ACCOUNTING OF

NATIONALISED
BANKING COMPANIES –
CASE STUDY

1
 PROJECT REPORT ON
ACCOUNTING OF NATIONALISED BANKING COMPANIES –
CASE STUDY

MASTER OF COMMERCE
M.COM (ACCOUNTANCY)
SEMISTER III

SUBMITTED BY

JAGRUTI JULALSING RATHOD

ROLL NO. 28

ADARSH COLLEGE OF ARTS & COMMERCE

KULGAON-BADLAPUR

SUMITTED TO

UNIVERSITY OF MUMBAI

(2018-19)

2
 ADARSH VIDYA PRASARAK SANSTHA, S

ADARSH COLLEGE OF ARTS & COMMERCE

KULAGAON –BADLAPUR

2017-2018

CERTIFICATE
THIS IS TO CERTIFY THAT MS. JAGRUTI JULALSING RATHOD OF
MASTER OF COMMERCE (ACCOUNTANCY), SEMESTER–III FOR THE
ACADEMIC YEAR 2018-201 HAS COMPLETED THE PROJECT
ONACCOUNTING OF NATIONALISED BANKING COMPANIES UNDER
THE GUIDANCE OFPROF. SURRAIYA SHAIKH.

------------------------------ ------------------------------
EXTERNAL EXAMINER INTERNAL EXAMINER

-------------------------------------- ----------------------------------------

COURSE CO-ORDINATOR PRINCIPAL

(DR. SATISH R. PHARATE) DR.VAIDEHI DAPTARDAR

DATE: ----------------

3
 DECLARATION

I am Miss. Jagruti Julalsing Rathod student of M.COM SEM III

(ACCOUNTANCY) - 2018-19 of ADARSH COLLEGE OF ARTS &
COMMERCE, BADLAPUR 421503 do hereby declare that I have completed
project work titled Accounting of Nationalised Banking Companies-Case
Study.

The information contained in this project work is true and original the best of my
knowledge and belief.

--------------------------------------

(Signature of student)

Jagruti Julalsing Rathod

4
 ACKNOWLEDGEMENT

Finally, I would like to thanks MUMBAI UNIVERSITY who have introduced this
course and in which I have been assigned for project work. This has given me an
opportunity to present my ideas in an innovative manner. I would like to thank our
college and teachers. I would express my sincere thanks to my guide Prof.
Surraiya Shaikh madam for encouraging and guiding me throughout my project,
I would hereby thanks to all the teachers, who continued to give their feedback till
the cooperation received from everyone at Library for helping me in searching for
books. Finally I acknowledge that this project would never have been possible
without the constant support, blessing and encouragement of my parents, my
friends, who helped me at the last moment of my project for taking out the prints.

------------------------------------------

Jagruti Julalsing Rathod

5
 INDEX

SR.NO. CHAPTER NAME PAGE NO.

1 Introduction 1

2 Accounting of banking 3
companies
3 Objectives and Functions 4

4 Fundamental Assumptions 5

5 Users and Needs 6

6 Preparations and Presentation 10

7 Accounting Formats 11

8 Case Study on SBI 18

9 Conclusion 26

10 Suggestions and 27
Recommendation
11 Bibliography 28

6
 INTRODUCTION

Banking companies

Banking is a service industry. Banks provide financial services to the people, business
and industries. Banking has become a part and parcel of our day to day life. Indian Banking
System, over the years has gone through various phases after establishment of RBI in 1935.
However, banking companies in India are governed by the Banking Regulation Act,
1949.basically, banks are register as companies.

A banking company means and includes any company which carries on business or which
transacts banking business in India. A banking businesses generally governed by the provisions of the
Companies Act 1956 and specifically by the Banking Regulation Act.

Most of the world’s work is done through organizations-groups of people who work
together to accomplish one or more objectives. In doing its work, an organization uses resources-
labor, materials, various services, buildings, and equipment. These resources need to be nuanced,
or paid for. To work effectively, the people in organization need information about the amounts
of these resources, the mean of financing they and the results achieved through using them.
Parties outside the organization need similar information to make judgments about the
organization. Accounting is a system that provides such information. Organizations can be
classified broadly as either for-profit or non-profit. As these names suggest, a dominant purpose
of organizations in the former category is to earn a profit, whereas organizations in the latter
category have other objectives, such as governing, providing social services, and providing
education. Accounting is basically similar in both types of organizations.

