1. ACCOUNTING & FINANCE FOR BANKERS-JAIIB-MODULE D
PRESENTATION BY
S.D.BARGIR
Joint Director-IIBF

2. Topics Partnership accounts Final accounts of banking companies
Company accounts
Balance sheet equation
Accounting in a Computerized environment

3. Partnership Accounts
Introduction
Definition
Partnership deed

4. In the absence of partnership deed/if deed is silent
Profit sharing ratio –Equal
No interest on capital
No interest on drawings
on loan given by partner
No salary /no commission/ no remuneration
Capital accounts under fluctuating capital method

5. Methods of capital accounts
Fixed
Capital account-transactions relating to capital
Current account
Other transactions such as Interest, profit, goodwill, past profits/losses & adjustments
Fluctuating
One account- all transactions

6. GOODWILL It’s reputation, super profit earning capacity of a firm
Necessity
change in profit sharing ratio
Admission, retirement, death
Sale of business
Methods:
Average profit
Super profit
capitalization of profit

7. Methods of goodwill Average profit (AP) Super profit (SP)
Capitalization of profit
AP x Multiplier
SP x multiplier
SP = AP less NP
NP=normal profit
(Capitalised value) less Actual Capital
Multiplier is given

8. GOODWILL IMPORTANT ENTRIES
ADMISSION
When goodwill is raised and written off
Debit goodwill and credit old partners capital a/c (old ratio)
Debit All partners capital a/c & credit goodwill (new ratio)
RETIREMENT/DEATH
Debit Continuing partners capital a/c & credit goodwill (new ratio)

9. … ADMISSION RETIREMENT
revaluation of assets/ liabilities, goodwill, capital adjustments, balance of reserves, past losses
RETIREMENT
As per Act of 1932, retirement by consent, partnership deed provision, at will by giving proper notice

10. Joint life policy Premium treated as expenses Premium treated as asset
Premium treated as reserves
At the end of each year, premium w/o to P & L A/c
Each year difference between surrender value and Book value is w/o to P & L A/c
difference between SV and BV is w/o to Jt. Policy Reserve A/c
receipt of policy amt.
Amount received is credited to partners
If amount is > SV, the excess is credited to partners
Policy amount credited to partners

11. Types of partners
Active
Sleeping
Quasi
nominal

12. FINAL ACCOUNTS OF BANKING COMPANIES
Definition
Requirements –Accounts & audit
Third Schedule annexed to BRA
Form A- Balance sheet
Form B- Profit & Loss Account
Audit
Submission of accounts- RBI- within 3 months
Publication of accounts- within 6 months
Auditor-prior approval of RBI for appt/removal

13. Balance sheet-Form A Capital & Liabilities Assets 1.Capital
6.Cash & Bank Bal. RBI
2. Reserves & surplus
7.Balances with Banks & Money at call and SN
3.Deposits
8.Investments
4.Borrowings
9Advances
5 Other Liabilities & Provisions
10.Fixed Assets
11.Other Assets

14. Demand deposits Credit balances in OD and CC Deposits payable at call
Overdue deposits
In-operative current accounts
Matured time deposits
Matured cash certificates
Matured certificate of deposits

15. Contingent liabilities
Schedule-12
Claims against bank not acknowledged as debts
Liability for partly paid shares
Liability on account of outstanding forward exchange contracts
Acceptances ,endorsement & other obligations
Other items for which bank is contingently liable.

16. PROFIT & LOSS ACCOUNT-FORM B
Income
Interest Earned
Other Income
Schedule.13
Schedule.14
Expenditure
Interest Expended
Operating Expenses
Provision for contingencies
Schedule.15
Schedule.16
Profit /Loss
Appropriations
Transfer to Reserves
Proposed dividend
Balance carried to Balance sheet

17. NOTES TO ACCOUNTS Significant Accounting Policies Schedule.17
Notes forming part of Accounts
Schedule.18

18. Other Income Profit on exchange transactions
Profit on sale of investments
Profit on revaluation of investments
Profit on sale of fixed assets
Letting of locker (income from locker charges )
Misc. income -Godown rent

19. Ponder over these points
Govt. securities shown at book value and diff. between MV and BV is given in the notes
If some fixed assets are w/o on revaluation of assets/reduction of capital every B/S after wards should. show the revised figure for next 5 yrs. With the date & amt. revised
Other fixed assets includes vehicles, furniture and fixtures. Lockers and safe deposit vaults are included in furniture

20. Ponder over these points
20% to reserve fund before declaring dividend
Gold is treated as investment
Silver is treated as other assets
Income from performing assets is recognized on accrual basis while in r/o non-performing assets it is on cash basis
In r/o NPA, if income is already recognized, then make provision

