This paper briefly describes some major Financial Statements items on the Balance Sheet and the Income statement. The compilations were done with a focus on the United States hence, some items might not apply to other countries.

1. FINANCIAL STATEMENTS
BY: PRECIOUS KERME GAYAN 0
BANKING & FINANCE
By: Precious Kerme Gayan

2. BANKING & FINANCE
BY: PRECIOUS KERME GAYAN 1
INTRODUCTION
This paper briefly describes some major Financial Statements items on the Balance
Sheet and the Income statement. The compilations were done with a focus on the United
States hence, some items might not apply to other countries.

3. BANKING & FINANCE
BY: PRECIOUS KERME GAYAN 2
BALANCE SHEET
ASSETS
VAULT CASH
This balance sheet item on a bank statement represents cash kept on hand in a bank
vault to meet day-to-day business needs, such as cashing checks for customers. The
bank must have a certain amount of cash on hand in order to deal with these types of
every day transactions. Vault cash is considered to be part of a bank's reserves, and
banks will usually be required to have a certain amount of "vault cash" on hand.
FEDERAL RESERVED DEPOSITS
This balance sheet item on a bank statement represents a certain proportion of deposits
that banks are required to maintain as reserve against potential withdrawals.
CASH ITEMS IN PROCESS OF COLLECTION
This balance sheet item on a bank statement represents checks and other cash items
that have been deposited with the Federal Reserve for collection on behalf of an institution
having an account with the bank. They also represent those checks given immediate
credit to a customer’s account, before a bank has received payment from the paying bank.
Examples are a depository transfer check (DTC) and a pre-authorized check.
FEDERAL FUNDS SOLD AND REPURCHASE AGREEMENT (RPS)
This balance sheet item on a bank statement represents short-term loans to other
depository at financial institutions without any collateral. This is usually provided by the
Federal Reserve banks, usually at the Federal Funds rate. These may be considered

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wholesale loans to other banks. RP is an acquisition of immediately available funds
through the sale of securities, together with a simultaneous agreement to repurchase
them at a later date.
US TREASURY AND US AGENCY SECURITIES
This balance sheet item on a bank statement represents the government department
responsible for issuing all Treasury bonds, notes and bills. Some of the government
branches operating under the U.S. which includes printing of bills, postage, Federal
Reserve notes and minting of coins,
U.S AGENCY SECURITIES
This balance sheet item on a bank statement represents securities issued by corporations
and agencies created by the US government, such as the federal home loan, band board
and ginnie mae.
SECURITIES ISSUED BY STATES AND POLITICAL SUBDIVISION
This balance sheet item on a bank statement represents securities issued by state and
local governments, their agencies, and/or political subdivisions to finance public
improvement projects. The bond issuer borrows needed money by selling municipal
bonds. The investors who buy municipal bonds become creditors and are essentially
loaning money to the issuer to fund public projects
MORTGAGE-BACKED BONDS OR SECURITIES (MBS)
This balance sheet item on a bank statement represents bonds or notes backed by
mortgages on residential or commercial properties. As the underlying loans are paid off
by the borrowers, the investors in MBS receive payments of interest and principal over

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time. The MBS market is for institutional investors and is not suitable for individual
investors.
OTHER DEBT AND EQUITY SECURITY
This balance sheet item on a bank statement represents any debt instrument that can be
bought or sold between two parties and has basic terms defined, such as notional amount
(amount borrowed), interest rate and maturity/renewal date. Debt securities include
government bonds, corporate bonds, CDs, municipal bonds, preferred stock,
collateralized securities (such as CDOs, CMOs, GNMAs) and zero-coupon securities.
COMMERCIAL AND INDUSTRIAL (C&I) LOAN
This balance sheet item on a bank statement represents any type of loan made to a
business or corporation and not to an individual. Commercial and industrial loans can be
made in order to provide either working capital or to finance major capital expenditures.
This type of loan is usually short-term in nature and is almost always backed with some
sort of collateral.
REAL ESTATE SECURED LOANS
This balance sheet item on a bank statement represents money that are borrowed, homes
that are pledge or other real property that served as collateral. This item also represents
a signed promissory note evidencing your promise to repay the loan, but you also offer
security in the form of real estate to encourage an approval. First and second mortgage
loans, along with home equity lines of credit, are common examples of real estate secured
loans.