Role of Banking Companies

There are 297 scheduled commercial banks (including approximately 40 foreign banks
and 196 regional rural banks) with over 65000 branches in India. Banking Companies are
governed by Banking Regulation Act, 1949. However Sec 2 of the Act provides that provisions
of Companies Act 1956, in the absence of special provisions in that regard in Banking
Companies Act, will apply to banks also. Sections 29-33 of the 1949 Act mention provisions
regarding to the preparation of annual accounts and their audit.

On 31st March of each year every banking company incorporated in India, in respect of all
business transactions by company and every banking company incorporated outside the India, in
respect of business transacted in India shall prepare a balance sheet and profit and loss account as

7
per the forms set out in Third Schedule. Form A in Third Schedule is the balance sheet and Form
B is the profit and loss account.

Just like other body corporate, banking companies are required to get profit and loss
account and balance sheet audited but auditor’s report on the accounts of banking companies has
to include certain additional particulars. Act requires the publication of accounts i.e. balance
sheet and profit and loss account along with auditor’s report in any newspaper circulating at the
place where it has its principal office, within 6 months from the end of accounting period.

A committee under the chairmanship of Sh A. Ghosh Deputy Governor, Reserve Bank of India
was formed to examine the desirability of full disclosure in the published accounts of the banks,
requirements of maintenance of secrecy between the banker and customer and the requirement of
maintaining the credit worthiness of banking companies.

The committee has suggested some suitable changes in the formats of Third
Schedule having regard to:

(a) The need for more disclosure

(b) The expansion of banking operations both area-wise and sector-wise over the period.

(c) The need for improvement in presentation of accounts.

8
 Accounting of banking companies

Meaning of Accounting

The Committee on Terminology set up by the American Institute of Certified Public

Accountants formulated the following dentition of accounting in 1961:“Accounting is the art of
recording, classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of a financial character, and interpreting the
result thereof. As per this dentition, accounting is simply an art of record keeping. The process of
accounting starts by first identifying the events and transactions which are of financial character
and then be recorded in the books of account. This recording is done in Journal or subsidiary
books, also known as primary books. Every good record keeping system includes suitable
classification of transactions and events as well as their summarization for ready reference. After
the transaction and events are recorded, they are transferred to secondary books. i.e. Ledger. In
ledger transactions and events are classified in terms of income, expense, assets and liabilities
according to their characteristics and summarized in profit & loss account and balance sheet.
Essentially the transactions and events are to be measured in terms of money. Measurement in
terms of money means measuring at the ruling currency of a country, for example, rupee in
India, dollar in the U.S.A. and like. The transactions and events must have at least in part,
financial characteristics. The inauguration of a new branch of a bank is an event without having
financial character, while the business disposed of by the branch is an event having financial
character. Accounting also interprets the recorded, classified and summarized transactions and
events.

The regulatory framework of financial reporting is very essential in determination of the

form and contents of financial reports. Reserve Bank of India has issued certain guidelines for
preparation of profit and loss account and balance sheet by banking companies conducting
affairs in India.

A Banking company in India is required to prepare its balance sheet according to Form A in the
Third Schedule to the Banking Act, 1949. Form A in a summary form and the details of the
various items are given in the schedules.

9
 Objectives and Functions of Accounting:

The main objectives are Systematic recording of transactions, Ascertainment of results of

recorded transactions and the financial position of the business, providing information to the
users for rational decision-making and to know the solvency position. The functions of
accounting are Measurement, Forecasting, Decision-making, Comparison & Evaluation, Control,
Government Regulation and Taxation.

 Accounting concepts
Accounting concepts define the assumptions on the basis of which financial statements of
a business entity are prepared. Certain concepts are perceived, assumed and accepted in
accounting to provide unifying structure and internal logic to accounting process. The word
concept means idea or notion, which has universal application. Financial transactions are
interpreted in the light of the concepts, which govern accounting methods. Concepts are those
basic assumptions and conditions, which form the basis upon which the accountancy has been
laid. Unlike physical science, accounting concepts are only result of broad consensus. These
accounting concepts lay the foundation on the basis of which the accounting principles are
formulated.

 Accounting principles
“Accounting principles are a body of doctrines commonly associated with the theory and
procedures of accounting serving as an explanation of current practices and as a guide for
selection of conventions or procedures where alternatives exist.”

Accounting principles must satisfy the following conditions:

1. They should be based on real assumptions

2. They must be simple, understandable and explanatory
3. They must be followed consistently
4. They should be able to reflect future predictions
5. They should be informational for the users.

