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Final Accounts of Banks & Companies
FINAL ACCOUNTS <ul><li>The most important objective of accounting is to ascertain </li></ul><ul><li>the profit or loss mad...
FINAL ACCOUNTS <ul><li>Summary of those accounts which affect the profit and loss of a business concern is called </li></u...
FINAL ACCOUNTS <ul><li>In a trading concern direct expenses include: </li></ul><ul><li>all expenses in bringing the goods ...
FINAL ACCOUNTS <ul><li>In a manufacturing concern direct expenses include: </li></ul><ul><li>all expenses incurred for pro...
FINAL ACCOUNTS <ul><li>Administrative and office expenses  include: </li></ul><ul><li>Office salaries </li></ul><ul><li>Es...
FINAL ACCOUNTS <ul><li>: Selling & Distibution expenses include: </li></ul><ul><li>Advertising </li></ul><ul><li>Commissio...
FINAL ACCOUNTS <ul><li>Fixed assets are those which are acquired for  </li></ul><ul><li>continuous use </li></ul><ul><li>n...
FINAL ACCOUNTS <ul><li>Current assets are those which are: </li></ul><ul><li>kept temporarily for resale </li></ul><ul><li...
FINAL ACCOUNTS <ul><li>Owners fund includes: </li></ul><ul><li>Capital less drawings of the owner </li></ul><ul><li>Undist...
FINAL ACCOUNTS <ul><li>: Closing consolidated journal entries are normally passed for </li></ul><ul><li>Transfer of all ma...
FINAL ACCOUNTS <ul><li>Transfer of Gross profit to the credit side of Profit & Loss a/c </li></ul><ul><li>Transfer of Gros...
FINAL ACCOUNTS <ul><li>Some common adjustments are: </li></ul><ul><li>Closing Stock </li></ul><ul><li>Expenses due but not...
FINAL ACCOUNTS <ul><li>Interest on Drawings </li></ul><ul><li>Interest on Loan </li></ul><ul><li>Bad debts to be written o...
Fundamentals of Partnership Accounts <ul><li>The important features of partnership are </li></ul><ul><li>It is a relations...
Fundamentals of Partnership Accounts <ul><li>Following details should be incorporated in the Partnership deed as different...
Fundamentals of Partnership Accounts <ul><li>Any variations in the mutual rights and duties of partners </li></ul><ul><li>...
Fundamentals of Partnership Accounts <ul><li>Goodwill is normally due to: </li></ul><ul><li>Favourable Location </li></ul>...
Fundamentals of Partnership Accounts <ul><li>It’s reputation, super profit earning capacity of a firm </li></ul><ul><li>Ne...
Fundamentals of Partnership Accounts <ul><li>Average profit(AP) Super profi(SP)  Capitalization of profit </li></ul><ul><l...
Fundamentals of Partnership Accounts <ul><li>Goodwill on capitalization basis can be calculated by the following steps: </...
Fundamentals of Partnership Accounts <ul><li>Super profit can be calculated by the following steps: </li></ul><ul><li>Iden...
Fundamentals of Partnership Accounts <ul><li>The following adjustments are made in the accounts of a partnership when a ne...
Fundamentals of Partnership Accounts <ul><li>When a new partner takes admission, he acquires the ownership rights of the a...
Fundamentals of Partnership Accounts <ul><li>When the capital of the new partner is fixed on the basis of the combined cap...
Fundamentals of Partnership Accounts <ul><li>When the capital of the old partners is fixed on the basis of capital brought...
Fundamentals of Partnership Accounts <ul><li>Let us say A and B are partners sharing profits equally. They take C as partn...
Fundamentals of Partnership Accounts <ul><li>Let  us suppose A, B, and C are partners sharing profits and losses in the ra...
Fundamentals of Partnership Accounts <ul><li>When a memorandum revaluation account is prepared, firstly the effect of chan...
Fundamentals of Partnership Accounts <ul><li>On the death of a partner the executors or representatives of the deceased pa...
Fundamentals of Partnership Accounts <ul><li>If the death takes place in the middle of accounting period, the deceased par...
COMPANY Accounts <ul><li>Features of a Joint Stock Company  </li></ul><ul><li>1. Incorporated association:   </li></ul><ul...
COMPANY Accounts <ul><li>6.  Separation of management from ownership:   </li></ul><ul><li>Even though the shareholders are...
COMPANY Accounts <ul><li>The Liabilities of a company are arranged in the following order </li></ul><ul><li>Share Capital ...
<ul><li>: Sweat shares means </li></ul><ul><li>Equity shares issued by the company to employees or directors  </li></ul><u...
<ul><li>Under Employees Stock Option Scheme, the company grants option to an employee </li></ul><ul><li>to apply for share...
COMPANY Accounts <ul><li>The Assets side of the balance sheet shows the following sequence: </li></ul><ul><li>Fixed Assets...
COMPANY Accounts <ul><li>With regard to Share Capital, the company should specifically state: </li></ul><ul><li>Details of...
COMPANY Accounts <ul><li>RESERVES AND SURPLUS </li></ul><ul><li>Capital Reserve </li></ul><ul><li>Capital redemption Reser...
COMPANY Accounts <ul><li>SECURED LOANS </li></ul><ul><li>Debentures </li></ul><ul><li>Loans and advances from banks </li><...
COMPANY Accounts <ul><li>UNSECURED LOANS </li></ul><ul><li>Fixed deposits </li></ul><ul><li>Loans and advances from subsid...
COMPANY Accounts <ul><li>CURRENT LIABILITIES & PROVISIONS </li></ul><ul><li>(A) Current Liabilities </li></ul><ul><li>Acce...
COMPANY Accounts <ul><li>FIXED ASSETS </li></ul><ul><ul><li>Goodwill </li></ul></ul><ul><ul><li>Land </li></ul></ul><ul><u...
COMPANY Accounts <ul><li>The fixed assets must be </li></ul><ul><li>Classified and distinguished </li></ul><ul><li>The fol...
COMPANY Accounts <ul><li>INVESTMENTS </li></ul><ul><li>Investments in Government or trust securities </li></ul><ul><li>Inv...
COMPANY Accounts <ul><li>: The followings must be clearly stated with regard to Investments: </li></ul><ul><li>Nature of I...
COMPANY Accounts <ul><li>CURRENT ASSETS LOANS & ADVANCES </li></ul><ul><li>Current Assets </li></ul><ul><li>Interest accru...
COMPANY Accounts <ul><li>: In respect of Sundry Debtors following details are to be shown: </li></ul><ul><li>Debts conside...
COMPANY Accounts <ul><li>Loans & Advances </li></ul><ul><li>Advances and loans </li></ul><ul><li>Bills of Exchange </li></...
COMPANY Accounts <ul><li>Miscellaneous expenditure is shown in the following sequence on the assets side of the balance sh...
BANKING ACCOUNTS <ul><li>What is true about a Banking Company? </li></ul><ul><li>A company that carries on the business of...
BANKING ACCOUNTS <ul><li>The Major institutions that are carrying on business of banking in India are: </li></ul><ul><li>N...
BANKING ACCOUNTS <ul><li>Main functions of modern commercial Banks are: </li></ul><ul><li>Accepting money on deposits. </l...
BANKING ACCOUNTS <ul><li>Bankers’ Books include: </li></ul><ul><li>Ledgers </li></ul><ul><li>Day Books </li></ul><ul><li>C...
BANKING ACCOUNTS <ul><li>Third Schedule:  Form ‘A’ </li></ul><ul><li>Form of Balance Sheet </li></ul><ul><li>Balance Sheet...
BANKING ACCOUNTS <ul><li>Assets Schedule No. Rs. </li></ul><ul><li>Cash and Balance with RBI 6 ……. </li></ul><ul><li>Balan...
BANKING ACCOUNTS <ul><li>The various items in schedule-1(Capital) in Balance Sheet(Form A) includes: </li></ul><ul><li>For...
BANKING ACCOUNTS <ul><li>The various items in schedule-2(Reserve and Surplus) in Balance Sheet(Form A)  </li></ul><ul><li>...
BANKING ACCOUNTS <ul><li>The various items in schedule-3(Deposits) in Balance Sheet(Form A) includes:  </li></ul><ul><li>a...
BANKING ACCOUNTS <ul><li>The various items in schedule-4(Borrowings) in Balance Sheet(Form A) includes:  </li></ul><ul><li...
BANKING ACCOUNTS <ul><li>The various items in schedule-5(other Liabilities and Provisions) in Balance  </li></ul><ul><li>S...
BANKING ACCOUNTS <ul><li>The various items in schedule-6(Cash and Balances with RBI) in Balance  </li></ul><ul><li>Sheet(F...
BANKING ACCOUNTS <ul><li>The various items in schedule-7(Balance with Banks & Money at call and short  </li></ul><ul><li>n...
