Presentation of Accounting Presented to: Prof. Nadeem Baig
Definition of BusinessBusiness includes all the activities of manufacturing trading and serviceswith the object of earning profit throughthe satisfaction of the human wants allthe activities must be carried out under the law of the country
Definition of Accounting Accounting is the art of classifying,recording, summarizing, results in asignificant manner and in term ofmoney the transaction & eventswhich are at least in financialcharacter & interpreting the resultsthereof.
Name of OrganizationBank Alfalah Limited
Slogan“Let’s Look Ahead Towards a Brighter Future Together”.
Vision: To be the premier organizations operating locally & internationally that provides the complete range of financial services to all segments under one roofMission: To develop & deliver the most innovative products, manage customer experience, deliver quality service that contributes to brand strength, establishes a competitive advantage and enhances profitability, thus providing value to the stakeholders of the bank.
Historical OverviewBank Alfalah Limited was incorporated on June 21st,1997 as a public limited company under the CompaniesOrdinance 1984. Its banking operations commenced from November 1st ,1997. The bank is engaged in commercial banking and related services as defined in the Banking companies ordinance, 1962. The Bank iscurrently operating through 104 branches in 36 cities,with the registered office at B.A.Building,I.I.Chundrigar, Karachi.Since its inception, as the new identity of H.C.E.B afterthe privatization in 1997, the management of the bankhas implemented strategies and policies to carve adistinct position for the bank in the market place.
Hierarchy President Chief Operating OfficeHead of County Country Risk Executive Vice Executive Vice Charted Operations Manger President President Accountant Information Corporate Branch Branch Department Heads Manager Manager
Chairman Message Our core Philosophy of honesty, transparency in customer dealings, product innovation, excellence in customer service and our commitment to being a responsible corporate citizen.
Board of DirectorsMr. Mohammad Mr. Abdulla NasserSaleem Akhtar Hawalileel Al-Chief Executive MansooriOfficerMr. Abdulla Khalil Al Mr. Ikram Ul-MajeedMutawa SehgalMr.Khalid Mana Mr. Nadeem IqbalSaeed Al Otaiba Sheikh
About the BankFollowing the privatization in July 1997,Habib Credit and Exchange Bank assumedthe new identity of Bank Alfalah on February25, 1998. It is now Abu Dhabi based bank asthe family of Sheikh Nahayan purchased 70%of its shares and 30% remained with HabibBank on behalf of Government of Pakistan. Ithas 115 branches in 46 cities of Pakistan.
Products• Royal profit• Royal patriot• Royal group• Financing scheme• Alfalah Car financing• Bank Alfalah home finance• Rupee traveler cheque• Credit Cards• Agri-Finance
Bank Alfalah Home FinanceThey have six types of homefinance loans.they are:-•Buy Your Home with BankAlfallah Home financeYou have a plot and need to finance toconstruct a home.they will provide you7.50 million or 70% of the estimated valueof constructed property.