 Accounting conventions
Accounting conventions emerge of accounting practices, commonly known as
accounting, principles, adopted by various organizations above a period of time. These
conventions are derived by usage and practice. The accountancy bodies of the world may change
any of the convention to improve the quality of accounting information. Accounting conventions
need not have universal application.

10
 Fundamental Accounting Assumptions

The Financial Statements are prepared with the following three Fundamental Accounting
Assumptions. Unless otherwise specie the readers of the Financial Statements assume that the
Financial Statements are prepared in line with these assumptions. They are Going Concern,
Consistency & Accrual. Accounting Standard 1 describes them as follows
Going Concern:
The enterprise is normally viewed as a going concern, that is, as continuing in operation for the
foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity
of liquidation or of curtailing materially the scale of the operations.
Consistency
It is assumed that accounting policies are consistent from one period to another.
Accrual
Revenues and costs are accrued, that is, recognized as they are earned or incurred (and not as
money is received or paid) and recorded in the financial statements of the periods to which they
relate. (The considerations affecting the process of matching costs with revenues under the
accrual assumption are not dealt with in this Statement.)

Limitations of Accounting:

The Financials Statements are prepared on the basis of the above-mentioned assumptions,
conventions and the Accounting Principles which the accountant chooses to adopt. These bring
in lot of subjectivity to the Financial Statements and hence these basis assumptions conventions
and principles become the limitation of accounting. The Financial Statements as the name states
accounts only for the items that can be measured by Money. There are lots of items that money
cannot measure but still are the most valuable assets for the enterprise, like Human Resources,
which the Financial Statements does not depict. The language of accounting has certain practical
limitations and, therefore, the financial statements should be interpreted carefully keeping in
mind all various factors influencing the true picture.

Financial Statements

Financial statements form part of the process of financial reporting. A complete set of
financial statements normally includes a balance sheet, a statement of profit and loss (also known
as ‘income statement’), a cash flow statement and those notes and other statements and
explanatory material that are an integral part of the financial statements. They may also include
supplementary schedules and information based on or derived from, and expected to be read
with, such statements. Such schedules and supplementary information may deal, for
example, with financial information about business and geographical segments, and disclosures
about the effects of changing prices. Financial statements do not, however, include such items as
reports by directors, statements by the chairman, discussion and analysis by management and
similar items that may be included in a financial or annual report.

11
 Users and Their Information Needs
The users of financial statements include present and potential investors, employees, lenders, suppliers
and other trade creditors, customers, governments and their agencies and the public. They use financial statements
in order to satisfy some of their information needs. These needs include the following:

(a) Investors
The providers of risk capital are concerned with the risk inherent in, and return provided
by, their investments. They need information to help them determine whether they should buy,
hold or sell. They are also interested in information which enables them to assess the ability
of the enterprise to pay dividends.

(b) Employees
Employees and their representative groups are interested in information about the
stability and profitability of their employers. They are also interested in information which
enables them to assess the ability of the enterprise to provide remuneration, retirement benefits and employment
opportunities.

(c) Lenders
Lenders are interested in information which enables them to determine whether their
loans, and the interest attaching to them, will be paid when due.

(d) Suppliers and other trade creditors

Suppliers and other creditors are interested in information which enables them to
determine whether amounts owing to them will be paid when due. Trade creditors are likely to be
interested in an enterprise over a shorter period than lenders unless they are dependent upon the continuance of
the enterprise as a major customer.

(e) Customers
Customers have an interest in information about the continuance of an enterprise,
especially when they have a long-term involvement with, or are dependent on, the enterprise.

(f) Governments and their agencies

Governments and their agencies are interested in the allocation of resources and, therefore, the
activities of enterprises. They also require information in order to regulate the activities of
enterprises and determine taxation policies, and to serve as the basis for determination of
national income and similar statistics.

(g) Public
Enterprises affect members of the public in a variety of ways. For example, enterprises
may make a substantial contribution to the local economy in many ways including the number of
people they employ and their patronage of local suppliers. Financial statements may assist the public by
providing information about the trends and recent developments in the prosperity of the
enterprise and the range of its activities.

12
 The Objective of Financial Statements
The objective of financial statements is to provide information about the financial
position, performance and cash flow of an enterprise that is useful to a wide range of users
in making economic decisions. Financial statements prepared for this purpose meet the common
needs of most users. However, financial statements do not provide all the information that users
may need to make economic decisions since
(a) they largely portray the financial effects of past events, and
(b) do not necessarily provide non-financial information.

