublicity ,8- 4epreciation on anks roperty ,8I- 4irectors 0ees( Allowances and ?&penses ,8II- Auditors 0ee and ?&penses ,Including ranch Auditors,8III- aw Charges ,IR- ostage( "elegrams( "elephones( etc. ,R- !epairs and $aintenance ,RI- Insurance ,RII- ther ?&penditure "otal ote+ Corresponding figures for the immediately preceding financial year should be shown in separate columns

COMMENTS ON FROFIT AND LOSS ACCOUNT ITEMS S5!*! 13 A I'$!!,$ E#'! 1. interestD4iscount on AdvancesDills+ includes interest and discount

on all types of loans and advances like cash%credit( demand loans( overdrafts( e&ports loans( term loans( domestic and foreign bills

Page50


purchased and discounted ,including those rediscounted-( overdue interest and also interest subsidy( if any relating to such advancesDbills. >. Income on Investments+ Includes all income derived from the investment portfolio by way of interest and dividend . Interest on balances with !eserve ank of India and other inter% bank funds+ Includes the interest on balances with !eserve ank of India and other banks( call loans( money market placements( etc. #. thers+ Includes any other interestDdiscount income not included in the above heads. S5!*! 1 B O$5! I'&+!, 1. Commission, "change and 'rokerage+ Includes all remuneration

on services as a commission on collection( commissionDe&change on remittance and transfers( commission on letter of credits( letting out lockers and guarantees( commission on 3overnment business( commission on other permitted agency business including consultancy and other services( brokerage etc. on securities It does not include foreign e&change income. >. 3rofit on sale of in)estment0 ess loss on sale of investment . 3rofit on re)aluation of in)estment0 ess loss on revaluation of investment. #. 3rofit on sale of land, building and other assets0 ess loss on sale of land( building and other assets. Includes profitDloss on the sale of securities( furniture land and buildings( motor vehicle( gold( silver( etc. nly the net position should be shown. If the net position is a loss( the amount should be shown as a deduction. "he net profitDloss on revaluation of assets may also be shown under this item 5. 3rofit on "change transactions0 ess loss on e&change transactions Includes profitDloss on dealing in foreign e&change( all income earned by way of foreign e&change commission and charges on foreign e&change transactions e&cluding interest which will be shown under interest. nly the net position should be shown. If the net position is a loss( the amount should be shown as a deduction. 6. !ncome earned by way of di)idends, etc. from subsidiaries, companies, 8oint )entures, abroadin !ndia. @. +iscellaneous !ncome0 Includes recoveries from constituents for godown rents( income from the banks properties( security charges( insurance( etc. and any other miscellaneous income. In case any item under this head e&ceeds one percentage of the total income( particulars may be given in the notes.

Page51


S5!*! 1 C I'$!!,$ E"!',!, 1. !nterest on deposits0 Includes interest paid on all types of deposits

from banks and other institutions. >. !nterest on ('!!nter;'an# 'orrowings0 Includes discountsDinterest on all borrowings and refinance from the !eserve ank of India and other banks. . thers0 Includes discountDinterest on all borrowings and refinance( penal interest paid( etc. may also be included here. S5!*! 1; D O"!#$%'/ E"!',!, 1. 3ayments to and pro)isions for employees0 Include staff salaries

>.

.

#.

5.

6.

@.

wages( allowances( bonus( other staff benefits( like provident fund( pension( gratuity( leave fare concessions staff welfare medical allowances to staff( etc. (ent, ta"es and /ighting0 Includes rent paid by the banks on buildings and municipal and other ta&es paid e&cluding income ta& and interest ta&( electricity and other similar charges and levies. 7ouse allowance and all similar payments to staff should appear under head ayments and provisions for employees. 3rinting and Stationary0 Includes books and forms and stationary used by bank and other printing which are not incurred by way of publicity e&penditure. Ad)ertisement and 3ublicity0 Includes e&penditure incurred by the bank for advertisement and publicity purpose including printing charges of publicity matter. epreciation on 'an#s 3roperty0 Includes depreciation on banks own property( motor cars and other vehicles( furniture( electric fittings( vaults( lifts( leasehold properties( non banking assets( etc. irector?s fees, allowances and e"penses0 Includes sitting fees and all other items of e&penditure incurred on behalf of directors. It includes the daily allowances( hotel charges( conveyance charges( etc. which though in the nature of reimbursement of e&penses incurred may include under this head. /imilar e&penses of local committee members may also be included in this head. Auditors? fees and e"penses0 ,including branch auditors fees and e&penses- Includes the fees paid to the statutory auditors and branch auditors for professional services rendered and all e&penses for performing their duties( even though they may be in the nature of reimbursement of e&penses. If e&ternal auditors have been appointed by the bankers themselves for internal inspection and

Page52


audits and other services( e&penses incurred in that conte&t including fees may not be included this head but shown under  ther ?&penses. 2. /aw Charges0 All legal e&penses and reimbursement of e&penses( incurred in connection with legal services are to be included here. 9. 3ostage, telegrams, telephones, etc0 Includes all postage charges like stamps( telegram( telephones( teleprinters( etc. 1<. (epairs and maintenance0 Includes repairs to banks property( their maintenance charges( etc. 11. !nsurance0 Includes insurance charges premium paid to 4IC3C( etc. to the e&tent they are not recovered from the concerned parties. 1>. ther e"penditure0 All e&penses other than those which are not included in any other heads like( licences fees( donation( subscription of papers( periodicals( entertainment e&penses( travel e&penses( etc. may be included in this head. In case any particular item under this head e&ceeds one percent of the total income particulars may be given in the notes.

