Professional Documents
Culture Documents
Banking
Balance Sheet
Of
A bank
What is Balance Sheet
A snap Shot.
A photograph of financial worth of
the concern at certain time.
Result Sheet of a concern base on
Character
Capacity
Capital
Conditions
Definition
A Statement showing the financial
position of a bank on a
particular date by means of debit
and credit balance outstanding
after all the revenue and
expenses terms have been
transferred to the trading
account and the profit and loss
account
How to Prepare
It is prepared in two separate
section.
One section is the liabilities
of the concern are recorded
Second section is for assets
of the bank
Importance
It shows its net worth as on a
particular date.
Profitability of a bank is known by
studying the trends of profits over a
period of years.
It shows the policy of the bank of
extending of credit to the customers,
The profit retained by the bank are
also shown in the balance sheet.
The balance sheet indicates the total
long term loans and debentures
liabilities and the assets charges as
securities for such borrowing.
In short the study of the balance sheet
reveals whether the business of the
bank is healthy and g rowing and
has a promising future or not
Balance sheet of the Bank
It reveals it financial position
On
The Shareholders, The Lenders and The
Depositors analyses the bank
Character-Capacity
Capital-Conditions
A Good Bank
That tries to give maximum profit to the
shareholders.
That tries to reach the maximum level of
profit sharing for their depositors.
That lend rationally and efficiently
keeping the economic viability and
importance.
That give security to their depositors.
Assets & Liabilities in
Bank’s Balance sheet
ASSETS
Cash included cash in hand and with the
central bank of the country including
foreign currencies and balances with
other banks., Cash is kept in hand by the
banks to meet the demand and
obligation of the customer
Cash is the primary reserve or fist line of
defense against depositors
Money at call & at short notice.
The banks advance short term loans to their
customers.
These loans are advanced on a normal interest
with the promise that these will be returned to
the bank on short notice
The amount advanced for short period is called
money at call and at short notice and is
regarded
The second line of defense
against the deposits
Investment
The bank invest funds in the securities of the
federal and Provincial Government.
The bank purchase fully paid up ordinary
shares.
Participation term certificate or bonds, gold or
other profitable commodities or instrument for
short and long term investment
The investment in these items
are quite liquid and profit yielding
Advances
The advances includes loans cash
credits, overdrafts, bills discounted
within country or cross border.
Advances are the larges items on the
assets side of the commercial bank.
These advances have high yield but
low liquidity
Bills Receivables Being the bills for
Collection as per contract
Bills for collection are those bills which are sent
by the people to the banks for collection.
These bills are shown on the assets side as well
as liabilities section
These are assets of the bank because the
amount has to be receive from the people
concerned at the maturity of the bills
They are liabilities because the collection is to
be paid to the customer
Basic Liabilities for acceptance endorsement and
other obligation as per contracts
Capital
The bank raises capital from its
shareholder and the sale of ordinary
shares.
The amount of authorized capital issued
capital and subscribed capital from the
capital of the bank
Reserve funds and their reserves
This is the amount which is accumulated
over the years out of net undistributed
profit.
In Pakistan the banks are required to
transfer 20% of their net profit to Reserve
Funds until it is equal; to the paid up
capital
This fund strengthens the financial
soundness of the bank
Borrowing from other Bank
This is the amount which the bank borrows
from the central bank of the country and from
outside the country.
Loans may be obtained against securities or
merely on person security.
Amount channelize to customer on Parking
facility.
Under Syndicate financing with other banks.
Bill Payable
It is the amount which the bank
recover on the basis of bills of
exchange from other branches or
from the head office.
So long as these are not paid they are
shown on the liability sided of the
balance sheet.
Bills on Collection &
Bill Receivable
Bills sent for collection are to be
paid on maturity to the customer.
The amount thus taken as
liabilities of the bank.
Cheques under collection locally
or foreign fall under same
categories of liability.
Other Liabilities
Under this heading branch adjustment staff
welfare funds and other liabilities are shown
Current Assets
Cash and cash equivalents
Marketable Securities
Accounts receivable
Inventories
Prepaid Expenses