Qualitative Characteristics of Financial Statements

Qualitative characteristics are the attributes that make the information provided in financial
statements useful to users. The qualitative characteristics are :-

• Understandability
• Relevance
• Reliability
• Comparability.
• Faithful Representation
• Substance over Form
• Neutrality
• Prudence
• Completeness

Among these characteristics most important are Prudence and Substance over form.

Prudence
The preparers of financial statements have to contend with the uncertainties that
inevitably surround many events and circumstances, such as the collectability of receivables, the
probable useful life of plant and machinery, and the warranty claims that may occur.
Such uncertainties are recognized by the disclosure
Of their nature and extent and by the exercise of prudence in the preparation of the financial
statements. Prudence is the inclusion of a degree of caution in the exercise of the judgments
needed in making the estimates required under conditions of uncertainty, such that assets or
income are not overstated and liabilities or expenses are not understated. However, the exercise
of prudence does not allow, for example, the creation of hidden reserves or excessive provisions,
the deliberate understatement of assets or income, or the deliberate overstatement of liabilities or
expenses, because the financial statements would then not be neutral and, therefore, not have the
quality of reliability.
Substance over Form

If information is to represent faithfully the transactions and other events that it purports to
represent, it is necessary that they are accounted for and presented in accordance with their

13
substance and economic reality and not merely their legal form. The substance of transactions or
other events is not always consistent with that which is apparent from their legal or contrived
form. For example, where rights and beneficial interest in an immovable property are transferred
but the documentation and legal formalities are pending, the recording of acquisition/disposal
(by the transferee and transferor respectively) would in substance represent the transaction
entered into.

Accounting Standards

Accounting standards codify acceptable accounting practices. They are the primary
source of the Generally Accepted Accounting Principles (GAAP) and, therefore, they are at the
top in the hierarchy of GAAP. Other sources of GAAP are technical pronouncements issued by
various professional bodies, regulating the accounting and auditing profession, that stipulate
accounting principles and methods.

Accounting standards are issued by institutions that are authorized to set accounting
standards. The standard-setting body that issues accounting standards is constituted by
representatives from various stake holders such as the accounting profession, the industry and
regulators. The process of formulating standards is a long ‘due-diligence’ process. The process is
somewhat akin to a ‘political process’ because the objective is to establish accounting standards.
(a) That are practical in the sense that those can be implemented with reasonable costs and
efforts; and
(b) that are acceptable to all stake holders. Most countries have their own accounting standard
setting bodies. In USA Statements of Financial Accounting Standards (SFAS) are issued by the
Financial Accounting Standards Board (FASB). In India accounting standards are issued by the
Institute of Chartered Accountants of India (ICAI). With globalization of capital markets, a trend
towards convergence of accounting practices in different territories emerged in 1970s. The
International Account Standards Committee (IASC) was formed in 1973to formulate
International Accounting Standards (IAS). In 2001 IASC was restructured and now it is known
as International Accounting Standards Board (IASB). Accounting standards issued by IASB are
called International Financial Reporting Standards (IFRS). Each territory (a country or a group of
countries like European Union) has initiated actions to harmonies its accounting practices with
accounting principles and methods stipulated in IAS / IFRS. Many countries use IAS / IFRS
without modification. Details of Indian Accounting Standards, US GAAP and IFRS are
discussed in the ensuing Sections.

ADVANTAGES:

1. It provides the accountancy profession with useful working rules.

2. It assists in improving quality of work performed by accountant.
3. It strengthens the accountant’s resistance against the pressure from directors to use accounting
policywhich may be suspect in that situation in which they perform their work.
4. It ensures the various users of financial statements to get complete crystal information on more
consistent basis from period to period.

14
5. It helps the users compare the financial statements of two or more organizations engaged
in same type of business operation.

DISADVANTAGES:

1. Users are likely to think that said statements prepared using accounting standard are infallible.
2. They have been derived from social pressures which may reduce freedom.
3. The working rules may be rigid or bureaucratic to some user of financial statement.
4. The more standards there are, the more costly the financial statements are to produce.

Data analysis:-

The provisions of the act, relating to annual accounts of banking company are as follows:

 Preparation of annual accounts.