BANKING ACCOUNTS <ul><li>The various items in schedule-8(Investments) in Balance Sheet(Form A) includes:  </li></ul><ul><l...
BANKING ACCOUNTS <ul><li>Investments Outside India in: </li></ul><ul><li>i) Govt.Securities (including Local Authorities) ...
BANKING ACCOUNTS <ul><li>. The various items in schedule-9(Advances) in Balance Sheet(Form A) includes:  </li></ul><ul><li...
BANKING ACCOUNTS <ul><li>I. Advances in India: </li></ul><ul><li>i) Priority Sectors </li></ul><ul><li>ii) Public Sector <...
BANKING ACCOUNTS <ul><li>The various items in schedule-10(Fixed Assets) in Balance Sheet(Form A) includes:  </li></ul><ul>...
BANKING ACCOUNTS <ul><li>.  The various items in schedule-11(Other Assets) in Balance Sheet(Form A)  </li></ul><ul><li>inc...
BANKING ACCOUNTS <ul><li>. The various items in schedule-12(Contingent Liabilities) in Balance Sheet(Form A)  </li></ul><u...
BANKING ACCOUNTS <ul><li>. Cash and Balance with the Reserve Bank of India includes: </li></ul><ul><li>Cash in hand includ...
BANKING ACCOUNTS <ul><li>Balances with other Banks and Money at Call and Short Notice includes: </li></ul><ul><li>Balances...
BANKING ACCOUNTS <ul><li>Investment in India includes: </li></ul><ul><li>Central and State Govt. securities and govt. trea...
BANKING ACCOUNTS <ul><li>Investment outside India includes: </li></ul><ul><li>All foreign government securities including ...
BANKING ACCOUNTS <ul><li>. The various items in Schedule 13 (Interest Earned) of Profit and Loss Account  </li></ul><ul><l...
BANKING ACCOUNTS <ul><li>The various items in Schedule 14 (Other Incomes) of Profit and Loss Account  </li></ul><ul><li>(F...
BANKING ACCOUNTS <ul><li>The various items in Schedule 15 (Interest Expended) of Profit and Loss Account  </li></ul><ul><l...
BANKING ACCOUNTS <ul><li>. The various items in Schedule 16 (Operating Expenses) of Profit and Loss Account  </li></ul><ul...
BANKING ACCOUNTS <ul><li>. Interest Earned (schedule 13) includes: </li></ul><ul><li>Interest/discount on Advances/bills: ...
BANKING ACCOUNTS <ul><li>Other Incomes (schedule 14) includes: </li></ul><ul><li>Commission, Exchange and Brokerage: inclu...
BANKING ACCOUNTS <ul><li>Profit on sale of Land, buildings and other assets less loss on sale of land, buildings and other...
BANKING ACCOUNTS <ul><li>Interest Expenses (schedule 15) includes; </li></ul><ul><li>Interest on deposits: Includes intere...
BANKING ACCOUNTS <ul><li>Operating Expenses (schedule 16) includes: </li></ul><ul><li>Payments to and provisions for emplo...
BANKING ACCOUNTS <ul><li>Printing and stationery: Includes books and forms of stationery used by the bank and other printi...
BANKING ACCOUNTS <ul><li>Directors’ fees, allowances and expenses: Includes sitting fees and all other items of expenditur...
BANKING ACCOUNTS <ul><li>Postage, telegrams, telephones etc.: Includes all postage charges like stamps, telegram, telephon...
BANKING ACCOUNTS <ul><li>The Provisions and Contingencies include: </li></ul><ul><li>Provisions made for bad and doubtful ...
BANKING ACCOUNTS <ul><li>‘ Money At Call and Short Notice’? </li></ul><ul><li>It relates to inter-bank transactions </li><...
BANKING ACCOUNTS <ul><li>‘ Advances’? </li></ul><ul><li>includes Loans, Cash Credit and Overdraft </li></ul><ul><li>Loan i...
BANKING ACCOUNTS <ul><li>‘ Bills receivable being Bills for collection as  </li></ul><ul><li>per contra’? </li></ul><ul><l...
BANKING ACCOUNTS <ul><li>‘ Acceptance Endorsements and other  </li></ul><ul><li>Obligations’? </li></ul><ul><li>It represe...
BANKING ACCOUNTS <ul><li>, ‘Non-Banking Assets? </li></ul><ul><li>This relates to assets, which are not acquired by the ba...
BANKING ACCOUNTS <ul><li>Investment by banks include; </li></ul><ul><li>Government Securities </li></ul><ul><li>Debentures...
BANKING ACCOUNTS <ul><li>Prepare the Profit and Loss account of ‘X’ Bank Ltd. for the year ended 31st March, 2003, from th...
BANKING ACCOUNTS <ul><li>Profit & Loss Account for the year ended 31st March 2003 </li></ul><ul><li>Schedule No. Rs </li><...
BANKING ACCOUNTS <ul><li>Schedules to be annexed with Profit and Loss Account </li></ul><ul><li>Schedule13: Interest Earne...
BANKING ACCOUNTS <ul><li>Schedule 14: Other Income </li></ul><ul><li>Commission charged to customer   62,500 </li></ul><ul...
BANKING ACCOUNTS <ul><li>Schedule 16: Operating Expenses </li></ul><ul><li>Establishment Expenses     15,000 </li></ul><ul...
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Final accounts of companies

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Final accounts of companies

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  1. 1. Final Accounts of Banks & Companies
  2. 2. FINAL ACCOUNTS <ul><li>The most important objective of accounting is to ascertain </li></ul><ul><li>the profit or loss made by the concern </li></ul><ul><li>Financial position of the concern </li></ul><ul><li>The final product of accounting process i S </li></ul><ul><li>final accounts </li></ul><ul><li>The objectives of accounting can be achieved by preparing the final accounts, which comprise of: </li></ul><ul><li>Profit & Loss Account & Balance Sheet </li></ul>
  3. 3. FINAL ACCOUNTS <ul><li>Summary of those accounts which affect the profit and loss of a business concern is called </li></ul><ul><li>Income Statement </li></ul><ul><li>The income statement has normally </li></ul><ul><li>Income statement comprises of Trading and Profit & Loss Account. They have two parts-the first part is called Trading account which reveals gross profit or gross loss, and the second part is called Profit & Loss account to show net profit or net loss. </li></ul>
  4. 4. FINAL ACCOUNTS <ul><li>In a trading concern direct expenses include: </li></ul><ul><li>all expenses in bringing the goods to the godown of the firm and in making them ready for sale, like freight paid on purchases, cartage, octroi, custom duty, carriage inward, etc. </li></ul><ul><li>all expenses for sale and distribution of goods. </li></ul>
  5. 5. FINAL ACCOUNTS <ul><li>In a manufacturing concern direct expenses include: </li></ul><ul><li>all expenses incurred for production of goods (like wages, power and fuel, Factory lighting,, factory rent and rates) and all expenses incurred in bringing the goods to the godown of the firm and in making them ready for sale, like freight paid on purchases, cartage, octroi, custom duty, carriage inward, etc. </li></ul>
  6. 6. FINAL ACCOUNTS <ul><li>Administrative and office expenses include: </li></ul><ul><li>Office salaries </li></ul><ul><li>Establishment expenses </li></ul><ul><li>Office rent & taxes </li></ul><ul><li>Printing & Stationnery </li></ul><ul><li>Postage & Telephone expenses </li></ul><ul><li>Electricity charges </li></ul><ul><li>Entertainment expenses </li></ul><ul><li>Conveyance expenses </li></ul><ul><li>Legal expenses & Audit fee </li></ul>
  7. 7. FINAL ACCOUNTS <ul><li>: Selling & Distibution expenses include: </li></ul><ul><li>Advertising </li></ul><ul><li>Commission </li></ul><ul><li>Discount </li></ul><ul><li>Packing expenses </li></ul><ul><li>Carriage outward </li></ul><ul><li>Freight on sales </li></ul><ul><li>Export duties </li></ul><ul><li>Insurance </li></ul><ul><li>Bad debts </li></ul>
  8. 8. FINAL ACCOUNTS <ul><li>Fixed assets are those which are acquired for </li></ul><ul><li>continuous use </li></ul><ul><li>not for sale </li></ul><ul><li>may be tangible </li></ul><ul><li>may be intangible </li></ul>
  9. 9. FINAL ACCOUNTS <ul><li>Current assets are those which are: </li></ul><ul><li>kept temporarily for resale </li></ul><ul><li>for converting into cash </li></ul><ul><li>they are cash or cash equivalent </li></ul><ul><li>are to be realized within a period of one year </li></ul><ul><li>are to be realized during the normal operating cycle </li></ul>
  10. 10. FINAL ACCOUNTS <ul><li>Owners fund includes: </li></ul><ul><li>Capital less drawings of the owner </li></ul><ul><li>Undistributed profits </li></ul><ul><li>Reserves </li></ul><ul><li>Assets minus liabilities </li></ul>
  11. 11. FINAL ACCOUNTS <ul><li>: Closing consolidated journal entries are normally passed for </li></ul><ul><li>Transfer of all manufacturing and purchase expense to the debit side of trading a/c </li></ul><ul><li>Transfer of Purchases and Sales return to the debit side of Trading a/c </li></ul><ul><li>Transfer of Sales and Purchases return to the credit side of Trading a/c </li></ul><ul><li>Transfer of closing stock to the credit of trading account by an adjustment entry </li></ul>
