1. Accounting & Finance for Bankers1
JAIIB-Module D
Accounting & Finance for Bankers
Prof.S.D.Bargir

2. 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

3. 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

4. SHARE CAPITAL
EQUITY
PREFERENCE
CUMULATIVE
REDEEMABLE
PARTICIPATING

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

6. 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

7. 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

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

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

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

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

12. 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

13. Schedule VI to Companies Act Part I- form of Balance sheet
Share capital
Reserves & surplus
Secured Loans
Unsecured Loans
Current Liabilities & Provisions
-current Liabilities
-Provisions
-other provisions
Fixed Assets
Investments
Current Assets, Loans & Advances
Current assets
Loans & advances
Miscellaneous Expenditure ( to the extent not w/o)
Profit & Loss Account

14. Contingent Liabilities
Do not form part of the Balance sheet. Shown by way of foot note
-Claims against the company not acknowledged as debts.
-Uncalled liability on partly paid-up shares.
-Arrears of cumulative dividends on Pref. Capital
-Estimated amount of contracts remaining to be executed on capital account and not provided for
-Other money for which the company is contingently liable

15. Profit & Loss Account Profit & Loss Account
-Shows current years expenses & Income
Profit & Loss Appropriation A/c
shows appropriation profit by way of dividend and transfer to various reserves
Shows excess or short provision in respect of income tax for earlier years

16. 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

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

18. 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.

19. 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

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

21. ASSET CLASSIFICATION ETC
Performing and
non performing ( remain out of order)
Income Recognition
Performing-accrual basis
Non performing-cash basis
Std-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. Q.Choose the item which is not part of “ other Income” in case of banking companies.
Commission , Exchange and brokerage
Income on investments by way of interest and dividends
Income earned by way of dividends etc. from subsidiaries, joint ventures abroad/ in India
Profit on sale of investments less loss on sale of investments
Q.2: Relate the following items with the various schedules of profit and Loss account (form B)Interest Earned, Interest expended, operating expenses, other Income
13,14,15,16
13,15,16,14
13,15,14,16
13,14,16,15

23. Q. Which of the following are true-----
The amount of bad debts and provision for bad debts is charged under the heading “Provisions and contingencies” in the Profit and Loss Account . In the Balance sheet , the advances are shown after deducting both bad debts and provisions for bad debts
If adjustment has to be made after preparation of trial balance in respect of rebate on bills discounted in respect of unearned discount relating to the next period, the amount of such rebate will be deducted from the total discount in the profit and Loss account and will also appear as a liability in the balance sheet.
Q choose the sentence which is not relating to fixed asset of a banking company-----
Premises wholly owned by the banking company for the purpose of banking business
Other fixed Assets ( including furniture and Fixtures) , Motor Vehicles
As regards fixed assets, where sums have been written off on revaluation of assets , every balance sheet after the first balance sheet subsequent to the revaluation should show the revised figures for a period of five years with the date and amount of revision made.
Non banking assets acquired in satisfaction of claims would include immovable properties /tangible assets acquired in satisfaction of claims.

24. Q: As per section 31 and 32 of the Banking Regulation Act,1949, three copies of Balance sheet and Profit & Loss Account prepared u/s 29 and auditors Report u/s 30 must be submitted to RBI within-----
One month from the end of the period to which they refer
Six month from the end of the period to which they refer
Three month from the end of the period to which they refer
Nine month from the end of the period to which they refer

25. a. Depreciation is shown on the debit side of P & L A/c
Q. When Depreciation A/c is debited and the Provision for Depreciation A/c is credited,
a. Depreciation is shown on the debit side of P & L A/c
b. Asset appears at its original value in the details column of the Balance Sheet
c. Accumulated Provision for depreciation is deducted from the value of the asset.
d. The net value of the Asset is shown in the amount column of the balance sheet.
e. All of the above
f. Asset is shown at its original cost in the Balance Sheet
Q.: A company purchased a second hand motor car for Rs. 80,000 and spent Rs. 35,000 on its overhauling. Depreciation is written 10% on the original cost. After two years the car was found unsuitable and sold for Rs. 65,000. What is the amount of loss on sale of car.
Rs. 15,000
Rs. 27,000
Profit Rs. 1000
Rs. 50,000

