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ACCOUNTING AND STATUTORY
REQUIREMENTS OF BANKING
COMPANIES
Unit structure
of Ba nking Companies:
As per section 6 of the Act, banking companies may engage
in the following business in addition to their usual banking business.
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1.1. Introduction
1.2. Important Accounting provis ions of Bankin g Regulation
Act 1949.
1.3. Books of Accounts
1.4. Provisioning of Non-Performing Assets
1.5. Final Accounts
1.6. Some important transactions
1.7. Illustrations
1.8. Exercises
1.1. INTRODUCTION
1.1.1 Meaning of Banking Companies:
A b a n k i s a c o m m e r c i a l i n s t i t u t i o n , p e r m i t t e d t o
accept, collect, transfer, lend and exchange money and claims
to money both the domestically and inter nationally and
thereby conduct smooth banking activities.
1.1.2. Definition:
B a n k i n g c o m p a n i e s a r e g o v e r n e d by the Banking Regulation
Act of 1949 and also subject to the companies act. 1956.
A c c o r d i n g t o B a n k i n g R e g u lation act, 1949 Banking means –
“The accepting, for the purpose of lending or investment, of deposit
of money from the public repayable on demand or otherwise
and withdraw able by cheque, dr aft, order or otherwise.’
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1. The borrowing, raising or ta king up on money, the lending or
advancing of money eit her upon or without security, the drawing,
making, accepting, discounting, buying, selling, collecting and
dealing in bills of e xchange, ‘hundies’, promissory notes, drafts,
bills of lading, railways receipt, warrants, debentures, certificates,
scrip’s and other instruments and secu rities whether transferable or
negotiable or not; granting and issuing of letters of credit, traveller’s
cheques and circular notes; the buying, selling and dealing in
bullion and specie; the buying and selling of foreign exchange
including foreign bank notes; t he acquiring, holding, issuing on
commission, underwriting and dealin g in stock, funds, shares,
debentures, debenture stock bonds, obligations, securities and
investments of all kinds; the pur chasing and selling of bonds, scrips
or other forms of securities on behalf of constituents or other, the
negotiating of loans and advances; t he receiving of all kinds of
bonds, scrips or valuables on depos it or for safe custody or
otherwise; the providi ng of safe deposit vaul ts; the collecting and
transmitting of money and securities.
2. Acting as agents for any Governm ent or local au thority or any
other person or persons; the carry ing on of agency business of any
description including the clearing and forwarding of goods, giving of
receipts and discharges and otherwise acting as on attorney on
behalf of customers but excluding the business of (managing agent
or secretary and treasurer) of a company.
3. Contracting for public and pr ivate loans and negotiating and
issuing the same.
4. The effecting, insuring, guaran terring, underwriting, participating
in managing and carrying out of any iss ue, public or private of state,
municipal or other loans or of s h a r e s , s t o c k , d e b e n t u r e s o r
debenture stock of any Company Cor poration or association and of
the lending of money for the pur pose of any such issue.
5. Carrying on and transacting every kind of guarantee and
indemnity business.
6. Managing, selling and realizi ng any property which may come
into the possession of the com pany in satisfaction or part
satisfaction of any of its claims.
7. Acquiring and holding and generally dealing with any property or
any right, title or interest in any such property which may form the
security or part of the security for any loans or advances which may
be connected with any such security.
8. Undertaking and executing trusts.
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9. Undertaking the administration of estates as executor, trustee or
otherwise.
10. Establishing and supporting or ai ding in the establishment and
support of associations, instituti ons, funds, trusts and conveniences
calculated to benefit em ployees or ex-employees of the company or
the dependents or connections of such persons; granting pensions
and allowances and making pay ments towards
insurance; subscribing to or guaranteeing m oneys for charitable or
benevolent objects or for any exhibition or for any public,
general or useful object.
11. The acquisition, construction maintenance and alteration of any
building or works necessary or c onvenient for the purpose of
the company.
12. Selling, improving, managing, developing, exchanging, leasing,
mortgaging, disposing of or turn ing into account or
otherwise dealing with all or any part of the property
and rights of the company.
13. Acquiring and underta king the whole or any part of the business
of any person or company, when such business is of a
nature enumerated or described in section 6.
14. Doing all such other things as ar e incidental or conclusion to the
promotion or advancement of the business of the company.
15. Any other form of business wh ich the central Government may
by notification in the official Ga zette, specify as a form of business
in which it is lawful for a banking company to engage.
N o B a n k i n g C o m p a n y s h a l l e n g age in any form of business
other than those referred to in section 6.
1.1.4 Restrictions on Business:
T h e B a n k i n g C o m p a n i e s a r e r e s t r i c t e d f r o m
conducting certain activities.
A b a n k c a n n o t d i r e c t l y o r i ndirectly deal in the buying
or selling or bartering of goods, ex cept in connection
with the realization of security given to or held by it, or engage in
any trade or buy or sell of barter goods f o r o t h e r s
otherwise than in connection with bills of exchange, immovable
property, except that required for its own use, however acquired,
m u s t b e d i s p o s e d o f within seven years from the date of
acquisition.
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Assets:
The case in which the custom er to whom a bank sanctioned
loan against some security and if he fails to repay the same, the
bank decides to acquire such property kept as security to satisfy its
claim. Such property or assets termed as ‘Non-Banking Assets’.
These Assets are exhibited in schedule 11 – “Other Assets”.
Capital a nd reserves – Section 11.
A c c o r d i n g t o t h e p r o v i s i o n o f section 11 (2) of the Banking
Regulation Act 1949 the following are the limits imposed on value
of paid up Capital and Reserves of a banking Company.
1) In the case of Banking Company incorporated outside India.
If it has a place or places of bus iness in the city of Bombay or
Calcutta or both Rs. 20 lakhs.
I f t h e p l a c e s o f b u s i n e s s a r e other than Bombay or Calcutta
Rs. 15 lakhs. In addition 20% of t he profits earned in India must be
added to the sums mentioned above.
2) In the case of a banking co mpany incorporated in India.
a) If it has places of business in more than one state and it has
a place or places of business in Bombay or Calcutta or both
Rs. 10 lakhs.
b) It is has places of business in more than one state but not in
Bombay or Calcutta Rs. 5 lakhs.
c) If it has places of business in one state but not in Bombay or
Calcutta. Rs. 1 lakhs in respect of its principle place plus Rs.
10,000 for each of its other places of bus iness in the same
district and Rs. 25,000 in res pect of each place of business
outside the district. The total n eed not exceed Rs. 5 lakhs. In
case there is only one place of business Rs. 50,000.
(In case of companies, which have commenced business after the
commencement of the Banking Co mpanies (Amendment) Act of
1962, a minimum of Rs. 5 lakhs is required)
d) If it has all its places of bus iness in one state / Rs. 5 lakhs
and if the places of business are also in / plus Rs. 25,000
Bombay or Calcutta. / In respect of each place of business
situated outside the city of Bombay or Calcutta. The total
need not exceed Rs. 10 lakhs.
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1.1.5 Non-Banking
1.2. IMPORTANT ACCOUNT ING PROVISIONS
OF BANKING REGULATION ACT 1949.
1.2.1 Minimum
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A B a n k c a n n o t
i) grant loans and advances on th e security of its own shares
and
ii) grant or agree to grant loan or advance to or on behalf of
a) Any of its directors;
b) Any firm in which any of its di rectors is interested as partner,
manager or gurantor; 1.2.2 Restriction on commission Brokerage, Discount, etc. on
sale of shares-section B:
Reserve – Section 17:
S e c t i o n 1 7 o f t h e a c t l a y s d o w n t h a t e v e r y b a n k i n g
company should create a reserve fund by transferring to it at least
20 percent of its annual profit as disclosed by its profit and loss
account before any declaration of dividend, such reserve is
known as statutory Reserve. The transfer of profit to r e s e r v e f u n d
s h o u l d b e c o n t i n u e d even after the accumulated amount of
reserve fund and share premium account together exceed
its paid up capital. Unless the central government grant
on ex emption in this regard on the recommendation of
Reserve Bank of India.
1.2.5 Cash Reserves – Section 18:
E v e r y B a n k i n g C o m p a n y r e q u i r e s t o m a i n t a i n a
balance equal to 3 percent of its time and demand liabilities with
RBI (a non scheduled bank has to keep similar balances
either in cash or deposit with RBI)
1.2.6 Restrictions on lo ans and Advances –section 20
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A B a n k i n g c o m p a n y i s n o t a l l o w e d t o p a y d i r e c t l y
o r indirectly commission, Brokerage, Discount or remuneration
in any form in respect of any shares issued by it, any amount
exceeding two and one-half person of the paid up value of the said
shares.
1.2.3 Restriction on payment of dividend – section 15:
A Banking company shall not pay dividend unless all of its
capitalized expenses (including preliminary expenses, organization
expenses, share selling commission, Brokerage, amount of
losses incurred and any other item. Of expenditure not
represented by tangible assets) have been completely written-off.
However, a banking company may pay dividend on its shares
without writing off.
1.2.4 Statutory
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c) Any company of which any of i t s d i r e c t o r s i s a d i r e c t o r
manager, employee or guarantor o r i n w h i c h h e h o l d s
substantial interest; or
d) Any individual in respect of whom any of its directors is a
partner or guarantor.
In order to have immediate en try of voluminous transaction
and enables continuous internal check on the record of these
transactions, Banks are required to maintain subsidiary books
along with its principal books of accounts.
A) Subsidiary books
i. Receiving cashier’s counter cash book;
ii. Paying cashier’s counter cash book;
iii. Current accounts ledger.
iv. Savings bank accounts ledger
v. Fixed deposit accounts ledger
vi. Investments Ledger
vii. Loans Ledger
viii. Bills discounted and purchased ledger
ix. Customer’s acceptan ces endorsements and guarantee
ledger
B) Principal Books
i. Cash book : It records all cash transactions
ii. General Leger : It contains c ontrol Accounts of all subsidiary
ledgers and different assets and liabilities account
Meaning:
T h e ‘ N o n - P e r f o r m i n g A s s e t s ’ r e f e r s t o t h o s e a s s e t s w h i c h
fails to generate expected returns to the bank due to borrowers
default in making repayment.
In accordance with the inte rnational practice and the
directives of RBI, the bank sh ould recognized income on Non-
Performing Assets (NPA) when it is actually received and not on
accrual basis.
1.3. BOOKS OF ACCOUNTS
1.4. PROVISIONING OF NON-PERFORMING ASSETS 6
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S i m i l a r l y , t h e R B I h a s a c c e p t ed the definition of a NPA given
by Narasimham committee from March 1995 onwards –
‘ a s a n a d v a n c e w h e r e , a s o n t h e bank’s balance sheet date,
(a) interest on a term loan account is past due or (b) a cash credit /
overdraft account remains out of order or (c) a bill purchased /
discounted is unpaid or overdue or (d) any amount to be received in
respect of any other account re mains past due, for a period more
than 180 days. (e) in respect of agricultural finance / advance (eg
crop loans) interest and / or in stallment of principal remains
overdue for two harvest seasons but for a period not exceeding two
half years. The period of 180 days has been reduced to 90 days
effective from March 31, 2004.
A ‘ p a s t d u e ’ a c c o u n t h a s b e e n d e f i n e d a s a n a m o u n t w h i c h
remains outstanding 30 days beyond the due date.
Assets classification and provisioning
I n o r d e r t o m a k e a d e q u a t e p r o v i s i o n s , a s s e t s h a v e b e e n
classified as follows:
i. Standard assets – These are the assets which does not
disclose any problems and does not carry more than normal
risk attached to the business ther efore no provision is to be
made against them.
ii. Substandard assets – These assets exhibit problems and
would include assets classified as non-performing for a
period not exceeding two years. Hence the pr ovision is to be
made at the rate of 10 perc ent of the total outstanding
amount of substandard assets.
iii. Doubtful assets – these are the assets which remain non
performing for a period exceedin g two years and would also
include loans in respect of wh ich installments are overdue
for a period exceeding two years.
The provision for doubtful assets as follows:
Period for which the advance Provision requirements (%)
Has been considered
As doubtful
Upto one year 20
One to three years 30
More than three years 50
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iv. Loss assets – Loss assets are those assets where the loss
has been identified but the amounts have not been return
off.
Illustration
E x e b a n k l t d . h a v i n g t h e f o l l o w i n g a d v a n c e s a s o n 3 1st
March 2009 and provision is to be made against them.
B i l l s P u r c h a s e d
and Discounted Cash credit,
overdraft Term
loans
i) Standard Assets
ii) Sub-standard Assets
iii) Doubtful Assets:
- upto one year
- One to 3 years
- More than 3 years
iv) Loss Assets 5,150
4,000
--
--
--4,925
1,500
500
1,800
1,275
350 2,375
1,000
1,800
700
550
225
9 , 1 5 0 1 0 , 3 5 0 6 , 6 5 0
Solution
A m o u n t
(Rs.) % of Provision Amount of
Provision (Rs)
i) Standard Assets
ii) Sub-standard Assets
iii) Doubtful Assets:
- upto one year
- One to 3years
- More than 3 years
iv) Loss Assets 12,450
6,500
2,300
2,500
1,825
575Nil
10%
20%
30%
50%
100%Nil
650
460
750
912.5
575
Total Provision on Advances 3,347.5
T h e B a n k i n g R e g u l a t i o n a c t , 1 9 4 9 p r e s c r i b e s f o r m a t s o f
preparing final accounts of the Banking companies. The third
schedule of section 29 gives forms ‘A’ for the balance sheet and
Form ‘B’ for Profit and loss account. The balance sheet consists of
total 12 schedules. Schedule 1 to sc hedule 5 depicts capital and
liabilities and schedule 6 to sche dule 11 shows Assets of the bank
and schedule 12 shows contin gent liabilities and t here is no specific
schedule prescribes for bills for collection.
1.5. FINAL ACCOUNTS 8
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THE THIRD SCHEDULE
(See Section 29)
Form ‘A’
FORM OF BALANCE SHEET
Balance Sheet of……………… (here enter the name of the Banking Company)
Balance Sheet as on 31st March __________(year) (000’s omitted)
Schedule
No. As on 31.3……
(Current Year) As on 31.3…..
(Previous Year)
Capital & Liabilities
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilities and
Provisions
Total
Assets
Cash and balance with
Reserve Bank of India
Balances with banks and
money at call and short
notice
Investments
Advances
Fixed Assets
Other Assets
Total
Contingent liabilities
Bills for collection 1
2
3
4
5
6
7
8
9
10
11
12
Form ‘B’
FORM OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH
(000’s omitted)
Schedule
No. Year ended 31.3…
(Current Year) Year ended 31.3…
(Previous Year)
13
14
15
16
I. Income
Interest earned
Other income
Total
II. Expenditure
Interest expended
Operating expenses
Provisions and contingencies
Total
III. Profit / Loss
Net profit / Loss (-) for the year
Profit / Loss (-) brought forward
Total
IV. Appropriations
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government /
Proposed dividend
Balance carried over to Balance
Sheet
Total 9
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NOTE: 1. The total income includes income of foreign branches of Rs.______
2 . T h e t o t a l e x p e n d i t u r e i n c l u d e s e x p e n d iture of foreign branches at Rs. _____
3 . S u r p l u s / d e f i c i t o f f o r e i g n b r a n c h e s R s . _ _ _ _ _ _
SCHEDULE 1 --- CAPITAL
As on 31.3….
(Current Year) As on 31.3…
(Previous Year)
I. For Nationalized Banks
Capital (Fully owned by Central
Government)
II. For Banks Incorporated Outside
India
Capital
(The amount brought in by banks by
way of start-up capital as prescribed by
RBI should be shown under this head)
Amount of deposit with the RBI under
Section 11(2) of Banking Regulation
Act, 1949
Total
III. For Other Banks
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 unpaid
Add: Forfeited shares
SCHEDULE 2 – RESERVES & SURPLUS
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. Statutory Reserves
Opening Balance
Additions during the year
Deductions during the year
II. Capital Reserves
Opening Balance
Additions during the year
Deductions during the year
III. Shares Premium
Opening Balance
Additions during the year
Deductions during the year
IV. Revenue and other Reserves
Opening Balance
Additions during the year
Deductions during the year
V. Balance in Profit and Loss Account
Total (I + II + III + IV + V) 10
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SCHEDULE 3 – DEPOSITS
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
A. I. Demand Deposits
i) From Banks
ii) From Banks
II. Savings Bank Deposits
III. Term Deposits
i) From banks
ii) From others
Total (I + II + III)
B. i) Deposits of branches in India
ii) Deposits of branches outside India
Total
SCHEDULE 4 – BORROWINGS
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. Borrowings in India
i) Reserve Bank of India
ii) Other banks
iii) Other institut ions and agencies
II. Borrowings outside India
Total (I + II)
Secured borrowings included in I & II
above – Rs.
SCHEDULE 5 – OTHER LIABILITIES AND PROVISIONS
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. Bills payable
II. Inter-office adjustments (net)
III. Interest accrued
IV. Others (including provisions)
Total
SCHEDULE 6 – CASH AND BALANCES WITH RESERVE BANK
OF India
As on 31.3…
(Current Year) As on 31.3…
(Previous Year)
I. Cash in hand (including foreign
currency notes)
II. Balances with RBI
(i) in Current Account
(ii) in Other Accounts
Total (I + II)
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SCHEDULE 7 – BALANCES WITH BANKS & MONEY AT CALL
& SHORT NOTICE
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. In India
(i) Balances with banks
(a) in Current Accounts
b) in Other Deposit Accounts
(ii) Money at call and short notice
a) With banks
b) With other institutions
Total
II. Outside India
(i) in Current Accounts
(ii) in Other Deposit Accounts
(iii) Money at call and short notice
Total
Grand Total (I + II)
SCHEDULE 8 – INVESTMENTS
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. Investments in India in
i) Government securities
ii) Other approved securities
iii) shares
iv) Debentures and Bonds
v) Subsidiaries and / or joint ventures
vi) Others (to be specified
Total
II. Investments outside India in
i) Government securities (including local
authorities)
ii) Subsidiaries and / or joint ventures
abroad
iii) Other investments (to be specified)
Total
Grand Total (I + II)
SCHEDULE 9 – ADVANCES
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
A. i) Bills purchased and discounted
ii) Cash credits, overdrafts and loans
repayable on demand
iii) Term loans
Total
B. i) Secured by tangible assets
ii) Covered by Bank / Government
guarantees
iii) Unsecured
Total 12
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C. I. Advances in India
i) Priority Sectors
ii) Public Sector
iii) Banks
iv) Others
Total
II. Advances outside India
i) Due from banks
ii) Due from others
a) Bills purchased and discounted
b) Syndicated loans
c) Others
Total
Grand Total (C. I. + C. II.)
SCHEDULE 10 – FIXED ASSETS
As on 31.3…
(Current Year) As on 31.3…
(Previous Year)
I. Premises
At cost as on 31st March of the preceding
year
Additions during the year
Deductions during the year
Depreciation to date
II. Other Fixed Assets (including
furniture and fixtures)
At cost as on 31st March of the preceding
year
Additions during the year
Deductions during the year
Depreciation to date
Total (I + II)
SCHEDULE 11 – OTHER ASSETS
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. Inter-office adjustments (net)
II. Interest accrued
III. Tax paid in advance / tax deducted at
source
IV. Stationery and stamps
V. Non-banking assets acquired in
satisfaction of claims
VI. Others @
Total
@ In case there is any unadjust ed balance of loss, the same may
be shown under this item with appropriate foot-note.
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SCHEDULE 12 – CONTINGENT LIABILITIES
As on 31.3….
(Current Year) As on 31.3….
(Previous Year)
I. Claims against the bank not
acknowledged as debts
II. Liability for partly paid investment
III. Liability on account of outstanding
forward exchange contracts
IV. Guarantee given on behalf of
constitutents
a) In India
b) Outside India
V. Acceptances, endor sements and, other
obligations
VI. Other items for which the bank is
contingently liable
Total
SCHEDULE 13 – INTEREST EARNED
Year ended 31.3…
(Current Year) Year ended 31.3…
(Previous Year)
I. Interest / discount on advances / bills
II. Income on investments
III. Interest on balances with Reserve
Bank of India and other inter-bank funds
IV. Others
Total
SCHEDULE 14 – OTHER INCOME
Year ended 31.3…
(Current Year) Year ended 31.3…
(Previous Year)
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 dividends
etc. from subsidiaries / companies and /
or joint ventures abroad / in India
VII. Miscellaneous Income
Total
Note : Under items II to V loss figur es may be shown in brackets
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SCHEDULE 15 – INTEREST EXPENDED
Year ended 31.3…
(Current Year) Year ended 31.3…
(Previous Year)
I. Interest on deposits
II. Interest on Reserve Bank of India /
inter-bank borrowings
III. Others
Total
SCHEDULE 16 – OPERATING EXPENSES
Year ended 31.3…
(Current Year) Year ended 31.3…
(Previous Year)
I. Payments to and provisions for
employees
II. Rent, taxes and lighting
III. Printing and stationery
IV. Advertisement and publicity
V. Depreciation on bank’s property
VI. Directors’ fees, allowances and
expenses
VII. Auditor’ fees and expenses (including
branch auditors’ fees and expenses)
VII. Law charges
IX. Postages, telegrams, telephone, etc.
X. Repairs and maintenance
XI. Insurance
XII. Other expenditure
Total
GUIDELINES OF RBI FOR COMPILATION OF FINANCIAL
STATEMENTS BALANCE SHEET
Item Schedule Coverage Notes and instructions for
compilation
(1) (2) (3) (4)
Capital 1 Nationalized
Banks
Capital (fully
owned by
Central
Government)
The capital owned by
Central Government as
on the date of the
Balance Sheet, including
contribution from
Government, if any, for
participating in World
Bank, Projects, should be
shown. 15
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B a n k i n g
Companies
incorporated
outside India (i) The amount brought in
by banks by way of start-
up capital as prescribed
by RBI, should be shown
under this head.
(ii) The amount or
deposits kept with RBI
under sub-section 2 of
Section 11 of the Banking
Regulation Act, 1949
should also be shown.
Other Banks
(Indian)
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
unpaid Add:
Forfeited
shares: Paid-
up Capital Authorized, Issued,
Subscribed, Called-up
Capital should be given
separately. Calls-in-
arrears will be deducted
from Called-up Capital
while the paid-up value of
forfeited shares should be
added, thus arriving at the
paid-up capital. The
necessary items which
can be combined should
be shown under one
head, for instance,
“Issued and Subscribed
Capital”.
Notes: General
The changes in the above
items, if any, during the
years, say, fresh
contribution made by the
Government, fresh issue
of capital, capitalization of
reserves, etc., may be
explained in the notes. 16
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Reserves
and
Surplus 2 (I) Statutory
Reserves Reserves created in
terms of Section 17 or
another section of
Banking Regulation Act,
must be separately
disclosed.
(II) Capital
Reserves The expression ‘capital
reserve’ shall not include
any amount regarded as
free for distribution
through the Profit and
Loss Account. Surplus on
revaluation should be
treated as Capital
Reserves. Surplus on
translation of the financial
statements of foreign
branches (which includes
fixed assets also) is not a
revaluation reserve.
(III) Share
Premium Premium on issue of
share capital may be
shown separately under
this head.
(IV) Revenue
and other
Reserves The expression ‘Revenue
Reserve’ shall mean any
reserve other than those
separately classified. This
expression ‘reserve’ shall
not include any amount,
written-off or retained by
way of providing for
depreciation, renewals or
diminution in value of
assets or retained by way
of providing for any
known liability.
(V) Balance
of Profit Includes balance of profit
after appropriation. In
case of loss the balance
may be shown as a
deduction. 17
munotes.in
Page 18
Notes : General
Movement in various
categories of reserves
should be shown as
indicated in the schedule.
Deposi
ts 3 A. (I) Demand
Deposits
(i) from banks
(ii) from others Includes all bank deposits
repayable on demand.
Include all demand
deposits of the non-
banking sectors.
Credit balances in
overdrafts, cash credit
accounts, deposits
payable at call, overdue
deposits, inoperative
current accounts,
matured time deposits
and cash certificates,
certificate of deposits, etc.
are to be included under
this category.
(ii) Saving
Bank
Deposits Includes all savings bank
deposits (including
inoperative savings bank
accounts).
(III) Term
Deposits
(i) from banks
(ii) from others Includes all types of bank
deposits repayable after
specified term.
Includes all types of
deposits of the non-
banking sector, repayable
after a specified term.