Payment period ranges from 3 to 20years•Renovate Your Home with Bank AlfalahHome ImproverThey provide upto Rs 7.50 million or100% of the existing finance.Payment period upto 20 years•Let’s Start It Together with BankAlfalah Home StartThey will provide you Rs 7.50 or 70%ofthe purchase price of the property
Payment ranges from 3 years to 20years•Build Your Home withBank Alfalah HomeConstructYou already own a home and need extraspace for growing family.they willfinance you upto Rs 2.50 million or 30%of the surveyed value of your home.Payment period upto 7 years
•Make An Easy Transfer withAlfalah Home BTF The crown Jewel of their home finance scheme.they offer a moratorium of up to 3 years in principal payment,for a financing of up to 20 years.you service only the mark up initially and principal repayment starts from the 4th year.Home start is specially designed for young people to own a home of their own. Processing fees:- •For financing up to Rs 1.00 m Rs 5,000
•For financing up to Rs 5.00 m Rs10,000•For financing up to Rs 10.00 m Rs 20,000Mark up rates:-•For SVR option:•SBP discount rate +1% currently7.5%+1%=8.5%•For fixed rate option:•1 year 7%
2 year 8%3 year 9%•Late payment charges•Rs 400/ late payment•Prepayment charges•Upto 5% of the outstanding amount
Credit card department Bank Alfalah offers:•VISA Classic•VISA Gold
Features of AlfalahClassic and Alfalah Gold •No Joining fee •No Annual/ Renewal fee •Low service charges are only 2.50% per year
•Balance transfer facilityvalid on all credit cards inPakistan•Global Acceptability in more then 150 countries •Free supplementary cards •Zero loss liability
Departments Accounts Operation CreditDepartment Department Department
Operations DepartmentOperation department of Bank Alfalah MainBranch Multan is responsible for the overalloperations of the bank. Here operations officeris responsible to make the daily report ofoperation and solve the queries of differentbranches remaining under the policies of BankAlfalah.a) Account Informationb) Cash Departmentc) Clearingd) Remittances
Types of Accountsa) Current Accounts No interest or profit shall be payable on current account to allow the customer to overdraw the Account, the bank shall charge Markup/Interest. The minimum balance required for opening the current account is rupees 5000/- inter bank fun transaction are handled by current account.b) Saving Account The purpose of this account is to introduce the debit of saving individuals in the neighborhood. The profit on saving account is paid on the basis of profit and loss sharing at 2% six monthly. The minimum balance requirement for opening the account is Rs. 2500/-
Types of Accountsc) Notice Deposits Notice Deposits are kind a fixed deposits the minimum balance requirement for opening account is Rs. 2500/- and payment is drawn on maturity of the specific period. Notice Deposit is of Two Types: > One for which a prior notice of 30 days and is required from the customer before withdrawing deposited amount and for which rate return is 6.10%. > Second for which a prior notice of 30 days and above is required from the customer before withdrawing deposited amount and for which the rate of return is 7.50%.
Types of Accountsc) Term Deposit A Term Deposit is a deposit that is made of a certain period of time. At the end of specific period the customer is allowed to withdraw the principal amount. The rate of return of this amount varies from 2.5% to 5.75%. The term deposit account varies from one month to 5 years and the minimum balance requirement is Rs. 2500/-
Cash DepartmentThis Department is given the completeresponsibility of Cash as a transaction intouch local and foreign currencies it is alsoresponsible for the book keeping for thesetransactions and the safe custody of cash.This department performs the main function:i) Cash Receiptsii) Cash Payments
Cash DepartmentCash Receipts: In Cash Department Depositors use deposit slips for depositing the amount into their account the officer checks if the deposit slip is properly filled up containing title of account, A/C number and amount in words and figures.Cash Payments: First the cheque is presented by the customer or holder to the cash payment officer. He confirms that it is drawn on the same branch and the particulars of cheque are properly filled. One Signature or the holder is taken on the back of the cheque.
Clearing DepartmentThe process by which cheque exchanged between thecollecting and paying bank and the ensuing financialsettlement is called “clearing”. This facility isprovided by the state bank of Pakistan for offsettingof cross obligations between the different banks.Clearing is of two types:a) Inward Clearing When Cheque drafts etc, of our branchpresented to us for clearing by the SBP. Cheque to behonored by bank.b) Outward Clearing The Cheque of other banks, which theaccount holder deposit in their accounts is, sends forcollection.
Remittance DepartmentThe need of remittance is commonly felt in today’sbusiness. A major function of any bank it to transferof funds from one place to anther. Bank Alfalah usesthe following modes of transfer of funds.a) Demand Draft (DD) Its an instrument, which is use to transfer from oncity to another it can be made on cash as well as oncheque, if it is made through cheque that it isnecessary the person must be account holder while incase of cash any person can make. It consists on threecopies. 1) Original Copy, which is given to the accountholder 2) DD advice sent to the central branch 3) Third party for reconciliation. Its photocopyis kept with bank while original is send tohead office for recociliation.