  12. 12. FINAL ACCOUNTS <ul><li>Transfer of Gross profit to the credit side of Profit & Loss a/c </li></ul><ul><li>Transfer of Gross loss to the debit side of Profit & Loss a/c </li></ul><ul><li>Transfer of all administrative, selling and financial expenses to the debit of P & L A/c </li></ul><ul><li>Transfer of all operational and non-operational incomes to the credit of P & L A/c </li></ul><ul><li>Transfer of Net proft to the credit of Capital a/c </li></ul><ul><li>Transfer of net loss to the debit of Capital a/c </li></ul>
  13. 13. FINAL ACCOUNTS <ul><li>Some common adjustments are: </li></ul><ul><li>Closing Stock </li></ul><ul><li>Expenses due but not paid (Outstanding expenses) </li></ul><ul><li>Expenses paid in advance (Prepaid expenses) </li></ul><ul><li>Incomes due but not received (Accrued incomes) </li></ul><ul><li>Incomes not due but received (Unearned incomes) </li></ul><ul><li>Depreciation on assets </li></ul><ul><li>Interest on Capital </li></ul>
  14. 14. FINAL ACCOUNTS <ul><li>Interest on Drawings </li></ul><ul><li>Interest on Loan </li></ul><ul><li>Bad debts to be written off </li></ul><ul><li>Provision for bad debts </li></ul><ul><li>Provision for discount on Debtors </li></ul><ul><li>Provision for discount on creditors </li></ul><ul><li>Losses on account of accidents </li></ul><ul><li>Commission payable on profit </li></ul><ul><li>Goods used by the proprietor </li></ul><ul><li>Goods distributed as Free Samples </li></ul>
  15. 15. Fundamentals of Partnership Accounts <ul><li>The important features of partnership are </li></ul><ul><li>It is a relationship between persons </li></ul><ul><li>There should be minimum two persons to form a partnership </li></ul><ul><li>It is the result of an agreement </li></ul><ul><li>The partnership agreement may be written or oral </li></ul><ul><li>The agreement is to share the profits of the business. </li></ul><ul><li>There must be a lawful business </li></ul><ul><li>The business must be carried on by any one of them acting for all or by more than one, or by all of the partners </li></ul>
  16. 16. Fundamentals of Partnership Accounts <ul><li>Following details should be incorporated in the Partnership deed as different clauses: </li></ul><ul><li>Name and business of the partnership firm </li></ul><ul><li>Commencement and duration of the business </li></ul><ul><li>Amount of capital to be contributed by each of the partner </li></ul><ul><li>Rate of interest to be allowed/charged to each of partner on his </li></ul><ul><ul><li>Capital </li></ul></ul><ul><ul><li>His loan to the firm </li></ul></ul><ul><ul><li>His drawings </li></ul></ul><ul><li>Profit sharing ratio for disposal of profits </li></ul><ul><li>Amount to be allowed as drawings and the timings of such drawings </li></ul><ul><li>Whether any partner will be allowed a salary </li></ul>
  17. 17. Fundamentals of Partnership Accounts <ul><li>Any variations in the mutual rights and duties of partners </li></ul><ul><li>Method by which goodwill is to be calculated on the admission, retirement or death of a partner </li></ul><ul><li>Procedure by which a partner may be admitted or retired, and the method of payment of dues </li></ul><ul><li>Basis of the determination of the executors if any one of them is deceased and the method of payment </li></ul><ul><li>Treatment of losses arising out of the insolvency of a partner. Whether Garner vs. Murray rule will be applicable to them or not. </li></ul><ul><li>Procedure to be followed for settlement of disputes among partners </li></ul><ul><li>Preparation of accounts and their audit. </li></ul>
  18. 18. Fundamentals of Partnership Accounts <ul><li>Goodwill is normally due to: </li></ul><ul><li>Favourable Location </li></ul><ul><li>Nature of business </li></ul><ul><li>Licences and quotas with the business </li></ul><ul><li>Possibility of competition </li></ul><ul><li>Better customer service </li></ul><ul><li>Efficient advertisement </li></ul><ul><li>Possession of patent rights and trade marks </li></ul><ul><li>Efficiency and Personal skill/ reputation of the management </li></ul><ul><li>Better products </li></ul>
  19. 19. Fundamentals of Partnership Accounts <ul><li>It’s reputation, super profit earning capacity of a firm </li></ul><ul><li>Necessity </li></ul><ul><ul><ul><li>change in profit sharing ratio </li></ul></ul></ul><ul><ul><ul><li>Admission, retirement, death </li></ul></ul></ul><ul><ul><ul><li>Sale of business </li></ul></ul></ul><ul><li>Methods: </li></ul><ul><ul><ul><li>Average profit </li></ul></ul></ul><ul><ul><ul><li>Super profit </li></ul></ul></ul><ul><ul><ul><li>capitalization of profit </li></ul></ul></ul>
  20. 20. Fundamentals of Partnership Accounts <ul><li>Average profit(AP) Super profi(SP) Capitalization of profit </li></ul><ul><li>AP x Multiplier SP x multiplier </li></ul><ul><li>SP = AP less NP </li></ul><ul><li>NP=normal profit (Capitalised value) less Actual Multiplier is given Multiplier is given CAPITAL </li></ul>
  21. 21. Fundamentals of Partnership Accounts <ul><li>Goodwill on capitalization basis can be calculated by the following steps: </li></ul><ul><li>Determine the normal rate of return. </li></ul><ul><li>Find the average profits of the firm </li></ul><ul><li>Find out the total capital employed by the same firm </li></ul><ul><li>Find the normal value of business by dividing Average profits into normal rate of return. </li></ul><ul><li>Take the difference of normal value of business and the capital employed </li></ul><ul><li>This will be the value of goodwill of the firm </li></ul>
  22. 22. Fundamentals of Partnership Accounts <ul><li>Super profit can be calculated by the following steps: </li></ul><ul><li>Identify the total capital employed by the Partnership firm </li></ul><ul><li>Identify the average profit earned by the partnership firmbased on past few years figures </li></ul><ul><li>Determine the normal rate of teturn prevailing in the industry or locality for the similar firms </li></ul><ul><li>Apply normal rate of return on capital employed to arrive at normal profit </li></ul><ul><li>Deduct normal profit from the average profit of the firm. If the average profit of the firm is more than the normal profit, there exists super profit </li></ul>
  23. 23. Fundamentals of Partnership Accounts <ul><li>The following adjustments are made in the accounts of a partnership when a new partner is admitted </li></ul><ul><li>Changes in profit sharing proportions </li></ul><ul><li>Valuation of goodwill </li></ul><ul><li>Distribution of accumulated profits and reserves by existing partners </li></ul><ul><li>Re-valuation of assets and liabilities </li></ul><ul><li>Re-structuring of capitals </li></ul><ul><li>Preparation of a new balance sheet </li></ul>
  24. 24. Fundamentals of Partnership Accounts <ul><li>When a new partner takes admission, he acquires the ownership rights of the assets and also makes himself responsible for the firms liabilities. It, therefore, becomes necessary to scrutinize the balance sheet carefully so that new partner should not get any benefit from the appreciation in the value of assets or reduction in the value of liabilities, nor he should suffer because of any decrease in the value of assets or increase of liabilities. Therefore, on the date of admission, the assets and liabilities of the firm are revalued and its profit or loss is transferred to the old partners capital accounts in their old profit sharing ratio </li></ul>
  25. 25. Fundamentals of Partnership Accounts <ul><li>When the capital of the new partner is fixed on the basis of the combined capital of old partners, it requires following steps: </li></ul><ul><li>1. Post all entries relating to old partners capital accounts and arrive at the closing balances </li></ul><ul><li>2. The combined capital represents the capital for the share held by old partners i.e. One minus proportion of new partner. </li></ul><ul><li>3. Based on the balance of old partners capital and their share, calculate the capital for full one share of profits. </li></ul><ul><li>4. On this basis calculate the share of new partner. </li></ul>