Fixed deposits,
cumulative and recurring
deposits, annuity
deposits, deposits
mobilized under various
schemes, ordinary staff
deposits, foreign currency
non-resident deposit
accounts, etc., are to be
included under this
category. 18
munotes.in
Page 19
B .
(i) Deposits
of branches
in India
(ii) Deposits
of branches
outside India The total of these two
items will agree with the
total deposits.
Notes : General
(a) Interest payable on
deposits which is accrued
but not due should not be
included but shown under
other liabilities.
b) Matured time deposits
and cash certificates, etc.,
should be treated as
demand deposits.
c) Deposits under special
schemes should be
included under the term
deposits, if they are not
payable on demand.
When such deposits have
matured for payment they
should be shown under
demand deposits.
d) Deposits from banks
will include deposits from
the banking system in
India, co-operative banks,
foreign banks, which may
or may not have presence
in India.
Borrow
ings 4 (I)
Borrowings
in India
(i) Reserve
Bank of India
(II) Other
Banks
(iii) Other
institutions
and agencies. Includes borrowing /
refinance obtained from
Reserve Bank of India
Includes borrowings /
refinance obtained from
commercial banks
(including co-operative
banks).
Includes borrowings /
refinance obtained from
industrial Development
Bank of India, Export-
Import of Bank of India, 19
munotes.in
Page 20
National Bank for
Agriculture and Rural
Development and other
institutions, agencies
(including liability against
participation certificates, if
any).
(II)
Borrowings
outside India Includes borrowings of
Indian branches abroad
as well as borrowings of
foreign branches.
Secured
borrowings
included
above This item will be shown
separately. Includes
secured borrowings /
refinance in India and
outside India.
Note: General
(i) The total of I and II will
agree with the total
borrowings shown in the
Balance Sheet.
(ii) Inter-office
transactions should not
be shown as borrowings.
(iii) Funds raised by
foreign branches by way
of certificate of deposits,
notes, bonds, etc., should
be classified depending
upon documentation, as
‘deposits’, ‘ borrowings’,
etc.
(iv) Refinance obtained
by banks from Reserve
Bank of India and various
institutions are being
brought under the head
‘Borrowings’. Hence,
advances will be shown
at the gross amount on
the assets side. 20
munotes.in
Page 21
Other
Liabiliti
es and
Provisi
ons 5 I.Bills
Payable Includes drafts,
telegraphic transfers,
traveler cheques, mail
transfers payable, pay
slips, bankers cheques
and other miscellaneous
items.
II. Inter-office
Adjustments The inter-office
adjustments balance, if
the credit should be
shown under this head.
Only net position of inter-
office accounts, inland as
well as foreign, should be
shown here.
III.Interest
Accrued Includes interest accrued
but not due on deposits
and borrowings.
IV.Others
(including
provisions) Includes net provision for
income tax and other
taxes like interest tax
(less advance payment,
tax deducted at source,
etc.,) surplus in aggregate
in provisions for
depreciation in securities,
contingency funds which
are not disclosed under
any of the major heads
such as unclaimed
dividend, provisions and
funds kept for specific
purpose, unexpired
discount, outstanding
charges like rent,
conveyance, etc. Certain
types of deposits like staff
security deposits, margin
deposits, etc. where the
repayment is not free,
should also be included
under this head.
21
munotes.in
Page 22
Notes: General
i) For arriving at the net
balance of inter-office
adjustments all connected
inter-office accounts
should be aggregated
and the net balance
should only be shown,
representing mostly items
in transit and unadjusted
items.
(ii) the interest accruing
on all deposits, whether
the payment is due or not,
should be treated as a
liability.
iii) it is proposed to show
only pure deposits under
the head ‘deposits’, and
hence, all surplus
provisions for bad and
doubtful debts,
contingency funds, secret
reserves, etc., which are
not netted off against the
relative assets, should be
brought under the head
‘others’ (including
provisions).
Cash
and
Balanc
es with
the
Reserv
e Bank
of India 6 I. Cash in
hand
(including
foreign
currency
notes)
II. Balance
with RBI
i) In current
Account
ii) in other
Accounts Includes cash in hand,
including foreign currency
notes and also of foreign
branches in the case of
banks having such
branches. 22
munotes.in
Page 23
Balanc
e with
banks
and
money
at call
and
short
notice 7 I. In India
i) Balance with
Banks
a) in current
accounts
b) in other
deposit
accounts Includes all balance with
banks in India (including
co-operative banks).
Balances in current
accounts and deposit
accounts should be
shown separately.
ii) Money at
call and short
notice
a) with banks
b) with other
institutions Includes deposits
repayable within 15 days
notice, lent in the inter-
bank call money market.
II. Outside
India
i) Current
accounts
ii) Deposits Includes balances held by
foreign branches and
balances held by Indian
branches of the banks
outside India. Balance
held with foreign
branches by other
branches of the bank,
should not show under
this head but should be
included in the inter-
branch accounts. The
amounts held in ‘current
accounts’ and ‘deposit
accounts should be
shown separately.
iii) Money at
call and short
notice Includes deposits usually
classified in foreign
currencies as money at
call and short notice.
Invest
ment 8 I. Investment
in India
i) Government
securities Includes Central and
State Government
securities and
Government treasury
bills. These securities
should be at the book
value. However, the
difference between the 23
munotes.in
Page 24
book value and market
value should be given in
the notes to the Balance
Sheet.
ii) Other
approved
securities Securities other than
Government securities,
which according to the
Banking Regulation Act,
1949, are treated as
approved securities,
should be included here.
iii) Shares Investment in shares of
companies and
corporations not included
in item (ii) should be
included here.
iv) Debentures
and Bonds Investments in
debentures and bonds of
Companies, Corporations
not included in item (ii)
should be included here.
v) Investments
in subsidiaries
/ joint venturesInvestment in subsidiary /
joint ventures (including
R. R. Bs) should be in
included here.
vi) Others Includes general
investments, if any, like
gold, commercial paper
and other instruments in
the nature of shares /
debentures / bonds.
II. Investment
outside India
i) Government
securities
(including
local
authorities)
ii) Subsidiaries
and / or joint
ventures
abroad
All foreign Government
securities including
securities issued by local
authorities may be
classified under this head.
All investments made in
the share capital of
subsidiaries, floated
outside India and / or joint 24
munotes.in
Page 25
iii) Others ventures abroad, should
be classified under this
head.
All other investments
outside India may be
shown under this head.
Advanc
es 9 A. i) Bills
purchased
and
discounted
ii) Cash
credits,
overdrafts and
loans
repayable on
demand
iii) Terms
loans In classification under
Section ‘A’, all
outstanding – in India as
well as outside – less
provisions made, will be
classified under three
heads as indicated, and
both secured and
unsecured advances will
be included under these
heads including overdue
installments.
B. i) Secured
by tangible
assets All advances or part of
advances which are
secured by tangible
assets may be shown
here. The item will include
advances in India and
outside India.
ii) Covered by
Bank /
Government
Guarantee Advances in India and
outside India to the extent
they are covered by
guarantees of Indian and
foreign governments and
Indian and foreign banks
and DICGC & ECGC are
to be included.
iii) Unsecured All advances not
classified under (i) and (ii)
will be included here.
Total of ‘A’ should tally
with the total of ‘B’.
C.I. Advances
in India
i) Priority
sectors Advances should be
broadly classified into
‘Advances in India’ and
‘Advances outside India’.
Advances in India will be 25
munotes.in
Page 26
ii)Public sector
iii) Banks
iv) Others further classified on the
sartorial basis as
indicated.
C.II.
Advances
outside India
i) Due from
banks
ii) Due from
others
a) Bills
purchased
and
discounted
b) Syndicated
loans
c) Others Advances to sectors
which for the time being
are classified as priority
sectors according to the
instructions of the
Reserve Bank are to be
classified under the head
‘Priority sectors’. Such
advances should be
excluded from the item (ii)
i.e., advance to public
sector. Advances to
Central and State
Government and other
Government undertakings
including Government
companies and
corporations, which are,
according to the statutes,
to be treated as Public
sectors companies, are to
be included in the
category ‘Public sector’.
All advances to the
banking sector including
co-operative banks, will
come under the head
‘Banks’. All the remaining
advances will be included
under the head ‘Others’
and typically this category
will include non-priority
advances to the private,
joint and co-operative
sectors
Note: General
i) The gross amount of
advances including
refinance and rediscounts
but excluding provisions
made to the satisfaction
of auditors should be
shown as advances. 26
munotes.in
Page 27
ii) Term loans will be
loans not repayable on
demand.
iii) Consortium advances
would be shown net of
share from other
participating banks /
institutions.
Fixed
Assets 10 I. Premises
i) At cost as
on 31st M a r c h
of the
preceding
year
ii) Addition
during the
year
iii)
Deductions
during the
year
iv)
Depreciation
to due Premises wholly or partly
owned by the banking
company for the purpose
of business, including
residential premises
should be shown against
‘premises’. In the case of
premises and other fixed
assets, the previous
balance, additions there
to, deductions there from,
during the year, and also
the total depreciation
written-off should be
shown. Where sums have
been written off on
reduction of capital and
revaluation of assets,
every Balances Sheet
after the first Balance
Sheet, subsequent to the
reduction or revaluation
should show the revised
figures for a period of five
years, with the date and
amount of revision made.
II.Other Fixed
Assets
(including
furniture and
fixtures)
i) At cost on
31st M a r c h o f
the preceding
year
Motor vehicles and all
other fixed assets other
than premises but
including furniture and
fixtures should be shown
under this head. 27
munotes.in
Page 28
ii)Additions
during the
year
iii) deductions
during the
year
iv) Depreciation
to date
Other
Assets 11 I. Inter-office
Adjustments
(net) The inter-office
adjustment balance, if in
debit, should be shown
under this head. Only net
position of inter-office
accounts, inland as well
as foreign, should be
shown here. For arriving
at the net balance of
inter-office adjustment
accounts, all connected
inter-office accounts
should be aggregated
and the net balance, if in
debit, only should be
shown, representing
monthly items in transit
and unadjusted items.
II.Interest
Accrued
Interest accrued but not
due or investments and,
advance and interest due
but not collected on
investment, will be the
main components of this
item. As banks normally
debit the borrowers
account with the interest
due on the Balance Sheet
date, usually there may
not be any amount of
interest due on advances.
Only such interest as can
be realized in the ordinary
course should be shown
under this head. 28
munotes.in
Page 29
III. Tax paid
in advance /
tax deducted
at source The amount of tax
deducted at source on
securities, advance tax
paid etc. to t he extent that
these items are not set off
against relative tax
provisions should be
shown against this item.
IV. Stationery
and Stamps Only exceptional items of
expenditure on stationery
like bulk purchase of
security paper, loose leaf
or other ledgers, etc.
which are shown as
quasi-asset to be written-
off over a period of time,
should be shown here.
The value should be on a
realistic basis and cost
escalation should not be
taken into account, as
these items are for
internal use.
V.Non-
banking
assets
acquired in
satisfaction
of claims Immovable properties /
tangible assets acquired
in satisfaction of claims
are to be shown under
this head.
VI. Others This will include items like
claims which have not
been met, for instance,
clearing items, debit items
representing addition to
assets or reduction in
liabilities, which have not
been adjusted for
technical reasons, want of
particulars, etc.,
advances given to staff by
a bank as an employer
and not as a banker, etc.
Items which are in the
nature of expenses,
which are pending 29
munotes.in
Page 30
adjustments, should be
provided for and the
provision netted against
this item, so that only
realizable value is shown
under this head. Accrued
income other than interest
may also be included
here.
Conting
ent
Liabilitie
s 12 I. Claims
against the
bank not
acknowledge
d as debts
II. Liabilities
for partly
paid
investments Liabilities on partly paid
shares, debentures, etc.,
will be included in this
head.
III. Liabilities
on account of
outstanding
forward
exchange
contracts Outstanding forward
exchange contracts may
be included here
I V .
Guarantees
given on
behalf of
constituents
i) in India
ii)outside
India Guarantees given for
constituents in India and
outside India may be
shown separately.
V)
Acceptances,
endorsement
and other
obligations This item will include
letters of credit and bills
accepted by the bank on
behalf of customers. 30
munotes.in
Page 31
VI. Other items
for which the
Bank is
contingently
liable Arrears of cumulative
dividends, bills
rediscounted under
under-writing contracts,
estimated amount of
contracts remaining to be
executed on Capital
Account and not provided
for, etc., are to be
included here.
Bills for
Collection B i l l s a n d o t h e r i t e m s i n
the course of collection
and not adjusted will be
shown against this item in
summary version only, a
separate schedule is
proposed.
Profit and Loss Account
Interest
earned 13 I. Interest /
discount on
advance / bills Includes interest and
discount on all types of
loans and advances, cash
credit, demand loans,
overdrafts, export loans,
term loans, domestic and
foreign bills purchased
and discounted (including
those rediscounted), over
interest and also interest
subsidy, if any, relating to
advances / bills
II. Income on
investments Includes all income
derived from the
investment portfolio by
way of interest and
dividend.
III. Interest on
balances with
the Reserve
Bank of India
and other inter-
bank funds Includes interest on
balances with Reserve
Ban and other banks, call
loans, money market
placements etc.
31
munotes.in
Page 32
IV. Others I n c l u d e s a n y o t h e r
interest / discount income
not included in the above
heads.
Other
Income 14 I. Commission,
exchange and
brokerage Includes all remuneration
on services such as
commission on
collections, commission /
exchanges on
remittances and transfers,
commission on letters of
credit, letting out of
lockers and guarantees,
commission on
Government business,
commission on other
permitted agency
business including
consultancy and other
services, brokerage, etc.,
on securities. It does not
include foreign exchange
income.
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.
Includes profit / loss on
sale of securities,
furniture, land and
buildings, motor vehicle,
gold, silver, etc. Only the
net position should be
shown. If the net position
is a loss, the amount
should be shown as a
deduction. The net profit /
loss on revaluation of
assets may also be
shown under this item.
32
munotes.in
Page 33
V. Profit on
exchange
transactions.
Less: Loss on
exchange
transaction
VI.Incomeearned
by way of
dividends etc.
from
subsidiaries,
companies, joint
ventures abroad
/ in India. Includes profit / loss on
dealing in foreign
exchange, all income
earned by way of foreign
exchange, commission
and charges on foreign
exchange transactions
excluding interest which
will be shown under
interest. Only the net
position should be shown.
If the net position is a loss,
it is to be shown as a
deduction.
VII.
Miscellaneous
income. Includes recoveries from
constituents for godown
rents, income from bank’s
properties, security
charges, insurance etc.,
and any other
miscellaneous income. In
case, any item under this
head exceeds one
percentage of the total
income, particulars may be
given in the notes.
Interest
Expended 15 I. Interest on
deposits
Includes interest paid on
all types of deposits
including deposits from
banks and other
institutions.
II. Interest on
Reserve Bank
of India / inter-
bank
borrowings Includes discount / interest
on all borrowings and
refinance from the Reserve
Bank of India and other
banks.
III. Others Includes discount / interest
on all borrowings /
refinance from financial
institutions. All other
payments like interest on
participation certificates,
penal interest paid, etc.
may also be included here. 33
munotes.in
Page 34
Operating
Expanses 16 I. Payments to
and provisions
for employees Includes staff salaries /
wages, allowances, bonus,
and other staff benefits,
like provident fund,
pension, gratuity, liveries
to staff, leave fare
concessions, staff welfare,
medical allowance to staff,
etc.
II. Rent, taxes
and lighting Includes rent paid by the
banks on buildings and
municipal and other taxes
paid (excluding income-tax
and interest tax) electricity
and other similar charges
and levies. House rent
allowance and other
similar payments to staff
should appear under the
head ‘Payments to and
Provisions for Employees’.
III. Printing and
Stationery Includes books and forms,
and stationery used by the
bank and other printing
charges, which are not
incurred by way of publicity
expenditure.
IV.
Advertisement
and Publicity Includes expenditure
incurred by the bank of
advertisement and
publicity purposes
including printing charges
of publicity matter.
V. Depreciation
on bank’s
property Includes depreciation on
bank’s own property, motor
cars and other vehicles,
furniture, electric fittings,
vaults, lifts, leasehold
properties, non-banking
assets, etc.
VI. Director’s
fees,
allowances and
expenses Includes sitting fees and all
other items of expenditure
incurred on behalf of the
directors. The daily 34
munotes.in
Page 35
allowance, hotel charges,
conveyance charges, etc.
which though in the nature
of reimbursement of
expenses incurred, may be
included under this head.
Similar expenses of Local
Committee members may
also be included under this
head.
VII. Auditor’s
fees and
expenses
(including
branch
auditor’s fees
and expenses) Includes the fees paid to
the statutory auditors and
branch auditors for the
professional services
rendered and also all
expenses for performing
their duties, even though
they may be in the nature
of reimbursement of
expenses. If external
auditors have been
appointed by the banks
themselves for internal
inspections and audits and
other services, the
expenses incurred in that
context including fees may
not be included under this
head but should be shown
under ‘other expenditure’.
VIII. Law
charges All legal expenses and
reimbursement of
expenses incurred in
connection with legal
services are to be included
here.
IX. Postage,
telegraphs,
telephones, etc.Includes all postal charges
like stamps, telegrams,
telephones, teleprinter etc.
X Repairs and
maintenance Includes repairs to bank’s
property, their
maintenance charges, etc. 35
munotes.in
Page 36
XI. Insurance I n c l u d e s i n s u r a n c e
charges on bank’s
property, insurance premia
paid to Deposit Insurance
and Credit Guarantee
Corporation, etc. to the
extent they are not
recovered from the
concerned parties.
XII. Other
expenditure
Provisions and
contingencies
All expenses other than
those not included in any
of the other heads, like,
licence fees, donations,
subscriptions to papers,
periodicals, entertainment
expenses, travel
expenses, etc., may be
included under this head.
In case, any particular item
under this head exceeds
one percentage of the total
income, the particulars
may be given in the notes.
Includes all provisions
made for bad and doubtful
debts, provisions for
taxation, provisions for
diminution in the value of
investments, transfers to
contingencies and other
similar items.
Disclosure of Accounting Policies
In order that the financial posit ion of banks represent a true
and fair view, the Reserve Bank of India has directed the banks to
disclose the accounting policies regarding the key areas of
operations along with the notes of account in their financial
statements for the accounting ye ar ending 31.3.1991 and onwards,
on a regular basis. The accounting policies disclosed may contain
the following aspects subject to m odification by individual banks:
1) General
T h e a c c o m p a n y i n g f i n a n c i a l statements have been prepared
on the historical cost and conform to the statutory provisions and
practices prevailing in the country. 36
munotes.in
Page 37
2) Transactions involving Foreign Exchange
a) Monetary assets and liabilit ies have been translated at the
exchange rates, prevailing at the close of the year. Non-monetary
assets have been carried in the books at the historical cost.
b) Income and expenditure items in respect of Indian branches
have been translated at the exchange rates, ruling on the date of
the transaction and in respect of overseas branches at the
exchange rates prevailing at the close of the year.
c) Profit or losses on pending fo rward contracts have been
accounted for.
3) Investments
a) Investments in Governments and o t h e r a p p r o v e d s e c u r i t i e s i n
India are valued at the lower of cost or market value.
b) Investments in subsidiary co mpanies and associate companies
(i.e., companies in which the bank holds at least 25 percent of the
share capital) have been accounted fo r on the historical cost basis.
c) All other investments are valued at the lower of cost or market
value.
4) Advances
a) Provisions for doubtful ad vances have been made to the
satisfaction of the auditors:
i) In respect of identified advanc es, based on a perio dic review of
advances and after taking into a ccount the portion of advance
guaranteed by the Deposit Insu rance and Credit Guarantee
Corporation, the Export Credit and Guarantee Corporation and
similar statutory bodies;
ii) In respect of general advances, as a percentage of total
advances taking into account the guidelines issued by the
Government of India and the Reserve Bank of India.
b) Provisions in respect of doubtful advances have been deducted
from the advances to the extent n e c e s s a r y a n d t h e e x c e s s h a v e
been included under “Other Liabi lities and Provisions”.
c) Provisions have been made on a gross basis. Tax relief, which
will be available when the advance is written-off, will be accounted
for in the year of write-off.
5) Fixed Assets
a) Premises and other fixed assets have been accounted for at
their historical cost. Premis es which have been revalued are 37
munotes.in
Page 38
accounted for the value dete rmined on the basis of such
revaluation made by the professi onal values; profit arising on
revaluation has been credit ed to Capital Reserve.
b) Depreciation has been prov ided for on the straight
line/diminishing balance method.
c) In respect of revalued assets, depreciation is provided for on the
revalued figures and an amount equal to the additional depreciation
consequent of revaluation is tr ansferred annually from the Capital
Reserve to the General Reserve / Profit and Loss Account.
6) Staff Benefits
P r o v i s i o n s f o r g r a t u i t y / p e n s ion benefits to staff have been
made on an accrual / casual basis. S e p a r a t e f u n d s f o r g r a t u i t y /
pension have been created.
7) Net Profit
a) The net profit discl osed in the Profit and Loss Account is after:
i) provisions for taxes on income, in accordance with the statutory
requirements.
ii) provisions for doubtful advances.
iii) adjustments to the va lue of “current investments” in Government
and other approved securities in Indi a, valued at lower of cost or
market value.
iv) transfers to contingency funds.
v) other usual or necessary provisions.
b) Contingency funds have been g r o u p e d i n t h e B a l a n c e S h e e t
under the head “Other Liab ilities and Provisions”.
the year) 1.6. SOME IMPORTANT TRANSACTIONS
1.6.1 Rebate on Bills Discounted :
R e b a t e o n B i l l s D i s c o u n t e d i s t h e D i s c o u n t i n c o m e
not earned by the bank of discounting off t he Bill of the Bill as
it gets mature after the closing date of its accounting year.
Journal entries :
i) On discounting of Bill
B i l l s D i s c o u n t e d a n d p u r c h a s e d A / c Dr (with its full value)
T o C u s t o m e r ’ s A c c o u n t ( w i t h t h e p r o c e e d s v a l u e )
T o D i s c o u n t A / c ( w i t h t h e a m ount of Discount earned during
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To Rebate on Bills Discounted (w ith the amount of unearned
Discount)
‘Rebate on Bills Discounted’ appears on Liabilities side of
Balance sheet under – “other liabilit ies and provisions” (schedule-5)
as it is the income received in advance.
ii) At the beginning of Accounting year entry will be Rebate on
Bills Discounted A/c Dr.
To Discount A/c (with t he amount of unearned Discount)
Illustration 1:
On 1st J a n u a r y 2 0 0 8 A j m e r B a n k L t d . D i s c o u n t e d a b i l l o f R s . 3 ,
00,000 @ 10 percent p.a. The Bills falls due on 31st May 2008 and
bank closes its account on 31st March every year. Pass necessary
journal entry.
Journal Entry
Solution:
1 Jan, 08 Bills discounted and purchased A/c Dr
To Customers’ A/c
To Discount A/c
To Rebate on bills discounted
(Being the bills discounted) 3,00,000
2,87,500
7,500
5,000
1 April, 08 Rebate on bills discounted A/c Dr.
To Discount A/c
(Being in next accounting year Rebate
on bills discounted transferred to
discount A/c) 5,000
5,000
Note : Discount for 3 months = 3,00,000 10 37,500100 12×× =
R e b a t e o n b i l l s f o r 2 m o n t h s = 3 , 0 0 , 0 0 0 10 25, 000100 12×× =
Illustration 2:
Following are the details o f b i l l s d i s c o u n t e d b y U C O B a n k L t d .
During the year ended 31/3/08
Date of Bill
2009 Amount
(Rs). Term
(Months) Rate of
Discount
p.a. (%) Discount
(Rs.)
Jan 15
March 5
Feb. 6 1,00,000
1,50,000
80,0004
3
512
15
184,000
5,625
6,000
Total 3,30,000 15,625 39
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Calculate Rebate on bills discounted and show the necessary
Journal entry.
Date of
Bill 2009 Date of
maturity No. of days
outstanding
after 31/3/2008 Amount
(Rs.) Discount
(%) Total amount
of discount
(Rs.) Portion of
Discount o/s
after
31/3/2008
(Rs.)