Remittance Departmentb) Telegraphic Transfer (TT) It is another mode of transfer of funds. It is quickest mode of transfer of funds from one city to another. For TT, client has to submit the application on a prescribed form of the bank. Client can deposit money in to the bank or can request the bank to deduct the amount against the TT along with the charges against the issuance of TT from his account. The charges against the issuance of TT charged by Bank Alfalah.c) Pay Order (PO) Written order which is issued and received to the save book or drawn or payable on same branch. Application form is given to the customer to fill two signatures are taken on the form one for request and the other for receiving the instrument
Remittance Departmentd) Call Deposit When the party wants to give the payment from it self to another party then its makes call deposit the bank keeps it with itself unless it does not receive instruction from the bank. Normally it is pain in cash and goes in party account.e) Pay Slip It is use when bank itself pay for any transaction for e.g purchase of stationary.f) Money Gram Its basically a person to person money transfer service that allows consumer to receive money in just a few minutes. Procedure: > Person must have reference no. > Person must tell reference no and compute the simple form. > Person have to show NIC and tell compute introduction after that he can obtain money.
Credit DepartmentType of Borrowers: This section classifies and describes various types of borrowers in the market along with specific lending guide lines. The policy should be read and understood carefully as the bank may enter into a business relationship with them at any point in time. Following are the three broad categories of borrowers.
Credit DepartmentIndividuals: > Existing Account Holders > Staff Members > Close Relatives of Staff Members > Businesses sponsored by staff members > Employees of other banks > Joints AccountsBusiness Entities: > Sole Proprietorship > Partnership > Joint Venture > Limited Liability Company > Group Accounts
Credit DepartmentOthers: > Clubs and Associations > Federal Provisional and Local Government Bodies. > Traders > Contractor or Construction Companies > Transport, Storage and warehousing > Property Dealers > Manufacturers
Credit DepartmentCredit Department Function and Facilities: The earning of Bank Alfalah are chiefly derived from interest charge and discounts. This department is the revenue generating department. Credit Department basically has three segments. > Credit Marketing Department. > Credit Administration Department, > Trade Finance Services Department. Credit and advance department deals with extending loans (credit facility) to customers.
Credit DepartmentFollowing are the different types or facilitiesoffered by the bankFunded Credits Non-Funded Creditsa) Current Finance a) Letters of Creditb) Term Finance b) Guarantees
Accounting DepartmentAccount department is the most importantdepartment of the bank because it is concernedwith: > Revenue Income from sales of goods and services,minus the cost associated with things likereturned or undeliverable merchandise also called"Sales", "Net Sales", "Net Revenue", and just plain"Revenue". > Expenses All operating, overhead and productioncosts incurred in producing gross revenue.
Accounting Department> Assets: Assets include holdings of obvious market value (cash, real estate), harder-to-measure value (inventory, aging equipment), and other quantities (pre-paid expenses, goodwill) considered an asset by accounting conventions but possibly having no market value at all.> Liabilities An obligation to pay. These include accounts payables, and bond and bank debt.> Short Term Liabilities: Which are expected to be paid with in one year.> Long Term Liabilities: Which are expected to be paid in more than one year.
Accounting DepartmentIn this department all the voucher that areposted during one day are send to the headoffice account department next day. Thesevouchers are already posted to computer bythe concern department so computer alsosends are report to the accounts department.The account department has to tell that therequirements for cheques and vouchers arefully check if any kind of renovation orconstruction or rebuilding is done, all is paidfrom the accounts department. Likestationary charges medical charge etc.