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CONSUMER LOAN
This balance sheet item on a bank statement represents an amount of money lent to an
individual (usually on a non-secured basis) for personal, family, or household purposes.
Consumer loans are monitored by government regulatory agencies for their compliance
with consumer protection regulations such as the Truth in Lending Act. It is also called
consumer credit or consumer lending.
OTHER LOANS
This balance sheet item on a bank statement represents accounts that do not fit under
the broad categories of finances (assets, credit cards, auto loans and home loans). This
grouping may include things like closed accounts with leftover balances and student
loans, as well as the occasional item which has been mischaracterized on your
Transunion credit report.
LEASES
This balance sheet item on a bank statement represents rental properties from another
party. A lease guarantees the lessee (the renter) use of an asset and guarantees the
lessor (the property owner) regular payments from the lessee for a specified number of
months or years. Both the lessee and the lessor must uphold the terms of the contract for
the lease to remain valid.
UNEARNED INCOME
This balance sheet item on a bank statement represents any income that comes from
investments and other sources unrelated to employment services. Examples of unearned

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income include interest from a savings account, bond interest, alimony, and dividends
from stock. Once this income is realized then it is taxable.
RESERVED FOR LOANS AND LEASE LOSSES
This balance sheet item on a bank statement represents calculated reserve that financial
institutions establish in relation to the estimated credit risk within the institution’s assets.
This credit risk represents the charge-offs that will most likely be realized against an
institution’s operating income as of the financial statement end date
NET LOANS AND LEASES
This balance sheet item on a bank statement represents loans and lease-financing
receivables net of unearned income and the allowance for possible loans and lease
financing receivable losses divided by total assets.
INVESTMENT SECURITIES
This balance sheet item on a bank statement represents securities that are purchased in
order to be held for investment. This is in contrast to securities that are purchased by a
broker-dealer or other intermediary for resale. Banks often purchase marketable
securities to hold in their portfolios.
INTANGIBLE ASSET
This balance sheet item on a bank statement represents asset that is not physical in
nature also knowing as corporate intellectual property (items such as patents,
trademarks, copyrights, business methodologies), goodwill and brand recognition are all
common intangible assets.

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LIABILITIES
DEMAND DEPOSIT
This balance sheet item on a bank statement represents funds held in an account from
which deposited funds can be withdrawn at any time without any advance notice to the
depository institution. Demand deposits can be demanded by an account holder at any
time. Many checking and savings accounts today are demand deposits and are
accessible by the account holder through a variety of banking options, including teller,
ATM and online banking.
NEGOTIABLE ORDER OF WITHDRAWAL (NOW) ACCOUNT'
This balance sheet item on a bank statement represents an interest-earning bank account
with which the customer is permitted to write drafts against money held on deposit. It is
also known as a "NOW account". Commercial banks, mutual-savings banks and savings-
and-loan associations can offer this type of account to individuals, some nonprofit
organizations and certain governmental units.
MONEY MARKET DEPOSIT ACCOUNTS
This balance sheet item on a bank statement represents savings account which shares
some of the characteristics of a money market fund. Like other savings accounts, money
market deposit accounts are insured by the Federal government. Money market deposit
accounts offer many of the same services as checking accounts although transactions
may be somewhat more limited. These accounts are usually managed by banks or
brokerages, and can be a convenient place to store money that is to be used for upcoming
investments or has been received from the sale of recent investments.

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FOREIGN DEPOSITS
This balance sheet item on a bank statement represents a deposit made at, or money put
in to, domestic banks outside of the United States. These deposits are not subject to
deposit insurance premiums (a premium paid to ensure that funds can be retrieved if the
debtor cannot repay the deposit), or reserve requirements (the amount of funds an
institution must hold relative to its deposits).
CERTIFICATE OF DEPOSIT - CD
This balance sheet item on a bank statement represents a savings certificate entitling the
bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and
can be issued in any denomination. CDs are generally issued by commercial banks and
are insured by the FDIC. The term of a CD generally ranges from one month to five years.
CORE DEPOSITS
This balance sheet item on a bank statement represents banking deposits made by
customers in the bank's general market area. A bank considers its core deposits to be a
reliable source of funding, since customers in its general market area tend to be loyal and
consistent. For example, a business owner who deposits checks at a local bank is less
likely to alter his or her depositing habits based on general economic changes, such as
interest rate fluctuations.
TOTAL DEPOSITS
This balance sheet item on a bank statement represents various kinds of deposits that
are added together to determine the Total Deposits. Demands Deposits, Term Deposits,