E P&%,%&', #' C&'$%'/!'%!,

Includes all the provisions made for bad debts and doubtful debts( provision for ta&ation( provisions for diminution in the value of investments( transfer to contingencies and other similar items.

8. ACCOUNTING TREATMENT OF SPESIFIC ITEMS

Accounting treatment of some specific items in the profit and loss account and balance sheet are as per following. A. B# D!$, #' P&%,%&', & D&$* D!$,

"he amount of bad debts and provision for bad debts has to be charged under heading rovision and Contingencies in the rofit and oss account. In the alance /heet( the advances are shown after deducting

Page53


both bad debts and provisions for bad debts. It may be noted the banks collect from their branches information regarding bad debts and doubtful debts also. "he schedule of Advances to be filled by the branches contains separate column regarding doubtful debts in respect of bills purchased and discounted( cash credits and overdrafts and unsecured loans. 7owever while consolidating the /chedule of Advances at the head office level( for balance sheet purposes( the advances are shown net of any bad or doubtful debts. B. P&%,%&' & T##$%&'

"he amount of provision for ta&ation has to be charged to the rofit and oss account under heading rovisions and Contingencies in the alance /heet( it will be shown under the heading ther liabilities and rovisions( on the liability side. C. R!#$! &'  B%**, D%,&'$!

"his refers to une&pired discount. A banking company charges discount in advance for the full period of the bill of e&change or promissory note discounted with it. "he accounting entry made is as follows+ ills discounted and purchased aDc "o Customers aDc "o 4iscount aDc

4r.

Customers account is credited with the net amount remaining after deducting the amount of discount. "he amount credited to discount account represents the earning of the bank. 7owever it may be possible that the bills discounted may mature after the close of financial year( It will be not be appropriate to take to the credit of the rofit and oss account( that part of the discount charged( which relates to ne&t year. An accounting entry is( therefore( passed for unearned discount in the following manner+ 4iscount aDc 4r. "o !ebate on ills 4iscounted aDc ,with the amount of unearned discount to the ne&t period!ebate on bills discounted( if already appears in the trial balance( is taken to the alance /heet on liabilities side. 7owever( if an ad*ustment has to be done after the preparation of the trial balance( in respect on bills discounted the amount of such rebate ,i.e. unearned discount- will be

Page54


deducted from the total discount in the profit and loss account and will also appear as a liability in the balance sheet.

9. IMPORTANT ITEMS OF BALANCE SHEET

et us consider some of the peculiar items of assets and liabilities appearing in the banks balance sheet. B#*#'! ,5!!$= A,,!$, S%!

"he various items of assets in the balance sheet are arranged according to li)uidity order.

Page55


1. M&'! #$ C#** #' S5&$ N&$%!

"hese are related to inter%bank transactions. ;nder this arrangement money borrowed one bank from other bank usually for one to fourteen days. anks having surplus money advance such loans. anks having short supply of money( contacts the banks having surplus funds or vice versa for this purpose. Alternatively( they may approach the primary dealers in the money market for deploying their surplus funds or making good the deficit. "he rate of interest on which money is supplied fluctuates every day even within the day. 2. A#'!,

;nder this head( the following items are covered+ 1. oans >. Cash credit . verdraft L&#',= A loan is advance of fi&ed amount given to customer for a specific

period. C#,5 !%$= A is an arrangement by which the bank agrees to lend money

up to a fi&ed limit against pledge or hypothecation of some securities. Customers need not draw the whole at home. O!#$= ;nder this arrangement( the customer is permitted to over draw the money from his current account up to a certain limit against some specific securities like .I.C policy banks fi&ed deposits receipts national savings certificates( )uoted shares.

3. B%**, R!!%#*! !%'/ B%**, & C&**!$%&' #, P! C&'$#

Customers deposit into bank the draft and the bills for collection and credit to their accounts. "he bank keeps the register for recording the bills for collection. n collection( cash account is debited and customers account is credited. At end of the accounting year( when some bills are left uncollected( following entry is passed+ ills received being bills for collection aDcNNNN4r. "o bills for collection being bills receivable account

Page56


It is contra item in the balance sheet. "he first account denotes the amount receivable and it is shown on assets side. "he second one denotes the amount payable to the customer and is shown on the liabilities side of the balance sheet. . A!"$#'! E'&,!+!'$ #' &$5! O*%/#$%&',

"hey represent the liabilities which the bank has assumed on behalf of its customers( the bank may accommodate his customer in the following ways+ 1. by opening letters of credit >. by accepting bills on behalf of the customer . by making endorsement on promissory notes prepared by the customer #. by issuing letters of guarantee to make payments if the customers fail to pay In all these cases( the bank is liable to third parties. 7ence( it is liability. Ehile undertaking such liabilities the bank obtains customer guarantee from its customers which enables it to claim the amounts from its customers. "herefore( it is an asset. At the end of the accounting year( the following entry is passed for recording unrecorded bills+ Constituents iability for Acceptance( ?ndorsement or other bligations aDc NNNNNNNNN..4!. "o Acceptance( ?ndorsement or other bligations. It is contra item in the balance sheet. "he first accounts appears on assets side while the other on liabilities side.

. N&'-B#'6%'/ A,,!$,

A bank cannot ac)uire certain assets but it can always lend against the security of such assets. "his means that some times( in case of failure on part of the loanee to repay the loans( the bank may have to take possession of such assets. rofit or loss on disposal of such assets should be disclosed separately in the profit and loss account. ;. G&* #' S%*!