  26. 26. Fundamentals of Partnership Accounts <ul><li>When the capital of the old partners is fixed on the basis of capital brought in by the new partner, it requires following steps: </li></ul><ul><li>1. Post all entries relating to all partners capital accounts and arrive at the closing balances. </li></ul><ul><li>2. Based on the balance of new partners capital and his share, calculate the capital for full one share of profits. </li></ul><ul><li>3. Calculate the balances that each old partner should hold keeping in view the total amount of capital multiplied with his proportion. </li></ul><ul><li>The capital accounts of old partners may show debit or credit balances. If debit balance, it shows the amount to be brought in by that partner. If it shows credit balance, the excess amount may either be paid back to him or may be transferred to his current account. </li></ul>
  27. 27. Fundamentals of Partnership Accounts <ul><li>Let us say A and B are partners sharing profits equally. They take C as partner with equal share. The position will be as under: </li></ul><ul><li>Partners Old Ratio New Ratio Loss(Sacrifice)/ </li></ul><ul><li>Gain </li></ul><ul><li>A 1/2 1/3 –1/6 </li></ul><ul><li>B 1/2 1/3 –1/6 </li></ul><ul><li>C Nil 1/3 +1/3 </li></ul><ul><li>Sacrificing Ratio = Old ratio  (–)  New ratio </li></ul>
  28. 28. Fundamentals of Partnership Accounts <ul><li>Let us suppose A, B, and C are partners sharing profits and losses in the ratio of 5 : 3 : 2. A retires and B and C agree to continue at the ratio of 3: 2. In this case, the position will be as follows: </li></ul><ul><li>Old Ratio New Ratio Net Gain/Loss </li></ul><ul><li>A 5/10 Nil — </li></ul><ul><li>B 3/10 3/5 + 3/10 (3/5 – 3/10) </li></ul><ul><li>C 2/10 2/5 + 2/10 (2/5 – 2/10) </li></ul><ul><li>Gain ratio will be 3 : 2. </li></ul><ul><li>(b) Let us now suppose B and C change their ratio to 5 : 3; then the position will be as follows: </li></ul><ul><li>Old Ratio New Ratio Net Gain/Loss </li></ul><ul><li>A 5/10 — (–) 5/10 i.e 1/2 </li></ul><ul><li>B 3/10 5/8 + 13/40 (5/8 – 3/10) </li></ul><ul><li>C 2/10 3/8 +  7/40 (3/8 – 2/10) </li></ul><ul><li>Gain ratio will be 13/40 : 7/40 i.e. 13 : 7. </li></ul>
  29. 29. Fundamentals of Partnership Accounts <ul><li>When a memorandum revaluation account is prepared, firstly the effect of changes in the value of assets and liabilities is transferred to the old partners capital accounts in their old ratio. Simultaneously, the entries are reversed and the balance is transferred to all the partners , including the new,in their new profit sharing ratio. This nullifies the effect of changes in the value of assets and liabilities of the firm and the capitals of the partners are adjusted. </li></ul>
  30. 30. Fundamentals of Partnership Accounts <ul><li>On the death of a partner the executors or representatives of the deceased partner are entitled to the following benefits: </li></ul><ul><li>The amount standing to the credit of deceased partners’ capital a/c </li></ul><ul><li>His share in the goodwill of the firm </li></ul><ul><li>His share of profits earned from the beginning of the year to the date of death </li></ul><ul><li>His share of profits on revaluation of assets and liabilities. His share of the loss, if any, shall be deducted </li></ul><ul><li>His share of undistributed profit or reserves </li></ul><ul><li>Interest on capital, salary or commission, etc. if provided in partnership deed. </li></ul><ul><li>His share of the proceeds of the joint life policy. </li></ul>
  31. 31. Fundamentals of Partnership Accounts <ul><li>If the death takes place in the middle of accounting period, the deceased partner is entitled to his share in profit or loss upto the date of his death. The amount can be determined by </li></ul><ul><li>(i)preparing final accounts up to the date of death, or </li></ul><ul><li>(ii) an estimated share in profit or loss is determined on the basis of </li></ul><ul><li>(a) Preceding year </li></ul><ul><li>(b) on the basis of sales up to the date of death and calculating profit on the basis of </li></ul><ul><li>the percentage of profit earned in the previous year </li></ul><ul><li>(c) on the basis of the time </li></ul><ul><li>(d) on the basis of the average of the two </li></ul>
  32. 32. COMPANY Accounts <ul><li>Features of a Joint Stock Company </li></ul><ul><li>1. Incorporated association: </li></ul><ul><li>A company is a registered body of individuals. According to the Companies Act, 1956, it is compulsory to register a joint stock company. </li></ul><ul><li>2. Artificial person: </li></ul><ul><li>It is an artificial person created by law. It is different from its members It can enter into contracts, purchase and sell the properties, can sue and be sued upon. Even a member can enter into contract with the company. </li></ul><ul><li>3. Perpetual succession: </li></ul><ul><li>A company has a perpetual succession. Death, or insolvency of any shareholder does not affect existence of the company. </li></ul><ul><li>4. Common seal: </li></ul><ul><li>As the company is an artificial person created by law, it cannot sign its name. So it has a common seal on which the company’s name is engraved. The common seal is treated as company’s signature and is affixed in all important documents and contracts as per the resolutions passed by the Board. </li></ul><ul><li>5. Limited liability: </li></ul><ul><li>The liability of the members of the joint stock company is limited to the face value of shares held by them. Companies (Amendment) Bill 2003 states that if a company, private or public, fails to enhance its minimum paid up capital ( i.e. One Lakh rupees or Five Lakh rupees, as the case may be) each director or manager or shareholder will have unlimited liability. </li></ul>
  33. 33. COMPANY Accounts <ul><li>6. Separation of management from ownership: </li></ul><ul><li>Even though the shareholders are true owners, they do not participate in the management of the company. They elect their representatives known as Board of Directors. </li></ul><ul><li>7. Transferability of shares: </li></ul><ul><li>The shares of a company are freely transferable subject to restrictions placed on transfer of private limited company’s shares. </li></ul><ul><li>8. Separate legal status: </li></ul><ul><li>A company has an independent legal status and as such, the shareholders or the owners are not liable for the acts of the company. </li></ul><ul><li>9. Large membership: </li></ul><ul><li>A company is owned by a large number of members. In the case of private limited company the minimum number of members is 2 and the maximum is 50. In the case of public limited company, the minimum number of members is 7 and there is no maximum limit on the number of members. </li></ul>
  34. 34. COMPANY Accounts <ul><li>The Liabilities of a company are arranged in the following order </li></ul><ul><li>Share Capital </li></ul><ul><li>Reserves and Surplus </li></ul><ul><li>Secured Loans </li></ul><ul><li>Unsecured loans </li></ul><ul><li>Current Liabilities & Provisions </li></ul><ul><ul><li>Current Liabilities </li></ul></ul><ul><ul><li>Provisions </li></ul></ul><ul><li>Other Provisions </li></ul>
  35. 35. <ul><li>: Sweat shares means </li></ul><ul><li>Equity shares issued by the company to employees or directors </li></ul><ul><ul><li>at a discount, or </li></ul></ul><ul><ul><li>for consideration other than cash </li></ul></ul><ul><li>-for providing know how </li></ul><ul><li>-making available right in the nature of intellectual property rights </li></ul><ul><li>-value additions </li></ul><ul><li>shares should be of the same class which have already been issued </li></ul><ul><li>it should be authorized by members by passing resolution in the General meeting </li></ul><ul><li>it should be issued in accordance with the regulations made by the SEBI </li></ul>
  36. 36. <ul><li>Under Employees Stock Option Scheme, the company grants option to an employee </li></ul><ul><li>to apply for shares at a pre-determined price </li></ul><ul><li>the right to be exercised during a specified period </li></ul><ul><li>listed companies have to follow SEBI guidelines for ESOS </li></ul>