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and Interest and Non-Interest bearing deposits are the cumulative examples of deposit
items that are summed to get the value of Total Deposits.
FEDERAL FUNDS PURCHASED
This balance sheet item on a bank statement represents short-term loans to other
depository financial institutions without any collateral, provided by Federal Reserve
banks, usually at the Federal Funds rate. These may be considered wholesale loans to
other banks.
REPURCHASE AGREEMENT
This balance sheet item on a bank statement represents is a type of short-term loan much
used in the money markets, whereby the seller of a security agrees to buy it back at a
specified price and time. The seller pays an interest rate called the repo rate when buying
back securities.
SUBORDINATE NOTES AND DEBENTURE
This balance sheet item on a bank statement represents loan (or security) that ranks
below other loans (or securities) with regard to claims on assets or earnings and debt
instrument that is not secured by physical assets or collateral.
SHAREHOLDER EQUITY
PREFERRED STOCK
This balance sheet item on a bank statement represents class of ownership in a
corporation that has a higher claim on the assets and earnings than common stock.

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Preferred stock generally has a dividend that must be paid out before dividends to
common stockholders and the shares usually do not have voting rights.
COMMON STOCK
This balance sheet item on a bank statement represents security that represents
ownership in a corporation. Holders of common stock exercise control by electing a board
of directors and voting on corporate policy. Common stockholders are on the bottom of
the priority ladder for ownership structure. In the event of liquidation, common
shareholders have rights to a company's assets only after bond holders, preferred
shareholders and other debt holders have been paid in full.
SURPLUS AND PAID IN CAPITAL
This balance sheet item on a bank statement represents the price paid by investors per
share at issue minus the par value per share, times the number of shares issued. It is
also called additional paid-in capital.
RETAINED EARNINGS
This balance sheet item on a bank statement represents the percentage of net earnings
not paid out as dividends, but retained by the company to be reinvested in its core
business, or to pay debt. It is recorded under shareholders' equity on the balance sheet.
OFF BALANCE SHEET
It is an asset or debt that does not appear on a company's balance sheet. Items that are
considered off balance sheet are generally ones in which the company does not have
legal claim or responsibility for. For example, loans issued by a bank are typically kept on
the bank's books. If those loans are securitized and sold off as investments, however, the

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securitized debt is not kept on the bank's books. One of the most common off-balance
sheet items is an operating lease.

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INCOME STATEMENT
REVENUE
INCOME
This item on the income statement represents money that an individual or business
receives in exchange for providing a good or service or through investing capital.
INCOME ON COMMERCIAL AND INDUSRIAL LOAN
This income statement item on a bank statement represents fees gotten from a
commercial and industrial loan (C&I loan) that is loan to a business rather than a loan to
an individual consumer. These short-term loans may have an interest rate based on the
prime rate and are secured by collateral owned by the business requesting the loan.
INCOME ON REAL ESTATE LOAN
It is a loan on real estate that is usually secured by a mortgage.
INCOME ON OTHER LOANS
This income statement item on a bank statement represents fees gotten from other loans.
That is, those items that do not fit under the broad categories of finances income on
consumer loans
This income statement item on a bank statement represents fees gotten from money that
are lent to individuals (usually on a non-secured basis) for personal, family, or household
purposes.