At the end of accounting year, every banking corporate company in India, in respect of
all business transacted by it and every banking company incorporated outside India in
respect of all business transacted through the branches in India are requires to prepare the
final accounts i.e. profit and loss a/c and balance sheet in forms set out in the third
schedule. Form A in third schedule is balance sheet form B is the profit and loss account.
Form A and B have been revised w.e.f.1 at April 1991.
 Signing authority.
All the annual financial statements must be signed by manager or principal officer and by
at least 3 directors. In case banking company incorporated in India and there are not more
than 3 directors, all directors must sign the statement of accounts. In case banking
company incorporated outside India, the manager of the principal office of the company
in India must sign the statements of accounts.
 Auditing of accounts.
Under sec 30, the banks are requires to get their accounts audited from a duly qualified
chartered accountant, appointed with the prior permission of the Reserve Bank of India.
 Filing of accounts.
Every banking company must file the three copies of the audited balance sheet and profit
and loss a/c together with the auditor’s report shall be furnished as returns to the Reserve
Bank of India within 3 months from the end of accounting year to which they relate.

15
 Preparation and presentation of accounts:-

The final accounts of banking companies include the profit and loss account and the
balance sheet. The financial year ends on 31st march, every year. The banks also prepare half-
yearly accounts on 30th September, every year. The final accounts must be audited by a person
who is duly qualified under the law. Every banking company must obtain the approval of the
RBI within three months from the end of the period. Every banking company must file three
copies of the final accounts and auditor’s report with the Register of Companies. These accounts
are also presented in the Annual General Meeting for the approval of the shareholders. The
Banking Companies Rules 1949 also prescribed that the accounts and auditor’s report should be
published in a newspaper circulating at a place where the banking company has its principal
office, within six months from the end of the period. The RBI can conduct inspection of the
books of accounts of the banking company at any time or on receiving direction from the Central
Government.

The regulatory framework of financial reporting is very essential in determination of the

form and contents of financial reports. Reserve Bank of India has issued certain guidelines for
preparation of profit and loss account and balance sheet by banking companies conducting
affairs in India.

A Banking company in India is required to prepare its balance sheet according to Form A in the
Third Schedule to the Banking Act, 1949. Form A in a summary form and the details of the
various items are given in the schedules.

16
 Form of final accounts
The formats of preparation of final accounts are given in the third schedule of the
Banking Regulation Act. The revised formats are in the vertical form. The formats are given
below.
FORM ‘A’
FORM OF BALANCE SHEET
Balance sheet of……………Bank Ltd. as on 31st March, ……….

Schedule As on 31.3……. As on 31.3…….

No. Current Year Previous Year

CAPITAL AND LIBILITIES

Capital 1

Reserves and surplus 2

Deposits 3

Borrowings 4

Other Liabilities and Provisions 5

Total Rs.

ASSETS

Cash and Balance with RBI 6

Balance with Banks and Money at Call and

Short Notice
7
Investments
8
Advances
9
Fixed Assets
10
Other Assets
11
Total Rs.

Contingent Liabililties
12
Bills for Collection

17
 Schedule 1: Capital
Current Year Previous Year

Authorized capital:

………Shares of Rs. ……..each

Issued Capital:

………Shares of Rs. ………each

Subscribed Capital:

………Shares of Rs. ………each

Called up Capital:

………Shares of Rs. ………each

Less: Calls in Arrears

Add: Forfeited Shares

Total Rs.

Schedule 2: Reserves and Surplus

Current Year Previous Year

I. Statutory Reserve:
Opening Balance
Additions during the year
Deduction during the year
II. Capital Reserve
III. Share Premium
IV. Other Reserves
V. Profit and Loss A/c
Total Rs.

Schedule 3: Deposits
Current Year Previous Year

A. 1) Demand Deposits

18
 I. From Banks
II. From Others
2) Saving Deposits

3) Term Deposits

Total Rs.

B. 1) Deposits of Branches in India

2) Deposits of Branches Outside India

Total Rs.

Schedule 4: Borrowings
Current Year Previous Year

I. Borrowing in india
1) From RBI
2) From Other Banks
3) From Other Institutions
II. Borrowings Outside India
Total Rs.

Schedule 5: Other Liabilities and Provisions

Current Year Previous Year

I. Bills Payable
II. Inter-Office Adjustments
III. Interest Accrued
IV. Other Provision
Total Rs.

Schedule 6: Cash and Balance with RBI

Current Year Previous Year

I. Cash in Hand
II. Balance with RBI in
1) Current Account
2) Other Accounts
Total Rs.

Schedule 7: Balance with Banks and Money at Call and Short Notice
Current Year Previous Year

19
 I. In India
1) Balance with banks in
a) Current Accounts
b) Other Deposit Accounts
2) Money at Call and Short Notice
a) With Banks
b) With Other Institutions
II. Outside India
1) In Current Account
2) In Other Deposit Accounts
3) Money at Call and Short Notice
Total Rs.