3old appears under Investment and silver appears under other assets

Page57


<. L&6!, & S#! D!"&,%$, 4#*$,

"hese are assets and are included are included under furniture 8. B#'5 A,$+!'$ A&'$

"here are many transactions that take place between the head office and the branches and between one branch to another towards the end of financial year. Ehen such transactions appear they are properly recorded in books of branch or head office when the transactions take place but in the absence of any advice or completion of the transactions( they remain unrecorded in the books of other party. ecause of these transactions there is always balance left in branch account in the head office books. "his balance is called ranch ad*ustment account. "his appears on assets side of the balance sheet if it has a debit balance and on liability side if it has credit balance. B#*#'! S5!!$= L%#%*%$%!, ,%! 9. S5#! C#"%$#*

;nder this head( authorised( subscribed and issued and paid up capital are shown separately. As in the case of any other limited company( calls in arrears are reduced from paid up capital and forfeited shares amount is added to it. 10. R!,!!, F' #' O$5! R!,!!,

?very banking company incorporated in India shall before declaring a dividend( transfer a sum e)ual to twenty per cent of net profit each year ,as per profit and loss account- to reserve fund. 11. D!"&,%$, #' O$5! A&'$,

"here are amounts lying in the credit of customers accounts. 0i&ed deposits are for a fi&ed period whereas savings bank and current accounts balances are repayable on demand. Contingency accounts( include the provision for contingencies( provision for ta&ation( etc. "hese are merged with current accounts. 12. B%**, & C&**!$%&' #' A!"$#'!, #' E'&,!+!'$, #! C&'$# I$!+,

Page58


"hese are e&plained in the above points number  and # 10. DISCLOSURE REQUIRMENTS OF BANKS TO BE ADDED AS NOTES TO ACCOUNTS ( %' S5!*! 1<) 1. N&'- "!&+%'/ A,,!$, (NPA)

"he banks have to classify their advances into four broad groups , istandard assets( , ii- sub%standard assets( , iii- doubtful assets and , i)- loss assets. roadly speaking( classification of assets into the above categories should be done taking into account the degree of well defined credit weaknesses and e&tent of dependence on collateral security for realisation of dues. anks should( therefore( keep the following definitions in mind while classifying the assets. F%'#'%#* S$#$!+!'$, & B#'6%'/ C&+"#'%!, ,i- S$#'# A,,!$, % /tandard asset is one which does not disclose any

problems and which does not carry more than normal risk attached to the business. /uch an asset is not a A. ,ii- S-,$#'# A,,!$, % /ub%standard asset is one which has been classified as A for a period not e&ceeding 1> months. In such cases( the current net worth of the borrowerDguarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the bank in full. In other words( such an asset will have well%defined credit weaknesses that *eopardi'e the li)uidation of the debt and are characteri'ed by the distinct possibility that the bank will sustain some loss( if deficiencies are not corrected. In the case of term loans( those where installments of principal are overdue for period e&ceeding one year should be treated as sub%standard. An asset where the terms of the loan agreement regarding interest and principal have been renegotiated or rescheduled after commencement of production( should be classified as sub%standard and should remain in such category for at least two years of satisfactory performance under the renegotiated or rescheduled terms. In other words( the classification of an asset should not be upgraded merely as a result of rescheduling( unless there is satisfactory compliance of the above condition. ,iii- D&$* A,,!$, % A doubtful asset is one which has remained A for a period e&ceeding 12 months. In the case of term loans( those where instalments of principal have remained overdue for a period e&ceeding 12 months should be treated as doubtful. 7ere too( as in the case of sub% standard assets( rescheduling does not entitle a bank to upgrade the )uality of an advance automatically.

Page59


A loan classified as doubtful has all the weaknesses inherent in that classified as sub%standard with the added characteristic that the weaknesses make collection or li)uidation in full( on the basis of currently known facts( conditions and values( highly )uestionable and improbable. ,iv- L&,, A,,!$, % A loss asset is one where loss has been identified by the bank or internal or e&ternal auditors or the !I inspection but the amount has not been written off( wholly or partly. In other words( such an asset is considered uncollectible and of such little value that its continuance as a bank asset is not warranted although there may be some salvage or recovery value. It may be noted that the above classification is meant for the purpose of computing the amount of provision to be made in respect of advances and not for the purpose of presentation of advances in the balance sheet. "he balance sheet presentation of advances is governed by the "hird /chedule to the anking !egulation Act( 19#9( which re)uires classification of advances altogether differently. "aking into account the time lag between an accounts becoming doubtful of recovery( its recognition as such( the reali'ation of the security and the erosion over time in the value of security charged to the banks( it has been decided that banks should make provision against sub%standard assets( doubtful assets and loss assets on the following basis+ ,a- Loss assets: "he entire amount should be written off or full provision should be made for the amount outstanding. $b% +oubtful assets: ,i- 0ull provision to the e&tent of the unsecured portion should be made. In doing so( the reali'able value of the security available to the bank should be determined on a realistic basis. 4IC3CD?C3C cover is also taken into account ,this aspect is discussed later in this chapter-. In case the advance covered by C3"/I guarantee becomes non%performing( no provision need be made towards the guaranteed portion. "he amount outstanding in e&cess of the guaranteed portion should be provided for as per the e&tant guidelines on provisioning for non%performing advances. ,ii- Additionally( ><= % 1<<= of the secured portion should be provided for( depending upon the period for which the advance has been considered as a doubtful asset( as follows+

eriod for which the advance has been portion Considered as doubtful

= of provision on secured

Page60


;p to 1 year $ore than 1 year and up to  years $ore than three years i. utstanding stock of As as on 1.<.><<# w.e.f. 1.<.><<5 w.e.f. 1.<.><<6 w.e.f. 1.<.><<@