Jan 15
March 05
Feb 06 May 18
June 08
July 09 (30 + 18) 48
(30+31+8) 69
(30+31+30+9)
100 1,00,000
1,50,000
80,000
12
15
18 12,000
22,500
14,400 1,578.08
4,253.42
3,945.21
Total 9,776.71
Journal Entry:
Bills discounted and purchased A/c Dr. 3, 30,000
T o C u s t o m e r A / c ( 3 , 30,000 – 5,848.29-9776.71)
T o D i s c o u n t A / c ( 1 5 6 2 5 - 9 7 7 6 . 7 1 ) 5 8 4 8 . 2 9
T o R e b a t e o n b i l l s d i s c o u n t e d 9 7 7 6 . 7 1
1.6.2 Acceptance Endorsement and other obligations
T h e B a n k a c c e p t s o r e n c l o s e s a bill on behalf
of its customers who has raised loan or made purchases on
credit basis and a customer deposit equal amount of security into
the bank. On maturity bank pays amount to the party on behalf
of its customer and at the same time claims same a m o u n t f r o m
its customer. It is shown under the heading ‘contingent Liabilities’
(Schedule -12)
1.6.3 Bills for collection
M a n y b a n k c u s t o m e r s u s u a l l y handover bills receivables to
the bank for the purpose of its collection on ma turity when the
bills get mature, bank credit the amount to the respective
client’s account. The ‘Bills for collection’ is shown at the foot of the
Balance sheet.
1.6.4 Provisions and contingencies
T h e r e i s n o s e p a r a t e s c h e d u l e g i v e n b y t h e
Banking Regulation Act,1949 regarding prov isions and
contingencies but it is shown in the profit and loss
account under the heading ‘Provisions and contingencies’. It
includes provisions for bad and doubtful debts, Provision for
income t a x p r o v i s i o n s f o r R e b a t e o n bills discounted and
such other r e q u i r e d p r o v i s i o n s a n d contingencies. It is
included in sc hedule – 5 ‘other liabilities and provisions’ with
sub-he ading – IV – others”.
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PROBLEMS
Illustration 1
A Smruti Bank Ltd. Provides y ou the following balances as on 31st
March 2009.
Particulars Amount (Rs.)
Share capital (Issued and subscribed)
Current account
Money at call and short notices
Rebate on bills discounted
Commission exchange and brokerage
Interest on loans
Interest on fixed deposit
Commission Received
Salaries and allowances
Reserve for building
Unclaimed discount
Unexpired discount
Investment of cost: Central and State
Government
- Securities
- Debentures
- Bullion
Reserve fund
Fixed deposit
Directors fees and allowances
Rent and taxes paid
Postage and telegram
Rent received
Interest on balances with RBI
Profit on sale of Investment
Loans, advances, overdraft and cash credit
Bills payable
Borrowings from banks in India
Branch adjustment
Furniture and fixtures
Non banking assets acquired
Interest accrued on investment
Dividend fluctuation fund 39,000
8,58,000
9,885
22,500
27,000
77,700
82,500
2,400
31,500
39,000
936
1,950
3,90,000
15,600
93,600
62,400
1,56,000
3,600
16,200
6,000
9,000
60,825
3,90,000
78,000
9,750
2,25,966
1,23,900
2,730
10,140
23,400 1.7 SOLVED 41
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Profit and loss A/c (Credit balance)
Locker rent
Transfer fees
Interest on saving bank deposits
Interest on cash credit
Premises at cost
Additions to premises
Advance payment of tax
Silver bullion
Saving Bank deposit
Cash balances with RBI
Cash balances with other banks
Depreciation Fund on premises 7,800
3,000
1,500
20,400
66,900
3,90,000
78,000
4,290
7,800
2,34,000
1,32,600
46,800
3,12,000
Other Information:
1) There was a claim of rupees 7,800 against bank but not
acknowledge as debt.
2) Bank transfer reserve for building to depreciation fund of
premises
3) Directors decided to declare 10 percent dividend
4) Provide rupees 1, 05,000 for income tax and rupees 15,000
for doubtful debts.
5) Transfer 20 percent of profit t o s t a t u t o r y r e s e r v e . P r e p a r e
final accounts of the bank.
Solution:
Smruti Bank Ltd.
Balance Sheet as on 31st March 2009
S c h e d u l e
No. As on 31st M a r c h
2009
39,000
1,01,625
12,48,000
9,750
5,58,036
19,56,411 Capital and Liabilities
Capital
Reserves and surplus
Deposits
Borrowings
Other Liabilities and provisions
Total
1
2
3
4
5
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1,32,600
56,685
4,99,200
4,25,100
5,91,900
2,50,926
19,56,411 Assets
Cash and balances with
Reserve Bank of India
Balances with banks and
money at call and short notice
Investments
Advances
Fixed Assets
Other Assets
Total
Contingent liabilities
Bills for collection 6
7
8
9
10
11
12
7,800
Profit and Loss account for the year ended 31st March 2009
S c h e d u l e
No. As on 31st M a r c h
2009
2,49,225
42,900
2,92,125
1,02,900
57,300
1,20,000
2,80,200
11,925
7,800
19,725
2,385
3,900
13,440 I. Income
Interest earned
Other income
Total
II. Expenditure
Interest expended
Operating expenses
Provisions and contingencies
Total
III. Profit / Loss
Net profit / Loss (-) for the year
Profit / Loss (-) brought forward
Total
IV. Appropriations
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government /
proposed dividend
Balance carried over to
Balance sheet
Total
13
14
15
16
19,725
Schedule 1 – Capital
A s o n 3 1st March 2009
Authorized Capital 39,000
Issued and subscribed 39,000
Total 39,000
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Schedule 2 - Reserves and surplus
A s o n 3 1st March 2009
62,400
2,385I. Statutory Reserves
Opening Balance
Additions during the year
II. Revenue and other
Reserves
Dividend fluctuation fund
III. Balance in profit and loss
Account
64,785
23,400
13,440
Total (I + II + III)
1,01,625
Schedule 3 – Deposits
A s o n 3 1st March 2009
A. I. Demand Deposits : From banks
II. Saving Bank Deposits
III. Term D eposits : Fixed Deposits 8,58,000
2,34,000
1,56,000
Tota l (I + II + III) 12,48,000
B. I. Deposits of branches in India
II. Deposits of branches outside India 12,48,000
--
Total 12,48,000
Schedule 4 – Borrowings
A s o n 3 1st March 2009
I. Borrowings in India: other banks 9,750
Total 9,750
Schedule 5–other liabilities and provision
A s o n 3 1st March 2009
I. Bills payable
II. Others : Rebate for bills discount
Provision fo r tax and doubtful debts
Unclaimed Discount
Unexpired Discount
Depreciation fund on premises
Proposed dividend 78,000
2,250
1,20,000
936
1,950
3,51,000
3,900
Total (I + II) 5,58,036
Note : Depreciation fund on premises = 3,12,000 + 39,000
= 3, 51,000
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Schedule 6 – Cash and Balances with RBI
A s o n 3 1st March 2009
I. Balances with RBI 1,32,600
Total 1,32,600
Schedule 7 – Balances with Ban ks and money at calls & short
notice
A s o n 3 1st March 2009
I. Balances with other banks in India
II. Money at call & short notice 46,800
9,885
Total (I + II) 56,685
Schedule 8 – Investments
A s o n 3 1st March 2009
I. Investment in Gove rnment securities
Debentures
Bullion 3,90,000
15,600
93,600
Total 4,99,200
Schedule 9 – Advances
A s o n 3 1st March 2009
I. Bills purchased and discounted
II. Cash credits, overdrafts and loans
repayable on demand 35,100
3,90,000
Total 4,25,100
Schedule 10 – Fixed Assets
A s o n 3 1st March 2009
I. Premises
Opening Balance
Additions during the year
II. Other Fixed Assets 3,90,000
78,000
4,68,000
1,23,900
Total (I + II) 5,91,900
Schedule 11 – Other Assets
A s o n 3 1st March 2009
I. Inter office adjustments
II. Interest accrued on investment
III. Advance payment of tax
IV. Non banking Assets acquired in
satisfaction of claims
V. Other : Silver bullion 2,25,966
10,140
4,290
2,730
7,800
Total 2,50,926 45
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Schedule 12 – Contingent Liabilities
A s o n 3 1st March 2009
I. Claims against the bank not
acknowledged as debt 7,800
Total 7,800
Schedule 13 – Interest earned
A s o n 3 1st March 2009
I. Interest / discount on Advances / bills:
Interest on loans
Interest on cash credits
II. Interest on balances with Reserve
Bank of India and other inter-bank
funds
III. Others: Discount on bills discounted
7,77,000
66,900
60,825
43,800
Total 2,49,225
Schedule 14- Other income
A s o n 3 1st March 2009
I. Commission exchange and brokerage
II. Profit on sale of investment
III. Miscellaneous income: Rent Received
Locker rent
Transfer fees
Commission received 27,000
28,500
9,000
3,000
1,500
2,400
Total 42,900
Schedule 15 – Interest expanded
A s o n 3 1st March 2009
I. Interest on Fixed deposits
II. Interest on saving bank deposit 82,500
20,400
Total 1,.02,900
Schedule 16 – Operating Expenses
A s o n 3 1st March 2009
I. Rent and Taxes paid
II. Directors fees, allowances and
expenses
III. Postage and telegram
IV. Other expenditure 16,200
3,600
6,000
31,500
Total 57,300
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Illustration 2:
On 31st March 2010 the following trial balance was extracted from
Amin Bank Ltd. You are required to prepare profit and loss account
for the year ended 31st March 2010 and also the balance sheet as
on that date.
Debit Balances Amount
(Rs.)
Insurance charges on bank property
Depreciation on banks property
Fees paid to statutory auditor
Staff salaries and medical allowances
Rent on building and municipal taxes
Interest due but not collected on investment
Land and building at cost
Other fixed Assets
Loss on sale of other fixed Assets
Repairs and maintenance
Legal charges
Tax deducted at source
Cash in hand
Balances with RBI: Current A/c
Other Accounts
Printing and stationary
Printing charges of publicity matters
Stationary and stamp
Term loans
Licence fee
Directors sitting fees
Other expenditure
Balance with other bank: In current A/c
In other deposit A/c
Money call and short notices with bank
Cash credit and overdraft
Investment:
Government treasury bills
Other approved securities
Joint ventures
Debentures and bonds of companies
Non banking Assets acquired in satisfaction of claims
Interest on RBI borrowings
Bills purchased and discounted
Interest paid on deposit: From banks
Other institution
Inter-office adjustment (net) 2,899
3,523
21,944
1,45,366
9,035
33,280
4,693
24,570
2,795
1,508
221
93,873
27,482
9,75,026
12,805
2,418
520
1,846
9,11,599
12,155
4,524
9,295
7,139
3,560
325
12,96,984
12,78,576
4,91,452
16,380
19,721
6,500
5,785
2,84,089
59,280
2,37,159
16,562
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Credit Balances Amount
(Rs.)
Issued, subscribed and paid up share capital:
3250 shares of Rs. 10 each
Interest on debentures and bonds
Rebate on bills discounted
Depreciation on building to date
Statutory Reserve
Revenue Reserves
Depreciation on other fixed assets to date
Demand deposits : From banks
From others
Saving bank deposits
Term deposits
Commission on remittances and transfer
Letting out lockers
Interest on balances with RBI and other
Inter-bank funds
Income earned by way of di vidend from joint venture
Interest on advances, cash credit and overdraft
Interest accrued
Profit on sale of investment
Bills payable
Borrowings from RBI
Profit and loss account 32,500
1,86,706
42,939
1,417
97,591
71,500
12,610
13,39,050
10,9,540
15,41,865
19,04,760
53,582
5,920
44,811
2,274
4,04,859
16,328
2,275
71,162
37,700
45,500
Adjustments:
1. The authorized capital of bank i s r u p e e s 6 5 , 0 0 0 d i v i d e d i n t o
6,500 shares of Rupees10 each, 50 percent of it is issued and
subscribed.
2. The provision for income tax to be made @ 45 percent
3. All advances are in I n d i a a n d t h e y a r e classified as follows:
priority sectors 12, 46,336; public sector 4, 98,534; banks 3,
94,198; others 3, 53,604. Advances secured by tangible assets
Rs. 11, 21,702; covered by bank/ Government guarantees Rs.
8, 72,435 and remaining ar e unsecured 4, 98,535.
4. Bank Transfer 20 percent of pr ofit to statutory reserve and 15
percent to revenue reserves.
5. contingent liabilities:
i) Claim against the bank not a c k n o w l e d g e d a s d e b t R s .
2,150.
ii) Liability on account of outstanding forward exchange
contracts Rs. 640.
iii) Acceptance, endorsement and other obligations 4542. 48
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Solution 2:
Amin Bank Ltd.
Balance Sheet as on 31st March 2010
S c h e d u l e
No. As on 31st March
2010
Capital & Liabilities
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilities and provisions
32,500
3,14,691
48,95,215
37,700
2,12,329
Total 54,92,435
Assets
Cash and balances with Reserve
Bank of India
Balances with banks and money at
call and short notice
Investments
Advances
Fixed Assets
Other assets
10,15,313
11,024
18,06,129
24,92,672
15,236
1,52,061
Total 54,92,435
Contingent Liabilities
1
2
3
4
5
6
7
8
9
10
11
7,332
PROFIT & LOSS A/C FOR THE YEAR ENDED ON
31ST MARCH, 2010
S c h e d u l e
No. As on 31-3-
10
I. Income: Interest earned
Other Income 6,36,376
61,256
Total 6,97,632
II. Expenditure: Interest expended
Operating expenses
Provisions and contingencies 3,02,224
2,13,408
81,900
Total 5,97,532
III. Profit / Loss:
Net Profit / Loss (-) for the year
Profit / Loss (-) brought forward
1,00,100
45,500
Total 1,45,600
IV. appropriations:
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government/proposed
dividend
Balance carried over to Balance Sheet
29,120
21,840
94,640
Total13
14
15
16
1,45,600 49
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Schedule 1 – Capital
A s o n 3 1st March 2010
65,000
32,500
32,500
32,500 For other banks
Authorized capital
6500 shares of Rs. 10 each
Issue capital
3250 shares of Rs. 10 each
Subscribed capital:
3250 shares of Rs. 10 each
Called-up capital:
3250 shares of Rs. 10 each
32,500
Schedule 2 – Reserves and surplus
As on 31st March 2010
97,591
29,120
1,26,711
71,500
21,840
93,340 I. Statutory reserves:
Opening balance
Additions during the year
II. Revenue and other reserves
Opening balance
Additions during the year
III. Balance in profit and loss A/c 94,640
Total (I + II + III) 3,14,691
Schedule 3 – Deposits
A s o n 3 1st March, 2010
I. Demand deposits: From banks
From others
II. Savings bank deposits
III. Term deposits 13,39,050
1,09,540
15,41,865
19,04,760
Total ( I + II + III) 48,95,215
Schedule 4 – Borrowings
A s o n 3 1st March, 2010
I. Borrowings in India : Reserve bank
of India 37,700
Total 37,700
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Schedule 5– Other Liabilities and provisions
A s o n 3 1st March, 2010
Bills payable
Interest accrued
Others: Rebate on bills discounted
Provision for income tax 71,162
16,328
42,939
81,900
Total 2,12,329
Schedule 6 – Cash and balances with RBI
A s o n 3 1st March, 2010
I. Cash in hand
II. Balances with RBI:
In current A/c
In other A/c 27,482
9,75,026
12,805
Total 10,15,313
Schedule 7 – Balances with banks & money at call
& short notice
A s o n 3 1st March, 2010
I. Balances with banks:
In current A/c
In other deposit A/c
II. Money at call & short notice
7,139
3,560
325
Total ( I + II) 11,024
Schedule 8 – Investment
A s o n 3 1st March, 2010
Investments in:
Government treasury bills
Other approved securities
Debentures and bonds of companies
Subsidiaries and joint venture
12,78,576
4,91,452
19,721
16,380
Total 18,06,129
Schedule 9 – Advances
A s o n 3 1st March, 2010
A)
i) Bills purchased and discounted
ii) Cash credit, overdraft and loans
repayable on demand
iii) Terms loans
2,84,089
12,96,984
9,11,599
Total 24,92,672 51
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B)
i) Secured by tangible assets
ii) Covered by bank / Government
guarantees
iii) Unsecured
11,21,702
8,72,435
4,98,535
Total 24,92,672
C)
I) Advances in India :
i) Priority sectors
ii) Public sector
iii) Banks
iv) Others
12,46,336
4,98,534
3,94,198
3,53,604
Total 24,92,672
II) Advances outside India --
Schedule 10 – Fixed Assets
A s o n 3 1st March, 2010
4,693
(1,417)
3,276
24,570
(12,610) I) Premises: At cost
Depreciation to date
II) Other fixed assets (including
Furniture and fixtures):
At cost
Depreciation to date
11,960
Total (I + II) 15,236
Schedule 11 – Other Assets
A s o n 3 1st March, 2010
Inter office adjustments
Interest due on investment but not
collected
Tax deducted at source
Stationary and stamps
Non banking assets acquired in
satisfaction of claims 16,562
33,280
93,873
1,846
6,500
Total 1,52,061
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Schedule 12 – Contingent Liabilities
A s o n 3 1st March, 2010
Claim against the bank not
acknowledge as debts
Liability on account of outstanding
forward exchange contracts
Acceptance, endorsement and other
obligations 2,150
640
4,542
Total 7,332
Schedule 13 – Interest earned
A s o n 3 1st March, 2010
Interest on advances, cash credit and
overdraft
Interest on debentures and bonds
Interest on balances with RBI and
other inter bank funds 4,04,859
1,86,706
44,811
Total 6,36,376
Schedule 14 – Other income
A s o n 3 1st March, 2010
Commission on remittances and
transfer
Profit on sale of investment
Loss on sale of other fixed assets
Income earned by way of dividend, etc
Form subsidiaries / companies
Miscellaneous income:
Letting out lockers 53,582
2,275
(2,795)
2,274
5,920
Total 61,256
Schedule 15 – Interest expanded
A s o n 3 1st March, 2010
Interest on deposits:
From banks
From other Institution
Interest on RBI / inter bank borrowings
59,280
2,37,159
5,785
Total 3,02,224
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Schedule 16 – Operating Expenses
A s o n 3 1st March, 2010
Staff salaries and medical allowances
Rent on building and municipal taxes
Printing and stationery
Printing charges of publicity matters
Depreciation on banks property
Directors fees, allowances and
expenses
Fees paid to statutory auditor
Law charges
Repairs and maintenance
Insurance charges on bank property
Other expenditure: license fee
Other expenses 1,45,366
9,035
2,418
520
3,523
4,524
21,944
221
1,508
2,899
12,155
9,295
Total 2,13,408
Illustration 3
From the following info rmation, prepare final accounts of Jetty Bank
Ltd. as on 31st March, 2010
Debit Balances Amount
(Rs.)
Inter-office Adjustments (Net)
Interest on investment not collected but accrued
Stationery and stamp
Interest on deposits
Interest on RBI and Inter-Bank borrowings
Investment: In India
Government securities
Other approved securities
Subsidiaries and Joint Ventures
Mutual fund
Commercial paper
Unit Trust of India
Outside India
Foreign Government securities (Issued by local
authorities)
Subsidiaries and Joint Ventures
Rent, Taxes, lighting
Printing and stationery
Depreciation on land and Building 135
365
410
2,100
820
2,215
1,600
310
225
60
365
665
234
500
775
400 54
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663
220
900
516
1,295
615
785
1,315
771
1,710
644
224 Directors Fees, allowances and expenses
Law charges
Non-banking assets acquired in satisfaction of claims
Tax paid in advance
Land and Building at cost
Other fixed assets
Bills purchased and discounted
Cash credit, overdrafts and loans
Terms loans
Balance with RBI
Balance with other Banks
Money at call and short notices
20,837
Credit Balances Amount
(Rs.)
2,000
225
311
1,775
1,100
1,322
775
1,120
1,335
330
1,000
925
885
700
435
1,100
375
446
1,135
531
411
225
800
665
911 Authorised, issued and subscribed capital
Deposits Repayable on demand
Certificates of deposits from non-bank sectors
Saving Bank deposits
Term Deposits: From Banks
Cumulative and Recurring deposits
Interest on Balances with other banks
Interest / discount on advances / bills
Income on investment
Commission, exchange and brokerage
Profit on sale of land and building
Income earned by way of dividend from subsidiaries
Statutory Reserves
Capital Reserves
Revenue and other Reserves
Borrowings in India : RBI
Other banks
Borrowings outside India
Profit on sale of investment (Net)
Profit on exchange transactions (Net)
Bills Payable
Inter-office Adjustment (Net)
Interest accrued
Other provisions
Interest on call loans
20,837 55
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Adjustments:
1. Advances amounting Rs. 1,439 ar e secured by tangible assets;
Rs. 1,210 covered by guarantees of Indian and foreign
governments and banks; and remaining are unsecured.
2. Advances are made both in India and outside India:
A d v a n c e s i n I n d i a o n s e c t o r a l basis – priority sector Rs. 860;
public sector Rs. 574; Banks Rs. 287 and other Rs. 193
A d v a n c e s o u t s i d e I n d i a – D u e f r o m B a n k s R s . 6 2 3 a n d d u e
from others Rs. 334
3. Provision is to be made for income tax at the rate of 30%.
4. Dividend is proposed at the rate of 15 percent.
5. The contingent liabilities appears as on 31st M a r c h 2 0 1 0 a s
follows.
i) Acceptance, endorsement and other obligations Rs. 310.
i i ) C l a i m s a g a i n s t b a n k n o t a cknowledged as debt Rs. 620.
6. Out of total deposits, Rs. 1, 317 are deposits of branches outside
India.
Solution:
Balance Sheet of Jetty Bank Ltd. as on 31-03-10
S c h e d u l e
No. As on 31st March
2010
Capital & Liabilities
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilities and provisions
2,000
3,528.8
4,733
1,921
3,176.2
Total 15,359
Assets
Cash and balances with RBI
Balances with banks and money at
call and short notice
Investments
Advances
Fixed Assets
Other assets
1,710
868
5,674
2,871
1,910
2,326
Total 15,359
Contingent Liabilities
Bills for collection
1
2
3
4
5
6
7
8
9
10
11
12
-- 930
-- 56
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PROFIT & LOSS A/C FOR THE YEAR ENDED ON
31ST MARCH, 2010
S c h e d u l e
No. As on 31-3-
10
I. Income:
Interest earned
Other Income
4,141
3,921
Total 8,062
II. Expenditure:
Interest expended
Operating expenses
Provisions and contingencies
2,920
2,558
775.2
Total 6253.2
III. Profit / Loss:
Net Profit for the year
1808.8
IV. Appropriations:
Transfer to statutory reserves
Transfer to other reserves
Transfer to proposed dividend
Balance carried over to Balance Sheet
361.76
--
300
1147.04
Total
13
14
15
16
1,808.8
Schedule 1 – Capital
A s o n 3 1st March 2010
2,000 Authorized, Issue, Subscribed capital:
2,000
Schedule 2 – Reserves and surplus
As on 31st March 2010
885
361.76
1246.76 I. Statutory reserves:
Opening balance
Additions during the year
II. Capital reserve
III. Revenue and other reserves
IV. Balance in profit and loss A/c 700
435
1147.04
Total 3,528.8
57
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Schedule 3 – Deposits
A s o n 3 1st March, 2010
A) I. Demand deposits:
Bank deposits repayable on demand
Certificate of deposits from non bank
II. Savings bank deposits
III. Term deposits
Cumulative and recurring deposits
225
311
1,775
1,100
1,322
Total ( I + II + III) 4,733
B)
I) Deposits of branches in India
II) Deposits of branches outside India
3,416
1,317
Total (I +II) 4,733
Schedule 4 – Borrowings
A s o n 3 1st March, 2010
I. Borrowings in India : RBI
Other Banks
II. Borrowings outside India 1,100
375
446
Total (I + II) 1,921
Schedule 5 – Other Liab ilities and provisions
A s o n 3 1st March, 2010
I) Bills payable
II) Inter office adjustment
III) Interest accrued
IV) Others: Provision for tax
Dividend 411
225
800
775.2
300
Total (I + II + III + IV) 3176.2
Schedule 6 – Cash and balances with RBI
A s o n 3 1st March, 2010
I. Cash in hand
II. Balances with RBI: --
1,710
Total 1,710
58
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Schedule 7 – Balances with banks & money at call
& short notice
A s o n 3 1st March, 2010
I. In India: Balances with banks:
Money at call & short notice 644
224
Total 868
II. Outside India --
Total (I + II) 868
Schedule 8 – Investment
A s o n 3 1st March, 2010
I. Investments in India in:
Government securities
Other approved securities
Subsidiaries and joint ventures
Others: mutual fund 225
Comme rcial papers 60
UTI 365
2,215
1,600
310
650
Total 4,775
II. Investment outside India in:
Government se curities (including
local authorities)
Subsidiaries and joint ventures
abroad
Total
665
234
899
Grand Total (I + II) 5,674
Schedule 9 – Advances
A s o n 3 1st March, 2010
A)
i) Bills purchased and discounted
ii) Cash credit, overdraft and loans
repayable on demand
iii) Terms loans
785
1,315
771
Total 2,871
B)
i) Secured by tangible assets
ii) Covered by bank / Government
guarantees
iii) Unsecured
1,439
1,210
222
Total 2,871
59
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C)
I) Advances in India :
i) Priority sectors
ii) Public sector
iii) Banks
iv) Others
860
574
287
193
Total 1,914
II) Advances outside India
i) Due from banks
ii) Due from others
623
334
Total 957
Grand Total (C. I + C. II) 2,871
Schedule 10 – Fixed Assets
A s o n 3 1st March, 2010
I) Premises: At cost
II) Other fixed assets (including
Furniture and fixtures) 1,295
615
Total (I + II) 1,910
Schedule 11 – Other Assets
A s o n 3 1st March, 2010
i) Inter office adjustments
ii) Interest accrued
iii) Tax paid in advance
iv) Stationary and stamps
v) Non banking assets acquired in
satisfaction of claims 135
365
516
410
900
Total 2,326
Schedule 12 – Contingent Liabilities
A s o n 3 1st March, 2010
i) Claim against the bank not
acknowledge as debts
ii) Acceptance, endorsement and
other obligations 620
310
Total 930
60
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Schedule 13 – Interest earned
A s o n 3 1st March, 2010
I) Interest / discount on advances /
bills (911 + 1120)
II) Income on investment
III) Interest on balances with other
bank 2,031
1,335
775
Total 4,141
Schedule 14 – Other income
A s o n 3 1st March, 2010
I) Commission, exchange and
brokerage
II) Profit on sale of investments
III) Profit on sale of land, buildings and
other assets
IV) Profit on exchange transactions
V) Income earned by way of dividend
etc, from subsidiaries / companies 330
1,135
1,000
531
925
Total 3,921
Schedule 15 – Interest expanded
A s o n 3 1st March, 2010
I) Interest on deposits:
II) Interest on RBI / inter bank
borrowings 2,100
820
Total 2,920
Schedule 16 – Operating Expenses
A s o n 3 1st March, 2010
I) Rent, taxes and lighting
II) Printing and stationery
III) Depreciation on banks property
IV) Directors fees, allowances and
expenses
V) Law charges 500
775
400
663
220
Total 2,558
Illustration 4
The following are the balances of merchant Bank Ltd. for the year
ended 31st M a r c h , 2 0 0 8 . P r e p a r e p r o f i t a n d l o s s a c c o u n t f o r t h e
year ended 31st M a r c h , 2 0 0 8 a n d a l s o b a l a n c e s h e e t a s o n t h a t
date. 61
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Page 62
Debit Balances Amount
(Rs.)