Schedule 8: Investments
Current Year Previous Year

I. Investment in India in
1) Government Securities
2) Other Approved Securities
3) Shares
4) Debentures and Bonds
5) Subsidiaries and Joint Venture
6) Other
Total Rs.
II. Investments Outside India
1) Government Securities
2) Subsidiaries and Joint Ventures
3) Other Investments
Total Rs.

Schedule 9: Advances
Current Year Previous Year

I. A)
1) Bills Purchased and Discounted

2) Cash Creditors, Overdrafts and Loans

3) Term Loans

Total Rs.

B)

20
 1) Secured by Tangible Assets

2) Covered by Bank Guarantees

3) Unsecured

Total Rs.

C) Advances In India

1) Priority Sector

2) Public Sector

3) Banks

4) Others

Total Rs.

II. Advances Outside India

1) Due from Banks
2) Due from Others
a) Bills Purchased and Discounted
b) Syndicated Loans
c) Others
Total Rs.

Schedule 10: Fixed Assets

Current Year Previous Year

I. Premises
At Cost as on 31-3-….
Additions During the Year
Deductions During the Year
Depreciation up to Date
II. Other Fixed Assets
At Cost as on 31st March ……
Additions During the Year
Deductions During the Year
Depreciation up to Date
Total Rs.
21
 Schedule 11: Other Assets
Current Year Previous Year

I. Inter-Office Adjustments(Net)
II. Interest Accrued
III. Tax Paid in Advance
IV. Stationary and Stamps
V. Non-Banking Assets Acquired in Satisfaction
of Claims
VI. Others
Total Rs.

Schedule 12: Contingent Liabilities

Current Year Previous Year

I. Claims against the bank not acknowledged as

debts
II. Liability for partly paid investments
III. Liability on account of outstanding forward
exchange contracts
IV. Guarantees given on behalf of constituents:
a) In India
b) Outside India
V. Acceptances, endorsements and other
obligations
VI. Other items for which the bank is contingently
liable
Total Rs.

22
 FORM ‘B’
FORM OF PROFIT AND LOSS ACCOUNT
Profit and Loss Account for the year ended 31st March, ……..

Schedule Current Year Previous Year

No.

I. Income
Interest Earned
Other Income 13
Total Rs. 14
II. Expenditure
Interest Expended
Operating Expenses
Provisions and Contingencies
Total Rs.
15
III. Profit and Loss Account
Net Profit/Losses for the Year 16
Profit/loss Brought Forward
Total Rs.
IV. Appropriations
Transfer to Statutory Reserve
Transfer to Other Reserves
Transfer to Government/Proposed
Dividend
Balance Carried to Balance Sheet
Total Rs.

Schedule 13: Interest Earned

Current Year Previous Year

I. Interest/Discount on Advances/Bills
II. Income on Investments
III. Interest on Balances with RBI and Others
IV. Others
Total Rs.

Schedule 14: Other Income

Current Year Previous Year

23
 I. Commission, exchange and brokerage
II. Profit on sale of investments
Less : Loss on sale of investments
III. Profit on revaluation of investments
Less : Loss on revaluation of investments
IV. Profit on sale of land, buildings and other assets
Less : Loss on sale of land, buildings and other
assets
V. Profit on exchange transactions
Less : Loss on exchange transactions
VI. Income earned by way of dividend
VII. Miscellaneous income
Total Rs.

Schedule 15: Interest Expended

Current Year Previous Year

I. Interest on Deposits
II. Interest on RBI/Inter-Bank Borrowings
III. Others
Total Rs.

Schedule 16: Operating Expenses

Current Year Previous Year

I. Payment to and Provisions for employees

II. Rent, Rates and Lighting
III. Printing and Stationery
IV. Advertisement and Publicity
V. Depreciation on Bank, Property
VI. Director’s Fees, Allowances and Expenses
VII. Auditors Fess and Expenses
VIII. Law Charges
IX. Postage, Telegram, Telephones
X. Repairs and Maintenance
XI. Insurance
XII. Other Expenditure
Total Rs.