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INCOME ON LEASES
This income statement item on a bank statement represents fees gotten from rental
properties from another party.
INTEREST AND FEES ON LOANS AND LEASES
This item represents charges made for loans and leases that bank establishes in relation
to borrow funds.
INTEREST ON INVESTMENT SECURITIES
This account on a bank statement represents charges made on Securities that are
purchased and held for investment.
INTEREST EXPENSE
The cost incurred by an entity for borrowed funds. Interest expense is a non-operating
expense shown on the income statement. It represents interest payable on any type of
borrowings – bonds, loans, convertible debt or lines of credit. It is basically calculated as
the interest rate times the outstanding principal amount of the debt. Interest expense on
the income statement represents interest accrued during the period covered by the
financial statements, and not the amount of interest actually paid over that period. While
interest expense is tax-deductible for companies, in an individual's case, it depends on
his or her jurisdiction and also on the loan's purpose.
INTERST ON NOW ACCOUNT
This item represents charges made on bank account with which the customer is permitted
to write drafts against money held on deposit

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INTEREST ON MONEY MARKET DEPOSIT AND OTHER SAVINGS
A money market account (MMA) or money market deposit account (MMDA) is a non-
financial account that pays interest based on current interest rates in the money markets.
Money market accounts typically have a relatively high rate of interest and require a
higher minimum balance (anywhere from $1,000 to $10,000 or $25,000) to earn interest
or avoid monthly fees. Like other bank deposits, they are liabilities from the bank's
perspective. They should not be confused with money market funds.
INTERST ON FOREIGN DEPOSIT
This item represents charges made on deposit put into domestic banks outside of the
United States.
INTEREST ON RETAIL CD
It is a savings certificate entitling the bearer to receive interest. A CD bears a maturity
date, a specified fixed interest rate and can be issued in any denomination. CDs are
generally issued by commercial banks and are insured by the FDIC. The term of a CD
generally ranges from one month to five years.
INTEREST ON WHOLESALE CD
It is a savings account, current account or any other type of bank account that allows
money to be deposited and withdrawn by the account holder. These transactions are
recorded on the bank's books, and the resulting balance is recorded as a liability for the
bank and represents the amount owed by the bank to the customer. Some banks may
charge a fee for this service, while others may pay the customer interest on the funds
deposited.

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INTEREST ON DEPOSIT ACCOUNT
It is a savings account, current account or any other type of bank account that allows
money to be deposited and withdrawn by the account holder. These transactions are
recorded on the bank's books, and the resulting balance is recorded as a liability for the
bank and represents the amount owed by the bank to the customer. Some banks may
charge a fee for this service, while others may pay the customer interest on the funds
deposited.
INTEREST ON OTHER BORROWED FUNDS
It is money one has received from another party with the agreement that it will be repaid.
Most borrowed funds are repaid with interest, meaning the borrower pays a certain
percentage of the principal amount to the lender as compensation for borrowing. Most
borrowed funds also have a maturity date by which time the borrower must have repaid
the loan. Borrowing and lending occur informally between family and friends, at the retail
level through banks and on a large scale through governments and institutional investors.
INTERST ON SUBORDINATE NOTES AND DEBENTURES
It is an amount earned on subordinated debt (also known as subordinated loan,
subordinated bond, subordinated debenture or junior debt) is debt which ranks after other
debts if a company falls into liquidation or bankruptcy.
NET INTEREST INCOME
It is the difference between the revenue that is generated from a bank’s assets and the
expenses associated with paying out its liabilities. A typical bank’s assets consist of all
forms of personal and commercial loans, mortgages and securities. The liabilities are, of

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course, the customer deposits. The excess revenue that is generated from the spread
between interest paid out on deposits and interest earned on assets is the net interest
income.
The net interest income of some banks is more sensitive to changes in interest rates than
others. This can vary according to several factors, such as the type of assets and liabilities
that are held. Banks with variable rate assets and liabilities will obviously be more
vulnerable to changes in interest rates than those with fixed-rate assets. Banks with
liabilities that price more often or quicker than its assets will also be affected by interest
rate changes.
PROVISION FOR LOAN LOSSES
It is an expense set aside as an allowance for bad loans (customer defaults, or terms of
a loan have to be renegotiated, etc. It is also known as a "valuation allowance" or
"valuation reserve". This would be a bank's equivalent of a manufacturing company's
allowance for returns on goods sold.
INTEREST FROM FEDUCIARY ACTIVITIES
The term “fiduciary activities” refers to assets, which a federal, state or municipal
government administers for non-federal individuals. Some types of fiduciary activities
include the Thrift Savings Plan, individual Indian trust funds and the Alaska Native Escrow
Fund. The Federal Accounting Standards Advisory Board (FASAB) sets guidelines for the
reporting of fiduciary activities on financial statements.