  37. 37. COMPANY Accounts <ul><li>The Assets side of the balance sheet shows the following sequence: </li></ul><ul><li>Fixed Assets </li></ul><ul><li>Investments </li></ul><ul><li>Current assets, Loans and Advances </li></ul><ul><ul><li>Current Assets </li></ul></ul><ul><ul><li>Loans & Advances </li></ul></ul><ul><li>Miscellaneous Expenditure </li></ul><ul><li>Profit & Loss account (Debit balance, if any) </li></ul>
  38. 38. COMPANY Accounts <ul><li>With regard to Share Capital, the company should specifically state: </li></ul><ul><li>Details of Authorised, Issued, Subscribed, Called up and Paid up capitals </li></ul><ul><li>Details of number of shares and face value of each share </li></ul><ul><li>Amount called up on each share </li></ul><ul><li>Classes of shares-Preference or Equity with or without voting rights </li></ul><ul><li>Shares allotted as fully paid for consideration other than cash </li></ul><ul><li>Shares issued as bonus shares and source </li></ul>
  39. 39. COMPANY Accounts <ul><li>RESERVES AND SURPLUS </li></ul><ul><li>Capital Reserve </li></ul><ul><li>Capital redemption Reserve </li></ul><ul><li>Share Premium Account </li></ul><ul><li>Other reserves </li></ul><ul><li>Less: Debit balance in P & L A/c, if any </li></ul><ul><li>Surplus (Balance in the P & L appropriation A/c) </li></ul><ul><li>Proposed additions to reserves </li></ul><ul><li>Sinking funds </li></ul>
  40. 40. COMPANY Accounts <ul><li>SECURED LOANS </li></ul><ul><li>Debentures </li></ul><ul><li>Loans and advances from banks </li></ul><ul><li>Loans and advances from Subsidiaries </li></ul><ul><li>Other Loans and advances </li></ul>
  41. 41. COMPANY Accounts <ul><li>UNSECURED LOANS </li></ul><ul><li>Fixed deposits </li></ul><ul><li>Loans and advances from subsidiaries </li></ul><ul><li>Short term loans & Advances </li></ul><ul><ul><li>from Banks </li></ul></ul><ul><ul><li>From Others </li></ul></ul><ul><li>4. Other loans and advances </li></ul><ul><li>(a.)from Banks </li></ul><ul><li>(b) From Others </li></ul>
  42. 42. COMPANY Accounts <ul><li>CURRENT LIABILITIES & PROVISIONS </li></ul><ul><li>(A) Current Liabilities </li></ul><ul><li>Acceptances </li></ul><ul><li>Sundry Creditors </li></ul><ul><li>Subsidiary companies </li></ul><ul><li>Advance payment and unexpired discounts </li></ul><ul><li>Unclaimed dividends </li></ul><ul><li>Other liabilities (if any) </li></ul><ul><li>Interest accrued but not due on loans </li></ul>
  43. 43. COMPANY Accounts <ul><li>FIXED ASSETS </li></ul><ul><ul><li>Goodwill </li></ul></ul><ul><ul><li>Land </li></ul></ul><ul><ul><li>Buildings </li></ul></ul><ul><ul><li>Leaseholds </li></ul></ul><ul><ul><li>Railway sidings </li></ul></ul><ul><ul><li>Plant & Machinery </li></ul></ul><ul><ul><li>Furniture & fittings </li></ul></ul><ul><ul><li>Development of property </li></ul></ul><ul><ul><li>Patents, trade marks & designs </li></ul></ul><ul><ul><li>Live stock </li></ul></ul><ul><ul><li>Vehicles, etc. </li></ul></ul>
  44. 44. COMPANY Accounts <ul><li>The fixed assets must be </li></ul><ul><li>Classified and distinguished </li></ul><ul><li>The following details are required to be shown separately: </li></ul><ul><ul><li>original cost, </li></ul></ul><ul><ul><li>additions during the year, </li></ul></ul><ul><ul><li>deductions there from during the year, </li></ul></ul><ul><ul><li>Total depreciation written off or provided up to the end of the year </li></ul></ul>
  45. 45. COMPANY Accounts <ul><li>INVESTMENTS </li></ul><ul><li>Investments in Government or trust securities </li></ul><ul><li>Investment in shares, Debentures or bonds </li></ul><ul><li>Investment in immovable properties </li></ul><ul><li>Investment in the capital of partnership firms </li></ul><ul><li>Balance of un-utilised monies raised by issues </li></ul>
  46. 46. COMPANY Accounts <ul><li>: The followings must be clearly stated with regard to Investments: </li></ul><ul><li>Nature of Investments </li></ul><ul><li>Mode of valuation (Cost or market value) </li></ul><ul><li>Classification of Investments </li></ul>
  47. 47. COMPANY Accounts <ul><li>CURRENT ASSETS LOANS & ADVANCES </li></ul><ul><li>Current Assets </li></ul><ul><li>Interest accrued on investments </li></ul><ul><li>Stores and spare parts </li></ul><ul><li>Loose tools </li></ul><ul><li>Stock in trade </li></ul><ul><li>Sundry Debtors </li></ul><ul><li>Cash in hand </li></ul><ul><li>Bank balances </li></ul><ul><ul><li>With scheduled banks </li></ul></ul><ul><ul><li>With others </li></ul></ul>
  48. 48. COMPANY Accounts <ul><li>: In respect of Sundry Debtors following details are to be shown: </li></ul><ul><li>Debts considered good and in respect of which the company is fully secured </li></ul><ul><li>Debts considered good for which the company holds no security other than personal security of debtors </li></ul><ul><li>Debts considered doubtful or bad </li></ul>
  49. 49. COMPANY Accounts <ul><li>Loans & Advances </li></ul><ul><li>Advances and loans </li></ul><ul><li>Bills of Exchange </li></ul><ul><li>Advances receivable in cash or kind or for value to be received </li></ul><ul><li>Balances on current accounts </li></ul><ul><li>Balances with Customs, Port trust, etc. (where payable on demand) </li></ul>
  50. 50. COMPANY Accounts <ul><li>Miscellaneous expenditure is shown in the following sequence on the assets side of the balance sheet: </li></ul><ul><li>Preliminary expenses </li></ul><ul><li>Expenses including commission or brokerage on underwriting or subscription of shares or debentures </li></ul><ul><li>Discount allowed on issue of shares or debentures </li></ul><ul><li>Interest paid out of capital during construction </li></ul><ul><li>Development expenditure not adjusted </li></ul><ul><li>Other items </li></ul>
  51. 51. BANKING ACCOUNTS <ul><li>What is true about a Banking Company? </li></ul><ul><li>A company that carries on the business of Banking in India. </li></ul><ul><li>It generally governed by the Provisions of the Companies Act, 1956. </li></ul><ul><li>It is specifically governed by the Banking Regulation Act. </li></ul>
  52. 52. BANKING ACCOUNTS <ul><li>The Major institutions that are carrying on business of banking in India are: </li></ul><ul><li>Nationalised Banks </li></ul><ul><li>State Bank of India and their associates </li></ul><ul><li>Foreign Banks having branches in India </li></ul><ul><li>Co-operative Banks </li></ul><ul><li>Rural Banks </li></ul><ul><li>Private Sector Banks </li></ul>
  53. 53. BANKING ACCOUNTS <ul><li>Main functions of modern commercial Banks are: </li></ul><ul><li>Accepting money on deposits. </li></ul><ul><li>Facilities to depositors for making payments by cheques. </li></ul><ul><li>Granting of loans and advances. </li></ul><ul><li>Dealing in securities on its own account or on behalf of customer. </li></ul><ul><li>Opening letters of credit and issuing Guarantees </li></ul><ul><li>Dealing in Foreign Exchange </li></ul><ul><li>Transferring money from one place to another in the form of Demand Draft, Telegraphic Transfers, Traveller’s Cheques and bills. </li></ul><ul><li>Acting as Trustees and Executors. </li></ul><ul><li>Dealing in Merchant Banking </li></ul>
  54. 54. BANKING ACCOUNTS <ul><li>Bankers’ Books include: </li></ul><ul><li>Ledgers </li></ul><ul><li>Day Books </li></ul><ul><li>Cash Books </li></ul><ul><li>Account Books </li></ul><ul><li>All other records used in the ordinary business of a bank </li></ul>
  55. 55. BANKING ACCOUNTS <ul><li>Third Schedule: Form ‘A’ </li></ul><ul><li>Form of Balance Sheet </li></ul><ul><li>Balance Sheet as on 31st March,…………. </li></ul><ul><li>Capital and Liabilities Schedule Rs </li></ul><ul><li>Capital 1 ……. </li></ul><ul><li>Reserves and Surplus 2 ……. </li></ul><ul><li>Deposits 3 ……. </li></ul><ul><li>Borrowings 4 ……. </li></ul><ul><li>Other Liabilities and Provisions 5 ……. </li></ul><ul><li>Total ……. </li></ul><ul><li>…… . </li></ul>
  56. 56. BANKING ACCOUNTS <ul><li>Assets Schedule No. Rs. </li></ul><ul><li>Cash and Balance with RBI 6 ……. </li></ul><ul><li>Balance with Banks and </li></ul><ul><li>Money at call and Short Notice 7 ……. </li></ul><ul><li>Investments 8 ……. </li></ul><ul><li>Advances 9 ……. </li></ul><ul><li>Fixed Assets 10 ……. </li></ul><ul><li>Other Assets 11 ……. </li></ul><ul><li>Total </li></ul><ul><li>Contingent Liabilities 12 </li></ul>