Balance with RBI
Premises at cost
Additions during the year
Other fixed assets
Balances with other banks in current account
Balances with banks in other deposit A/c
Money at call and short notices
Inter-office adjustment
Interest accrued
Stationary and stamps
Tax paid in advance
Non banking assets acquired in satisfaction of
claims
Medical allowances
Allowances to employees
Staff provident fund
Other provisions for employees
Expenses on books and forms
Insurance charges
Telephone and stamp
Subscription to periodicals
Rent and taxes
Audit fees and expenses
Interest on deposits
Interest on inter bank borrowings
Bills purchased and discounted
Cash credit, overdraft and loans
Term loans
Investment: In Government securities
Shares
Debentures and bonds
Subsidiaries 1,500
860
900
1,300
3,300
1,000
3,000
800
800
1,750
380
240
410
525
230
333
125
400
360
250
155
600
930
630
1,830
2,070
1,330
3,450
3,000
782
2,200
Total 32,470 62
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Page 63
Credit Balances (Rs. In‘ 000)
Amount
(Rs.)
Issued, subscribed an d called up capital:
30,000 shares of Rs. 100 each
Rent received
Miscellaneous income
Income earned from subsidiaries
Commission on remittances and transfer
Interest on balance with RBI
Dividend on shares
Profit on sale of investment
Depreciation to date (Premises)
Depreciation to dat e (other assets)
Revenue reserves
Profit on sale of other assets
Borrowings: From NABARD
From RBI
From Co-operative Banks
Capital reserves
Statutory reserves
Share premium
Bills payable
Inter office adjustment
Interest on loans and advances
Discount on bills purchased
Balances in profit and loss A/c
Interest accrued
Interest on debentures and bonds
Demand deposits: From banks
From others
Fixed deposit
Saving bank deposit
3,000
310
400
830
730
840
350
650
350
210
910
1,100
1,200
1,100
980
1,400
1,000
590
2,000
900
1,940
960
2,220
1,500
500
2,790
1,210
1,050
1,450
Total 32,470
63
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Other Information:
1) On 31st March, 2008 advances appears as follows:
(Rs. In ‘000)
B i l l s p u r c h a s e d
and discounted Cash credit,
overdraft, loans Term loan
Standard assets
Sub-standard assets
Doubtful assets:
- upto 1 year
- 1 year to 3 year
- more than 3 years
Loss assets 1,030
800
--
--
--
--985
300
100
360
255
70475
200
360
140
110
45
Total 1,830 2,070 1,330
The provision is yet to be made on above advances.
2) Depreciation to be charged on premises Rs. 1, 53,000 and
other assets Rs. 1, 10,000.
3) Directors declare interim dividend @ 10 Percent
4) Claims against the bank not acknowledged as debt Rs. 7,
80,000. Liability for partly pai d investment Rs. 5, 95,000.
Solution:
MERCHANT BANK LTD.
Balance Sheet as on 31-3-2008
S c h e d u l e
No. As on 31st March
2010
(Rs. In ‘000)
Capital & Liabilities
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilities and provisions
3,000
8,299.5
6,500
3,280
4,950
Total 26029.5
Assets
Cash and balances with RBI
Balances with banks and money at
call and short notice
Investments
Advances
Fixed Assets
Other assets
1,500
4,330
9,432
4560.5
2,237
3,970
Total 26,029.5
Contingent Liabilities
Bills for collection
1
2
3
4
5
6
7
8
9
10
11
12
-- 1,695
-- 64
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Page 65
PROFIT & LOSS A/C FOR THE YEAR ENDED ON
31ST MARCH, 2008
S c h e d u l e
No. As on 31-3-10
(Rs. In ‘000)
I. Income: Interest earned
Other Income 4,590
4,020
Total 8,610
II. Expenditure: Interest expended
Operating expenses
Provisions and contingencies 1,560
3,651
919.5
Total 6,130.5
III. Profit / Loss:
Net Profit / Loss (-) for the year
Profit / Loss (-) brought forward
2,479.5
2,220
Total 4,699.5
IV. Appropriations:
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government / proposed
dividend
Balance carried over to Balance Sheet
495.9
300
3,903.6
Total13
14
15
16
4,699.5
Schedule 1 – Capital
A s o n 3 1st March 2008
3,000
3,000
3,000 Authorized capital
30,000 shares of Rs. 100 each
Issue capital
30,000 shares of Rs. 100 each
Subscribed capital:
30,000 shares of Rs. 100 each
Called-up capital:
30,000 shares of Rs. 100 each
3,000
65
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Schedule 2 – Reserves and surplus
As on 31st March 2008
1,000
495.9
1,495.9 I. Statutory reserves:
Additions during the year
II. Capital reserve
III. Shares Premium
IV. Revenue and other Reserves
V. Balance in profit and loss account 1,400
590
910
3,903.6
Total (I + II +I II +IV + V) 8,299.5
Schedule 3 – Deposits
A s o n 3 1st March, 2008
I. Demand deposits:
i) From banks
ii) From others
II. Savings bank deposits
III. Term deposits
2,790
1,210
1,450
1,050
Total ( I + II + III) 6,500
Schedule 4 – Borrowings
A s o n 3 1st March, 2008
I. Borrowings in India :
Reserve Bank of India
Other Banks: From NABA RD
From Co -operative banks
1,100
1,200
980
Total 3,280
Schedule 5 – Other Liab ilities and provisions
A s o n 3 1st March, 2008
I) Bills payable
II) Inter office adjustment (Net)
III) Interest accrued
IV) Others: Interim Dividend
Provision on tax 2,000
900
1,500
300
250
Total 4,950
Schedule 6 – Cash and balances with RBI
A s o n 3 1st March, 2008
I. Balances with RBI 1,500
Total 1,500 66
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Schedule 7 – Balances with banks & money at call
& short notice
A s o n 3 1st March, 2008
In India:
i) Balances with banks:
a) In current Accounts
b) In other deposit accounts
ii) Money at call & short notice
330
1,000
3,000
Total 4,330
Schedule 8 – Investment
A s o n 3 1st March, 2008
I. Investments in India:
i) Government securities
ii) Shares
iii) Debentures and bonds
iv) Subsidiaries and / or joint ventures
3,450
3,000
782
2,200
Total 9,432
Schedule 9 – Advances
A s o n 3 1st March, 2008
i) Bills purchased and discounted
ii) Cash credit, overdraft and loans
repayable on demand
iii) Terms loans 1,750
1,714.5
1,096
Total 4,560.5
Schedule 10 – Fixed Assets
A s o n 3 1st March, 2008
I) Premises: At cost
Additions during the year
Depreciation to date (350+153)
II) Other fixed assets (including
Furniture and fixtures) at cost
Deprecia tion to date (210 + 110) 860
900
(503)
1,300
(320)
Total (I + II) 2,237
67
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Schedule 11 – Other Assets
A s o n 3 1st March, 2008
i) Inter office adjustments (net)
ii) Interest accrued
iii) Tax paid in advance / tax deducted
at source
iv) Stationary and stamps
v) Non banking assets acquired in
satisfaction of claims 800
800
380
1,750
240
Total 3,970
Schedule 12 – Contingent Liabilities
A s o n 3 1st March, 2008
i) Claim against the bank not
acknowledge as debts
ii) Liability for partly paid investments
ii) Acceptance, endorsement and
other obligations 780
595
320
Total 1,695
Schedule 13 – Interest earned
A s o n 3 1st March, 2008
I) Interest / discount on advances /
bills
Discount on bills purchased
Interest on loans and advances
II) Income on investment
Interest on debentures and bonds
Dividend on shares
III) Interest on balances with RBI and
other inter bank Funds
960
1,940
500
350
840
Total 4,590
68
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Page 69
Schedule 14 – Other income
A s o n 3 1st March, 2008
I) Commission on remittance and
transfer.
II) Profit on sale of investments
III) Profit on sale of land, buildings and
other assets
IV) Income earned by way of dividend
etc, from subsidiaries / companies
V) Miscellaneous income:
Rent received
Other miscellaneous income 730
650
1,100
830
310
400
Total 4,020
Schedule 15 – Interest expanded
A s o n 3 1st March, 2008
I) Interest on deposits:
II) Interest on RBI / inter bank
borrowings 930
630
Total 1,560
Schedule 16 – Operating Expenses
A s o n 3 1st March, 2008
I. Allowances to employees
II. Medical allowances
III. Staff providend fund
IV. Other provision for employees
V. Rent, taxes and lighting
VI. Expenses on books and forms
VII. Depreciation on banks property
(153 + 110)
VIII. Audit fees and expenses
IX. Postage and telephones
X. Insurance
XI. Other expenditure:
Subscription to periodicals 525
410
230
333
155
125
263
600
360
400
250
Total 3,651
69
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Page 70
I. Provisions on Advances:
(Rs. In ‘000)
Assets Bills
Purchased &
Discounted Cash Cr.,
Overdraft,
loans Term
loans % of
provision Bills Purchased
& Discounted Cash Cr.,
Overdraft,
loans Term
loans
Standard Assets
Sub-standard Assets
Doubtful assets:
- upto 1 year
- 1 to 3 years
- More than 3 years
Loss Assets 1,030
800
--
--
--
-- 985
300
100
360
255
70 475
200
360
140
110
45 --
10%
20%
30%
50%
100% --
80
--
--
--
-- --
30
20
108
127.5
70 --
20
72
42
55
45
1 , 8 3 0 2 , 0 7 0 1 , 3 3 0 8 0 3 5 5 . 5 2 3 4
Total Provision on Advances = Rs. 669.5
II Interim dividend 1030,00,000 3,00,000100×=
III Provision on Tax = 2, 50,000
Illustration – 5
Kranti Bank Ltd. provides you the following balances as on 31st
March, 2007. Prepare profit and loss account and balance sheet
from the given balances and other information.
Particulars Amount
Annuity deposit
Matured time deposits
Pay slips and bankers cheques
Bills purchased and discounted
Borrowings from: PNB bank of India
Rajgrih co-operative bank
Statutory reserve fund
Profit and loss A/c (Credit)
Deposits repayable within 15 days notice (in India)
Deposits with Wilson Financial agency (in India)
Capital reserve
Saving bank deposits
Term loans
Prepaid Insurance
Non banking assets acquired in satisfaction of
claims
Remuneration for consultancy and other services
Land and building (cost Rs. 1,38,000)
Furniture and Fixtures (Cost Rs. 23,920)
Interest paid on deposits 18,81,630
13,85,980
46,000
6,80,110
46,000
69,000
32,200
23,000
23,460
5,29,000
92,000
9,30,580
32,75,200
161
691
46,000
94,300
16,790
28,750 70
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Page 71
Cash balance
Balances with RBI
Share premium
Contingency fund
Repairs and maintenance of buildings
Directors fees, allowances and expenses
Payment to and provision for employees
Fees paid to statutory auditor
Traveling allowances
Postage and telephone
Advertisement and publicity
Other expenditure
Profit on exchange transaction
Income on investment
Investment in India: share capital of subsidiaries
Government bonds
Branch adjustment – A/c (Credit)
Share capital 1,93,200
1,84,000
5,000
27,600
19,320
4,600
2,990
2,990
3,910
1,380
1,380
690
4,600
1,20,750
2,34,600
2,31,380
17,940
8,00,000
Other Adjustments:
1. Authorized capital in equity shares of Rs. 100 each,
Rs. 16, 00,000. Issued, sub scr ibed and called up capital
Rs. 50 per share.
2. Bills accepted by bank of behalf of customer amounting
Rs. 33,000.
3. Depreciation on Land & building Rs. 3,680 and furniture
Rs. 1,610 is to be provided.
4. Transfer 20% of net prof it to statutory reserve.
Kranti Bank Ltd.
Balance Sheet as on 31st March 2007
S c h e d u l e
No. As on 31-3-07
Capital & Liabilities
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilities and provisions
8,00,000
2,52,250
41,98,190
1,15,000
91,540
Total
1
2
3
4
5
54,56,980 71
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Page 72
Assets
Cash and balances with RBI
Balances with banks and money at
call and short notice
Investments
Advances
Fixed Assets
Other assets
3,77,200
5,52,460
4,65,980
39,55,310
1,05,800
230
Total 54,56,980
Contingent Liabilities
Bills for collection
6
7
8
9
10
11
12
33,000
PROFIT & LOSS A/C FOR THE YEAR ENDED ON
31ST MARCH, 2007
S c h e d u l e
No. Year ended
31.03.07
I. Income:
Interest earned
Other Income
1,20,750
50,600
Total 1,71,350
II. Expenditure:
Interest expended
Operating expenses
Provisions and contingencies
28,750
42,550
Total 71,300
III. Profit / Loss:
Net Profit / Loss (-) for the year
Profit / Loss (-) brought forward
1,00,050
23,000
Total 1,23,050
IV. Appropriations:
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government / proposed
dividend
Balance carried over to Balance Sheet
13
14
15
16
20,010
--
--
1,03,040
Schedule 1 – Capital
A s o n 3 1st March 2007
16,000,00
8,00,000
8,00,000 Authorized capital
16,000 shares of Rs. 100 each
Issue capital
16,000 shares of Rs. 50 each
Subscribed capital:
16,000 shares of Rs. 50 each
Called-up capital:
16,000 shares of Rs. 50 each
8,00,000 72
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Page 73
Schedule 2 – Reserves and surplus
As on 31st March 2007
32,200
20,010
52,210 I. Statutory reserves:
Additions during the year
Total
II. Capital reserve
Opening balance
III. Shares Premium
Opening balance
IV. Revenue and other Reserves
V. Balance in profit and loss account 92,000
5,000
1,03,040
Total 2,52,250
Schedule 3 – Deposits
A s o n 3 1st March, 2007
I. Demand deposits: matured time
deposit
II. Savings bank deposits
III. Term deposits: Annuity deposit 13,85,980
9,30,580
18,81,630
Total 41,98,190
Schedule 4 – Borrowings
A s o n 3 1st March, 2007
I. Borrowings in India :
i) RBI
ii) Other Banks: PNB Bank of India
Rajgrih Co-operative Bank
46,000
69,000
Total 1,15,000
Schedule 5 – Other Liab ilities and provisions
A s o n 3 1st March, 2007
I) Bills payable: Pay slips and bankers’
cheques
II) Inter office adjustment
III) Others (including provisions)
- Contingency Fund 46,000
17,940
27,600
Total 91,540
73
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Page 74
Schedule 6 – Cash and balances with RBI
A s o n 3 1st March, 2007
I. Cash in hand
II. Balances with RBI 1,93,200
1,84,000
Total 3,77,200
Schedule 7 – Balances with banks & money at call
& short notice
A s o n 3 1st March, 2007
In India:
i) Balances with banks:
ii) Money at call & short notice:
Deposits repayable within 15 days
notice
Deposits with Wilson financial agency
23,460
5,29,000
Total 5,52,460
Schedule 8 – Investment
A s o n 3 1st March, 2007
Investments in India:
Government bonds
Share capital of subsidiaries
2,31,380
2,34,600
Total 4,65,980
Schedule 9 – Advances
A s o n 3 1st March, 2007
Bills purchased and discounted
Terms loans 6,80,110
32,75,200
Total 39,55,310
Schedule 10 – Fixed Assets
A s o n 3 1st March, 2007
1,38,000
(47,380)
90,620
23,920
8,740 I) Premises: At cost
Depreciation to date (43,700 +
3,680)
II) Other fixed assets (including
Furniture and fixtures) At cost as
on 31st March of the preceding year.
Depreciation to date (7 ,130 + 1, 610)
15,180
Total (I + II) 1,05,800 74
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Schedule 11 – Other Assets
A s o n 3 1st March, 2007
Non banking assets acquired in
satisfaction of claims.
Prepaid Insurance 69
161
Total 230
Schedule 12 – Contingent Liabilities
A s o n 3 1st March, 2007
Bills accepted on behalf of customer 33,000
Schedule 13 – Interest earned
A s o n 3 1st March, 2007
Income on investment 1,20,750
Total 1,20,750
Schedule 14 – Other income
A s o n 3 1st March, 2007
I. Commission brokerage and
exchange:
Remuneration for consultancy and
other services
II. Profit on exchange transactions
46,000
4,600
Total 50,600
Schedule 15 – Interest expanded
A s o n 3 1st March, 2007
I) Interest paid on deposits: 28,750
Total 28,750
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Schedule 16 – Operating Expenses
A s o n 3 1st March, 2007
Payment to and provision for
employees
Advertisement and publicity
Depreciation on bank’s property
(3,680 + 1,610)
Director’s fees, allowances and
expenses
Fees paid to statutory auditor
Traveling expenses
Postage and telephone
Repairs and maintena nce of building
Other expenditure 2,990
1,380
5,290
4,600
2,990
3,910
1,380
19,320
690
Total 39,859
Summary:
A bank is a commercial instit ution, which accepts deposits
and repay on demand; lend; transfer and invest the money.
Banking companies are governed by Banking Regulation Act, 1949
and also subject to the companies Act, 1956.
Section 6 of the Banking Regu lation Act prescribes various
business of banking companies which includes borrowing, raising
or taking up of money, acting as on agent for any government or
local authority or any other pers on; contracting, guaranteeing and
so on. Also the banks are restrict ed to deal in buy ing, selling or
bartering of goods and also not allowed to engage in any trade
related to bills of exchange receiv ed for collection or negotiation or
such of its business.
The various accounting provisions regarding minimum
capital and reserves; restriction on commission, brokerage,
discount on sale of shares, rest rictions on payment of dividend,
statutory reserves, cash reserves and restrictions on loans and
advances given under various secti ons of Banking Regulation Act,
1949.
The banks keep subsidiary and principal books of accounts
to minimize the errors in maintaining records of voluminous
transactions.
The recommendation of Narsimham Committee report on
Non-performing Assets was accepted by RBI and accordingly
issued directives to all the bank s regarding income recognition,
assets classification and loan provisioning. The assets have been 76
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classified as standard assets, s ub-standard assets, doubtful assets
and loss assets and provisioning norms for each category is given.
The final accounts of bankin g companies are prepared as
per the formats given under form ‘A’ for balance sheet and form ‘B’
for profit and loss account. Out of 16 schedules, form A contains 12
schedules and form B contains the remaining 4 schedules.
EXERCISES:
Q.1 State whether the follo wings are True or False:
1) All nationalized Banks are governed by the Banking Regulation
Act.
2) Section 6 of the Banking Regulation Act, 1949 prescribes
requirements of minimum paid-up capital and reserves to be
maintained by banking companies.
3) It is voluntary for all Banking companies to publish their Balance
Sheet in newspapers.
4) The assets and liabilities of B a n k i n g C o m p a n i e s a r e s h o w n
vertically along with the figures of last year.
5) The commission, exchange and brokerage are shown in
Schedule 15 of the Bank’s Profit and loss account.
6) Every bank needs to create a reserve fund by transferring 20
percent of its annual profit afte r the declaration of dividend.
7) Money at call is refundable at 2 4 h o u r s ’ n o t i c e a n d m o n e y a t
short notice is refundable at 7 days notice.
8) The income from non-performi ng assets should not be taken
into profit and loss account unless income had been realized.
9) A credit facility is classified as non-performing if interest and / or
installment of principal have remained unpaid for two quarters
after it has become past due.
10) The assets which do not yield positive returns become non-
performing assets.
Answer: True - 1; 4; 7; 8; 9; 10;
F a l s e - 2 ; 3 ; 5 ; 6 ;
Q.2 Multiple choice Question
1) For internal purpose, banks may close their accounts on
________________.
i) 31st December 1.8 77
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ii) 30th June
iii) 31st March
iv) 30th September
2) The principal books of a bank ing company that gives the
summary of the receiving cashier’s counter cash books and
the paying cashiers counter cash book.
i ) G e n e r a l L e d g e r
i i ) S a v i n g B a n k a c c o u n t s l e d g e r
i i i ) C a s h b o o k
i v ) I n v e s t m e n t L e d g e r
3) The ___________ of section 29 of the Banking Regulation
Act, 1949 prescribes formats of Balance sheet and profit and
loss account of banking companies.
i ) T h i r d s c h e d u l e
i i ) S e c o n d s c h e d u l e
i i i ) S i x t h s c h e d u l e
i v ) F o u r t h s c h e d u l e
4) It is the last item to appear under ‘Capital and li abilities of the
Balance Sheet of a bank.
i ) R e s e r v e s a n d s u r p l u s
i i ) D e p o s i t s
i i i ) B o r r o w i n g s
i v ) O t h e r l i a b i l i t i e s a n d p r o v i s i o n .
5) It is shown by way of a f ootnote and details are given in
schedule 12.
i ) C o n t i n g e n t L i a b i l i t i e s
i i ) O t h e r A s s e t s
i i i ) I n v e s t m e n t s
i v ) O t h e r l i a b i l i t i e s a n d p r o v i s i o n s .
6) Bills purchased and discount ed are shown in _________ on
the Balance sheet of a Bank.
i ) S c h e d u l e 1 0
i i ) S c h e d u l e 8
i i i ) S c h e d u l e 9
i v ) S c h e d u l e 1 2
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7) Every Bank needs to maintain a cash reserves of at least
_________ of the total of it s demand and time liabilities.
i ) 3 p e r c e n t
i i ) 5 p e r c e n t
i i i ) 7 p e r c e n t
i v ) 2 0 p e r c e n t
8) In respect of sub-standard assets, a general provision of
___________ of the total outst anding should be created.
i ) 2 0 p e r c e n t
i i ) 1 0 p e r c e n t
i i i ) 3 0 p e r c e n t
i v ) N o n e o f t h e a b o v e
9) The assets which does not di sclose any problems and which
does not carry more than no rmal risk attached to the
business.
i ) S t a n d a r d a s s e t s
i i ) S u b - s t a n d a r d a s s e t s
i i i ) D o u b t f u l a s s e t s
i v ) L o s s a s s e t s
10) Section 20 of the Banki ng Regulation Act, 1949 deals with
_____________.
i) Cash Reserves
i i ) R e s t r i c t i o n s o n l o a n s a n d a d v a n c e s
i i i ) S t a t u t o r y R e s e r v e s
i v ) F i n a l a c c o u n t
Answers: 1 – iv; 2 – iii; 3 – I; 4 – iv; 5 – I; 6 – iii; 7 – I; 8 – ii;
9 – I ; 1 0 – i i .
