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OF
BANKING
COMPANIES
DEFINITION
Section 5 of banking
regulation act defines
banking as the
accepting, for the purpose
of lending or investment,
of deposit of money from
the public repayable on
demand or otherwise and
Features of banking
company
The borrowing,raising,or taking up
of money.
The lending or advancing of money
either upon or without security.
The granting and issuing of letters
of credit,travellers cheques and
circular notes.
The buying and selling of bullion.
The buying and selling of foreign
exchange including foreign bank
notes.
Contracting for public and private
loans negotiating and issuing the
Continued . . . . .
The acquisition, constructing,
maintenance and alternation of
any building or works necessary
or convenient for the purpose of
the company.
Carrying on and transacting
every kind of guarantee and
indemnity business.
The collecting and transmitting
of money and securities.
Undertaking the administration
General Information
No banking company can carry
on business in India unless its
subscribed capital is not less
than one- half of the authorized
capital and its paid up capital is
not less than one half of
subs.capital.
A banking company cannot
create any charge upon its
uncalled capital.
Every banking co.shall transfer a
Accounting System
PARTICULARS SCHEDULE
NO. AMOUNT
INCOMES:-
Interest earned 13.
Other incomes 14.
TOTAL(A)
EXPENDITURE:-
Interest expanded 15.
Operating expenses 16.
Provision and contingencies -
TOTAL (B)
PROFIT (A-B)
PROFIT AND LOSS APPROPRIATION ACCOUNT
PARTICULARS AMOUNT
CAPITAL ( SCHEDULE
NO. 1 )
PARTICULARS Amt.
Statutory Reserve
General reserve
Capital reserve
Investment Fluctuation Reserve
Workmen compensation fund
Sinking fund
Surplus ( P/L app. a/c)
Building fund
Depreciation fund
Tax fund
Capital redemption reserve
DEPOSITS ( SCHEDULE NO. 3 )
PARTICULARS AMOUNT
Fixed deposits
Saving deposits
Current account
Recurring deposit
L/C a/c
Other deposits except income tax deposit
Government securities
Bonds
Mutual funds
Equity shares of other companies
Gold etc.
Premises
Furniture
Fixtures
Equipments
Land and building
Plant and machinery
motor vehicles
Computers etc.
OTHER ASSETS ( SCHEDULE NO. 11 )
PARTICULARS AMOUNT
Prepaid expenses
Silver
Non-banking asset
Inter branch adjustment
Accrued incomes
Stamps in hand
CONTINGENT LIABILITIES (SCHEDULE NO. 12 )
PARTICULARS AMOUNT
BR/ bills for collection
Forward exchange transactions
Future contracts
Acceptance, endorsement and
guarantee
Liability for bill rediscounted
Disputed liabilities
Income tax under appeal
Income tax deposits
Claims not acknowledged as debt
Liability for partly paid investments
INTEREST EARNED ( SCHEDULE NO. 13 )
PARTICULARS AMOUNT
Bad debts
Provision for doubtful debts
Provision for tax
Provision for contingencies
Provision for depreciation
Other provisions
Explanation of some terms relating to balance sheet
MONEY AT CALL AND SHORT NOTICE :-
This item appears on the assets side
of a bank balance sheet and
represents temporary loans to Bill
Brokers and other banks . If the loan
is given for one day, it is called
money at call and if the loan cannot
be called back on demand and will
require at least a notice of three days
for calling back , it is called money at
short notice . It also includes
deposits repayable within 10 days or
less than 15 days notice lent in the
ADVANCES :-
Advances appear on the Assets
side as fourth head and include
loans , cash credits , bank
overdrafts and bills discounted
and purchased . Banks generally
advance money to their customers
in the form of loans , cash
credits , overdrafts and
purchasing and discounting of
bills .
PROVISIONS IN RESPECT OF DOUBTFUL
ADVANCES ARE DEDUCTED FROM
CASH CREDIT :-
It is an arrangement by which the
customer is granted the right to
borrow money from time to time upto
a certain limit . Cash credit is usually
given on hypothecation or pledge of
stock . The bank usually charges a
higher bank interest on the actual
amount withdrawn than that charged
on loan because the bank has to keep
the amount allowed as cash credit .
OVERDRAFT :-
LOAN :-
Loan is advance of fixed amount to a
customer to be withdrawn in lump
sum by him . Interest is charged on
the total amount of the loan agreed to
be paid to a customer whether he
uses the full amount of the loan or not
. So , customers prefer to take cash
credit and pay interest at a little
higher rate .
DISCOUNTING OF BILLS :-
Discounting of a bill means making
the payment of the bill before the
maturity date of the bill . While
PURCHASING AND DISCOUNTING OF
BILLS :-
The bank may purchase or
discount clean or documentary
bills at the current rate of interest
.
NON-BANKING ASSETS :-
A banking company is not allowed
to deal directly or indirectly in the
purchase or sale or barter of
goods except in connection with
its legitimate banking business .
REBATE ON BILLS DISCOUNTED OR
UNEXPIRED DISCOUNTS :-
This item is like interest received in
advance and represents unearned discounts
for those bills which will mature after the
closing of the financial accounts .
INCOME :-
INTEREST EARNED 13 5800
OTHER INCOME 14 1755
TOTAL 7555
EXPENDITURE:-
INTEREST EXPANDED 15 1300
OPERATING EXPENSES 16 3707
PROVISIONS & CONTINGENCIES 1095
TOTAL 6102
NET PROFIT = 1453
PROFIT AND LOSS APPROPRIATION
ACCOUNT
PARTICULARS
AMT.
CAPITAL 1 10,000
RESERVE AND SURPLUS 2 13805
DEPOSITS 3 105700
BORROWINGS 4 12200
OTHER LIABILITIES AND PROVISIONS 5 7120
TOTAL 148825
CASH AND BANK BALANCE WITH RBI 6 438
BALANCE WITH BANKS AND MONEY AT CALL 7 8369
INVESTMENTS 8 49900
ADVANCES 9 85700
FIXED ASSTS 10 3500
OTHER ASSETS 11 918
TOTAL 148825
CONTINGENT LIABILITIES 3378