  57. 57. BANKING ACCOUNTS <ul><li>The various items in schedule-1(Capital) in Balance Sheet(Form A) includes: </li></ul><ul><li>For Nationalised Banks- Capital </li></ul><ul><li>For Banks incorporated outside India- Start up capital as prescribed by RBI + Amount of deposit kept with RBI under section 11(2) of BR Act,1949. </li></ul><ul><li>For other Banks- i) Authorised Capital (…shares of Rs….each) </li></ul><ul><li>ii) Issued Capital --do- </li></ul><ul><li> iii) Subscribed Capital --do— </li></ul><ul><li> iv) Called-up Capital --do— </li></ul><ul><li>v)Less call unpaid + Add Forfeited Shares </li></ul>
  58. 58. BANKING ACCOUNTS <ul><li>The various items in schedule-2(Reserve and Surplus) in Balance Sheet(Form A) </li></ul><ul><li>includes: </li></ul><ul><li>Statutory Reserves(opening Balance + Additions and Deductions during the </li></ul><ul><li>year). </li></ul><ul><li>Capital Reserves ( ---------------- do-------------------------------------------). </li></ul><ul><li>Share Premium ( ---------------- do-------------------------------------------). </li></ul><ul><li>Revenue and other Reserves ( ---------------- do---------------------------). </li></ul><ul><li>Balance in Profit and Loss Account. </li></ul><ul><li>Total(a+b+c+d+e) </li></ul>
  59. 59. BANKING ACCOUNTS <ul><li>The various items in schedule-3(Deposits) in Balance Sheet(Form A) includes: </li></ul><ul><li>a) (I) Demand Deposits-- ( i )From Banks, ii) From Others. </li></ul><ul><li>(II) Savings Bank Deposits </li></ul><ul><li>(III) Term Deposits – i)From Banks, ii) From Others </li></ul><ul><li>(IV) Total (I + II + III) </li></ul><ul><li>b) (I) Deposits of Branches in India </li></ul><ul><li>(II) Deposits of Branches Outside India </li></ul>
  60. 60. BANKING ACCOUNTS <ul><li>The various items in schedule-4(Borrowings) in Balance Sheet(Form A) includes: </li></ul><ul><li>Borrowings in India (reserve Bank of India +Other Banks +Other Institutions </li></ul><ul><li>and agencies) </li></ul><ul><li>Borrowings outside India </li></ul><ul><li>Total(a + b) </li></ul><ul><li>Secured Borrowings in a & b above </li></ul>
  61. 61. BANKING ACCOUNTS <ul><li>The various items in schedule-5(other Liabilities and Provisions) in Balance </li></ul><ul><li>Sheet(Form A) includes: </li></ul><ul><li>Bills Payable </li></ul><ul><li>Inter-office Adjustments(net) </li></ul><ul><li>Interest Accrued </li></ul><ul><li>Others(including Provisions) </li></ul>
  62. 62. BANKING ACCOUNTS <ul><li>The various items in schedule-6(Cash and Balances with RBI) in Balance </li></ul><ul><li>Sheet(Form A) includes: </li></ul><ul><li>Cash in Hand (including foreign currency notes) </li></ul><ul><li>Balances with RBI in(Current Account, other Accounts) </li></ul><ul><li>Total(a + b) </li></ul>
  63. 63. BANKING ACCOUNTS <ul><li>The various items in schedule-7(Balance with Banks & Money at call and short </li></ul><ul><li>notice) in Balance Sheet(Form A) includes: </li></ul><ul><li>In India: </li></ul><ul><li>i) Balance with banks (in Current Accounts + in Other Deposit Accounts) </li></ul><ul><li>ii) Money at Call and Short Notice (With Banks + With other Institutions) </li></ul><ul><li>Total( i + ii ) </li></ul><ul><li>Outside India: </li></ul><ul><li>i) In Current Accounts </li></ul><ul><li>ii) In other Deposit Accounts </li></ul><ul><li>iii) Money at Call and Short Notice </li></ul><ul><li> Total (i + ii + iii) </li></ul><ul><li>Grand Total (a + b) </li></ul>
  64. 64. BANKING ACCOUNTS <ul><li>The various items in schedule-8(Investments) in Balance Sheet(Form A) includes: </li></ul><ul><li>Investments in India in: </li></ul><ul><li>i) Govt. Securities </li></ul><ul><li>ii) Other Approved Securities </li></ul><ul><li>iii) Shares </li></ul><ul><li>iv) Debentures and Bonds </li></ul><ul><li>v) Subsidiaries and/or Joint Ventures </li></ul><ul><li>vi) Others (to be specified </li></ul>
  65. 65. BANKING ACCOUNTS <ul><li>Investments Outside India in: </li></ul><ul><li>i) Govt.Securities (including Local Authorities) </li></ul><ul><li>ii) Subsidieries and/or Joint Ventures abroad </li></ul><ul><li>iii) Other Investment (to be specified) </li></ul><ul><li>Total: </li></ul><ul><li>Grand Total (a and b) </li></ul>
  66. 66. BANKING ACCOUNTS <ul><li>. The various items in schedule-9(Advances) in Balance Sheet(Form A) includes: </li></ul><ul><li>i) Bill Discounted and Purchased </li></ul><ul><li>ii) Cash Credits, Overdrafts and Loans Payable on Demand </li></ul><ul><li>iii) Term Loans </li></ul><ul><li>Total: </li></ul><ul><li>i) Secured by Tangible Assets </li></ul><ul><li>ii) Covered by Bank/Govt. Guarantees </li></ul><ul><li>iii) Unsecured </li></ul><ul><li>Total: </li></ul>
  67. 67. BANKING ACCOUNTS <ul><li>I. Advances in India: </li></ul><ul><li>i) Priority Sectors </li></ul><ul><li>ii) Public Sector </li></ul><ul><li>iii) Banks </li></ul><ul><li>iv) Others </li></ul><ul><li>Total: </li></ul><ul><li>II. Advances Outside India: </li></ul><ul><li>i) Due from Banks </li></ul><ul><li>ii) Due from Others( Bills Purchased and Discounted, Syndicated Loans, </li></ul><ul><li>Others) </li></ul><ul><li>Total: </li></ul><ul><li>Grand Total( I and II ) </li></ul>
  68. 68. BANKING ACCOUNTS <ul><li>The various items in schedule-10(Fixed Assets) in Balance Sheet(Form A) includes: </li></ul><ul><li>Premises : </li></ul><ul><li>At cost as on 31st March of the preceding year </li></ul><ul><li>Additions during the year </li></ul><ul><li>Deductions during the year </li></ul><ul><li>Depreciation to date </li></ul><ul><li>Other Fixed Assets(Including Furniture and Fixture) </li></ul><ul><li>At cost on 31st March of the preceding year </li></ul><ul><li>Additions during the year </li></ul><ul><li>Deductions during the year </li></ul><ul><li>Depreciation to date </li></ul><ul><li>Total (a + b) </li></ul>
  69. 69. BANKING ACCOUNTS <ul><li>. The various items in schedule-11(Other Assets) in Balance Sheet(Form A) </li></ul><ul><li>includes: </li></ul><ul><li>Inter-Office Adjustments </li></ul><ul><li>Interest Accrued </li></ul><ul><li>Tax Paid in Advance/Tax Deducted at source </li></ul><ul><li>Stationery and Stamps </li></ul><ul><li>Non-banking Assets acquired in satisfaction of claims </li></ul><ul><li>Others (any unadjusted balance of loss, when the loss exceeds the aggregate of capital, Reserves and Surplus) </li></ul>
  70. 70. BANKING ACCOUNTS <ul><li>. The various items in schedule-12(Contingent Liabilities) in Balance Sheet(Form A) </li></ul><ul><li>includes: </li></ul><ul><li>Claims against the Bank not acknowledged as debts </li></ul><ul><li>Liability for partly paid investments </li></ul><ul><li>Liability on account of Outstanding Forward Exchange Contracts </li></ul><ul><li>Guarantees given on behalf of constituents; </li></ul><ul><li>i) In India </li></ul><ul><li>ii) Outside India </li></ul><ul><li>Acceptances, Endorsements and other Obligations </li></ul><ul><li>Other items for which the Bank is contingently liable </li></ul><ul><li>Total </li></ul>
  71. 71. BANKING ACCOUNTS <ul><li>. Cash and Balance with the Reserve Bank of India includes: </li></ul><ul><li>Cash in hand including foreign currency notes. </li></ul><ul><li>Balance with RBI in current account and in other accounts. </li></ul><ul><li>It includes cash in hand including foreign currency notes and also of foreign branches in case of banks having such branches. </li></ul>
  72. 72. BANKING ACCOUNTS <ul><li>Balances with other Banks and Money at Call and Short Notice includes: </li></ul><ul><li>Balances with Banks in India including co-operative Banks, in current accounts and in other Deposit accounts shown separately. </li></ul><ul><li>Money at call and short notice with banks and other institutions. It represents loans given by one bank to other for a short period. Call loans are repayable at any time the banker recalls while short notice advances are repayable within short notice say, 24 hours to maximum period of two weeks. It also includes deposits repayable within 15 days notice lent in the inter-bank call money market. </li></ul><ul><li>Balances in current accounts and deposit accounts outside India which includes balances held by foreign branches and branches of Indian Banks outside India. </li></ul><ul><li>Money at call and short notice in foreign countries. </li></ul>