24
ACCOUNTING OF STATE BANK OF INDIA

25
 FORM ABALANCE SHEET OF STATE BANK OF INDIA
AS ON 31st MARCH 2009

Particulars Schedule As on As on
31.3.09(current 31.3.08(pervious
No.
year) year)

CAPITAL AND LIBILITIES

Capital 1 6348802 631,47,04

Reserves and surplus 2 71755,51,31 60604,91,23

Deposits 3 1011988,32,63 776416,51,88

Borrowings 4 64591,64,43 66023,17,07

Other Liabilities and Provisions 5 15362,71,37 121565,32,52

Total Rs. 1304825,74,07 1027269,51,83

ASSETS

Cash and Balance with RBI 6 741.81,06,66 74817,25,54

Balance with Banks and Money at

Call and Short Notice
7 51100,62,90 14211,16,16
Investments
8 372231,44,86 273841,72,43
Advances
9 750362,38,45 603221,94,04
Fixed Assets
10 5223,47,75 4662,78,97
Other Assets

26
Total Rs. 11 51746,73,45 56514,64,69

304805,74,07 1027269,51,83

Contingent Liabililties 12 860686,08,21 945770,20,75

Bills for Collection 49938,35,27 25225,90,75

27
 Form B
Profit and Loss Account of State Bank of India for the year ended
on 31st March 2009

Particulars Schedule As on As on
No. 31.3.09 31.3.08
I. Income
Interest Earned
Other Income 13 63788,43,38 48950,30,71
Total Rs. 14
II. Expenditure 12690,78,90 8694,92,84
Interest Expended
76479,22,28 57645,23,55
Operating Expenses
Provisions and Contingencies
Total Rs.
15 42915,29,37 31929,07,69
III. Profit and Loss Account
Net Profit/Losses for the Year 16 15648,70,44 12608,60,60
Profit/loss Brought Forward
Transfer from general reserve 8793,99,82 6378,42,79
Total Rs.
IV. Appropriations 567357,99,63 50916,11,08
Transfer to Statutory Reserve
Transfer to Investment Reserve
Transfer to Capital Reserve 9121,22,65 6729,12,47
Transfer to Revenue Reserve and
other 33,93 33,93
Transfer to Proposed Dividend
9,37
Tax on Dividend
Loss from State Bank of 9121,56,58 6792,55,77
Saurashtra
Balance Carried to Balance Sheet

Total Rs. 5291,79,28 4839,07,23

62,17,87

826,55,32 4,43,98

28
306,89,30 300,00,00

1841,15,26 1357,66,13

248,03,47 165,86,63

606,80,02

33,93 33,93

9121,56,58 6792,55,77

29
 ADDITIONAL DISCLOSURE PRESCRIBED BY RBI

In addition to the disclosure to be made in the balance sheet and profit and loss account, in pursuance of
the requirements of the Third Schedule to the Act, the RBI has directed, Circular NO.
BDOD.BP.BC. NO.59/21.04.018/2005-06, dated January 30, 2006 that the following information should be
disclosed by way of notes on accounts:

List of Disclosure Items

• Capital adequacy ratio

• Capital adequacy ratio-tier T capital
• Capital adequacy ratio-tier II capita
l• Percentage of shareholding of the Government of India in nationalized banks
• Amount of subordinated debt raised as tier II capital
• Gross value of investments, etc
.• Provisions made towards depreciation in the value of investments
• Movement of provisions held towards depreciation on investments
• Repo transactions
• Non-SLR investment portfolio
• Forward rate agreement/interest rate swap
• Exchange traded interest rate derivatives
• Disclosures on risk exposure m derivatives
• Percentage of net NPAs to net advances
• Movement in NPAs
• Amount of provisions made towards NPAs
• Movement of provisions made towards NPAs
• Details of Loan assets subjected to restructuring

30
• Restructuring under CDR
• Details of financial assets sold to a SC/RC for asset reconstruction
• Provision on standard assets
• Interest income as a percentage to working funds
• Non-interest Income as a percentage to working funds
• Operating profit as a percentage to working funds
• Return on assets
• Business (deposits plus advances) per employee Profit per employee
• Maturity pattern of loans and advances
• Maturity pattern of investment securities
• Maturity pattern of deposits
• Maturity pattern of borrowings-
• Foreign currency assets and liabilities
• Exposure to real estate sector
• Exposure to capital market: investment in equity shares, etc
.• Bank financing for margin trading
• Exposure to country risk
• Details of single borrower/group borrower limit exceeded by the bank
• Provision made towards income tax during the year
• Disclosure of penalties imposed by RBI
• Consolidated financial statements —AS 21• Segment reporting —AS 17