><= <= 5<=

6<= @5= 1<<=

ii. Advances classified as doubtful for more than three years on or after <1.<#.><<# w.e.f. 1.<.><<5 1<<= ,c- Sub-standard assets = A general provision of 1<= on total outstanding should be made without making any allowance for 4IC3CD?C3C cover and securities available. An additional provision of 1<= ,i.e.( total ><= of total outstanding- is re)uired to be made on unsecured e&posure ab initio sanction of loan. 3enerally such a situation may arise in case of personal and education loans etc. ;nsecured e&posure is defined as an e&posure where the reali'able value of security is not more than 1<= of the outstanding e&posure ,fund based and non%fund based-. /ecurity should not include guarantees( comfort letters etc ,d- Standard assets + A general provision of a minimum of <.#<= of total standard assets should be made. It has been clarified that the provision should be made on global laon portfolio basis and not on domestic advances alone. 3ro)ision for Certain Specific &ypes of Ad)ances

"he guidelines also deal with provisioning for certain specific types of advances as follows + Ad)ances Secured Against &erm eposits, ational Sa)ings Certificates, Surrender alue of /ife 3olicies, etc. Advances secured against term deposits( /Cs eligible for surrender( Indira 8ikas atras( Misan 8ikas atras and life insurance policies are e&empted from provisioning re)uirements. Accordingly( the banks need not treat such accounts as As. It may be noted that advances against gold ornaments( government securities( and all other kinds of securities are not e&empted from provisioning re)uirements. Ad)ances uaranteed by o)ernment of !ndia andor State o)ernments According to the guidelines( credit facilities where government guarantees are available( although overdue( should not be treated as A. 7owever( it

Page61


needs to be noted that such e&emption from classification of advances as A is only for the purposes of assets classification and provisioning norms and not for the purposes of recognition of income. In other words( if such a credit facility meets the criteria for being classified as A( income in respect of the facility should not be recognised until it is actually reali'ed. Also( in the case of state government guarantees( this e&emption is available only where the guarantees have not been invoked. "he /tate 3overnment guaranteed accounts which have been invoked upon becoming A are to be treated at par with other advances for purpose of asset classification( income recognition and provisioning norms. Advances ;nder !ehabilitation ackages Ehere additional facilities are granted to a unit under rehabilitation packages approved by the oard for Industrial and 0inancial !econstruction ,I0!- or by term%lending institutions or the bank ,on its own or under a consortium arrangement-( provision should continue to be made for the dues in respect of e&isting credit facilities. As regards the additional facilities( provision need not to be made for a period of one year from the date of disbursement in respect of additional facilities sanctioned under rehabilitation packages approved by I0!Dterm%lending institutions. /imilarly( no provision need be made for a period of one year in respect of additional facilities granted to a sick small%scale industrial unit in accordance with a rehabilitation packageDnursing programme drawn up by the bank itself or under a consortium arrangement. After the period of one year( the bank in consultation with its auditors would take a view whether there is need for making provision in respect of the additional facilities sanctioned. &a#e;out >inance In the case of take%out finance( if based on record of recovery( the account is classified by their lending bank as A( it should make provision for loan losses as per the guidelines. "he provision should be reversed when the account is taken over by the taking%over institution. n taking over the account( the taking%over institution should make provisions as per the guidelines. 0or this purpose( the account should be considered to have become A from the actual date of its becoming so( even though the account was not on the books of the taking%over institution on that date. P&%,%&'%'/ %' ##'!, &!!  $5! /##'$!!, & DICGC:ECGC

+ In the case of advances guaranteed by ?&port Credit 3uarantee Corporation ,?C3C- or by 4eposit Insurance and Credit 3uarantee Corporation ,4IC3C-( provision is re)uired to be made only for the balance in e&cess of the amount guaranteed by these corporations. In case the bank also holds a security in respect of an advance guaranteed by

Page62


?C3CD4IC3C( the reali'able value of the security should be deducted from the outstanding balance before the ?C3CD4IC3C guarantee is off% set. "he !eserve ank of India has also clarified that if the banks are following more stringent method of provisioning in respect of advances guaranteed by ?C3CD4IC3C( such banks may continue to do so. "he manner of determining the amount of provision in respect of ?C3CD4IC3C guaranteed advances in accordance with the above guidelines is illustrated below. ,It may be noted that these illustrations are merely intended to facilitate understanding of the !I guidelines: they have not been issued by the !I.anking companies are re)uired to make additional disclosure in the /chedule 1@ on otes on Accounts regarding movement of the provisions for A ,e&cluding the provisions on standard assets- and depreciation on investments as per the following format+ 2 M&!+!'$ & "&%,%&', 5!* $&?#, NPA

articulars ><<&

As on 1%%><<&

As on 1%%

,Current year-

,revious

yearpening alance Add+ rovisions made during the yr. /ub%total ess+ Erite off bad debtsD write ack of e&cess provisions Closing alance 3 M&!+!'$ & "&%,%&', 5!* $&?#, D!"!%#$%&' &' I'!,$+!'$,

articulars ><<&

As on 1%%><<&

As on 1%%

,Current year-

,revious

yearpening alance Add+ ,a- Appropriation from Investment 0luctuation !eserves during the yr ,b- rovisions made during the year ess+ ,c- "ransfer to Investment 0luctuation !eserves during the yr. ,d- rovision made during the year