Q.3 Match the following
A)
1) Principal Books a) Personal ledger
2) Contingent liabilities b) Schedule 11
3) Share Premium c) Cash book and General ledger
4) Subsidiary Books d) Reserves and surplus
e ) S c h e d u l e 1 2
f ) B i l l s p u r c h a s e d a n d d i s c o u n t e d
Answer: 1-c; 2-e; 3-d; 4-a 79
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B)
1) Income on investment a) Schedule 8
2) Stationery and st amp b) Schedule 2
3) Balance of prof it c) Schedule 5
4) Bills payable d) Schedule 11
e ) S c h e d u l e 1 3
f ) S c h e d u l e 1 6
Answer: 1-e; 2-d; 3-b; 4-c.
Q.4 D e f i n e B a n k i n g C o m p a n i e s a n d write a note on ‘Business of
banking companies.
Q.5 E x p l a i n t h e p r o v i s i o n s g i v en by Banking Regulation Act,
1949 with regard to following –
i) Statutory Reserve
ii) Minimum capital and Reserves
iii) Restrictions on Payment of Dividend
Q.6 E x p l a i n i n b r i e f t h e c l a s s i f i c a tion of assets and provisioning
of NPA.
Q.7 E x p l a i n t h e f o l l o w i n g t e r m s :
1) Non-banking assets
2) Doubtful assets and loss assets
3) Rebate on bills discounted
4) Bills for collection
5) Provisions and contingencies
Q.8 T h e a s s e t o f t h e B a n k i s b i f u r c a t e d a s p e r f o r m i n g a n d n o n -
performing assets and accordingl y income to be recognized.
Interest Earned Interest Received
Performing Assets
Cash credit and overdraft
Bills purchased and discounted
Term loans
Non-performing Assets
Cash credit and overdraft
Bills purchased and discounted
Term loans 10,50,000
2,10,000
1,68,000
2,10,000
1,40,000
1,05,000
8,68,000
2,10,000
1,12,000
16,800
28,000
7,000
Answer: Income Recognized – Rs. 14, 79,800.
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Q.9 T h e f o l l o w i n g a r e t h e b a l a n c e s of Armo Bank Ltd. for the
year ended 31st March, 2008.
Debit Balances Amount (Rs.)
Money at call and short notices
Constituents, Liability for acceptance & endorsement
Non-banking assets acquired in satisfaction of claims
Land and Building
Furniture and fixtures
Advances
Investment in Government bonds
Gold bullion
Other investment
Balances with RBI
Cash in hand
Interest accrued on investment
Interest on deposits
Bills receivable being bills for collection
Law charges
Loss on sale of building
Printing and stationery
Rent, taxes and lighting
Repairs and maintenance
Bills discounted and purchased
Directors Remuneration
Branch adjustment
Loss on sale of investment
Deposits with other Banks 1,82,000
3,95,500
14,000
35,000
4,55,000
14,00,000
13,60,590
1,05,910
10,89,410
2,16,300
1,08,150
1,72,340
55,650
3,04,500
35,000
7,000
350
1,48,400
8,400
87,500
84,000
1,40,000
2,10,000
5,25,000
Total 71,40,000
Credit Balances Amount (Rs.)
Term deposits from banks
Demand deposits
Share capital
Provision for depreciation on furniture & fixtures
Security deposits of employee
Statutory Reserves
Share Premium account
Borrowings from institutions and agencies
Profit and loss account
Rent received
Profit on bullion
Acceptance and endorsement 51,940
1,61,350
20,00,000
1,40,000
1,05,000
9,80,000
7,30,000
5,40,610
45,500
4,200
8,400
3,95,500 81
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Bills for collection
Commission, exchange and brokerage
Discount on advances
Other miscellaneous income
Current ledger control account
Interest on balances with RBI 3,04,500
1,77,100
2,94,000
18,900
6,79,000
5,04,000
Total 71,40,000
Adjustment:
1) Depreciation on Furniture and Fixtures for the year
amounted to Rs. 35,000 and propos ed dividend is 8 percent.
2) Transfer 20 percent to stat utory Reserve from the profit
earned during the year.
3) Rebate on bills discounted Rs. 35,000.
4) Current account ledger depict s credit balance Rs. 8, 54,000
after the overdrawn to the extent of Rs. 1, 75,000.
5) Liability for partly pai d investment Rs. 80,000.
Answer: C u r r e n t y e a r p r o f i t R s . 1 , 5 0 , 2 4 0
B a l a n c e s h e e t T o t a l R s . 5 8 , 9 1 , 2 0 0
Q.10 O n 3 1st M a r c h , 2 0 0 9 t h e f o l l o w i n g b a l a n c e s w a s e x t r a c t e d
from Oasis Bank Ltd. You are required to prepared profit and
loss account for the year ended 31st M a r c h 2 0 0 9 a n d a l s o
the balance sheet as on that date.
Particulars Amount (Rs.)
Capital Reserve
Interest accrued on Government Bonds
Bills for collection
Investment in Government Bonds
Investment in Gold bullion
Current Deposits
Reserve Fund
Interest and discount received
Profit and loss account (Credit Balance)
Brokerage, exchange and commission received
Capital
Loans and advances
Saving account
Cumulative and recurring deposits
Sundry creditors
Debts due to banks (secured)
Branch adjustments (Credit)
Balances : Cash and hand 1,50,000
26,125
9,95,500
55,000
1,32,000
25,02,500
6,87,500
3,19,000
46,860
96,525
4,00,000
22,93,500
9,08,600
19,34,900
25,025
6,71,000
2,50,525
71,885 82
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Cash with other banks
Liabilities for partly paid investment
Furniture and office equipment
Depreciation on assets
Interest paid on Inter-Bank borrowings
Brokerage, exchange and commission paid
Rebate on bills discounted
Non-banking assets
Customer’s liability for acceptance
Investments in shares
Payment to employees
Auditor’s fees
Repairs and maintenance
Advertisement and publicity
Premises
Current a/c balance with other Banks
Short notices with other institutions and Agencies 3,30,000
8,34,240
27,500
27,500
66,000
5,500
825
2,750
8,34,240
8,74,500
1,32,000
5,500
22,000
16,500
1,87,000
49,500
33,000
Additional Information:
1) The authorized capital of the bank is Rs. 800,000 divided
into 16,000 shares of Rs. 50 eac h. Out of this 8,000 shares
issued, subscribed and paid-up.
2) Current account includes Rs. 4, 67,500 debit balances being
overdraft. One of the a ccounts for Rs. 5,500 including
interest Rs. 550 is doubtful.
3) During the year, a property wa s acquired in satisfaction of a
claim amounting to Rs. 2,750 a nd was sold Rs. 1,980. The
loss resulting there from re mained unadjusted in the books.
4) Bank guaranteed Rs. 1, 00,000 on behalf of its constituents.
5) Provision for taxation is Rs. 55,000.
Answers: Provisions and contingencies – Rs. 59,950
P r o f i t f o r t h e c u r r e n t y e a r – R s . 6 3 , 4 0 4
B a l a n c e s h e e t t o t a l – R s . 8 1 , 7 9 , 4 9 0
Q.11 Y a s h o d a B a n k L t d . p r o v i d e s you the following balances you
are asked to prepare Profit and Loss account and Balance
Sheet.
Particulars Amount (Rs.)
Share capital
Statutory Reserves
Other Reserves
Term Loans 3,40,000
1,04,000
1,00,000
17,00,000 83
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Cash credit
Bills purchased
Rebate on bills discounted
Deposits from other Banks
Current deposits
Saving account
Legal charges
Repairs
Insurance on bank property
Entertainment expenses
Directors sitting fees
Printing charges
Rent and Taxes
Bonus and other staff benefits
Profit and loss account (credit Balances)
Interest paid on deposits
Discount on domestic Bills purchased
Commission received on letter of credit
Bank property
Cash with RBI
Interest received on loans and advances
Investments
Stationery and stamps
Cash with Exe Bank Ltd.
Income on investments 37,62,100
27,89,700
81,600
14,87,500
23,23,900
29,44,400
62,500
2,62,000
95,500
71,100
1,51,000
67,000
35,000
2,30,000
13,94,000
12,71,600
7,59,900
4,98,100
81,6,000
39,100
21,86,200
2,58,100
1,38,000
4,84,500
13,600
Other Information
1) The Bank provided d epreciation on its proper ty at the rate of
12 percent p.a.
2) Tax to be provided at 40 percent.
3) Directors declared dividend at 10 percent.
4) Liabilities on partly paid investment Rs. 81,600
Answer: P r o f i t f o r c u r r e n t y e a r R s . 2 2 , 5 1 , 3 4 4
B a l a n c e s h e e t t o t a l R s . 9 8 , 8 9 , 5 8 0
84
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ACCOUNTS OF INSURANCE COMPANIES
To Ascert ain Profit Or Loss Of The Life Insurance
Business
of
T h e b u s i n e s s o f I n s u r a n c e i n I n d i a i s g o v e r n e d b y T h e
Insurance Act, 1938 along with the r egulations framed by Insurance
Regulations and Development Authorities Act, 1999 (IRDA)
I n s u r a n c e i s a n a g r e e m e n t o r contract of indemnity between
‘insurer’ and ‘insured’. Insurer is one party agrees to provide
protection against loss or damage in the form of promise to pay for
such loss to other party known as ‘insured’ in consideration for a
fixed sum of money known as ‘premium’.
T h e t e r m s a n d c o n d i t i o n s o f s u ch insurance contract in the
written is called ‘Insurance Policy’.
Insurance are of the types –
I) Life Insurance
II) General Insurance
a) Fire insurance
b) Marine insurance
c) Miscellaneous insurance 2
Unit Structure
2.1 Introduction
2.2 Life Introduction Business
2.3 Statutory Boo ks and Subsidiary Books
2.4 Some Important Terms
2.5 Preparation of financial Statements
F o r m A - R A ; F o r m A - P L a n d F o r m A - B S
2.6 Illustrations
2.7 Procedure
2.7 General Insurance Business
2.8 S o m e I m p o r t a n t T e r m s
2.9 Preparation Financial Statements
Form B-RA; Form B-PL and Form B-BS
2.10 S u m m a r y
2.11 E x e r c i s e s
2.1 INTRODUCTION
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I n c a s e o f L i f e I n s u r a n c e , the insurer guarantees to pay a
certain sum of money to the assu red on completing a s t i p u l a t e d
period or in the event of the death to his l egal representative. It
covers risks and gives protection for the investment.
S e c t i o n 2 ( I I ) o f t h e I n s u r ance Act, 1938 has defined ‘Life
Insurance Business” as the busine ss of effecting. Contracts of
insurance upon human life, includi ng any contract whereby the
payment of money is assured on death or the happening of any
contingency dependent on human life, and any contract which is
subject to payment of premiums for a term dependent on human
life and shall be deemed to include
a) The granting of disability and doub le or triple indemnity accident
benefits, if so provided in the contract of insurance;
b) The granting of annuiti es upon human life; and
c) The granting of superannuati on allowances and annuities
payable out of any fund applicable solely to the relief and
maintenance of person engaged or who have been engaged in
any particular profession, trade or employment or of the
dependents of such persons.
A] Statutory Books –
The Insurance Act, 1938, require s the following books to be
maintained by all insurance company –
I. Register of Policies – It contains all the details in respect
of each policy such as nam e and address of the policy
holder, the date when the policy was effected and a record
of any assignment of the policy.
II. Register of claims – A l l t h e p a r t i c u l a r s o f c l a i m s a r e
recorded – date of claim, name and address of claimant,
the date on which the claim wa s discharged, the case of a
claim which is rejected and reasons for rejection.
III. Register of agents – I t c o n t a i n s a l l t h e i n f o r m a t i o n o f
licensed insurance agents such as name and address of
the agent, date of appointment, etc.
B] Subsidiary books –
Apart from statutory books, t he insurance companies also
maintain the following books 2.2 LIFE INSURANCE BUSINESS
2.3 STATUTORY BOOKS AN D SUBSIDIORY BOOKS 86
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I. Ledgers – Life insurance Fund ledger; revenue ledger
and miscellaneous ledger
II. Cash books – Receipts cash boo ks and expenditure cash
books.
III. Journal – J o u r n a l f o r r e c o r d i n g t r a n s a c t i o n a l r e l a t i n g t o
outstanding premium and claims and inter-departmental
transfer.
IV. First year premium book
V. Renewal premium book
VI. Surrender policy book
I. Whole life policy –
Policy under which, amount of policy is received only when
the insured expired.
II. Endowment policy –
Amount of policy received by the insured either he/she
reaches certain age or expi red whichever is earlier.
III. With profit policies -
Policy holder is entitled to shar e in profit of insurer along
with the guaranteed amount payable on maturity
IV. Without profit policies –
On maturity policy holder received only fixed sum of money
stated in the policy
V. Bonus –
The share of profit enjoyed by insured is called bonus –
a) ‘Reversionary bonus’ is one which is paid only on
maturity of the policy along with guaranteed amount.
b) ‘Bonus in cash’ is paid immediately
c) ‘Bonus in reduction of premium’ is normally adjusted
by policy holder against t he future premium due from
him.
d) ‘Interim bonus’ is paid on maturity of policy before
deciding the exact profit amount
VI. Premium –
First year’s premium is the premium paid for the first year
of the life insurance poli cy and premium paid for the
subsequent year is termed as r e n e w a l p r e m i u m . S i n g l e
premium is the total of all the premiums amount, paid by
the policy holder once at t he initiation of policy period
2.4 SOME IMPORTANT TERMS 87
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VII. Surrender value –
It is the amount which is life insurance company agrees to
pay when policy holder discont inue to pay further premium
and surrender the policy.
VIII. Claims –
It is the amount payable by an insurer against the policy
either on maturity (known as claim by maturity or
survivance) or on the death of the policy holder (known as
claim by death).
IX. Re-insurance –
Re-insurance is the transfer of part of risk by the insurance
company on another insur ance company. When the
insurance company find it diffi cult to carry risk involves
huge amount, it makes an arr angement for reinsurance by
giving away a part of its business to another company
(known as accepting company or re-insurance) and
receives commission from accepting company
X. Annuities –
The insurance company agree s to pay a fixed sum of
money at regular intervals of time to the policy holder
during a specified period in return for a lump sum paid in
advance known as annuities
OF FINANCIAL STATEMENTS
T h e f i n a n c i a l s t a t e m e n t o f the life insurance companies
consist of Revenue account, Pr ofit & loss account and Balance
sheet. These statements to be prepared in accordance with the
provisions of IRDA (Preparati on of Financial Statements and
Auditors’ Report of Insurance Co mpanies) Regulati ons, 2002 and
comply with the requirements of schedule ‘A’. The Insurer needs to
prepare Revenue A/C in form A-RA; profit & loss A/C inform A-PL
and Balance sheet in form A-BS.
T h e R e v e n u e a c c o u n t c o n t a i n s t o t a l 4 s c h e d u l e s - s c h e d u l e 1
– Premium; schedule 2- Commi ssion expenses; Schedule 3-
Operating expenses and schedule 4 – Benefits paid. It also shows
the items having no specific schedule such as Income from
Investments, Interim bonus paid; Provision for doubtful debts; tax
and such other provisions. The bottom section of Revenue account
exhibits appropriators of surplus such as transfer to shareholders
accounts, transfer to other reserv es, etc. The remaining balance of
revenue account is transferred to life Insurance Fund account.
T h e p r o f i t a n d l o s s a c c o u n t s hown all expenses and income
not directly related to Insurance business 2.5. PREPARATION 88
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T h e B a l a n c e S h e e t o f l i k e insurance companies are
prepared in ‘vertical form’ having t oo sections – sources of fund and
application of fund. The schedule 5,6 and 7 deals with sources of
fund and schedule 8 to schedule 15 s hows the application of Fund.
The contingent liabilities is discl osed as part of financial statement
by way of notes to Balance Sheet.
FROM A-RA
Name of the Insurer:
Registration No. and Date of Registration with the India:
Revenue Account for the year ended 31st March, 20…
Policyholder’s Account (Technical account)
Particulars s c h e
dule Current
Year
(RS’000) Previous
Year
(Rs’000)
Premiums earned – net
(a) Premium 1
(b) Re-insurance ceded
(c) Re-insurance accepted
Income from investments
(a) Interest, Dividends and
Rent –Gross
(b) Profit on sale / redemption
of Investments
(c) (Loss on sale / redemption
of Investments)
(d) Transfer / Gain on
revaluation /change in fair
value*
Other Income (to be specified)
T o t a l ( A )
Commission 2
Operating Expenses related to
Insurance Business 3
Provision for doubtful debts
Bad debts written off
Provision for tax 89
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Provision (other than taxation)
(a) For diminution in the value
of investment (Net)
(b) Other (to be specified)
T o t a l ( B )
Benefits Paid (Net) 4
Interim Bonuses Paid
Change in valuation of liability
in respect of life policies
(a) Gross**
(b) Amount ceded in
Reinsurance
(c) Amount accepted in
Reinsurance
T o t a l ( c )
Surplus / (Deficit( (D) = (A) - (B) - (C)
Appropriations
Transfer to Shareholders’
Accounts
Transfer to other Reserves (to
be specified)
Balance being Funds for
Future appropriations
T o t a l ( D )
Notes:
* Represents the deemed realized ga in as per norms specified by
the authority.
** Represents Mathematical Rese rves after allocation of bonus.
The total surplus shall be disclos ed separately with the following
details:
a) Interim bonuses Paid;
b) Allocation of Bonus to Policyholders;
c) Surplus shown in the Revenue Account;
d) Total Surplus [( a) + (b) + (c)].
See Notes appended at the end of Form A-PL.
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FROM A-PL
Name of the Insurer:
Registration No. and Date of Registration with the IRDA:
Profit and Loss Account for the year ended 31st March, 20..
Shareholders’ Account (Non-technical Account)
Particulars Sche
dule Current
Year
(RS’000) Previous
Year
(Rs’000)
Amounts transferred from /to
the Policyholders’ Account
(Technical account)
Income from investments
(a) Interest, dividends and
Rent – Gross
(b) Profit on sale /redemption
of Investments
(c) (Loss on sale/ redemption
on Investments)
Other income (to be specified)
T o t a l ( A )
Expenses other than those
directly related to the insurece
business
Bal debts written off
Provisions (other than
taxation)
(a) For diminution in the value
of investments (Net)
(b) Provisions for doubtful
debts
(c) Others (to be specified)
T o t a l ( B )
Profit / (Loss) before tax
Provision for Taxation
Profit / (Loss) after tax
Appropriations
(a) Balance at the beginning
of the year
(b) Interim dividends paid
during the year
(c) Proposed final dividend
(d) Dividend distribution on tax 91
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(e) Transfer to reserves/ other
accounts (to be specified)
Profit carried… to the Balance
Sheet
Notes to Form A-RA and A-PL:
(a) Premium income received from business concluded in and
outside India shall be separately disclosed.
(b) Reinsurance premiums w hether on business ceded or
accepted are to be brought into a c c o u n t g r o s s ( i . e . b e f o r e
deducting commissions) under the head reinsurance
premiums.
(c) Claims incurred shall comprise claims paid, specific claims
settlement costs wherever applicable and change in the
outstanding provision for claims at the year end.
(d) Items of expenses and income in excess of one per cent of the
total premiums (less re-insurance) or Rs. 5,00,000 whichever is
higher, shall be shown as a separate line item.
(e) Fees and expenses connected with claims shall be included in
claims.
(f) Under the sub-head “ Others” shall be included items like foreign
exchange gains or loss es and other items.
(g) Interest, dividends and rentals receivable in c onnection with an
investment should be stated as gross amount, the amount of
income-tax deducted at source being included under “advance
taxes paid and taxes deducted at source”.
(h) Income from rent shall include only the realized rent. It shall
not include any notional rent.
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FORM A-BS
Name of the Insurer:
Registration No. and Date of Registration with the IRDA:
Balance Sheet as at 31st March, 20 …
Particulars s c h e
dule Current
Year
(RS’000) Previous
Year
(Rs’000)
SOURCES OF FUNDS
Shareholders’ Funds:
Share Capital 5
Reserves and Surplus 6
Credit / [Debit] Fair Value
Change Account
Sub total
Borrowings 7
Policyholders’ Funds:
Credit/ [Debit] Fair Value
Change Account
Policy Liabilities
Insurance Reserves
Provision for Linked Liabilities
Sub Total
Funds for Future
Appropriations
T o t a l
APPLICATION OF FUNDS
Investments
Shareholders’ 8
Policyholders’ 8a
Assets Held to Cover Linked
Liabilities 8b
Loans 9
Fixed Assets 10
Current Assets 93
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Cash and Bank Balances 11
Advances and other Assets 12
Sub total
(A)
Current Liabilities 13
Provisions 14
Sub total
(B)
Net Current Assets (C) = (A)-
(B)
Miscellaneous Expenditure (to
the extent not written off or
adjusted) 15
Debit balance in profit and loss
account (Shareholders’
Account)
Total
CONTINGENT LIABILITIES
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Partly paid-up investments
2. Claims, other than against policies, not
acknowledge as debts by the company
3. Underwriting commitments outstanding (in
respect of shares and securities)
4. Guarantees given by or on behalf of the
company
5. Statutory demands/liabilities in dispute, not
provided for
6. Reinsurance obligations to the extent not
provided for in accounts
7. Others (to be specified)
Total
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SCHEDULES FORMING PART OF FINANCIAL STATEMENTS
SCHEDULE 1
Premium
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. First year premiums
2. Renewal premiums
3. Single premiums
Net Premium
Total Premiums
SCHEDULE 2
Commission Expenses
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
Commission paid
Direct First year premiums
Renewal premiums
Single premiums
Add: Commission on Re-insurance Accepted
Less: Commission on Re-insurance Ceded
Net commission
Note : The profit/commission, if any, are to be combined with the
Re-insurance accepted or Re-insurance ceded figures.
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SCHEDULE 3
Operating Expenses Related to Insurance Business
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Employees’ remuneration and welfare
benefits
2. Travel, conveyance and vehicle running
expenses
3. Training expenses
4. Rents, rates and taxes
5. Repairs
6. Printing and stationery
7. Communication expenses
8. legal and professional changes
9. Medical fees
10. Auditors’ fees, expenses etc.
(a) as auditor
(b) as adviser or in any other capacity, in
respect of
i. taxation matters
ii. insurance matters
iii. management services, and
(c) in any other capacity
11. Advertisement and publicity
12. Interest and Bank Changes
13. Others (to be specified)
14. Depreciation
Total
Note: Items of expenses and income in excess of one per cent of
the total premiums (less reinsuranc e) or Rs. 5,00,000 whichever is
higher, shall be shown as a separate line item.
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SCHEDULE 4
Benefits Paid (Net)
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Insurance Claims
(a) Claims by Death
(b) Claims by Maturity
(c) Annuities/ Pension Payments
(d) Other Benefits, specify
2. (Amounts ceded n reinsurance):
(a) Claims by Death
(b) Claims by Maturity
(c) Annuities / Pension Payments
(d) Other Benefits, specify
3. Amount accepted in reinsurance:
(a) Claims by Death
(b) Claims by Maturity
(c) Annuities / Pension Payments
(d) Other Benefits, specify
Total
Note:
(a) Claims include specific claims s e t t l e m e n t c o s t s , w h e r e v e r
applicable.
(b) Legal and other fees and expens es shall also form part of the
claims cost, wherever applicable.
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SCHEDULE 5
Share Capital
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Authorized capital
Equity shares of Rs….. each
2. Issued capital
Equity shares of Rs…..each
3. Subscribed capital
Equity shares of Rs…..each
4. Called-up capital
Equity shares of Rs….. each
Less: Calls unpaid
Add: Shares forfeited (amount originally paid
up)
Less: Par value of Equity Shares bought back
Less: Preliminary Expenses
Expenses including commission or brokerage on underwriting or subscription of shares
Total
Note:
(a) Particulars of the different classes of capital should be
separately stated.
(b) The amount capitalized acc ount of issue of bonus shares
should be disclosed.
(c) In case any part of the capi tal is held by a holding company,
the same should be separately disclosed.