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SERVICE CHARGE ON DEPOSIT ACCOUNT
Many banks charge nominal fees for various services, such as requesting a deposit slip
or counter check or notarizing a document. Bank fees are usually nondeductible, except
for annual custodial fees charged by the bank for IRA accounts. Even checks that are
used for tax records are nondeductible, unless the checks are written from a money
market account with limited check-writing privileges, and violation of this privilege results
in forfeiture of the account's money market status. Bank fees generally constitute a major
portion of revenue for the bank, particularly for regional and local branches.
TRADING REVENUE
It is the profit that an investor derives from buying and selling short term securities, or
those that the investor holds for less than one year. Trading profits can be substantial if
the investor knows what he/she is doing, but there is a good deal of risk involved.
Governments often seek to encourage long-term investment at the expense of short-term,
and because of this, trading profit is usually taxed at the (higher) income tax rate instead
of the capital gains rate.
FFEES FROM SECURITY BROKERAGE
A fee charged by an agent, or agent's company to facilitate transactions between buyers
and sellers. There are many types of brokerage fees added in areas such as insurance,
realty, delivery services or stocks. Brokerage fees will usually be based on either a
percentage of the transaction or a flat fee. They can also be a combination of the two.
The brokerage fee is charged for services such as negotiations, sales, purchases,
delivery or advice on the transaction.

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FEES FROM INVESTMENT BANKING
An investment bank is a financial institution that assists individuals, corporations, and
governments in raising financial capital by underwriting or acting as the client's agent in
the issuance of securities (or both).
FEES FROM INSURANCE
A contract (policy) in which an individual or entity receives financial protection or
reimbursement against losses from an insurance company. The company pools clients'
risks to make payments more affordable for the insured.
NET GAIN OR LOSS FROM SALES OF INVESTMENT SECURITY
This is in contrast to securities that are purchased by a broker-dealer or other intermediary
for resale. They are Securities that are purchased in order to be held for investment. .
Banks often purchase marketable securities to hold in their portfolios.
OTHER NON INTEREST INCOME
Bank and creditor income derived primarily from fees. Institutions charge fees that provide
non-interest income as a way of generating revenue and ensuring liquidity in the event of
increased default rate. Examples of non-interest income include deposit and transaction
fees, insufficient funds (NSF) fees, annual fees, monthly account service charges;
inactivity fees, check and deposit slip fees, etc.
SALARIES AND EMPLOYEES BENEFIT
They are benefits in kind (also called fringe benefits, perquisites, or perks) include various
types of non-wage compensation provided to employees in addition to their normal wages
or salaries.

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EXPENSES
Expenses are economic costs that a business incurs through its operations to earn
revenue. Because expenses are such an important indicator of a business's operations,
there are specific accounting rule on expense recognition. In order to maximize profits,
businesses must attempt to reduce expenses without also cutting into revenues.
INCOME BEFORE TAXES AND EXTRAORDINARY ITEMS
Net profit before Tax and Extraordinary Items is the starting point for calculating Cash
from Operating Activities. To determine Net profit before Tax and Extraordinary Items we
make some adjustments to the Net Profits as shown by the Statement of Profit and Loss
of a concern by adding and subtracting various items.
APPLICABLE INCOME TAXES
It is a tax that governments impose on financial income generated by all entities within
their jurisdiction. By law, businesses and individuals must file an income tax return every
year to determine whether they owe any taxes or are eligible for a tax refund. Income tax
is a key source of funds that the government uses to fund its activities and serve the
public.
EXTRAORDINARY ITEMS
It includes gains or losses included in a company's financial statements, which are
infrequent and unusual in nature. These are usually explained further in the "notes to the
financial statements."

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These are the result of unforeseen and atypical events. They are usually accounted for
separately so they don't skew the company's regular earnings. An example would be a
snowstorm in Hawaii creating extraordinary losses to banana crops. These losses might
be written down as a one-time charge.