Page63


Closing alance

. A,,!$ C*#,,%%#$%&' I'&+! R!&/'%$%&' #' P&%,%&' N&+,

Assets classification ,a- A banks advances are divided between performing and non% performing assets. An advance giving income on continuous basis is called a performing asset. A nonFperforming asset( on other hand( is one remains out of order for ninety days. A term loan is treated as A( if the interest instalment remains overdue for more than 12< days while a cash creditDoverdraft account treated as A( if the outstanding amount remains over and above sanctioned limitsDdrawing power more than ninety days "he bill purchasedDdiscounted is treated as A( if bill remains overdue and unpaid for ninety days. In other case ,i.e. where the outstanding amount is less than drawing power- it is treated as A it there is no credit is less than the debit to the account on account of interest( interest during the ninety days preceding the date of the balance sheet. ,b- Incoming !ecognition "he income from performing assets is recognised on accrual basis and interest income from non%performing assets is recognised on cash basis. In case interest on A is already recognised in the books of accrual basis( the same should be ad*usted by making provisions for income recorded but not received on A. ,c-

Assets classification for provisioning re)uirement "he rules regarding classification and provisioning re)uirements are listed below+

Page64


Category

/tandard Assets

4efinitional re)uirements

A performing asset with *ust normal risk attached

rovisioning re)uirement

<.#<=

/ub% /tandard Assets Ehich has remained A for a period not e&ceeding eighteen months 1<= of total outstanding

4oubtful Assets

oss Assets

Ehich has Ehich has been remained identified by A for a internal and period e&ternal auditors( e&ceeding !I inspectors eighteen months ;nsecured 1<<= of total portion outstanding %1<<= /ecured portion F 4ebt doubtful ><= up to one year 1 to  years <= more than  years 5<=

,d- Investment Classification 1. >. . #. 5.

Investment by banks include as under+ 3overnment /ecurities Approved securities /hares 4ebenture and bonds 6. /ubsidiariesD*oint venture @. thers ,commercial paper( units of mutual funds( etc"he first two( vi'.( 3overnment securities and Approved securities are generally used for meeting statutory li)uidity ratio and are called /! securities. "he remaining securities are known as non%/! securities. "he banks were re)uired to bifurcate their /! securities into current and permanent categories. "he minimum ratio prescribed most recently was @5: >5 for current and permanent investments. "he current /!

Page65


securities and entire non%/! securities were to be written down to market value. "his leads to depreciation being shown in account. "he permanent securities were carried at cost. As per new guidelines( both /! and on /! securities are to be divided in three categories vi'.( 1. 7eld to maturity >. Available for sale . 7eld for trading Category 1 is like old permanent category > and  are like current category. "he investment under 7eld to maturity should not e&ceed >5= of banks total investment. "he banks have the freedom to decide on e&tent of holding under available for sale and held for trading category. "he securities ac)uired by banks to the intension to hold them up to maturity are classified as under 7old to the maturity. "he security( ac)uired by banks with intention of trading( by taking advantage of short term priceDinterest rate movement( is classified under held for trading. "he remaining securities are classified under the category available for sale. "he securities held for trading are to be sold within ninety days. "he profit and loss on securities held to maturity is to be transferred to rofit and oss account. "he profit is subse)uently transferred to Capital !eserves Account. "he securities held to maturity need not to be marked to market. "he remaining two categories are marked to market.

THIRD SCHEDULE= FORM A BALANCE SHEET OF STATE BANK OF INDIA

Page66


AS ON 31ST MARCH 2009

,<<<s omitted ) P#$%*#,

S5!*! A, &' 31.3.09 N&. (!'$ !#)

A, &' 31.3.08 ("!%&, !#)

CAPTIAL AND LIABILITES

Capital !esaves and surplus $inorities Interest

1 > >A

4eposits orrowings ther iabilities and rovision

 # 5

TOTAL ASSETS

6#(22(<> @1@55(51(1

61(#@(<# 6<6<#(91(>

>>>2(>@(1

><>2(1>(<9

1<11922(>(6 6#591(6#(# 156>@ffl(@

@@6#16(51(22 66<>(1@(<@ 1>1565(>(5>

13082<0< S5!*! A, &' 31.3.09 N&. (!'$ !#)

102<2;9183 A, &' 31.3.08 ("!%&, !#)

Cash and balance with !I 6 alance with banks and money at @ call and short notice

@#1.21(<6(66

@#21@(>5(5#

511<<(6>(9<

1#>11(16(16

Investments Advances 0i&ed Assets ther Assets

@>>1(##(26 @5<6>(2(#5 5>>(#@(@5

>@2#1(@>(# 6<>>1(9#(<# #66>(@2(9@

51@#6(@(#5

5651#(6#(69

308<0<

102<2;9183

26<626(<2(>1 #992(5(>@

9#5@@<(><(@5 >5>>5(9<(@5

2 9 1< 11

TOTAL

Contingent liabilities ills for Collection

1>

S5!*!, $& ! #''!! ?%$5 #*#'! ,5!!$

,<<<s omitted ) PARTICULARS

A, &' 31.3.09

A, &' 31.3.08

Page67


S5!*! 1 C#"%$#*

(C!'$ !#) RS.

Authori'ed capital ,1<<(<<(<<(<<< shares of !s. 1< each Issued capital ,6(#9(62(5<< ,revious Jear 6(15(52(65# ?)uity /hares of !s. 1< each/ubscribed and aid up capital

(P!%&, !#) R,.