SCHEDULE 5A
Pattern of Shareholding [As certified by the Management]
Current Year Previous Year
Particulars Number
of Shares% of
Holding Number
of Shares% of
Holding
1. Promoters
Indian
Foreign 2. Others
Total
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SCHEDULE 6
Reserves and Surplus
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Capital Reserve
2. Capital Redemption Reserve
3. Share Premium
4. Revaluation Reserve
5. General Reserves
Less: Debit balance in profit and
loss account, if any
Less: Account utilized for buyback
6. Catastrophe Reserve
7. Other Reserve (to be specified)
8. Balance of profit in profit and loss
account
Total
Note: Additions to and deductions fr om the reserves shall be
disclosed under each of the specified heads.
SCHEDULE 7
Borrowings
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Debentures / Bonds
2. Banks
3. Financial Institutions
4. Others (to be specified)
T o t a l
Note:
(a) The extent to which the borrowing are secured shall be
separately disclosed stating the nature of the security under
each sub-head.
(b) Amounts due within 12 months from the date of balance sheet
should be shown separately.
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SCHEDULE 8
Investments – Shareholders
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
LONG TERM INVESTMENTS
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other Approved Securities
3. Other Investments
(a) Shares
(aa) Equity
(bb) Preference
(b) Mutual funds
(c) Derivative instruments
(d) Debentures/ Bonds
(e) Other securities (to be specified)
(f) Subsidiaries investment properties
– Real Estate
4. Investments in infrastructure and
Social Sector
5. Other than approved investments
SHORT TERM INVESTMENT
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other approved securities
3. Other investments
a) Shares
(aa) Equity
(bb) Preference
b) Mutual funds
c) Derivative instruments
d) Debentures/ Bounds
e) Other securities (to be
specified)
f) Subsidiaries
g) Investment properties – Real
Estate
4. investments in infrastructure and
social sector
5. Other than approved investments
T o t a l
NOTE: See Notes appended at the end of schedule 8B. 100
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SCHEDULE 8A
Investments – Policyholders
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
LONG TERM INVESTMENTS
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other Approved Securities
3. Other Investments
a) Shares
(aa) Equity
(bb) Preference
b) Mutual funds
c) Derivative instruments
d) Debentures/ bonds
e) Other securities (to be specified)
f) Subsidiaries
g) Investment properties – Real
Estate
4. Investments in infrastructure and
social sector
5. Other than approved investments
SHORT TERM INVESTMENT
1.Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other approved securities
3. Other investments
a) Shares
(aa) Equity
(bb) Preference
b) Mutual funds
c) Derivative instruments
d) Debentures/ Bonds
e) Other Securities (to be specified)
f) Subsidiaries
g) Investment properties – Real
Estate
4. Investments in infrastructure and
social sector
2. Other than approved investments
T o t a l
Note: See Notes appended at the end of Schedule 8B. 101
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SCHEDULE 8B
Assets Held to Cover Linked Liabilities
Particulars C u r r e n t
Year
(RS’000) Previous
Year
(Rs’000)
LONG TERM INVESTMENTS
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other Approved Securities
3. Other Investments
(a) Shares aa) Equity bb)
Preference
(b) Mutual funds
(c) Derivative instruments
(d) Debentures/ bonds
(e) Other securities (to be
specified)
(f) Subsidiaries
(g) Investment properties –Real
Estate
4. Investments in infrastructure and
social sector
5. Other than approved investments
SHORT TERM INVESTMENT
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other approved securities
3. Other investments
a) Shares (aa) Equity
(bb) Preference
b) Mutual funds
c) Derivative instruments
d) Debentures/ Bounds
e) Other securities (to be specified)
f) Subsidiaries
g) Investment properties – Real
Estate
4. Investments in infrastructure and
social sector
5. Other than approved investments
T o t a l
Note (applicable to Schedules 8, 8A and 8B): 102
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a) Investments in subsidiary /hol ding companies, joint ventures
and associates shall be separately disclosed, at cost.
I. Holding company and subsidiary shall be construed as
defined in the Companies Act, 1956.
II. Joint venture is contractual a r r a n g e m e n t s w h e r e b y t w o o r
more parties undertake an economic activity, which is
subject to joint control.
III. Joint control is the contractually agreed sharing of power to
govern the financial and operati ng policies of an economic
activity to obtain benefits from it.
IV. Associate is an enterprise in which the company has
significant influence and which is neither a subsidiary nor a
joint venture of the company.
V. Significant influence (f or the purpose of this schedule)means
participation in the fi nancial and operating policy decisions of
a company, but not control of those polices. Significant
influence may be exercised in several ways, for example, by
representation on the boar d of directors, participation in the
policymaking process, material inter-company transactions,
interchange of managerial personnel or dependence on
technical information. Signific ant influence may be gained by
share ownership, statute or a g r e e m e n t . A s r e g a r d s s h a r e
ownership, if an investor holds, directly or indirectly though
subsidiaries, 20 per cent or more of the voting power of the
investee, it is presumed t hat the investor does have
significant influence, unless it c a n b e c l e a r l y d e m o n s t r a t e d
that this is not the case. Conv ersely, if the investor hold,
directly or indirectly thr ough subsidiaries, less than 20 per
cent of the voting power of t he investee, it is presumed that
the investor does not have signifi cant influence, unless such
influence is clearly demonstrated. A substantial or majority
ownership by another investor does not necessarily preclude
an investor from having significant influence.
b) Aggregate amount of co mpany’s investment other than listed
equity securities and derivative instruments and also the
market value thereof shall be disclosed.
c) Investment made out of Catast rophe reserve should be shown
separately.
d) Debt securities will be considered as “held to maturity”
securities and will be measured at historical cost subject to
amortization.
e) Investment Property means a pr operty (land or building or part
of a building or both) held to ear n rental income or for capital
appreciation or for both use in services or for administrative
purposes. 103
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f) Investments maturing within twelve months from balance sheet
date and investments made with t he specific intention to
dispose of within twelve months from balance sheet date shall
be classified as short-term investments.
SCHEDULE 9
Loans
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1.SECURITY-WISE CLASSIFICATIONS
Secured
a) On mortgage property
(aa) in India
(bb) outside India
b) Shares, Bonds, Government
securities etc.
c) Loans against policies
d) Others (to be specified)
Unsecured
T o t a l
2. BORROWER-WISE CLASSIFICATION
a) Central and state government
b) Banks and financial institutions
c) Subsidiaries
d) Companies
e) Loans against policies
f) Other (to be specified)
T o t a l
3.PERFORMANCE-WISE
CLASSIFICATION
a) Loans classified as standard
(aa) in India
(bb) outside India
a) Non-standard loans less
provisions
(aa) in India
(bb) outside India
T o t a l
4. MATURITY-WISE CLASSIFICATION
a) short-term
b) long-term
T o t a l
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Notes:
a) Short-term loans shall inclu de those, which are repayable
within 12 months fr o the date of balance sheet. Long-term
loans shall be the loans other than short-term loans.
b) Provisions against non-performi ng loans shall be shown
separately.
c) The nature of the security incase of all long-term secured loans
shall be specified in each case. Secured loans for the purposes
of this schedule, means loans secured wholly or partly against
an asset of the company.
d) Loans considered doubtful and t he amount of provision created
against such loans shall be disclosed.
SCHEDULE 10
Fixed Assets
particular Cost / Gross Block Depreciation Net Block
O p e n i n g a d d i t i o n s d e d u c t i ons closing Up to
last
Year For
the
Year On Sales /
Adjustment To
Date As at
year
and Previous
year
Goodwill
Intangibles
(specify)
Land-
freehold
Leasehold
Property
Buildings
Furniture and
Fittings
Information
Technology
Equipment
Vehicles
Office
Equipment
Others
(specify
nature)
Total
Work in
progress
Grand total
Previous
Year
Note: Assets included in land, property and building above exclude
Investment Properties as defi ned in note (e) to Schedule 8. 105
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SCHEDULE 11
Cash and Bank Balances
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Cash (including cheques, drafts and
stamps)
2. Bank Balance
a) Deposit accounts
(aa) Short term (due within 12
months of the date of balance
sheet)
(bb) Others
b) Current accounts
c) Others (to be specified)
3. Money at call and short notice
a) With banks
b) With other institutions
4. Others (to be specified)
T o t a l
Balance with non-scheduled banks
included in 2 and 3 above
CASH AND BANK BALANCES
1. In India
2. Outside India
T o t a l
Note : Bank balance may include remittanc es in transit. If so, the
nature and amount shall be separately stated.
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SCHEDULE 12
Advances and Assets
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
ADVANCES
1. Reserve deposits with ceding
companies
2. Application money for investments
3. Prepayments
4. Advances to Directors / officers
5. Advance tax paid taxes deducted at
source (net provision for taxation)
6. Others (to be specified)
Total
(A)
OTHERS ASSETS
1. Income accrued on investments
2. Outstanding Premiums
3. Agents’ Balance
4. Foreign Agencies Balance
5. Due from other entities carrying on
insurance business (including
reinsures)
6. Due from subsidiaries / holding
company
7. Deposit with Reserve Bank of India
(pursuant to Section 7 of Insurance
Act, 1938)
8. Others (to be specified)
Total
(B)
Total
(A+B)
Notes:
a) The items under the above heads s h a l l n o t b e s h o w n n e t o f
provisions for doubtful amounts. T h e a m o u n t o f p r o v i s i o n
against each head should be shown separately. 107
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b) The term ‘offer’ should conform to the definition of that term as
given under the Companies Act, 1956.
c) Sundry debtors will be show n under item 8 (Others).
SCHEDULE 13
Current Liabilities
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Agents’ Balance
2. Balance due to other insurance
companies
3. Deposits held on re-insurance ceded
4. Premium received in advance
5. Unallocated premium
6. Sundry creditors
7. Due to subsidiaries / holding
company
8. Claims outstanding
9. Annuities due
10. Due to officers / directors
11. Others (to b specified)
Total
SCHEDULE 14
Provisions
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. For taxation (less payments and
taxes deducted at source)
2. For proposed dividends
3. For dividend distribution tax
4. Others (to be specified)
T o t a l
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SCHEDULE 15
Miscellaneous Expenditure (To the extent not written off a
adjusted)
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Discount allowed in issue of shares /
debentures
2. Others (to be specified)
T o t a l
Notes:
a) No item shall be included under the head “Miscellaneous
Expenditure” and carried forward unless:
1. some benefit form the expenditure can reasonably be
expected to be received in future, and
2. the amount of such benef it is reasonably determinable.
b) The amount to carried forward in respect of any included under
the head “Miscellaneous Expenditu re” shall not exceed the
expected future revenue / other benefits related to the
expenditure.
PROBLEMS
Illustration 1
From the following balances of the Axis Life assurance
Company Ltd., prepare its revenue account and balance sheet for
the year ended 31st March 2006.
Life Assurance Fund at the beginning of the year 2,60,000
Claims admitted but not paid 780
Interest, dividend and rent received 9,100
Loans on life interest 26,000
Loans of mortgages 46,800
Claims by death 7,800
Claims by maturity 13,000
Single premium 10,400
Government securities 1,30,000 2.6. SOLVED 109
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Registration and other fees received 260
Surrenders 2,600
Investment fluctuation account 1,300
Considerations for annuities granted 6,500
Deprecation on furniture 390
Provision for depreciation 390
Loans on policies 39,000
Amount due from other insurance company 468
Annuities due 260
Free hold property and furniture 13,390
Salaries 390
Directors fees 39
Promotional expenses 182
Audit fees 195
Law charges 130
Postage and stationary 1404
Office expenses 4680
Bank balance 21892
Commission on Re-insurance accepted 3120
Outstanding premium 3120
Interest accrued on investment but not due 390
Renewal premiums 26,000
Solution
Revenue A/C for the year ended 31st March, 2006
Particulars Schedule Amount
(Rs) Amount
(Rs)
Premiums earned-net premium 1 36,400
Income from investment:
Interest, dividend and rent 9 , 1 0 0
Consideration for annuities
granted 6 , 5 0 0 1 5 , 6 0 0
Other income:
Registration and other fees
received 2 6 0
Total (A) 5 2 , 2 6 0 110
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Commission 2 3.120
Operating expenses related to
Insurance Business 3 7,410
Total (B) 1 0 , 5 3 0
Benefit paid (Net) 4 23,400
Total (C) 2 3 4 0 0
Surplus / (Deficit) (D) = (A)-(B)-
(C) 1 8 , 3 3 0
Balance Sheet as at 31st March 2006
Particulars Schedule Amount
(Rs) Amount
(Rs)
SOURCES OF FUNDS
Shareholders fund:
Share capital 5 -
Reserves and surplus 6 2,79,630
Borrowings 7 -
Total 2,79,630
APPLICATION OF FUNDS
Investments 8 1,30,000
Loans 9 1,11,800
Fixed Assets 10 13,000 2,54,800
Cash and bank balance 11 21,892
Advances and other Assets 12 3,978
Sub-Total (A) 2 5 , 8 7 0
Current liabilities 13 1,040
Sub-Total (B) 1 , 0 4 0
Net Current Assets (C) = (A - B) 24830
Total 2,79,630
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SCHEDULE 1
Premium
Particulars Amount (Rs)
Renewal premiums 26,000
Single premium 10,400
Total premium 36,400
SCHEDULE 2
Commission Expenses
Particulars Amount (Rs)
Commission on Re- insurance accepted 3,120
Net commission 3,120
Schedule 3
Operating Expenses Related to Insurance Business
Particulars Amount (Rs)
Salaries 390
Directors fees 39
Postage and stationery 1,404
Law charges 130
Audit fees 195
Promotional expenses 182
Office expenses 4,680
Deprecation on furniture 390
Total 7,410
SCHEDULE 4
Benefit Paid (Net)
Particulars Amount (Rs)
Insurance claims
a) Claims by death 7800
b) Claims by maturity 13000
c) Surrenders 2600
Total 23400
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SCHEDULE 6
Reserves and surplus
Particulars Amount (Rs)
Life assurance fund 2,60,000
Investment fluctuation account 13000
Surplus 18330
Total 279630
SCHEDULE 8
Investments – shareholders
Particulars Amount (Rs)
Government securities 1,30,000
Total 1,130,00
SCHEDULE 9
Loans
Particulars Amount (Rs)
Loans on mortgages 4,6,800
Loans on life interest 26,000
Loans on policies 39,000
Total 111800
SCHEDULE 10
Fixed Assets
Particulars Amount (Rs)
Free hold property and furniture 13390
less depreciation 390
Total 13,000
SCHEDULE 11
Cash and bank balance
Particulars Amount (Rs)
Bank balance 21,892
Total 21892
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SCHEDULE 12
Advances and Assets
Particulars Amount (Rs)
Interest accrued on inve stment but not due 390
Outstanding premium 3,120
Due from other insurance companies 468
Total 3978
SCHEDULE 13
Current liabilities
Particulars Amount (Rs)
Claims admitted but not paid 780
Annuities due 780
Total 1040
Illustration 2
Following are the bal ance available for the year ended 31st
March 2007 of Nutan Life Insurance Company Ltd. You are
required to prepare revenue account and balance sheet for the year
ended 31st March 2007.
Particulars Amounts (Rs)
Insurance claims
Claims by death 1,95,000
Claims by maturity 56,250
Other benefits 99,690
General reserve 15,70,560
Life Assurance fund of the begging of the year 31,41,126
First year premium 13,8,126
Traveling and conveyance 31,840
Interest dividend and rent received 15,7,383
Cash and bank balance 20,7,270
Office building 5,00,000
Office equipment 2,00,000 114
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Outstanding premium 1,46,380
Advances to directors 1,57,650
Other sundry assets 1,20,300
Loans against policies 5,02,780
Surrenders 65,304
Employees remuneration and welfare benefit 20,000
Training expenses 17,830
Single premium 67,3590
Interest and bank charges 20,000
Agents balances (Dr) 2,95,500
Deposit with RBI 2,00,000
Commission on re-insurance accepted 1,09,623
Consideration for annuities granted 31,860
Amount due to other insurance companies 87,000
Agents balance outstanding 1,00,191
Subscribed and paid up capital 20,00,000
Brokerage on underwriting of shares 2000
Government bonds 33,81,670
Investment in other approved securities 10,00,000
Investment in mutual fund 16,90,800
Claims outstanding 1,20,051
Adjustments –
Interest dividend and rents ou tstanding (NET) Rs. 35000 and
interest and rent accrued Rs. 65,300.
Depravation on office building Rs. 40,000 and on office equipment
Rs. 10,000.
Bonus utilized in reduction of premium Rs. 14,500
Insurance claims arises due to the death of policy holder
Rs. 80,000.
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Solution
Revenue Account for the year ended 31st March 2007
Particulars Schedule Amount
(Rs) Amount
(Rs)
Premiums earned – net
Premium 1 8,26,216
Income from other investments
Interest, dividend and rent 1 , 5 7 , 3 8 3 Add: outstanding and accrued
consideration for annuities
granted
1,00,300
2,57,683
31,860
Total (A) 11,15,759
Commission 2 1,09,623
Operating expenses related to
Insurance Business 3 1,39,670
Total (B) 2 , 4 9 , 2 9 3
Bonus paid 4 4,96,244
Bonus utilized in reduction of
premium 1 4 , 5 0 0
Total (C) 5 , 1 0 , 7 4 4
3,55,752 Surplus/ (Deficit) (D) = (A)-(B)-
(C)
Balance Sheet as at 31st March 2007
Particulars Schedule Amount
(Rs)
SOURCES OF FUND
Shareholders fund
Share capital 5 19,98,000
Reserves and surplus 6 50,67,408
Sub-Total 70,65,408
Total 70,65,408 116
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APPLICATION OF FUND
Investments : Shareholders 8 50,72,470
Loans 9 5,02,780
Fixed assets 10 6,50,000
62,25,250
Current assets
Cash and bank balance 11 2,07,270
Advances and other assets 12 10,20,130
Sub-Total (A) 12,27,400
Current liabilities 13 3,87,242
Sub-Total (B) 3,87,242
Net Current Assets (C) = (A – B) 8,40,158
Total 70,65,408
SCHEDULE 1
Premium
Particulars Amount (Rs)
First year premium 1,38,126
Single premium 6,73,590
Add: Bonus utilized in reduction of premium 14,500
Total premiums 826216
SCHEDULE 2
Commission expenses
Particulars Amount (Rs)
Commission on re-insurance accepted 1,09,623
Net commission 1,09,623
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SCHEDULE 3
Operating Expenses Related to Insurance Business
Particulars Amount (Rs)
Employee’s remuneration and welfare benefit 20,000
Traveling and conveyance 31,840
Training expenses 17,830
Interest and bank charges 20,000
Depreciation on office building 40,000
Depreciation on office equipment 10,000
Total 1,39,670
SCHEDULE 4
Benefit Paid (Net)
Particulars Amount (Rs)
Insurance claims
Claims by death 1,95,000
Add: further claims arises due to death 80,000
2 , 7 5 , 0 0 0
Claims by maturity 56,250
Surrenders 65,304
Other benefit 99,690
Total 4,96,244
SCHEDULE 5
Share Capital
Particulars Amount (Rs)
Subscribed and paid up capital 20,00,000
Less: brokerage on underwriting of shares 2000
Total 19,98,000
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SCHEDULE 6
Reserves and Surplus
Particulars Amount (Rs)
Life Assurance fund at the begi nning of the year 31,41,126
General reserves 15,70,560
Surplus 3,55,722
Total 50,67,408
SCHEDULE 8
Investments
Particulars Amount (Rs)
Government bonds 33,81,670
Other approved securities 10,00,000
Investment in mutual fund 6,90,800
Total 50,72,470
SCHEDULE 9
Loans
Particulars Amount (Rs)
Loans against policies 5,02,780
Total 5,02780
SCHEDULE 10
Fixed Assets
Particulars Amount (Rs)
Office building 5,00,000
Less depreciation 40,000 4,60,000
Office equipment and furniture 2,00,000
Less depreciation 10,000 1,90,000
Total 6,50,000
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SCHEDULE 11
Cash and Bank Balance
Particulars Amount (Rs)
Cash and Bank balance 2,07,270
Total 2,07,270
SCHEDULE 12
Advances and Assets
Particulars Amount (Rs)
Advances of directors 1,57,650
Sundry assets 1,20,300
Interest, dividend and rent accrued 65,300
Interest, dividend and rent outstanding 35,000
Agents balance 2,95,500
Outstanding premium 1,46,380
Deposit with RBI 2,00,000
Total 10,20,130
SCHEDULE 13
Current Liabilities
Particulars Amount (Rs)
Agents balances 1,00,191
Amount due to other insurance
companies 87,000
Claims outstanding 1,200,51
Add: further claims arises due to
death 80,000 2,0,051
Total 3,87,242
Illustration 3
Prepare Revenue account and Balance sheet from the
following balance of Sanjivani Life Insurance Company Ltd. for the
year ended 31st March 2005.
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Debit:
Particulars Amounts (Rs)
Agents balances owing 2,10,000
Repairs 10,000
Furniture and fittings 2,00,000
Loans on government securities 11,00,990
Amount due from other In surance Company 3,30,000
Commission on re0insurnace accepted 62,390
Deposits with ceding companies 11,00,000
Surrenders less assurance 5,25,000
Interim bonus paid 2,10,000
Sundry debtors 4,35,000
Commission paid for single premium 77,600
Buildings 6,50,000
Printing and stationary 12,000
Insurance claim : claim by maturity 23,41,900
Claim by death : 7,66,400
Outstanding premium 3,32,100
Auditors fees 25,000
Investment in government bonds 22,75,100
Re-insurance accepted claims by maturity 8,11,900
Preliminary expenses 11,000
Investment in infrastructure bonds 10,81,000
Bank balance 4,33,300
Advertisement 41,000
Re-insurance irrecoverable 35,000
Total 1,36,76,680
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Credit:
Particulars Amounts (Rs)
Premium deposits 6,72,000
First year premium 29,82,500
Commission on re-insurance ceded 59,300
Renewal premium 23,11,900
Deposits held on re-insurance ceded 3,39,100
Balance of account at the beginning of t he year 19,52,000
Single premium 11,00,000
Sundry creditors 1,72,780
Borrowings from financial institutions 4,95,000
Re-insurance ceded – claims by maturity 2,12,400
Share capital 20,00,000
General reserves 5,00,000
Profit on realization of assets 35,000
Surplus on revaluations of reversions 2,44,700
Total 1,30,76,680
Adjustments
1. The company had a paid up capital of rupees 20,00,000 divided
into 20,000 shares of rupees 100 each.
2. Re-insurance obligations to th e extent not provided for in
accounts Rs. 1,50,000.
3. Transfer 15% of surplus to general reserve
4. Provide Rs. 1,70,000 for taxation
5. Claims by death covered under re-insurance Rs. 86,000 and
interest accrued on investment Rs. 59,000.
6. The company hold Rs. 7,64,000 government securities (not
included in the agents balance) d e p o s i t e d b y c h i e f a g e n t a s
security.
7. Provide depreciation on furnitur e Rs. 5000 and on building Rs.
20,000.
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Solution
Revenue Account for the Year Ended 31st March 2005
Particulars Schedule Amount
(Rs) Amount
(Rs)
Premium earned-net
Premium 1 63,94,400
Income from Investment
Interest, dividend and rent
accrued 5 9 , 0 0 0
Surplus on revaluation of
reversions 2 , 4 4 , 7 0 0 3 , 0 3 , 7 0 0
Profit on realization of assets 3 5 , 0 0 0
Total (A) 67,33,100
Commission 2 80690
Operating expenses related to
insurance business 3 1,13,000
Re-insurance irrecoverable 35000
Provision for tax 1,70,000
Total (B) 398690
Benefits paid (Net) 4 41,46,800
Interim bonuses paid 2,10,000
Total (C) 43,56,800
Surplus/ (D)= (A)–(B)-(C) 19,77,610
Appropriations
Transfer to general reserve
(15%) 2,96,642
Balance being funds for future
appropriations 16,80,968
Total (D) 19,77,610
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Balance Sheet as at 31st March 2005
Particulars Schedule Amount
(Rs) Amount
(Rs)
SOURCES OF FUNDS
Shareholders fund
Share capital 5 19,89,000
Reserves and surplus 6 44,29,610
Sub-Total 64,18,610
Borrowings 7 11,67,000
Total 75,85,610
APPLICATION OF FUNDS
Investments
Shareholders 8 41,20,100
Loans 9 11,00,990
Fixed Assets 10 8,25,000
Current Asset
Cash and bank balance 11 4,33,300
Advances and other Assets 12 25,52,100
Sub-Total (A) 29,85,400
Current Liabilities 13 12,75,880
Provisions 14 1,70,000
Sub-Total (B) 14,45,880
Net Current Assets (C) = (A – B) 15,39,520
Total 75,85,610
Note : Contigent liabilities : Reinsuranc e obligation to the extent not
provided for in amounts to ` 1,50,000.