Accounting DepartmentDaily Customer Movements List: All the changes that are made in accounts of customers are shown in the daily customer movement list. By using this list, people of accounts department can prepare the vouchers. Account Department performs following activity: > Voucher preparation > Preparation of Daily Weekly and monthly statements > Budgeting and fixed assets > Employers benefit > Expenditure approval
Accounting DepartmentThe bank does not make payment of a chequebearing a six month or older date. If anaccount is not operated in six month. It iscalled dormant account
Accounting DepartmentIn Account Department functions areperformed in three steps:> Data Controlling:i. Collection of data from a department ondaily basis.ii. Sorting of data and voucher with respectto General Ledger and customer activityiii. Further sorting of voucher product wise
Accounting DepartmentGeneral Ledger (GL) Activities: i. Sorting of different heads of accounts ii. Separation of DD from TT, PO etc, Income accounts, and expense accounts iii. Checking of voucher with generated reports iv. Counting of no of vouchers, preparation of summary and bunching of voucher v. Data retrieval vi. Rectification of Data
Accounting Department> Payments: This section is concerned with alltypes of payments i. Preparation of pay slips ii. Preparation of cash slip vouchers iii. Calculation of with holding tax onweekly basis iv. Few miscellaneous commitments
Accounting Department> Payroll Payroll is one of a series of accountingtransactions dealing with the process ofpaying employees for services rendered, afterprocessing of the various requirements forwithholding of money from the employee forpayment of payroll taxes, insurancepremiums, employee benefits, garnishmentsand other deductions
Accounting Department> Reporting System In reporting system different types ofreports are prepared, stored in folders ormailed to head office. There are six basicreports on daily basis.i. Daily Branch Position. (Treasury)ii. Daily Deposit and Advances positioniii. Daily management information system.iv. Daily foreign currency report.v. Daily fund rupee position.vi. Statement Affairs.
Accounting DepartmentTransaction used in Bank Alfalah’s accounting system: Customer presents a cheque: Customer A/C Dr Cash Cr (GL Activity)
Accounting DepartmentBalance Sheet: A Balance Sheet is a Statement which shows the Financial position of the Company at a particular date. With the help of Balance Sheet, management can assess the companys position in terms of solvency, its liquidity and its profitability. The Balance Sheet is followed by number of schedules separately detailing assets, liabilities and revenue. The Balance Sheet must necessarily refer to a particular date because the financial condition of the company will change from time to time depending on whether the Company is operated as a profit or loss, whether additional resources are brought
Accounting Departmentin by way of capital or loans, whether some assets arepurchased etc. It should, therefore, be useful tovisualize the Balance Sheet essentially in terms ofresources of the company. Shareholder or institutionsproviding funds to the company (either directly asinvestors or indirectly by providing credit) shall haveclaims against the assets and at appropriate thefunds originally made available by them to thecompany shall have to be repaid. Since all existingfunds invariably represent claim on assets, they aretechnically known as equities in the Company. Onepart of the Balance Sheet set out claims or equities,those relating to shareholders being classified ascapital and the other equities relating to outsidersbeing classified as liabilities.
Accounting Department Balance Sheet Sep 30, 2005• ASSETS• Cash and balances with treasury banks• Balances with other banks• Lendings to financial institutions• Investments• Advances• Other assets• Operating fixed assets• Deferred tax assets• LIABILITIES• Bills payable• Borrowings from financial institutions• Deposits and other accounts• Sub-ordinated loans• Liabilities against assets subject to finance lease - -• Other liabilities• Deferred tax liabilities• NET ASSETS•• REPRESENTED BY• Share capital• Reserves• Unappropriated profit• Surplus on revaluation of assets - net of deferred tax• Grand Total:
Accounting DepartmentDepreciation: Bank depreciates its own assets by state line methods Cost – Residual Value years of useful lifeBank uses IT Softwares in helping with the accounts system. > Accounts Maintenance > Inward Clearing > Cash Posting > Transferring Posting > Cash Supervision > Transfer Supervision > Quick Statement
Swot AnalysisStrengths: > Bank Alfalah has moved rapidly in expanding branches network and Deposit base, along with making profitable advances and increasing the rang of products and services. > As Bank Alfalah Limited pursuing the path of excellence, customer satisfaction remains its priority > Bank Alfalah developing and delivering the most innovative products, manage customer experience, deliver quality service that contribute brand strength, establishes a comparative advantage and enhances profitability > In comparison to other banks Alfalah providing high excellence service like home, car, agri-financing > Modernize Banking system with highly integrated information system record kept properly, online banking and integrated circuits. > Salaries are very reasonable, so the employs are not financially disturb and they devote their selves fully to their work.
