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Final accounts of Banking Company

♦Introduction
A banking company means and includes any company which carries on the business or
which transacts business of banking in India. A banking company is generally
governed by the provisions of the Companies Act, 2013 and specifically by the
Banking Regulation Act. The Banking Regulation Act of 1949 came into force on
16th March, 1949 as a result of the long –felt need to regulate the banking business in
India and protect the interests of number of depositors.

♦Functions of a Bank
 Banking has been defined by Section 5 of the Banking Regulation Act and means:
accepting of deposits of money from the public, for purpose of lending or investment
and the deposit are repayable on demand or otherwise by cheque, draft, order etc.

♦Requirements of Banking Companies as to Accounts and Audit


Preparation of financial Statements and Accounting Data -Companies Act 2013, Section 29

 Form A- Balance sheet


 Form B- Profit & Loss Account
 The Govt. has notified that account of the banking companies shall be closed on
31 March every year as against 31st December earlier.
st

Signatures – Financial statements of banking companies incorporated in India should be signed


by the manager or principal officer of the banking company- Companies Act 2013, Section 29

Audit (Section 30):An audit is an independent examination of financial information of any


entity, whether profit oriented or not, irrespective of its size or legal form

Submission of Accounts (Section 31 and 32): Three copies of the balance sheet and profit and
loss account prepared under Section 29 together with auditor’s report under section 30 must be
submitted to the RBI within 3 months from the end of the period to which they refer.
However, it can be extended up to a further period of 3 months by RBI (Section 31).

Section 32 of the Act requires a banking company (but not other types of banks)to furnish 3
copies of its annual accounts and auditor’s report there on the Registrar of Companies at the
same time when it furnished these documents to the RBI.
Publication of Accounts: Rule 15 of the Banking Regulating (Companies) Rules, 1949.
Publication of accounts- within 6 months

♦Features of Accounting Systems of Banks


 Bankers’ Book: According to Section 2 (3) of the Bankers’ Books Evidence Act,
‘Bankers Books’ included ledgers, day book, cash book, account books and all other
books used in the ordinary business of a bank. Generally the following books are
maintained by bank to keep up to date records of its customers.
 Cash Book: All cash receipt and payments are recorded in the receiving cashier’s cash
book and paying cashier’s cash book.
 Ledger Book: Maintained Current Account Ledger, FD accounts Ledger, RD accounts
Ledger, Loan Ledger etc
 Other Book: Clearing Register, Securities Register, Draft Register, Bills for collection
Register, Safe deposit vault Register, Dishonored cheques Register

♦Balance sheet-Form A
 Schedule 1: Capital
 Schedule 2: Reserves & surplus
 Schedule 3: Deposits
 Schedule 4: Borrowings
 Schedule 5: Other Liabilities & Provisions
 Schedule 6: Cash & Bank Bal. RBI
 Schedule 7: Balances with Banks & Money at call and Short Notice
 Schedule 8: Investments
 Schedule 9: Advances
 Schedule 10: Fixed Assets
 Schedule 11: Other Assets
 Schedule 12: Contingent Liabilities
 (i) Claims against bank not acknowledged as debts
 (ii) Liability for partly paid shares
 (iii) Liability on account of outstanding forward exchange contracts
 (iv) Acceptances ,endorsement & other obligations
 (v) Other items for which bank is contingently liable.
♦Profit & loss account-form B
Income
Schedule.13
Interest Earned
Schedule.14
Other Income

Expenditure
Interest Expended Schedule.15
Operating Expenses Schedule.16
Provision for contingencies

Profit /Loss

Appropriations
Transfer to Reserves
Proposed dividend
Balance carried to Balance sheet

Significant Accounting Policies Schedule.17

Notes forming part of Accounts Schedule.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 )
 income -Godown rent

Important points

 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% 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 and Other


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.-Unsecured – 25%, Secured – 15%
 Doubtful – Unsecured – 100%, Secured – upto 1year-25%, 1 to 3yrs-40%, more than 3
years – 100%
 Loss assets-100%

♦SLR & Non SLR Deposit


Held to maturity Available for sale Held for trading

Investment should not


exceed 25% of total Freedom available Freedom available
investment

-Marked to market
-no marked to market. Marked to market
-profit on sale of
Profit on sale treated as To be sold within 90
investment. taken to P&L
cap. Reserve days
a/c

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