SCHEDULE 1
Premium
Particulars Amount (Rs)
First year premiums 29,82,500
Renewal premiums 23,11,900
Single premiums 11,00,000
Total premiums 63,94,400 124
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SCHEDULE 2
Commission expenses
Particulars Amount (Rs)
Commission paid for single premium 77,000
Add: commission on re-insurance accepted 62,390
Less: commission of re-insurance ceded (59,300)
Net commission 80,690
SCHEDULE 3
Operating Expenses Related to Insurance Business
Particulars Amount (Rs)
Repairs 10,000
Printing and stationary 12,000
Auditors fees 25,000
Advertisement and publicity 41,000
Depreciation on furniture 5000
Depreciation of building 20,000
Total 1,13,000
SCHEDULE 4
Benefits Paid (Net)
Particulars Amount (Rs)
Insurance claims
Claims by death 7,66,400
Claims by maturity 23,41,900
Surrenders less re-insurance 5,25,000
Amounts ceded in Re-insurance
Claims by death (86,000)
Claims by maturity (2,21,400)
Amount Accepted in re-insurance
Claims by maturity 8,11,900
Total 41,46,800
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SCHEDULE 5
Share Capital
Particulars Amount (Rs)
Issued, subscribed, and called up 20,000 shares
of Rs. 100 each 20,00,000
Less: preliminary expenses 11,000
Total 19,89,000
SCHEDULE 6
Reserves and Surplus
Particulars Amount (Rs)
Balance of account at the beginning of
the year 1 9 , 5 2 , 0 0 0
General reserve 5,00,000
Add: Transfer from surplus 2,96,642
7 , 9 6 , 6 4 2
Balance fund 16,80,968
Total 44,29,610
SCHEDULE 7
Borrowings
Particulars Amount (Rs)
Borrowings from financial institutions 4,95,000
Premium deposits 6,72,000
Total 11,67,000
SCHEDULE 8
Investments Shareholders
Particulars Amount (Rs)
Government Securities 7,64,000
Government bonds 22,75,100
Investment in infrastructure bonds 10,81,000
Total 41,20,100
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SCHEDULE 9
Loans
Particulars Amount (Rs)
Loans on government securities 11,00,990
Total 11,00,990
SCHEDULE 10
Fixed Assets
Particulars Amount (Rs)
Building 6,50,000
Less: depreciation (20,000) 6,30,000
Furniture 2,00,000
Less: depreciation (5000) 1,95,000
Total 8,25,000
SCHEDULE 11
Cash and Bank Balance
Particulars Amount (Rs)
Bank balance 4,33,300
Total 4,33,300
SCHEDULE 12
Advances and Assets
Particulars Amount (Rs)
Deposits with ceding companies 11,00,000
Other Assets
Outstanding premium 3,32,100
Income accrued on investment 59,000
Claims covered under re-insurance 86,000
Due from other insu rance company 3,30,000
Sundry debtors 4,35,000
Agents balance 2,10,000
Total 25,52,100
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SCHEDULE 13
Current Liabilities
Particulars Amount (Rs)
Security hold against investment 7,64,000
Deposited by chief agent
Deposits hold on re-insurance ceded 3,39,100
Sundry creditors 1,72,780
Total 12,75,880
SCHEDULE 14
Provisions
Particulars Amount (Rs)
Provision for tax 1,70,000
Total 1,70,000
TO ASCE RTAIN PROFIT OR LOSS
OF THE LIFE INSURANCE BUSINESS
T h e p r o f i t o r l o s s o f t h e l i f e i n s u r a n c e b u s i n e s s i s t o b e
ascertained after every two year s by preparing ‘Valuation Balance
sheet’:
I n c a s e o f l i f e i n s u r a n c e b u s i n e s s , t h e c l a i m s a r i s e e i t h e r o n
death or expiry of policy period. Hence, a deficiency may arise due
to the difference between the present value of the future premium
to be received and the present value of future liability on all policies
in force. This deficiency is termed as ‘net liability’. The estimation of
such liability is done of mathem aticians well versed in tedious
calculations of life insurance – known as ‘actuaries’. After the
valuation of net liability by appoi nted actuary, it is compared with
Life Assurance fund by prepar ing Valuation Balance sheet and
thereby find out profit or loss of a Life Insurance Company.
Valuation Balance Sheet of ______ as at ______
Particulars Rs. Particulars Rs.
Net Liabilities xxx Life Insurance Fund xxx
Surplus (if any) xxx Deficit (if any) xxx
xxx xxx
2.7 PROCEDURE 128
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Illustration 4
Gipsy Life insurance company provides following information
to prepare Valuation Balance S heet and profit distribution
statement for t he year ended on 31st M a r c h 2 0 0 5 a n d a l s o g i v e
journal entries.
Amount is Rs .
Life insurance fund (as on 1-4-2004) 1,83,865
Interim Bonus Paid 27,500
Revenue account balance (as on 31-3-05) 2,64,000
Net Liability as per Valuation (as on 31-3-05) 1,81,500
The company declared a reverslonary bonus of Rs. 210 per
Rs. 1,000 and gave the policy holder s an options to take bonus in
cash Rs. 120 per Rs. 1,000. Tota l business of t he company was
Rs. 7,48,000. The company issued wit h profit policy only, ¾ of the
policy holders in value opted for cash bonus.
Solution
Gipsy Life Insurance Company
Valuation Balance sheet as at 31-3-05
Particulars Rs. Particulars Rs.
Net Liabilities 1,81,500 Life Insurance Fund 2,64,000
Surplus 82,500
2,64,000 2,64,000
Profit Distribution Statement
Particulars Amount (Rs)
Surplus as per Valuation Balance sheet 82,500
Add: Interim Bonus Paid 27,500
Profits available for distribution 1,10,000
Share of policy holders (95%) 1,04,500
Less: Interim Bonus Paid 27,500
Amount due to policy holders 77,000
Shares of shares holders (5%) 5,500
Note: 95% of the surplus must be utiliz ed for the benefit of policy
holders and 5% of the surplus to be given to shareholders. 129
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Journal Entries:
Particulars Dr
RS. Cr
Rs.
Life Insurance fund A/C
To Profit & loss A/C
To
[Being profit revealed by Valuation
Balance sheet transferred to profit & loss
A/C] Dr 82,500
82,500
Profit and loss A/C
To
To Bonus in cash A/C
[Being bonus payable @ Rs. 120 per
1,000 on ¾ of Rs. 7,48,000] Dr 67,320
67,320
Profit and loss A/C
To
To life insurance fund A/C
[Being the amount @ Rs. 210 per Rs.
1,000 on ¼ of Rs. 7,48,000 transferred to
life insurance fund in respect of
reversionary bonus. Dr
Illustrations 5
Jai Hind Life Insurance Com pany Ltd. provides information
to prepare Valuation Balance s heet and a statement showing
amount due to policy holders as on 31st March 2008
Life assurance fund as on 31st March 2008 amounted to Rs.
1,55,104, before provid ing dividend for the year 2007-08. It’s
actuarial valuation as on 31st March 2008 discloses net liability of
Rs. 1,49,480 under the assurance and annuity contracts. Interim
bonus paid Rs. 1,480 for the period ending 31st March 2008.
Solution
Valuation Balance Sheet as on 31-3-08
Particulars Rs. Particulars Rs.
Net Liabilities 1,49,480 Life Insurance Fund 1,55,104
Surplus 5,624
1,55,104 1,55,104
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Profit Distribution Statement
Particulars Amount (Rs)
Surplus as per Valuation Balance sheet 5,624
Add: Interim Bonus Paid to policy holders 1,480
7 , 1 0 4
Less: Dividend to shareholders (for 2007-08) 1,184
Profit for 2 year s ending on 31-3-08 5,920
Policy holder entitled fo r 95% of Rs. 5,624 5,624
Less: Already paid interim bonus 1,480
Amount due to policy holders 4,144
G e n e r a l I n s u r a n c e B u s i n e s s i s the business other than Life
Insurance. It is carried by General I n s u r a n c e C o r p o r a t i o n o f I n d i a
through its subsidiary companies and many private companies also
involve in General Insurance business.
S e c t i o n 2 ( 6 0 ) o f t h e I n surance Act 1938 has defined
‘General Insurance Business’ as f i r e , m a r i n e o r m i s c e l l a n e o u s
insurance business, whether carri ed on singly or in combination
with one or more of them. Fire i n s u r a n c e b u s i n e s s m e a n s t h e
business of effecting, otherwise t han incidentally to some other
class of insurance business, contra cts of insurance against loss by
or incidental to fire or other occurrence customarily included among
the risks insured against the fire i n s u r a n c e p o l i c i e s . M a r i n e
Insurance Business means the busi ness of effecting contracts of
insurance upon vessels of any descr iptions, including cargoes,
freights and other interests which ma y be legally insured in or in
relation to such vessels, cargoes and freights, goods wares,
merchandise and property of whatev er description insured for any
transit by land or water, or bo th and whether or not including
warehouse risks or similar risks in addi tion or incidental to such
transit, and includes any other risks customarily included among
the risks insured against in marine insurance policies.
• RESERVED FOR UNEXPIRED RISK:
General Insurance Policies are taken for one year period
and so risk is covered for 12 months from the date of insurance.
The policies are issued throughout the year and remain in force
even after the close for the current f i n a n c i a l y e a r a n d t h e e n t i r e 2.8 GENERAL INSURANCE BUSINESS
2.9 SOME IMPORTANT TERMS 131
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premium for his period is colleted in advance. For e.g. this period is
colleted in advance. For e.g. a policy is issued on 15 January 2006
and it will be in force up to 1 4 J a n u a r y 2 0 0 7 s o t h e p r e m i u m
received on such policy covers partly current year 2005-06 and
partly next year 2006-07. the ri sk may happen on any day during
the lifetime of policy. The premium received on individual policy is
not separated on time basis. Therefore a provision against
unexpired risk is made to meet fu ture claims arises under such
policies
Reserves for unexpired risks are laid down as follows.
Fire and miscellaneous business 50% of the premium, net of re-
insurance, during t he preceding 12 months.
Marine cargo business 50% of the premium, net of re-issue during
the preceding 12 months.
Marine hull business 100% of the pr emium, net of re-issue during
the preceding 12 months.
However, an insurance company may keep additional reserve if it
feels so.
Accounting Treatment
T h e o p e n i n g b a l a n c e o f r e s e r v e for unexpired risk is credited
to revenue account and closing bal ance is debited to revenue
account.
Illustration 6
Give the journal entries and unexpired risk reserve account
from the following information of Biji General Insurance Company
Ltd. for the year ended on 31st March 2009.
I. Total reserve for unexpired risk as on 31st March 2008.
Marine Insurance policies Rs. 285
Fire Insurance policy Rs. 380
Miscellaneous Insurance policies Rs. 95
Total Rs. 760
II. Reserves to be created for the year ending
31st March 2009:
Marine Insurance policy – 100% of net premium
Fire and miscellaneous - 50% of net premium insurance
policies.
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III. During the year the premium received:
Marine Insurance business Rs. 345
Fire insurance business Rs. 817
Miscellaneous insurance business Rs. 228
Premium collected from other insurance companies in
respect of risk undertaken
Marine insurance business Rs. 133
F i r e i n s u r a n c e b u s i n e s s R s . 9 5
M i s c e l l a n e o u s i n s u r a n c e b u s i n e s s R s . 7 6
V. Premium paid to other insurance companies on business
ceded
Marine insurance business Rs. 127.3
F i r e i n s u r a n c e b u s i n e s s R s . 8 1 . 7
M i s c e l l a n e o u s i n s u r a n c e b u s i n e s s R s . 1 3 3
Solution
In the Books of Biji General Insurance Company Ltd.
Journal Entries
Date Particulars Dr
Rs. Cr
Rs.
31st March
2009 Unexpired Risk Reserve (Fire) A/C 380
U n e x p i r e d R i s k R e s e r v e ( M a r i n e )
A/C 285
Unexpired Risk Reserve 95
( M i s c e l l a n e o u s ) A / C
T o
To fire Revenue A/C 380
T o
To marine Revenue A/C 285
T o s R e v e n u e A / C
To 95
[ B e i n g o p e n i n g b a l a n c e o f r e s e r v e i s
credited to revenue A/C]
M a r i n e R e v e n u e A / C ( n o t e l )
To 347.7
T o U n e x p i r e d R i s k R e s e r v e A / C 3 4 7 . 7 133
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[ B e i n g t h e r e s e r v e c r e a t e d a t 1 0 0 %
of net premium income]
F i r e R e v e n u e A / C ( n o t e l ) 4 1 5 . 1 5
T o u n e x p i r e d R i s k R e s e r v e A / C 4 1 5 . 1 5
[ B e i n g t h e r e s e r v e c r e a t e d a t 5 0 % o f
net premium income)
m i s c e l l a n e o u s R e v e n u e A/C (note I) 85.5
T o u n e x p i r e d r i s k r e s e r v e A / C 8 5 . 5
[ B e i n g t h e r e s e r v e c r e a t e d a t 5 0 % o f
net premium income)
Calculation on Net Premium Income
Particulars Marine Fire Miscellaneous
Premium collected from
policyholders. 342 817 228
Premium collected from other
Insurance company 133
Less: Premium paid to other
Insurance Company (127.3) (81.7) (133)
To other insurance company
347.7 830.3 171
Percentage of reserve 100% 50% 50%
Amount of reserve to be
created 347.7 415.15 85.5
Unexpired Risk Reserve Account
Date Particulars Marine
Fire
Miscellan
eous Date Particular Marine Fire Miscella
neous
31,
March
2000 To revenue
A/C 285 380 95 31st
March
09 By
balance
b/d 285. 380 95
T o b a l a n c e
C/D 347.7 415.15 85.5 By
Revenue
A/C 347.7 415.15 85.5
632.7 795.15 180.5 632.7 795.15 180.5
OF FINANCIAL STATEMENT.
The General insurance company i n I n d i a p r e p a r e s i t s
financial statements in accor dance with provision of IRDA
regulations, 2002. The financial statements consist of revenue
account, profit and loss account and vertical balance sheet in form
B-RA, form B-PL and Form B-BS respectively’. Revenue accounts 2.10 PREPARATION 134
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for fire, marine and miscellaneous i n s u r a n c e b u s i n e s s t o b e
prepared separately. Revenue a ccount contains schedule-1,
schedule-2, schedule-3, and schedule -4 and given oper ating profit
or loss from insurance business which is transferred to profit and
loss account.
I t e m s n o t d i r e c t l y r e l a t e d to the insurance business are
exhibited in profit and loss account for e.g. transfer fees, diminution
in the value of investment bad debts written-off.
B a l a n c e s h e e t c o n t a i n s s o u r c e o f f u n d s a n d a p p l i c a t i o n o f
fund. Sources of funds consists o f s c h e d u l e - 5 , s c h e d u l e - 6 a n d
schedule-7 and application of funds c o n s i s t o f s c h e d u l e - 8 t o
schedule 15. Contingent liabilities are disclosed at the bottom of
Balance Sheet.
Form B-BA
Name of the lnsurer:
Registration No. and Date of Registration with the IRDA:
Revenue Account for the year ended 31st March, 20…
Particulars s c h e
dule Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Premiums eamed – net 1
2. Profit /Loss on
Sale/Redemption of
Investments
3. Other (to be Specified)
4. Interest, Dividends and
Rent - Gross
T o t a l ( A )
1. Claims Incurred (Net) 2
2. Commission 3
3. Operating Expenses related
to Insurance Business 4
T o t a l ( B )
Operating profit/ (Loss) from
Fire / Marine /Miscellaneous
Business C = (A-B) 135
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Appropriations
Transfer to Shareholder
Account
Transfer to Catastrophe
Reserve
Transfer to other Reserves (to
be specified)
T o t a l ( c )
Note: See Notes appended at the end of Form B-PL
FORM B-PL
Name of the Insurer
Registration No. and Date of Registration with the IRDA:
Profit and Loss Account for the year ended 31st March, 20…
Particulars s c h e
dule Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Operating Profit / (Loss)
a) Fire insurance
b) Marine insurance
c) Miscellaneous insurance
Income form Investment
Interest, Dividend and Rent
– Gross
Profit on sale of investments
Less: Loss on sale of
investments
3. Other income (to be
specified)
T o t a l ( A )
4. Provisions (other than
taxation)
a) For diminution in the
value of investments
b) For doubtful debts
c) Others (to be specified) 136
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Other Expenses
a) Expenses other than
those related to
insurance business b) Bad debts written off c) Others (to be specified)
T o t a l ( B )
Profit Before Tax
Provision for Taxation
Appropriations
a) Interim divided paid
during the year
b) Proposed final dividend
c) Dividend distribution tax
d) Transfer to any reserves/
other accounts (to be
specified)
Balance of profit/ loss brought
forward from last year
Balance carried forward to
Balance Sheet
Notes to Form B-RA and B-PL:
a) Premium income received from business concluded in and
outside India shall be separately disclosed.
b) Reinsurance premiums whether on business ceded or accepted
are to be brought into account gross (i.e. before deducting
commissions) under the head reinsurance premiums.
c) Claims incurred shall comprise claims paid, specific claims
settlement costs wherever applicable and change in the
outstanding provision for claims at the year end.
d) Items of claims at the year end.
e) Fees and expenses connected wit h claims shall be included in
claims.
f) Under the sub-head “other s” shall be included items like foreign
gains or losses and other items.
137
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g) Interest, dividends and rentals rece ivable in connection with an
investment should be stated as gross amount, the amount of
income-tax deducted at source beings included under ‘advance
taxes paid and taxes deducted at source”.
h) Income from rent shall include on ly the realized rent. It shall not
include any national rent.
FROM B-BS
Name of insurer:
Registration No. and Date of Registration with the IRDA:
Balance Sheet as at 31st March, 20…
Particulars s c h e
dule Current
Year
(RS’000) Previous
Year
(Rs’000)
Sources of Funds
Share capital 5
Reserves and surplus 6
Fair value change account
Borrowings 7
S u b T o t a l
Application of Funds
Investments 8
Loans 9
Fixed assets 10
Current assets
Cash and bank balance 11
Advances and other assets 12
S u b T o t a l
(A)
Current Liabilities 13
Provisions 14
S u b T o t a l
(B) 138
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Net current assets (C)= (A-B)
Miscellaneous expenditure
(to the extent not written off
or adjusted)
15
Debit balance profit and loss
account
T o t a l
Contingent Liabilities
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
Partly paid-up investments
Claims, other than against policies, not
acknowledged as debts by the company
Underwriting commitments outstanding (in
respect of shares and securities)
Guarantees given by or on behalf of the
company
Statutory demands / liabilities in dispute, not
provided for
Reinsurance obligations to the extent not
provided for in accounts
Others (to be specified)
Total
SCHEDULES FORMING PART OF FINANCIAL STATEMENTS
SCHEDULE 1
Premium Earned (Net)
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
Premium from direct business written
Add: premium on reinsurance accepted
Less: premium on reinsurance ceded
Net premium
Adjustment for change in reserve for unexpired
risks
Total premium earned (Net) 139
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Note: Reinsurance premiums whet her on business ceded or
accepted are to be brought into a c c o u n t , b e f o r e d e d u c t i n g
commission, under the head of reinsurance premiums
SCHEDULE 2
Claims Incurred (Net)
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
Claims paid
Direct
Add: Re-insurance accepted
Less: Re-insurance ceded
Net claims paid
Add: claims outstanding at the end of the year
Less: claims outstanding at the beginning
Total Claims Incurred
Notes:
a) Incurred But Not Reported (IBNR), Incurred But Not Enough
Reported (IBNER) claims should be included in the amount for
outstanding claims.
b) Claims includes specific clai ms settlement cost but not
expenses of management.
c) The surveyor fees, legal and othe r expenses shall also form part
of claims cost.
d) Claims cost should be adjusted for estimated salvage value if
there is a sufficient certai nty of its r ealization.
SCHEDULE 3
Commission
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
Commission paid
Direct
Add: re-insurance accepted
Less: commission on re-insurance ceded
Net Commission 140
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Note: The profit / commission, if any , are to be combined with the
re-insurance accepted or Re-insurance ceded figures.
SCHEDULE 4
Operating Expenses Related to Insurance Business
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Employees remuneration and welfare
benefits
2. Travel, conveyance and vehicle running
expenses
3. Training expenses
4. Rents, rates and taxes
5. Repairs
6. Printing and stationery
7. Communication
8. Legal and professional charges
9. Auditors fees, expenses etc.
a) As auditor
b) As adviser or in any other capacity, in
respect of
I. Taxation matters
II. Insurance matters
III. Management services, and
c) In any other capacity
10. Advertisement and publicity
11. interest and bank charges
12. others (to be specified)
13. depreciation
Total
Note: Items of expenses and income in excess of one per cent of
the total premiums (less reinsurance) or Rs. 5,00,000 whichever
higher, shall be shown as a separate line item.
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SCHEDULE 5
Share Capital
Particulars Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Authorized Capital
Equity shares of Rs....each
2. Issue Capital
Equity shares of Rs….each
3. Subscribed Capital
Equity shares or Rs….each
4. Called-up Capital
Equity shares of Rs….each
Less: calls unpaid
Add: Equity shares forfeited (amount originally
paid up)
Less: Par value of equity shares bought back
Less: preliminary expenses
Expenses including commission or brokerage on
underwriting or subscription of shares
Total
Notes:
a) Particulars of the different classes of capital should be
separately stated.
b) The amount capitalized on account of issue of bonus shares
should be disclosed.
c) In case any part of the capital is held by a holding company, the
same should be separately disclosed.
SCHEDULE 5A
Pattern of Shareholding [As certified by the Management]
Current Year Previous Year
Shareholder Number
of Shares% of
Holding Number
of Shares% of
Holding
1. Promoters Indian
Foreign
2. Others
Total 142
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SCHEDULE 6
Reserves and Surplus
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Capital reserve
2. Capital Redemption reserve
3. Share premium
4. General reserves
Less : Debit balance in Profit and Loss
Account, if any
Less : Amount utilised for Buy back
5. Catastrophe reserve
6. Other reserves (to be specified)
7. Balance of profit in profit and loss account
Total
Note: Additions to and deductions fr om the reserves shall be
disclosed under each of the specified heads.
SCHEDULE 7
Borrowings
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Debentures / Bonds
2. Banks
3. Financial Institutions
4. Others (to be specified)
T o t a l
Note:
a) The extent to which the bo rrowing are secured shall be
separately disclosed stating the nature of the security under
each sub-head.
b) Amounts due within 12 months from the date of Balance Sheet
should be shown separately.
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SCHEDULE 8
Investments
Particulars C u r r e n t
Year
(RS’000) Previous
Year
(Rs’000)
LONG TERM INVESTMENTS
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other Approved Securities
3. Other Investments
a. Shares
(aa) equity
(bb) preference
b. Mutual funds
c. Derivative instruments
d. Debentures/ bonds
e. Other securities (to be
specified)
f. Subsidiaries
g. Investment properties – Real
Estate
4. Investments in infrastructure and
social sector
5. Other than Approved Investments
SHORT TERM INVESTMENT
1. Government securities and
Government guaranteed bonds
including Treasury Bills
2. Other approved securities
3. Other investments
a) Shares
(aa) Equity
(bb) Preference
b) Mutual funds
c) Derivative instruments
d) Debentures/ Bounds
e) Other securities (to be
specified)
f) Subsidiaries
g) Investment properties – Real
Estate
4. Investments in infrastructure and
social sector
5. Other than Approved Investments
T o t a l 144
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Notes:
a) Investments in subsidiary / holding companies, joint ventures
and associated shall be separately disclosed, at cost.
I. Holding company and subsidiary s h a l l b e c o n s t r u e d a s
defined in the Companies Act, 1956.
II. Joint venture is a contractual arrangement whereby two or
more parties undertake an economic activity, which is
subject to joint control.
III. Joint control is the contractua lly agreed sharing of power to
govern the financial and operat ing policies of an economic
activity to obtain benefits from it.
IV. Associate is an enterprise in which the company has
significant influence and which is neither a subsidiary nor a
joint venture of the company.
V. Significant influence (for t he purpose of this schedule)
means participations in the financial and operating policy
decisions representation on the board of directors,
participation in the policymaking process, material inter-
company transactions, interchange of managerial
personnel or dependence on technical information.