1<(<<(<<(<<<

T&$#*

1<(<<(<<(<<<

6#(96(25

61(55(2@

6#(22(<>

61(#@(<#

;38802

;31<0

S5!*! 2 R!,!!, #' S"*,

I

/tatutory !eserves pening balance Additions during the year 4eductions during the year

!s. >5>12(1<(9 1 55<2(5@(95

!s.

!s. ><@9(<(6 2 #29(<@(>

<@>6(62(26 II

Capital !eserves pening balance Additions during the year 4eductions during the year

#>>(52(@ 2##(@>(>

>5>12(1<(91 #12(1#(9 #(#(92

1>6@(<(69 III /hare premium pening balance Additions during the year 4eductions during the year

><<92(96(@ 5 56<(16(95

#>>(52(@ 51<(5@. 1661@(<9(6 @ >2(@<(>5

1(>1(12 ><65@(9>(5>

I8

Investment !eserves pening balance Additions during the year 4eductions during the year

><<92(96(@5

6>(1@(2@ 6>(1@(2@ 6>(1@(2@ %%%%

8 !evenue and the other reserves pening balance Additions during the year 4eductions during the year

>#19(2(1# 6@#(#@(1 2(56(9#

6>(1@(2@ 6195(56(<@ <<(<<(<< #<@5(@>(9

<25(@1( 8I 0oreign currency "ransaction !eserves pening balance Additions during the year 4eductions during the year

!s.

1@9(12(1# 6@#(#@(1 2(52(9#

>#19(21#

6195(56(<@ <<(<<(<< #<@5(@>(9

Page68


8II

alance in rofit and oss Account

T&$#* ( I  II  III  I4  4 4I  4II )

<25(@1( (9

>#19(2(1# (9

<31281;2

8011911

S5!*! 3 D!"&,%$,

A I. 4emand 4eposits 0rom banks 0rom others II. /avings banks accounts III. "erm 4eposits 0rom banks 0rom others

1<@(61(2#(16 99991(@(#> 192>>#(>6(25

1>1(#<(6@ 252><(1>(# 15#>>9(>2(65

165@(16(<< #19#2(1>(@

@<65(#@(@# >@@9@5(6#(69

T&$#* ( I II #' III)

<20<31280

3<03909



@1<<1(51(>> ><#1(61(52

51#6@6(<6(@6 >>@>@(2@(

<20<31280

3<03909

%%%% 919(9#6< >@52(5(29

1<<(<<(<< @25(52(9 6#2(95(1@

II. orrowings outside India

5<<5(@(@>

29>#(2@(1@

T&$#* ( I #' II ) /ecured borrowings in I and II above

3<13;821 >2@1(6<(5

1<2<113 #6@(2@(@6

129>9(2@(6< 5@<6(@1(55 6921(15(56 @91#>(2>(@1

19159(9<(#

110;9<<2

833;2298

i- 4eposits of branches in India ii- 4eposits of branches outside India

T&$#* ( % #' %% ) S5!*!  B&&?%'/,

I. orrowings in India i- !eserve ank of India ii- ther anks iii- ther institutions and agencies

S5!*!  O$5! *%#%*%$%!, #' "&%,%&',

i- ills payable ii- Inter office ad*ustment ,netiii- Interest accrued iv- thers , including provisionsT&$#*

5<9>(>1(25 5911<(1@(56

S5!*! ; C#,5 #' #*#'! ?%$5 RBI

Page69

Project report of accounting in banks and balance sheet I. Cash in hand ,including foreign currency notes and goldII. alance with !I In Current Account In ther Accounts

#>95(51(52

>><(1(11

51>#2(1#(6 >(51(

><9<<(6<(6 >@#1(@<(11

555#6(1@(>@

515#(61(52

S5!*!
I. In India i- alance with banks+ a- in Current Accounts b- in ther Accounts ii- $oney at call and /hort notice a- Eith banks b- Eith other institutions

9>6(><(21 1<622(99(5

11<5(19(2 >6<2(1(9<

1><@(1@( N

6559(<<(<< N

T&$#* ( I #' %% )

28223<;<

10<2128

II. utside India i- In Current Accounts ii- In other 4eposits Accounts iii- $oney at Call and /ort notice

1656(5#(#1 1>6(9(9< 9<51(@6(61

1>5>(1(9 @#9(15(# #5@(@(@

T&$#* ( I %% #' %%%)

203292

920;

G#' T&$#* ( I #' II)

88<;29

1931<192

>>6>1@(#@(<# 129>(62(<2 #59<(#1(@6 1#222(9@(@9 61@(<1(1@

1#<@#(<(62 >@2(>5(1@ #5<>(5(@> 1@6>2(@@(5@ @66(#6(<

12>6#(51(@6

1#96<(<#(<@

>69#@1(<@(6<

12#<(1<(>#

@#>(59(>2

9#(>(#1

1>55(#5(95

61(2<(>5

S5!*! 8 I'!,$+!'$

I. Investments in India in i- 3overnment /ecurities ii- ther approved /ecurities iii- /hares iv- 4ebentures and onds v- /ubsidiaries and Dor *oint ventures vi- thers ,;nitsDCommercial apers( etc."otal II. Investments outside India in i- 3overnment /ecurities , including local authorities ii- /ubsidiaries andDor *oint ventures abroad

Page70

Project report of accounting in banks and balance sheet iii- ther investment ,shares( debenture( etc.-

##2#(2>(26

#16(1(19

T&$#*

;828809

1<11;8

2<939;9

189012<09

A i- ills 4iscounted and urchased ii- Cash Credits( verdraft( and oans payable on 4emand iii- "erm loans