  73. 73. BANKING ACCOUNTS <ul><li>Investment in India includes: </li></ul><ul><li>Central and State Govt. securities and govt. treasury bills shown at the book value. Difference between the book value and market value should be mentioned in notes. </li></ul><ul><li>Other than govt. securities which are treated as approved securities as per BR Act,1949. </li></ul><ul><li>Investments in shares, debentures and bonds of companies and corporations not included above. </li></ul><ul><li>Investments in Subsidiaries/Joint Ventures (including RRBs) </li></ul><ul><li>Residual investments if any, like Gold, commercial paper and instruments in the nature of share/debentures/bonds. </li></ul>
  74. 74. BANKING ACCOUNTS <ul><li>Investment outside India includes: </li></ul><ul><li>All foreign government securities including securities issued by local </li></ul><ul><li>authorities. </li></ul><ul><li>Investments made in the share capital of subsidiaries floated outside India </li></ul><ul><li>and/or joint ventures abroad. </li></ul><ul><li>All other investments made outside India. </li></ul>
  75. 75. BANKING ACCOUNTS <ul><li>. The various items in Schedule 13 (Interest Earned) of Profit and Loss Account </li></ul><ul><li>(Form B) includes: </li></ul><ul><li>Interest/Discount on Advances/Bills </li></ul><ul><li>Income on Investments </li></ul><ul><li>Interest on balances with RBI and other inter-bank funds </li></ul><ul><li>Others </li></ul>
  76. 76. BANKING ACCOUNTS <ul><li>The various items in Schedule 14 (Other Incomes) of Profit and Loss Account </li></ul><ul><li>(Form B) includes: </li></ul><ul><li>Commission, Exchange and Brokerage </li></ul><ul><li>Profit on Sale of Investments </li></ul><ul><li>Less: Loss on sale of investments </li></ul><ul><li>Profit on Revaluation of Investments </li></ul><ul><li>Less: Loss on Revaluation of Investments </li></ul><ul><li>Profit on Sale of Land/Building and other Assets </li></ul><ul><li>Less: Loss on sale of Land, Building & Other assets </li></ul><ul><li>Profit on Exchange Transactions </li></ul><ul><li>Less: Loss on Exchange Transactions </li></ul><ul><li>Income earned by way of dividends, etc., from subsidiaries, companies and/or joint ventures abroad/in India </li></ul><ul><li>Misc. Income </li></ul>
  77. 77. BANKING ACCOUNTS <ul><li>The various items in Schedule 15 (Interest Expended) of Profit and Loss Account </li></ul><ul><li>(Form B) includes: </li></ul><ul><li>Interest on deposits </li></ul><ul><li>Interest on RBI/Inter-Bank Borrowings </li></ul><ul><li>Others </li></ul>
  78. 78. BANKING ACCOUNTS <ul><li>. The various items in Schedule 16 (Operating Expenses) of Profit and Loss Account </li></ul><ul><li>(Form B) includes: </li></ul><ul><li>Payments to and Provisions for Employees </li></ul><ul><li>Rent, Taxes and Lighting </li></ul><ul><li>Printing and Stationery </li></ul><ul><li>Advertisement and Publicity </li></ul><ul><li>Depreciation on Bank’s property </li></ul><ul><li>Director’s fees, Allowances and Expenses </li></ul><ul><li>Auditor’s fees and expenses (Including Branch Auditors) </li></ul><ul><li>Law Charges </li></ul><ul><li>Postages, Telegrams, Telephones etc. </li></ul><ul><li>Repairs and Maintenance </li></ul><ul><li>Insurance </li></ul><ul><li>Other Expenditure </li></ul>
  79. 79. BANKING ACCOUNTS <ul><li>. Interest Earned (schedule 13) includes: </li></ul><ul><li>Interest/discount on Advances/bills: includes interest and discount on all types </li></ul><ul><li>of loans and advances like Cash Credit, demand loans, overdrafts, export </li></ul><ul><li>loans, term loans, domestic and foreign bills purchased and </li></ul><ul><li>discounted (including those rediscounted), overdue interest and also interest </li></ul><ul><li>subsidy, if any, relating to such advances/bills. </li></ul><ul><li>Income on investments: Includes all income derived from the investment portfolio by way of interest and dividend. </li></ul><ul><li>Interest on Balances with RBI and other inter-bank funds: includes interest on balances with Reserve Bank and other banks, call loans, money market placements, etc. </li></ul><ul><li>Others: Includes any other interest/discount income not included in the above heads. </li></ul>
  80. 80. BANKING ACCOUNTS <ul><li>Other Incomes (schedule 14) includes: </li></ul><ul><li>Commission, Exchange and Brokerage: includes all remuneration on services </li></ul><ul><li>such as commission on collection, commission/exchange on remittances and </li></ul><ul><li>transfers, commission on letters of credit, letting out of lockers, guarantees, </li></ul><ul><li>commission on Govt. business, commission on the other permitted agency </li></ul><ul><li>business including consultancy and other services, brokerage etc., on securities </li></ul><ul><li>excluding foreign exchange income. </li></ul><ul><li>Profit on sale of investments less loss on sale of investments. </li></ul><ul><li>Profit on revaluation of investments less loss on revaluation of investments. </li></ul>
  81. 81. BANKING ACCOUNTS <ul><li>Profit on sale of Land, buildings and other assets less loss on sale of land, buildings and other assets. It also includes profit/loss on sale of securities, furniture, land and buildings, motor vehicle, gold, silver etc.(only net position to be shown and net loss should be shown as deduction). </li></ul><ul><li>Profit on Exchange transaction less loss on Exchange transaction. It includes profit/loss on dealing in Foreign Exchange, all income earned by way of foreign exchange, commission and charges on foreign exchange transactions excluding interest which will be shown under interest. (only net position to be shown and net loss should be shown as deduction. (only net position to be shown and net loss should be shown as deduction). </li></ul><ul><li>Income earned by way of dividends, etc., from subsidiaries, companies, joint ventures abroad/in India. </li></ul><ul><li>Miscellaneous Income: Includes recoveries from constituents for Godown rents, income from bank properties, security charges, insurance etc., and any other miscellaneous income. In case any item under this head exceeds one percentage of the total income, particulars may be given in the notes. </li></ul>
  82. 82. BANKING ACCOUNTS <ul><li>Interest Expenses (schedule 15) includes; </li></ul><ul><li>Interest on deposits: Includes interest paid on all types of deposits from banks and other institutions. </li></ul><ul><li>Interest on RBI/Inter-bank borrowings: Include discounts/interest on all borrowings and refinance from RBI and other banks. </li></ul><ul><li>Others: Includes discount/interest on all borrowings/refinance, penal interest paid, etc. </li></ul>
  83. 83. BANKING ACCOUNTS <ul><li>Operating Expenses (schedule 16) includes: </li></ul><ul><li>Payments to and provisions for employees: Includes staff salaries/wages, allowances, bonus, other staff benefits like provident fund, pension, gratuity, leave fare concessions, staff welfare medical allowance to staff. </li></ul><ul><li>Rent, Taxes and lighting: Includes rent paid by the banks on buildings and other municipal and other taxes paid excluding income tax and interest tax, electricity and other similar charges and levies. House rent allowance and other similar payments to staff should appear under the head “Payment to and provisions for employees”. </li></ul>
  84. 84. BANKING ACCOUNTS <ul><li>Printing and stationery: Includes books and forms of stationery used by the bank and other printing charges which are not incurred by way of publicity expenditure. </li></ul><ul><li>Advertisement and publicity: Includes expenditure incurred by the bank for advertisement and publicity purposes including printing charges of publicity matter. </li></ul><ul><li>Depreciation on bank’s property: Includes depreciation on bank’s own property, motor cars and other vehicles, furniture, electric fittings, vaults, lifts, leasehold properties, non-banking assets etc. </li></ul>