Swot Analysis>Entertainment facilities are available for customers >Bank Alfalah is lending more money then any other bank in Pakistan by providing least interest rates Bank Alfalh is offering two types of banking II. Consumer banking III. Islamic banking >Alfalahs credit cards are globally accepted in more then 150 countries
Swot AnalysisWeakness: > The majority of people are not well aware about the products of Bank Alfalah their for it should advertise especially home, agri & car loans and credit cards. > Miss management of time is another draw back in Bank Alfalah branches, The bank official timing for closing is 6 pm but due to miss management employees leave there desk at 8 pm. > A behavior has been noted that Bank Alfalah tries to feel at ease with good looking rich and educated people and the uneducated and old customers feel a bit strange in the environment of the bank. > The number of counter must be increased because the customer have to wait at peak hour on the counter for deposit, withdraws and online.
Swot AnalysisOpportunities: > The policies of new government to uplift the economy and pursue financial sector reforms are expected to yield positive results in the banking industry of the country. Bank Alfalah should avail these promising opportunities. > Bank Alfalah is surrounding by many competitors it has an opportunity to aggressive marketing and increase its business. > As Government is taking bold steps in promoting IT in Pakistan, Bank Alfalah should be well aware of this opportunity as it will help in the near future.
Swot AnalysisThreats: > Bank Alfalah has many competitors who are continuously increasing their products and marketing aggressively, it may cause its customers to shift to the other competitors. > The privatization of other banks is a threat for Bank Alfalah. Due to the privatization of different banks the competitions has increasing a lot.
Recommendation:> The Bank is now over staff the building under operation isin adequate for such a large staff as new branches openingin different part of city should be availed.> Under no circumstances cheque book should be given if theaccount formalities should be complete.> There are two officer involved in Cash Deposit processwhich is time consuming. Cashier should be given certainpowers to receive cash of US$ and DM to provide promptservices.> Cheque which are drawn on Bank Alfalah Branch andreturned unclear in clearing are not reflected in thestatement of account of the customer. These cheques must bereflected in the account so that credibility of the customersmay be assessed.> The bank should try to give more loans to the smallborrowers as the past history shows that most of the loansgiven to corporate borrowers have converted into bad debt.
Observation & Conclusion: I observed the Bank Alfalah a financially sound bank, itsprofits are increasing year by year, its staff is very goodsincere with the bank. Bank Alfalah under the leader ship ofSheikh Hammad Bin Mubarak Al Nahyan has madesignificant in building and both the corporate and retailbanking sectors in pakistan. The bank attained number twoposition in terms of its balance sheet size amongst theprivate bank in Pakistan in 2000. Bank Alfalah use specialization and service excellence asthe corner stone of its strategy the people at bank realize thatinnovation, creativity, reliability, customized, service andtheir execution are the key ingredients are the keyingredients of their future
Observation & Conclusion: Revenue from these activates have started yieldingdividends they expect significant growth. They areaware that they have stepped into 21 Century andthey must meet its challenges by acquiring the highestlevel of technology. They say that they will continue toinvest in the modern tools and substantial allocationto resources will be made to achieve this objectiveduring the current year. Online banking has beenstarted and the introduction of ATM at strategiclocation have been of great help since June 2001.