#@12(96(6< >>6@9(9>(62

6@(#9(<> 151999(99(96

>@169(1(1#

>>2<#(@<(6#

T&$#*

203202

1;<;819;2

 i- /ecured by tangible Assets ii- Covered by bankD3ovt. guarantees iii- ;nsecured

5<<>6(9>(# @26<1(>(99

>2#>1(<6(15 ><>##(@5(@#

11>2@5(<#(<<

11>>9>(@(@

T&$#*

203202

1;<;819;2

C I Advances in India i- riority /ector ii- ublic /ector iii- anks iv- thers

1#6@(56(1 6>#1(55.<> #(>1(@1 >@65<>(9<(25

119><(51(12 ><>5(<<(> @@(66(># >12>95(16(99

T&$#*

;<1;2392

3;0;283<3

##11(@9(@5

>15(16(19

>9<2(52(@6 >@<9#(#@(16 >#9@>(1<(2

155#(#<(#5 19256(6>(>< 126<#(66(<5

8<8;9;0

;139889

203202

1;<;819;2

G#' T&$#* ( I #' II) S5!*! 9 A#'!,

C II Advances out side India i- 4ue from banks ii- 4ue from others+ a- ills purchased discounted b- /yndicate oans c- thers T&$#* G#' T&$#* ( CI. #' C II) S5!*! 10 F%! A,,!$,

I remises a- At cost as on 1st $arch of the preceding year Additions during the year

1#22(##(52

1##2(6>(@@

1<#(<@(#@

#<(><(1<

Page71

Project report of accounting in banks and balance sheet 4eduction during the year 4epreciation to date

1(#2(< 6@(9<(51

b- remises including other fi&ed Assets under construction II ther fi&ed assets , incl. furniture and fi&turesAt cost as on 1st $arch f the preceding year Additions during the year 4eduction during the year 4epreciation to date

2(>9 55@(<(>5 93131

931133

2;33<

23282

6561(@(>9

5#9(19(>@

1#5(@>(>6 ><(9>(< 5>@1(>(><

11#5(#(9< @6(2<(22 #9@(99(>2 2;12132

21;3<01

III. eased Assets At cost as on 1st $arch f the preceding year Additions during the year 4eduction during the year 4epreciation to date

ess+ ease Ad*ustment and rovisions

92(16(91

11><(1<(#1

1>(62(65 9>1(@@(25 3<01

121(9(5< 222(5#(1< 9;281

,>(5(@#-

5(>2(22 ;0;1

T&$#* ( I II #' III )

382<8<2

3393

33<3809

S5!*! 11 O$5! A,,!$,

I. Inter office ad*ustment ,netII. Interest accrued III. "a& paid in advance D "a& deducted at source

6@>9(5<(51 6#>(21(12

11#<(5(>2 6>92(1#(#2 >#@@(26(@#

I8. 4eferred "a& Assets ,net8. /tationary and stamps. 8I. on%banking assets ac)uired in satisfaction of claims 8II. thers

1<>6(22(62 95(65(25 5(12

#>(<#(56 95(6<(1> #(91

>6>2(<5(92

>#16>(#2(#>

T&$#*

3<<332<38

1< 0291

>191(21(6>

@99(@(<>

S5!*! 12 C&'$%'/!'$ *%#%*%$%!,

I. Capital against the bank not acknowledged as debts

Page72

Project report of accounting in banks and balance sheet II. iability for partly paid investment III. iability on Account of outstanding forward ?&change contracts I8. 3uarantees given on behalf of constituents In India utside India 8. Accepts endorsements and other obligation 8I. ther items for which the bank is contingently iable T&$#*

>(2<(<<

>(2<(<<

>29#>9(>#(<1

1<#5@(51(@#

#6##(#<(#1 >#1@(>9(< 1<9<9(#9(<9

5159(1(#5 1#5<(22(1< @#@<6(<9(#1

>5<<><(@1(5#

@516@(>(5

<233;99<<0

810<9;80<

F&+ B T5% S5!*! PROFIT AND LOSS ACCOUNT OF STATE BANK OF INDIA FOR EAR ENDED ON 31 ST MARCH 2009

Page73


,<<<s omittedP#$%*#,

S5!*! N+!

A, &' 31.3.09 (!'$ !#)

A, &' 31.3.08 ("!%&, !#)

I. I'&+!= Interest ?arned ther income TOTAL

1 1#

6@22(#(2 1>69<(@2(9< <;<92228

#295<(<(@1 269#(9>(2# <;23

II. E"!'%$!= Interest ?&pended perating ?&penses rovisions and Contingencies TOTAL

15 16 N

#>915(>9(@ 156#2(@<(## 2@9(99(2> ;<3<99;3

19>9(<@(69 1>6<2(6<(6< 6@2(#>(@9 091;1108

91>1(>>(65 (9 N 9121;8

6@>9(1>(#@ (9 9(@ ;<92<<

5>91( >91(@9 @9((>2 N 2>6(55(> <6(29(<

#29( 29(<@ <@((> 6>(1@(2@ #(#(92 <<(<<(<<

12#1( 2#1(15 15((>6 >#2(<(#@ 6<6(2<(<>

15@( 5@(66 66((1 165(26(6

(9

(9

9121;8

;<92<<

III. P&%$:L&,,= et rofitD,oss- of the year rofit brought forward "ransfer form general reserve TOTAL I4. A""&"%#$%&',= "ran ransfer sfer to /tatu atutory !ese eserve rves "ransfer to investment reserves "ransfer to Capital reserves "ransfer to !evenue reserve and ther reserves "ran ransfer sfer to ropose posed d 4ivid vidend "a& on 4ividend oss from /tate ank of /aurashtra alance Carried over to alance /heet TOTAL

S5!*!, $& ! #''!! ?%$5 P&%$ #' L&,, A&'$

,<<<s omitted ) P#$%*#,

A, &' A, &' 31.3.08 31.3.09 ("!%&, (!'$ !#) !#)

S5!*! 13= I'$!!,$ E#'!