21. ASSET CLASSIFICATION ETC
Performing and
non performing ( remain out of order)
Income Recognition
Performing-accrual basis
Non performing-cash basis
Std-0.40% (revised from 0.25%)
Sub-Std.<18 months-10%
Doubtful>18 months-usl-100%-secured.3yrs-50%,>1&<3-30%-upto 1year-20%
Loss assets-100%

22. SLR & NON SLR DEPOSITS Held to maturity Available for sale
Held for trading
Investment should not exceed 25% of total investment
Freedom available
-no marked to market. Profit on sale treated as cap. Reserve
-Marked to market
-profit on sale of investment.taken to P&L a/c
Marked to market
To be sold within 90 days

23. COMPANY ACCOUNTS Features of a Joint stock Company
Incorporated association
Artificial person
Perpetual succession
Common seal
Limited liability
Separation of management from ownership
Transferability of shares
Separate legal status
Large membership

24. Types of companies On the basis of incorporation
On the basis of ownership
On the basis of liability
Chartered company
Private company
Co.limited by shares
Statutory company
Public company
Co. Ltd. by guarantee
Registered company
Government company
Co. with unlimited liability
Foreign company
Holding company

25. SHARE CAPITAL
EQUITY
PREFERENCE
CUMULATIVE
REDEEMABLE
PARTICIPATING

26. SHARE CAPITAL AUTHORISED CAPITAL ISSUED CAPITAL SUBSCRIBED CAPITAL
CALLED CAPITAL
PAID UP CAPITAL

27. ISSUE OF SHARE AT PAR Over subscription -share application
-BANK
- SHARE APPLICATION
Debited -
credited
SHARE APPLICATION
SHARE CAPITAL
Credited
Over subscription
-share application
-share capital
-bank (refund)
-share allotment

28. SHARE ALLOTMENT/SHARE CALL
Share allotment a/c
Share capital a/c
Debited -
Credited
Bank a/c
Share call a/c
Calls in arrears a/c

29. Issue of shares at premium
Share application/
allotment a/c
Share capital A/c
Share premium A/c
Debited -
Credited

30. Issue of shares at discount
Share allotment A/c
Discount on issue of shares A/c
Share capital A/c
Debited -
Credited

31. Forfeiture of shares Share capital A/c Call in arrears A/c
Forfeited shares A/c
Debited -
Credited

32. Re-issue of shares Bank A/c Forfeited shares A/c Share capital A/c
Capital reserve A/c
Debited -
Credited

33. Issue of Bonus shares Cap. Red. Reserve A/c Share premium A/c
Capital reserve A/c
Gen Reserve A/c
Profit & Loss A/c
Bonus to shareholders A/c
Debited -
credited
Equity share capital A/c

34. Balance sheet equation
LIABILITIES
ASSETS
Capital
300.00
Fixed assets
700.00
Reserves
200.00
Current assets
Term Loans
Current Liabilities
Total

35. Balance Sheet Equation
Assets =
Liabilities
Liabilities (+)
Capital
Assets (-)

36. BALANCE SHEET EQUATION
Assets = Liabilities
Assets = Capital + Liabilities
Assets =Net worth + Liabilities
Net worth = Capital + Reserves& Surplus
Net worth = Assets Less Liabilities

37. 1. The Assets of a business are Rs. 500000 and its capital is Rs
1. The Assets of a business are Rs and its capital is Rs Its liabilities on that date would be------ Rs Rs Rs Rs
2. A had a capital of Rs He has also purchased goods of Rs on credit from Mr. Saha. The value of total assets of the entity is----- Rs Rs Rs Rs

38. B/s Equation Examples
(1) If the net worth of the business is Rs.1100,fixed assets are Rs. 600, current assets Rs.400, investments Rs.300, current liabilities Rs. Nil, what is the amount of claim to outsiders?
Rs. 1300l
Rs. 500
Rs.200*
Rs. Nil
(2) Identify the wrong pair
Outstanding expenses - Personal Account account*
Profit and Loss Account (Dr. balance) – Application of funds
Net worth less reserves & surplus - Balance in P & L Account*
Balance sheet - Financial position

39. Computerized accounting
Computer language: cobol, foxpro,unix …etc
Analog computers : scientific and mech. Field
Digital computers: computerized accounting
Data : fact
Record : group of data
Data file: data records

40. Computerized accounting
Computer language- Cobol, FoxPro, Unix …..
Analog computers- scientific/ mechanical field
Digital computers- computerized accounting
Data- fact
Record- group of data
File- data record

41. Contact details
Website:
Phone
/4/5