  85. 85. BANKING ACCOUNTS <ul><li>Directors’ fees, allowances and expenses: Includes sitting fees and all other items of expenditure incurred on behalf of directors. The daily allowance, hotel charges, conveyance charges etc., which though in the nature of reimbursement of expenses incurred may be included under this head. Similar expenses of local committee members may be included under this head. </li></ul><ul><li>Auditors’ fees and expenses (Including branch auditors’ fees and expenses): Includes the fees paid to the statutory auditors and branch auditors for professional services rendered and all expenses for performing their duties, even though they may be in the nature of reimbursement of expenses. If external auditors have been appointed by bank themselves for internal inspection and audits and other services, the expenses incurred in that context including fees may not be included under this head but shown under ‘Other expenditure’. </li></ul><ul><li>Law charges: includes all legal expenses and reimbursement of expenses incurred in connection with legal services. </li></ul>
  86. 86. BANKING ACCOUNTS <ul><li>Postage, telegrams, telephones etc.: Includes all postage charges like stamps, telegram, telephones, teleprinters etc. </li></ul><ul><li>Repairs and Maintenance: Includes repairs to bank’s property, their maintenance charges. </li></ul><ul><li>Insurance: Includes insurance charges on bank’s property, insurance premium paid to DICGC etc., to the extent they are not recovered from the concerned parties. </li></ul><ul><li>Other expenditures; Includes all expenses other than those not included in any of the other heads like, license fees, donations, subscriptions to papers, periodicals, entertainment expenses, travel expenses, etc. In case any particular item under this head exceeds one percentage of the total income, particulars may be given in the notes. </li></ul>
  87. 87. BANKING ACCOUNTS <ul><li>The Provisions and Contingencies include: </li></ul><ul><li>Provisions made for bad and doubtful debts </li></ul><ul><li>Provisions for taxation </li></ul><ul><li>Provision for diminution in the value of investments </li></ul><ul><li>Transfers to contingencies </li></ul>
  88. 88. BANKING ACCOUNTS <ul><li>‘ Money At Call and Short Notice’? </li></ul><ul><li>It relates to inter-bank transactions </li></ul><ul><li>Banks having short supply of money borrow from banks having surplus money. </li></ul><ul><li>Money is borrowed usually for 1 to 14 days. </li></ul><ul><li>The rate of interest fluctuates everyday and even within a day. </li></ul>
  89. 89. BANKING ACCOUNTS <ul><li>‘ Advances’? </li></ul><ul><li>includes Loans, Cash Credit and Overdraft </li></ul><ul><li>Loan is an advance which has fixed amount and fixed period. </li></ul><ul><li>Cash Credit is an arrangement where banks agree to lend money to borrowers up to a fixed limit against Hypothecation or Pledge of securities. However the borrower need not avail the whole amount in one go. </li></ul><ul><li>Overdraft is an arrangement where customer is permitted to overdraw money in his current account up to a certain limit against securities like, L.I.C. Policy, FDRs, National Saving Certificates, Quoted shares etc. </li></ul>
  90. 90. BANKING ACCOUNTS <ul><li>‘ Bills receivable being Bills for collection as </li></ul><ul><li>per contra’? </li></ul><ul><li>It is a contra item in the Balance Sheet. </li></ul><ul><li>‘ Bills received being bills for collection ‘ account denotes the amounts receivable and is shown on assets side of the balance sheet. </li></ul><ul><li>‘ Bills for collection being Bills receivable’ account denotes the amount payable to the customer and is shown in the liabilities side of the balance sheet. </li></ul>
  91. 91. BANKING ACCOUNTS <ul><li>‘ Acceptance Endorsements and other </li></ul><ul><li>Obligations’? </li></ul><ul><li>It represents liabilities, which the bank assumes on behalf of its customers. </li></ul><ul><li>The various ways in which a bank may accommodate its customers are, opening of L/C, accepting bills on behalf of customers, making endorsements on Promissory Note prepared by customers, issuing Letter of Guarantee. </li></ul><ul><li>The bank obtains counter Guarantee from its customers to meet the third party liabilities. </li></ul><ul><li>It creates contra item in balance sheet. </li></ul><ul><li>The account ‘Constituents’ liability for acceptances, endorsements or other obligations’ appears in the asset side of the balance sheet. </li></ul><ul><li>The account ‘ Acceptances, Endorsements and other Obligations’ appears in the liabilities side of the balance sheet. </li></ul>
  92. 92. BANKING ACCOUNTS <ul><li>, ‘Non-Banking Assets? </li></ul><ul><li>This relates to assets, which are not acquired by the banks, but against security of which Loan is given. </li></ul><ul><li>In case of non-payment of loan amount such securities are taken in possession for recovery. </li></ul><ul><li>Profit or loss on disposal of such assets are disclosed separately in the Profit and Loss account. </li></ul>
  93. 93. BANKING ACCOUNTS <ul><li>Investment by banks include; </li></ul><ul><li>Government Securities </li></ul><ul><li>Debentures and Bonds </li></ul><ul><li>Subsidiaries/Joint Ventures </li></ul><ul><li>Shares </li></ul><ul><li>Approved securities </li></ul><ul><li>Others(Commercial papers, units of mutual fund etc.) </li></ul>
  94. 94. BANKING ACCOUNTS <ul><li>Prepare the Profit and Loss account of ‘X’ Bank Ltd. for the year ended 31st March, 2003, from the following: </li></ul><ul><li>  Rs </li></ul><ul><li>Interest on Fixed Deposits 1,62,410 </li></ul><ul><li>Rebate on Bills discounted 29,000 </li></ul><ul><li>Interest on Loans 45,000 </li></ul><ul><li>Commission Charged to Customers 62,500 </li></ul><ul><li>Establishment 15,000 </li></ul><ul><li>Discount on Bills Discounted 89,000 </li></ul><ul><li>Interest on Cash Credit 24,000 </li></ul><ul><li>Amount Charged against Current Accounts 71,500 </li></ul><ul><li>Directors’ Fees 10,000 </li></ul><ul><li>Audit Fees 20,000 </li></ul><ul><li>Postage and Telegram 2,000 </li></ul><ul><li>Printing and Stationery 4,000 </li></ul><ul><li>Rent and Taxes 22,500 </li></ul><ul><li>Interest on Overdrafts 71,000 </li></ul><ul><li>Sundry Charges 1,500 </li></ul><ul><li>Interest on Savings Bank Deposits 57,780 </li></ul>
  95. 95. BANKING ACCOUNTS <ul><li>Profit & Loss Account for the year ended 31st March 2003 </li></ul><ul><li>Schedule No. Rs </li></ul><ul><li>I. Income </li></ul><ul><li>Interest Earned 13 2,71,500 </li></ul><ul><li>Other Income 14 62,500 </li></ul><ul><li>Total 3,34,000 </li></ul><ul><li>II. Expenditure </li></ul><ul><li>Interest Expended 15 2,20,190 </li></ul><ul><li>Operating Expenses 16 75,000 </li></ul><ul><li>Provision for Contingencies — </li></ul><ul><li>Total 2,95,190 </li></ul><ul><li>III. Profit </li></ul><ul><li>Net Profit for the year 38,810 </li></ul>
  96. 96. BANKING ACCOUNTS <ul><li>Schedules to be annexed with Profit and Loss Account </li></ul><ul><li>Schedule13: Interest Earned </li></ul><ul><li>Interest on: </li></ul><ul><li>Loan 45,000 </li></ul><ul><li>Cash Credit 24,000 </li></ul><ul><li>Overdrafts 71,000 1,40,000 </li></ul><ul><li>Discount on Bills discounted 89,000 </li></ul><ul><li>Less: Rebate on Bill Discounted 29,000 60,000 </li></ul><ul><li>Amount charged against current accounts 71,500 </li></ul><ul><li>2,71,500 </li></ul><ul><li>Schedule 14: Other Income </li></ul><ul><li>Commission charged to customer 62,500 </li></ul><ul><li>Schedule 15: Interest Expended </li></ul><ul><li>Interest paid on </li></ul><ul><li>       Fixed Deposits 1,62,410 </li></ul><ul><li>       Savings Bank Deposits 57,780 </li></ul><ul><li>2,20,190 </li></ul>
  97. 97. BANKING ACCOUNTS <ul><li>Schedule 14: Other Income </li></ul><ul><li>Commission charged to customer 62,500 </li></ul><ul><li>Schedule 15: Interest Expended </li></ul><ul><li>Interest paid on </li></ul><ul><li>       Fixed Deposits 1,62,410 </li></ul><ul><li>       Savings Bank Deposits 57,780 </li></ul><ul><li>2,20,190 </li></ul>
  98. 98. BANKING ACCOUNTS <ul><li>Schedule 16: Operating Expenses </li></ul><ul><li>Establishment Expenses 15,000 </li></ul><ul><li>Director’s Fees 10,000 </li></ul><ul><li>Audit Fees 20,000 </li></ul><ul><li>Rent and Taxes 22,500 </li></ul><ul><li>Postage and Telegrams 2,000 </li></ul><ul><li>Printing and Stationery 4,000 </li></ul><ul><li>Sundry Expenses 1,500 </li></ul><ul><li> 75,000 </li></ul>
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