Page74


,I- Intere Interest stDD 4iscou 4iscounts nts on Advan Advances cesDi Dills lls ,II- Income on Investments ,III- Interest on balances with !I and other inter bank funds funds ,I8- thers

#6#<#(@ #6#<# (@1(# 1(#9 9 155@#(@1(51 1#@#(@(@#

5>>2(1 5>>2 (11(1 1(19 9 119##(16(6 1><<(<@(#<

5(>>(6#

5@@(95(@6

;3<88 ;3 <88338

890 9030<1

@61@(> @61@ (>( (5# 5# >56@(>9(<> ,56(5<,>(95(#>-

591#(> 591# (>5( 5(#5 #5 16#9291 ,@<(5<(<@11(<#(<9

11@9(>#(9> #<9(6<(>2

69>(69(21 19@(#<(55

>6(6@(<< 29#(@2(<6

1(26(6 9<1(>(@#

12;90<890

8;9928

,I- Interest on 4eposits ,I ,II- Interest on !IDInter%ank 4eposits ,III- thers

@96(2#(@ >555(<1(<# >#>(#(6<

>@<@>(52(1< 92(#(92 1912(<5(6

T&$#*

291293<

3192920<;9

9@#@(1(> 1>95(1(@ >>(2>(<2 >51(>>(95 @9(1>(#

@@25(26(9# 99(#1(21 122(2@(@6 1@(>(16 651(<#(>#

>#(<1(69 99(21 1<(69(62

>2(9(6@ 1(>(>< 9@(#(52

@#(61(19

6<(#5(1#

T&$#* $#* S5!*! 1= O$5! I'&+!,

,I,I- Comm Commis issi sion on(( ?& ?&ch chan ange ge and and rok roker erag agee ,II- rofit on /ale of investment ,net ,I ,III- rofit on revaluation of Investment ,net ,I8- rofit on /ale of andDuilding and ther Assets ,net,8- rofit on ?&change transactions ,net ,8I- Income earned by way of dividend( etc.( from subsidiaries Companies andDor *oint ventures abroadDin India. ,8II- Income from financial lease ,8III- $isc. Income T&$#* N&$!= ;nder items II to 8 loss figures be shown in

brackets S5!*! 1 = I'$!!,$ E"!'!

S5!*! 1;= O"!#$%'/ E"!',!,

,I- ayment to and rovisions for ?mployees ,II- !ent( "a&es and ighting ,III- rinting and /tationary ,I8- Advertisement and ublicity ,8- 4epreciation 4eprecia tion on anks roperty ,other than leased assets4epreciation on leased assets ,8I- 4irectors 0ees( Allowances and ?&penses ,8II- Auditors 0ee and ?&penses ,Including ranch Auditors,8III- aw Charges

Page75


,IR- ostage( "elegrams( "elephones( etc. ,R- !epairs and $aintenance ,RI- Insurance ,RII- ther ?&penditure T&$#*

>@9(@(>5 16<(52(2 5>9(<1(29 >>1<(#1(62

>16(5@(@> >5(2>(@ #15(2#(6 1@59(95(>9

1;8<0

12;08;0;0

11. ADDITIONAL DISCLOSURE PRESCRIBED B RBI

In addition to the disclosure to be made in the balance sheet and profit and loss account( in pursuance of the re)uirements of the "hird /chedule to the Act( the !I has directed( Circular . 44..C. .59D>1.<#.<12D><<5%<6( dated Kanuary <( ><<6 that the following information should be disclosed by way of notes on accounts+ L%,$ & D%,*&,! I$!+,

Page76


S Capital ade)uacy ratio S Capital ade)uacy ratio%tier " capital S Capital ade)uacy ratio%tier II capital S ercentage of shareholding of the 3overnment of India in nationali'ed banks S Amount of subordinated debt raised as tier II capital S 3ross value of investments( etc. S rovisions made towards depreciation in the value of investments S $ovement of provisions held towards depreciation on investments S !epo transactions S on%/! investment portfolio S 0orward rate agreementDinterest rate swap S ?&change traded interest rate derivatives S 4isclosures on risk e&posure m derivatives S ercentage of net As to net advances S $ovement in As S Amount of provisions made towards As S $ovement of provisions made towards As S 4etails of oan assets sub*ected to restructuring S !estructuring under C4! S 4etails of financial assets sold to a /CD!C for asset reconstruction S rovision on standard assets S Interest income as a percentage to working funds S on%interest Income as a percentage to working funds S perating profit as a percentage to working funds S !eturn on assets S usiness ,deposits plus advances- per employee rofit per employee S $aturity pattern of loans and advances S $aturity pattern of investment securities S $aturity pattern of deposits S $aturity pattern of borrowings % S 0oreign currency assets and liabilities S ?&posure to real estate sector S ?&posure to capital market+ investment in e)uity shares( etc. S ank financing for margin trading S ?&posure to country risk S 4etails of single borrowerDgroup borrower limit e&ceeded by the bank S rovision made towards income ta& during the year S 4isclosure of penalties imposed by !I S Consolidated financial statements TA/ >1 S /egment reporting TA/ 1@

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21987582-Final-Accounts-of-Banking-Companies.pdf

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