ACCOUNTING & FINANCE FOR

BANKERS-JAIIB-MODULE D

PRESENTATION BY
S.D.BARGIR
Joint Director-IIBF

Topics

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

Partnership Accounts

Introduction
Definition
Partnership deed

In the absence of partnership deed/if

deed is silent

Profit sharing ratio Equal

No interest on capital
No interest on drawings
interest@6% on loan given by partner
No salary /no commission/ no remuneration
Capital accounts under fluctuating capital
method

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

GOODWILL
Its 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

Methods of goodwill
Average profit Super profit
(AP)
(SP)
AP x Multiplier SP x multiplier
SP = AP less NP
NP=normal profit

Multiplier is
given

Multiplier is
given

Capitalization of
profit
(Capitalised
value) less
Actual Capital

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
When goodwill is raised and written off
Debit goodwill and credit old partners capital a/c
(old ratio)
Debit Continuing partners capital a/c & credit
goodwill (new ratio)

 ADMISSION

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
revaluation of assets/ liabilities, goodwill,
capital adjustments, balance of reserves, past
losses

Joint life policy

Premium treated as Premium treated as Premium treated as
expenses
asset
reserves
At the end of each
Each year difference
year, premium w/o to P between surrender
& L A/c
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

receipt of policy amt.

receipt of policy amt.

If amount is > SV, the

excess is credited to

Policy amount credited

partners

to partners

Types of partners

Active
Sleeping
Quasi
nominal

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

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

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

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.

PROFIT & LOSS ACCOUNTFORM B

Income
Interest Earned
Other Income
Expenditure
Interest Expended
Operating Expenses
Provision for contingencies
Profit /Loss

Appropriations
Transfer to Reserves
Proposed dividend
Balance carried to Balance
sheet

Schedule.13
Schedule.14
Schedule.15
Schedule.16

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

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

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

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

ASSET CLASSIFICATION ETC

Asset Classification
Performing and
non performing ( remain out of order)

Income Recognition
Performing-accrual basis
Non performing-cash basis

Asset Classification
Std-0.40% (revised from 0.25%)
Sub-Std.<18 months-10%
Doubtful>18 months-usl-100%-secured.3yrs-50%,>1&<330%-upto 1year-20%
Loss assets-100%

SLR & NON SLR DEPOSITS

Held to maturity Available for
sale
Investment should
not exceed 25% of
total investment

Freedom available

-no marked to market. -Marked to market

Profit on sale treated as -profit on sale of
cap. Reserve
investment.taken to
P&L a/c

Held for trading

Freedom available

Marked to market

To be sold within
90 days

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

Types of companies
On the basis of
incorporation

On the basis of
ownership

On the basis of
liability

Chartered
company

Private company Co.limited

shares

Statutory
company

Public company Co. Ltd. by

guarantee

Registered
company

Government
company

Foreign
company

Holding
company

Co. with
unlimited
liability

by

SHARE CAPITAL
EQUITY
PREFERENCE
CUMULATIVE
REDEEMABLE
PARTICIPATING

SHARE CAPITAL

AUTHORISED CAPITAL
ISSUED CAPITAL
SUBSCRIBED CAPITAL
CALLED CAPITAL
PAID UP CAPITAL

ISSUE OF SHARE AT PAR

-BANK

credited

-SHARE CAPITAL

Debited
Debited
-

Over subscription
-share application
-share capital
-bank (refund)
-share allotment

Debited
-

Credited
Credited
Credited

- SHARE APPLICATION
-SHARE APPLICATION

Credited

SHARE ALLOTMENT/SHARE CALL

Share allotment a/c
Share capital a/c

Debited
-

Credited

Bank a/c

Debited
-

Credited

Debited
-

Credited

Debited
-

Credited

Debited
-

Credited

Credited

Share allotment a/c

Share call a/c
Share capital a/c
Bank a/c
Share call a/c
Calls in arrears a/c
Share allotment a/c
Share call a/c

Issue of shares at premium

Share application/
allotment a/c
Share capital A/c
Share premium A/c

Debited

Credited
Credited

Issue of shares at discount

Share allotment A/c
Discount on issue of
shares A/c
Share capital A/c

Debited
Debited

Credited

Forfeiture of shares
Share capital A/c
Call in arrears A/c
Forfeited shares A/c

Debited
-

Credited
Credited

Re-issue of shares
Bank A/c
Forfeited shares A/c
Share capital A/c
Capital reserve A/c

Debited
Debited
-

Credited
Credited

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
Bonus to shareholders A/c
Equity share capital A/c

Debited
Debited
Debited
Debited
Debited
Debited

credited
credited

Balance sheet equation

LIABILITIES

ASSETS

Capital

300.00

Fixed assets 700.00

Reserves

200.00

Current
assets

300.00

Term Loans

300.00

Current
Liabilities
Total

300.00
Total

1000.00

1000.00

Balance Sheet Equation

Assets

Liabilities

Assets

Liabilities (+)

Capital

Liabilities

Assets (-)

Capital

Capital

Assets (-)

Liabilities

BALANCE SHEET EQUATION

Assets = Liabilities
Assets = Capital + Liabilities
Assets =Net worth + Liabilities
Net worth = Capital + Reserves& Surplus
Net worth = Assets Less Liabilities

1. The Assets of a business are Rs.500000 and its capital is

Rs.115000. Its liabilities on that date would be-----a) Rs.615000
b) Rs.385000
c) Rs.500000
d) Rs. 115000
2. A had a capital of Rs.750000. He has also purchased goods
of Rs.150000 on credit from Mr. Saha. The value of total
assets of the entity is----a) Rs.750000
b) Rs.900000
c) Rs.600000
d) Rs.1050000

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

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

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

Contact details
Website: www.iibf.org.in

Email: sudaaba@iibf.org.in
Phone. 022-22183898
022-22187003/4/5