31
 Conclusion

The new accounting theory that would be introduced ,keeping into the mind that it
will have admixed application of the accounting particular, result that the separate application of
the debt and equity has so many clauses which are still remained into exceptions. The
accounting concept would require to be revised as there are more provisions to be made the
accountants will have to rely on more such provisions, which would bases on the case to
case basis. This will not give cleat picture in the account. As we all know, the concept of
accounting is a dual aspect and has it an application in both the place to recon ciliate the final
state of the accounting entry. Making or providing more provisions will not help much as
it will either have no correct treatment for the accounting entries. Moreover
,implementation of such changes in the accountancy standards will take some more time to
implement correctly all over the place, the impact which it would be making is that the
movement and merging of the current measures to globally acknowledged ones will
constrain accounting experts to take in the new standard, and will prompt con sistency
in bookkeeping practices.

The balance-sheet along with the income statement is an important tool for investors and
many other parties who are interested in it to gain insight into a company and its operation. The
balance sheet is a snapshot at a single point of time of the company’s accounts covering its
assets, liabilities and shareholder’s equity. The purpose of the balance-sheet is to give users an
idea of the company’s financial position along with displaying what the company owns and
owes. It is important that all investors know how to use, analyze and read balance sheet. Profit
and loss account tell the net profit and net loss of a company and its appropriation.

32
 SUGGESTIONS AND RECOMMENDATIONS

Some of the recommendation and suggestion are as follows:

The Reserve Bank of India issued prudential norms for

b a n k i n g c o m p a n i e s . According to that more nonperforming assets may leads
to bankruptcy. Hence, the bank tries to reduce its nonperforming assets to an extent.

The prime motive of any type of business is to earn profits. For banking
company, r e n d e r i n g f i n a n c i a l s e r v i c e s a n d e a r n i n g p r o f i t s a r e t h e p r i m a r y
objectives. As nationalized bank, it also has the same objectives. The
growth rate of profits is d e c r e a s i n g . S o , t h e b a n k t r i e s t o i m p r o v e i t s
p r o f i t s . F o r t h a t t h e b a n k n e e d s t o concentrate on both core and non core
banking activities.

The major income for any financial institution is interest income. A banking company
will get more interest income only when it lends money for the productive purposes.
Advances are the major assets of a banking company. The bank tries to increase the
advances because it is the core business of a bank. Increase in advances pays a way to increase in
interest income which automatically increases the profits of the bank.

Every company must try to control their borrowings. Because more

borrowings leads to increase their interest expenses which reduces their profits. At
the same time, low borrowings are also not good for the company. Here, the borrowings
are increasing to an extent. So, the bank shall try to reduce the borrowings which
automatically reduce the interest expenses to a certain extent.

Deposits are of two types. One is term deposits and the other is demand
deposits. The i m p o r t a n t s o u r c e o f f u n d s f o r b a n k i s d e p o s i t s . M o r e d e p o s i t s
m e a n s t h e b a n k a r e attracting the customers. The bank provides advances against
his/her deposits to the needy person. This provides the bank to get interest income
as well as safety for its funds. So, the bank needs to increase its deposits.

The bank has to focus on work than the work achieved. It means the bank has to work to attract
the new customers and rendering all types of financial services.

33
 As compared to its competitors, the bank has low number of branches and ATMs. It is a
major disadvantage to the bank. Due to low number of branches and ATM, both the customers
and bank may feel uncomfortable to contact and render services. So, the bank has to
increase its number of branches and ATMs.

Nowadays competition takes in every sector. In banking sector, the competition is high.
In general, a both good and bad product needs advertisement. Advertisements pursue
the people to buy. Other banks are giving continues advertisements about their services to the
public. So, the bank has to promote its services through advertisements which increase the new
customers.

34
 BIBLIOGRAPHY
Books Referred:

Accountancy R.K. Mittal, A.K.Jain.

Financial Management- Theory and Practice. Shashi.K.Gupta, R.K. Sharma.

P.N. VARSHNEY “Banking Law And Practices” Sultan Chand & Sons

SUNDRAM & VARSHNEY “Banking, Theory Law And Practices” Sultan Chand &Sons

DR. S. N. MAHESHWARI “Principles Of Accounting” Sultan Chand & Sons

Advanced Accounting, revised edition june 2010-ICAI

35
 WEBLIOGRAPHY

www.indianbank.in

www.moneycontrol.com

www.money.rediff.com

www.wikipedia.org

www.google.com

www.scribd.com

www.managementparadise.com

www.rbi.org.in

36