26. First year Depreciation Rs. 17,739.60
The amount written off as depreciation is invested in outside securities to yield interest, and the interest earned thereon is reinvested.
For example if the cost of machine is Rs. 1,00,000. It is expected to have an economic life
of 5 years and the investment yields 6% p.a.
(A reference to the Sinking Fund Table the factor applicable for 5 years at 6% rate is The annual depreciation would be Rs. 1,00,000 x or Rs. 17, ) This amount will become Rs. 1,00,000 in 5 6% p.a. as under:
First year Depreciation Rs. 17,739.60
Interest at the end of First year on 17, Rs. 1,064.37
Total investment at the beginning of 2nd year Rs.18,803.97
Second year depreciation Rs. 17,739.60
Interest on 18, Rs. 1,128.24
Total investment at the end of 2nd year Rs. 37,671.81
Third year depreciation Rs
Interest on 37, Rs. 2,260.30
Total investment at the end of 3rd year Rs. 57,671.71
Fourth year depreciation Rs. 17,739.60
Interest on 57, Rs. 3,460.31
Total investment at the end of 4th year Rs. 78,871.62
Fifth year depreciation Rs. 17,739.60
Interest on 78, Rs. 4,732.30
Total investment at the end of 5th year Rs

27. The annual depreciation is transferred to Sinking Fund A/c every year:
Debit: Depreciation A/c Credit: Sinking Fund A/c (To the extent of the amount of depreciation is written off, amount is invested in outside securities at the stipulated rate of interest and kept under Sinking Fund Investment A/c.)
Debit: Sinking Fund Investment A/c Credit: Bank A/c
Interest realized from the investments are again utilized and is invested in the Securities and kept under Sinking Fund Investment A/c.
Debit: Bank A/c Credit: Interest on Sinking Fund Investment A/c
Debit: Interest on Sinking Fund Investment A/c Credit: Sinking Fund A/c
In the final year-no fresh investment is made. Only the following entries are made:
Debit: Depreciation A/c Credit: Sinking Fund A/c
For realization of investments
Debit: Bank A/c Credit: Sinking Fund Investment A/c
If the amount realized is the same as book value of the Sinking Fund Investment, this account is automatically closed.
If the amount realized is more or less, there is a profit or loss on sale of investments, which is transferred to Sinking Fund A/c.
9. The Asset account is closed by:
Debit: Sinking Fund A/c Credit: Asset A/c
10. The Sinking fund account is closed by transferring any balance in it to the
P & L A/c.

28. Partnership Accounts Definition Methods of maintaining capital a/cs
Fixed capital method
Fluctuating capital method
Partners Loan A/c
- 6%
Interest on Capital, drawings
Based on provision in the agreement

29. Goodwill & methods of valuation
Average Profit Method
Super Profit Method
Capitalisation of Profit Method
Average profit multiplied by an agreed multiplier
Super profit multiplied by an agreed multiplier
Super Profit =Actual profit less Normal Profit
Normal profit capitalized by applying normal rate of return

30. Goodwill- Capitalisation of profit Method-Example
Capital = Rs
Actual normal profit (NP)= Rs
Normal rate of Return(NRR) = 10%
Capitalisation of Profit= NP /NRR
= (120000/10) *100 = Rs
Goodwill = less =Rs

31. Admission of a partner Sacrificing ratio= Old ratio less new ratio
Treatment of goodwill
Revaluation of assets & Liabilities
Capital to be brought in by new partner
Adjustment-accumulated losses
Adjustment- Reserves
Adjustment- Capital Accounts of partners

32. Retirement or Death of a partner
Goodwill
Revaluation of Assets & Liabilities
New Profit sharing ratio of continuing partner
Share of profit till retirement/ death
Treatment of accumulated reserve/losses
Capital account/current account
Loan account

33. BALANCE SHEET EQUATION
ASSETS = CAPITAL + LIABILITIES
LIABILITIES = ASSETS - CAPITAL
CAPITAL = ASSETS - LIABLITIES

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

35. 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

36. Q.Choose the incorrect statement-----
A firm can be formed with maximum number of 10 persons for carrying banking business
A firm can be formed with maximum number of 20 persons for carrying other business
A firm can be formed with maximum number of 50 persons for carrying professional services
A private company can be formed with a maximum number of 50 persons
A public company can be formed with a maximum number of 1000 persons
Issued capital is that capital which is issued to the public. It cannot exceed authorised capital.
Subscribed capital is that part of the issued capital which has been actually paid by the shareholders.
Called up capital is that part of the subscribed capital which has been called from the subscribers.

37. Q: Analog computers are mostly used for----
Running accounting software
Running simulation of guided missile system
Using in scientific and mechanical fields*
All of these
Q:Data means----
Facts
Observations
Assumptions
Occurrences
None of the above
Q: Compilation of related data records maintained in some prearranged order is known as-----
Data base
Data file
Data mart
Data group
None of these