Significant influence may be gai ned by share ownership,
statute or agreement. As regar ds share ownership, if an
investor holds, directly or indirectly through subsidiaries, 20
per cent or more of the voting power of the investee, it is
presumed that the investor does have significant influence,
unless it can be clearly demonstr ated that this is not the
case. Conversely, if the investor holds, directly or indirectly
though subsidiaries, less than 20 per cent of the voting
power of the investee, it is pr esumed that the investor does
not have significant influence, unless such influence is
clearly demonstrated. A substantial or majority ownership
by another investor does not necessarily preclude an
investor form having significant influence.
b) Aggregate amount of company’s investments other than listed
equity securities and derivative in struments and also the market
value thereof shall be disclosed.
c) Investments made out of Catast rophe reserve should be shown
separately.
d) Debt securities will be considered as “held to maturity” securities
and will be measured at hi storical cost subject to amortization.
e) Investment Property means a proper ty (land or building or part
of a building or both) held to earn rental income or for capital
appreciation or for both, rather than for use in services or for
administrative purposes. 145
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f) Investments maturing within twelve months from Balance Sheet
date investments made with the specific intention to dispose of
within twelve months from balance sheet date shall be classified
as short-term investments.
SCHEDULE 9
Loans
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1.SECURITY-WISE CLASSIFICATIONS
Secured
a) On mortgage property
(aa) in India
(bb) outside India
b) On shares, Bonds, Government
securities etc.
c) Others (to be specified)
Unsecured
T o t a l
2. BORROWER-WISE CLASSIFICATION
a) Central and state government
b) Banks and financial institutions
c) Subsidiaries
d) Industrial Undertakings
e) Other (to be specified)
T o t a l
3.PERFORMANCE-WISE
CLASSIFICATION
a) Loans classified as standard
(aa) in India
(bb) outside India
a) Non-performing standard loans
less provisions
(aa) in India
(bb) outside India
T o t a l
4. MATURITY-WISE CLASSIFICATION
a) short-term
b) long-term
T o t a l 146
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Notes:
a) Short-term loans shall inclu de those, which are repayable
within 12 months from the date of Balance Sheet. Long-term
loans shall be the loans other than short-term loans.
b) Provisions against non-performi ng loans shall be shown
separately.
c) The nature of the security incase of all long-term secured loans
shall be specified in each case. Secured loans for the
purposes of this schedule, means l o a n s s e c u r e d w h o l l y o r
partly against an asset of the company.
d) Loans considered doubtful and t he amount of provision created
against such loans shall be disclosed.
SCHEDULE 10
Fixed Assets
particular Cost / Gross Block Depreciation Net Block
O p e n i n g a d d i t i o n s d e d u c tions closing Up to
last
Year For
the
Year On Sales /
Adjustment To
Date As at
year
and Previo
us
year
Goodwill
Intangibles
(specify)
Land-
freehold
Leasehold
Property
Buildings
Furniture
and Fittings
Information
technology
equipment
Vehicles
Office
Equipment
Others
(specify
nature)
Total
Work in
progress
Grand total
Previous
year
Note: Assets included in land, property and building above exclude
Investment Properties as defi ned in note (e) to Schedule 8. 147
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SCHEDULE 11
Cash and Bank Balances
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Cash (including cheques, drafts and
stamps)
2. Bank Balance
a) Deposit accounts
(aa) Short term (due within 12
months)
(bb) Others
b) Current accounts
c) Others (to be specified)
3. Money at call and short notice
a) With banks
b) With other institutions
4. Others (to be specified)
T o t a l
Balance with non-scheduled banks
included in 2 and 3 above
Note : Bank balance may include remittanc es in transit. If so, the
nature and amount shall be separately stated.
SCHEDULE 12
Advances and Other Assets
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
ADVANCES
1. Reserve deposits with ceding
companies
2. Application money for investments
3. Prepayments
4. Advances to Directors / officers
5. Advance tax paid taxes deducted at
source (net provision for taxation)
6. Others (to be specified)
Total(A) 148
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OTHERS ASSETS
1. Income accrued on investments
2. Outstanding Premiums
3. Agents’ Balance
4. Foreign Agencies Balance
5. Due from other entities carrying on
insurance business (including
reinsures)
6. Due from subsidiaries / holding
7. Deposit with Reserve Bank of India
(pursuant to Section 7 of Insurance
Act, 1938)
8. Others (to be specified)
Total
(B)
Total
(A+B)
Notes:
a) The items under the above heads s h a l l n o t b e s h o w n n e t o f
provisions for doubtful amounts. The amount of provision
against each head should be shown separately.
b) The term ‘officer’ should conform to the definition of that term
as given under the Companies Act, 1956.
c) Sundry debtors will be show n under item 9 (Others).
SCHEDULE 13
Current Liabilities
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Agents’ Balance
2. Balance due to other insurance
companies
3. Deposits held on re-insurance ceded
4. Premium received in advance
5. Unallocated premium
6. Sundry creditors
7. Due to subsidiaries / holding
company
8. Claims outstanding
9. Due to officers / directors
10. Others (to b specified)
Total 149
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SCHEDULE 14
Provisions
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Reserve for Unexpired Risk
2. For taxation (less advance tax paid
and taxes deducted at source)
3. For proposed dividends
4. For dividend distribution tax
5. Others (to be specified)
T o t a l
SCHEDULE 15
Miscellaneous Expenditure (To the extent not written off a
adjusted)
Particulars
Current
Year
(RS’000) Previous
Year
(Rs’000)
1. Discount allowed in issue of shares /
debentures
2. Others (to be specified)
T o t a l
Notes:
a) No item shall be incl uded under the head “Miscellaneous
Expenditure” and carried forward unless:
1. some benefit form the expenditure can reasonably be
expected to be received in future, and
2. the amount of such benef it is reasonably determinable
b) The amount to carried forward in respect of any included under
the head “Miscellaneous Expenditur e” shall not exceed the
expected future revenue / ot her benefits related to the
expenditure.
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Illustration 7
From the following information of the Junk Fire Insurance co.
Ltd. you are required to prepare r e v e n u e a c c o u n t f o r t h e y e a r
ended 31st March 2010.
Particulars Amount
Rs. In Lakhs
Reserve for unexpired risk as on 31-3-09 776
Rent, rates and taxes 22
Premium from direct business 830
Premium on re-insurance ceded 47
Auditors fees relating to insurance matters 12
Profit on sale of investment 175
Bad debts 26
Contribution to provident fund 88
Bonus to employees 64
Additional reserve as on 31-3-09 82
Medical expenses 16
Traveling expenses 09
Interest, dividend and rent received 320
Printing and stationary 13
Depreciation on office equipment 12
Survey fees relating to claims 15
Commission paid on direct business 152
Claims outstanding as on 31-3-2010 102
Claims outstanding as on 31-3-2009 74
Claims paid: direct 1,100
Re-insurance accepted 231
Re-insurance ceded 169
Commission on re-insurance ceded 29
The required for unexpired risk as on 31-3-2010 is 50% of the net
premium received.
151
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Solution:
Junk Fire Insurance Co. Ltd.
Revenue account for the year ended 31st March 2010
Particulars Schedule Amount Rs.
in Lakhs
Premiums earned net 1 1,249.5
Profit on sale of investment 17.5
Interest, dividend and rent 320
Total (A) 1,744.5
Claims incurred (net) 2 1,205
Commission 3 123
Operating expenses related to insurance
business 42 6 2
Total (B) 1,590
Operating profit from fire insurance
business C = (A – B)
154.5
SCHEDULES FORMING PART OF FINANCIAL STATEMENTS
SCHEDULE 1
Premium Earned (net)
Particulars Amount Rs.
in Lakhs
Premium from direct business 830
Less premium on reinsurance ceded (47)
Net premium 783
Adjustment for change in reserve for
unexpired risk
Reserve for unexpired risk as on 31-3-
2009 776
Add aditioanl reserve as on 31-3-09 82 858
Less resene for unexpired risk as on 31-3-
10 391.5
Total premium earned 1,249.5,
152
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SCHEDULE 2
Claims Incurred (net)
Particulars Amount Rs.
in Lakhs
Claims paid : Direct 1,100
Add: Re-insurance accepted 231
Less: Re-insurance ceded (169)
Net claims paid 1162
Add: claims outstanding as on 31-3-10 102
Less: claims outstanding as on 31-3-09 74 28
Surveyor fees 15
Total claims incurred 1205
SCHEDULE 3
Commission
Particulars Amt Rs. in
Lakhs
Commission paid: Direct 152
Less: commission on re-insurance ceded 29
Net commission 123
SCHEDULE 4
Operating Expenses relate d to Insurance Business
Particulars Amt Rs. in
Lakhs
Contribution to Provident Fund 88
Bonus to employees 64
Traveling expenses 9
Rent, Rates and taxes 22
Printing and stationery 13
Auditors fees related to insurance matters 12
Bad debts 26
Medical expenses 16
Depreciation on office equipment 12
Total 262 153
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Illustration 8
Jetty Marine Insurance Co. Ltd provides following
information’s as on 31st March 2006 and 31st March 2007. You are
required to prepare Revenue account for two years.
Particulars Amt (Rs)
31-3-06 Amt (Rs)
31-3-07
Commission on Direct business 350,000 3,77,500
On re-insurance ceded 3,52,000 2,64,000
On re-insurance accepted 2,47,500 2,75,000
Interest and bank changes 1,10,000 1,14,000
Repairs and maintenance 83,000 92,000
Depreciation on office buildings 40,000 50,000
Audit fees 35,000 50,000
Printing charges 72,000 89,000
Employees salary 13,75,000 14,85,000
Miscellaneous expenses 66,000 63,000
Managers salary 55,000 65,000
Claims paid 8,38,750 15,64,750
Premium from direct business 65,00,000 66,00,000
Re-insurance accepted 10,00,000 10,80,000
Re-insurance ceded 11,61,000 12,10,000
Adjustments
1. Claims outstanding as on:
31-3-05 Rs. 3,76,750
31-3-06 Rs. 4,92,250
31-3-07 Rs. 6,11,050
2. Interest, dividend and rent accrued Rs. 3,30,000 for the year
ended on 31-3-07
3. Reserve for unexpired risks as on 31st M a r c h 2 0 0 5 w a s R s .
55,20,000 and additional rese rve was Rs. 6,62,400.The
company’s policy is to provide reserve for unexpired risk at @
100% and addition reserves @ 12% of net premium received.
154
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Solution
Jelly Marine Insurance Co. Ltd
Revenue A/C for the year ended on 31-3-06 & 31-3-07
Particulars
Schedule Current Year
31-3-07 Amt
(Rs) Previous
Year 31-3-06
Amt (Rs)
Premium earned 1 63,23,280 54,21,720
Interest, dividend & rent 3,30,000
Total (A) 66,53,280 54,21,720
Claims incurred 2 16,83,550 9,54,250
Commission 3 3,88,500 2,45,500
Operating expenses
related to marine business 42 0 , 0 8 , 0 0 01 8 , 3 6 , 0 0 0
Total (B) 40,80,050 30,35,750
Operating profit from
marine business [ C= A–B] 25,73,230 23,85,970
SCHEDULES FORMING PART OF FINANCIAL STATEMENTS
SCHEDULE 1
Premium Earned (net)
Particulars Current Year
31-3-07 Amt
(Rs) Previous
Year 31-3-06
Amt (Rs)
premium from direct business 66,00,000 65,00,000
Add: premium on reinsurance
accepted 10,80,000 10,00,000
Less: premium on reinsurance ceded (12,10,000) (11,61,000)
Net premium (A) 64,70,000 63,39,000
Adjustment for change in reserve for
Unexpired risks
Add reserve for unexpired risks at the
beginning of the year 63,39,000 55,20,000
Additional reserve to the beginning of
the year 7,60,680 6,62,400 155
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(B) 70,99,680 61,82,400
Less reserve for unexpired risks at the
end of the year 64,70,000 63,39,000
Additional reserve at the end of the
year 7,76,400 7,60,680
(C) 72,46,400 70,99,680
Total premium (A + B - C) 63,23,280 54,21,720
SCHEDULE 2
Claims Incurred (net)
Particulars 31-3-07 Rs. 31-3-06 Rs.
Claims paid 15,64,750 8,38,750
Add outstanding at the end of the year 6,11,050 4,92,250
Less outstanding at the beginning of
the year (4,92,250) (3,76,750)
Total claims incurred 16,83,550 9,54,250
SCHEDULE 3
Commission
Particulars 31-3-07 Rs. 31-3-06 Rs.
Commission paid Direct 3,77,500 3,50,000
Add re-insurance accepted 2,75,000 2,47,500
Less re-insurance ceded (2,64,000) (3,52,000)
Net commission 3,88,500 2,45,500
156
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SCHEDULE 4
Operating Expenses Related to Insurance Business
Particulars 31-3-07 Rs. 31-3-06 Rs.
Employees salary 14,85,000 13,75,000
Repairs and maintenance 92,000 83,000
Printing charges 89,000 72,000
Audit fees 50,000 35,000
Managers salary 65,000 55,000
Miscellaneous expenses 63,000 66,000
Depreciation office building 50,000 40,000
Total 20,08,000 18,36,000
Illustrations 9
Akbar Ali General Insurance Company Ltd. furnishes you the
following balance as on 31st M a r c h 2 0 0 9 . y o u a r e r e q u i r e d t o
prepare i) fire revenue account ii) marine revenue account iii) profit
and loss account and iv) Balance Sheet as per the requirements of
law.
Amount (Rs. in ‘000)
Particulars Fire marine
Expenses of management 500 600
Commission paid 823 752
Commission on reinsurance ceded 316 471
Claims paid less reinsurance 7,131 9,016
Claims O/S (as on 31-3-09) 240 273
Premium less reinsurance 13,356 17,841
Reserve for unexpired risks (as on 31-3-
08) 11,100 13,260
Additional reserve (as on 31-3-08) 1,110 1,326
Audit fees 52 65
Directors sitting fees 44
Income from Investment 826
Share transfer fees 110
Borrowings from banks 218
Bank balances 1,516 157
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Cash balances 189
Deposits held on reinsurance companies 143
Outstanding premium 2,100
Advances to banks and financial
institution 2,901.25
Agents balances 510
Sundry debtors 990
Sundry creditors 281
Advances to directors 122
Investments
Government securities 17,102.4
Other approved securities 12,771.35
Equity shares 1,000
Mutual fund 1,200
General reserves 920
Other reserves 116
Furniture and fittings 800
Building 1100
Deposits with RBI 373
Share capital 1,000
Adjustments
1. Share capital consists of 30,000 e quity shares of Rs. 100 each.
Issued, subscribed and called-up 20,000 equity shares of Rs. 50
each.
2. The company directors declared di vidend at 10% out of profits
earned during the year.
3. Expenses of management include surveyor fees and legal
expenses of Rs. 82,0 00 and Rs. 64,000 respectively relating to
fire insurance claims
4. Provision for tax is to be made at 30%
5. The reserves for unexpired risk to be created at 50% of net
premium income for fire insuranc e and at 100% of net premium
income for Marine Insurance as on 31st M a r c h 2 0 0 9 . A d d i t i o n
reserve for fire and Marine Insurance is to be maintained at 15%
and 10% of net premium income.
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Solution
Akbar Ali General Insurance Co. Ltd.
Revenue A/C for the year ended as on 31-3-09
Amount (Rs. in ‘000)
Particulars
Schedule Fire Marine
premiums earned net 1 16,884.6 12,801.9
Total (A) 16,884.6 12,801.9
Claims incurred (net) 2 7,517 9,289
Commission 3 507 281
Operating expenses related to 4 409 709
Insurance Business
Total (B) 8,433 10,279
Operating profit from fire and
marine business (C = A – B) 8,451.6 2,522.9
Profit & Loss A/C for th e year ended on 31-3-09
Particulars 31-3-09 amount
(Rs. in ‘000)
Operating profit
Fire insurance 8,451.6
Marine insurance 2,522.9 10,974.50
Income from investments 826
Total (A) 11,800.50
Other expenses
Share transfer fees 110
Total (B) 110
Profit before tax 11,690.50
Provision for tax (30%) 3,507.15
Profit after tax 8,183.35
Appropriations
Proposed final dividend 100
Balance, carried forward to balance sheet 8,083.35
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Balance Sheet as at 31st March 2009
Particulars Schedule Amount (Rs.
in ‘000)
Sources of fund
Share capital 5 1,000
Reserves and surplus 6 9,119.35
Borrowings 7 218
Total 10,337.35
Application of funds
Investments 8 32,073.75
Loans 9 2,901.25
Fixed assets 10 1,900
3 6 , 8 7 5
Current Assets
Cash and Bank Balance 11 1,705
Advances and other assets 12 4.095
Sub total (A) 5,800
Current liabilities 13 424
Provisions 14 31,913.65
Sub total (B) 32,337.65
Net current assets (C= A – B) (26,537.65)
Total 10,337.35
SCHEDULES FORMING PART OF FINANCIAL STATEMENTS
SCHEDULE 1
Premium Earned (net)
31-3-09 Amount (Rs.
in ‘000)
Particulars
Fire Marine
Premium less reinsurance 13,356 17,841
Adjustments for change in reserves for
unexpired risks
Add reserve for unexpired risks (1-4-08) 11,100 31,260
Additional reserve (1-4-08) 1,110 1,326
2 5 , 5 6 6 3 2 , 4 2 7
Less reserve for unexpired risks (31-3-09) 6,678 17,841
Additional reserve (31-3-09) 2,003.4 1784.1
( 8 , 6 8 1 . 4 ) ( 1 9 , 6 2 5 . 1 )
Total premium 16,884.6 12,801.9
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SCHEDULE 2
Claims Incurred (net)
31-3-09 Amount
(Rs. in ‘000)
Particulars
Fire marine
Claims less reinsurance 7,131 9,016
Add claims O/S at the end (240) 273
Add surveyor fees 82
Legal expenses 64 146
7,517 9,289
SCHEDULE 3
Commission
31-3-09 Amount
(Rs. in ‘000)
Particulars
Fire marine
Commission paid 823 752
Less commission on reinsurance ceded (316) (471)
Net commission 507 281
SCHEDULE 4
Operating Expenses Related to Insurance Business
31-3-09 Amount
(Rs. in ‘000)
Particulars
Fire marine
Expenses of management 500 600
Less surveyors fees 82
Legal expenses 64 146
Auditors fees 52 65
Directors sitting fees 44
Total 406 709
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SCHEDULE 5
Share capital
Particulars Amount
(Rs. in ‘000)
Authorized capital
3,000 30,000 equity shares of Rs. 100 each Issued,
subscribed and called-up capital
20,000 equity shares of Rs, 50 each 1,000
Total 1,000
Schedule 6
Reserves and Surplus
Particulars Amount
(Rs. in ‘000)
General reserves 920
Other reserves 116
Balance of profit in profit & loss A/C 8,083.35
Total 9,119.35
SCHEDULE 7
Borrowings
Particulars Amount
(Rs. in ‘000)
Borrowings from banks 218
Total 218
SCHEDULE 8
Investments
Particulars Amount
(Rs. in ‘000)
Government securities 17,102.40
Other approved securities 12,771.35
Equity shares 1,000
Mutual fund 1,200
Total 32,073,75 162
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SCHEDULE 9
Loans
Particulars Amount
(Rs. in ‘000)
Advances to banks and Financial Institutions 901.25
Total 901.25
SCHEDULE 10
Fixed Assets
Particulars Amount
(Rs. in ‘000)
Buildings 800
Furniture and fittings 1,100
Total 1,900
SCHEDULE 11
Cash and Bank Balances
Particulars Amount
(Rs. in ‘000)
Cash 189
Bank Balance 1,516
Total 1,705
SCHEDULE 12
Advances and other Assets
Particulars Amount
(Rs. in ‘000)
Advances to directors 122
Outstanding premiums 2,100
Agents balances 510
Deposits with RBI 373
Sundry debtors 990
Total 4,095
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SCHEDULE 13
Current Liabilities
Particulars Amount
(Rs. in ‘000)
Deposits held on re-insurance ceded 143
Sundry creditors 281
Total 424
SCHEDULE 14
Provisions
Particulars Amount
(Rs. in ‘000)
Reserve for unexpired risk
Fire Rs. 8,681.4
Marine Rs. 19,625.1 28,306.5
Tax provision 3,507.15
Proposed dividends 100
Total 31,913.65
Illustration 10
From the following figures app earing in the books of Ayush
General Insurance Company Ltd. c a r r i e s o n f i r e i n s u r a n c e
business, show the final accounts for the year ended on 31st March
2009.
A. Items directly related to Fire Insurance business
Electricity charges 525
Communication 490
Salaries to staff 2,000
Depreciation 500
Interest and dividend received rent received on
accommodation 493
Facilities provided to employees 247
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B. Items indirectly related to Fire Insurance business
Refund of double taxation 230
Miscellaneous receipts 115
Professional tax 150
General charges 110
Loss on realization on investment 799
Auditors fees 100
Other common items
Claims paid on direct business 8950
Amount due to reinsure 4870
Sundry creditors 961
Commission paid on direct business 490
Investment in government bonds 9885
Investment in infrastructure bonds 3365
Commission on reinsurance accepted 250
Claims paid on reinsurance 1306
Reserve for unexpired risk 10,000
Additional reserve 2100
Premium less reinsurance 17500
Share capital 18500
Outstanding claims at the beginning of the year 725
Advance to directors 6500
Application money for investment 8500
Lease hold property 865
Vehicles 207
General reserve 2499
Investment fluctuation reserve 1090
Loans given to other company 700
Agents balance (Dr) 5000
Balance due from reinsure 4050
Bank balance 4100
Cash balance 488
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Adjustments
1. Transfer 20% to general reserve from current year profit
2. Rs. 110 income tax deducted at source from interest and
dividend received
3. The market value of investment is Rs. 11790
4. Outstanding claims due as on 31st March 2009 Rs. 644
5. It is the policy of the company to maintain 50% of net premium
towards reserve for unexpired risk and additional reserve to be
increased by 10% of net premium for the year ended on 31st
March 2009.
Solution
Ayush General Insurance Com pany Ltd. Revenue Account
for the year ended 31st March 2009
Particulars Schedule Amount
(Rs)
Premium earned net 1 17000
Interest, dividends and rent gross (493 + 247 +
110) 850
Total (A) 17850
Claims incurred (net) 2 10175
Commission 3 740
Operating expenses related to Insurance
Business 43 5 1 5
Total (B) 14430
Operating profit from fire insurance business C
= (A – B) 3420
Profit and Loss Account for the year ended 31st March 2009
Particulars Amount
(Rs)
Operating profit from fire insurance 3420
Income from investments : Loss on realization of investment (799)
Refund of double tax 230
Other income
Miscellaneous receipts 115
Total (A) 2966 166
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Provisions
Additional provision for investment 370
Other expenses
Professional tax 150
General charges 110
Auditors fees 100
Total (B) 730
Profit before tax (Total A – Total B) 2236
Appropriations
Transfer to general reserve (20%) 447.2
Balance carried forward to balance sheet 1788.8
Balance Sheet as at 31st March 2009
Particulars Schedule Amount
(Rs)
Sources of fund
Share capital 5 18500
Reserves and Surplus 6 6195
Borrowings 7
Total 24695
Application of funds
Investments 8 13250
Loan 9 700
Fixed assets 10 1072
Total 15022
Current Assets
Cash and bank balance 11 4588
Advance and other assets 12 24050
Subtotal (A) 28638
Current liabilities 13 6475
Provisions 14 12490
Subtotal (B) 18965
Net current asset (C) = (A – B) 9673
Total 24695
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SCHEDULES FORMING PART OF FINANCIAL STATEMENTS
SCHEDULE 1
Premium Earned (net)
Particulars Amount
(Rs.)
Premium less: reinsurance 17500
Adjustment for change in reserve for unexpired
risks
Reserve for unexpired risk at the beginning of
the year 10,000
Additional reserve 2100 12,100
Less: reserve for unexpired risk at the end of
the year 8750
Additional reserve (2100 + 1750) 3850 (12,600)
Total premium earned (net) 17000
SCHEDULE 2
Claims incurred (net)
Particulars Amount
(Rs.)
Claims paid on direct business 8950
Add: re-insurance accepted 1306
Net claims paid 10256
Add : claims O/S at the end of the year 644
Less : claims O/S at the beginning (725)
Total claims incurred 10175
SCHEDULE 3
Commission
Particulars Amount
(Rs.)
Commission paid on direct business 490
Add: re-insurance accepted 250
Net commission 740
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SCHEDULE 4
Operating Expenses Related to Insurance Business
Particulars Amount
(Rs.)
Salaries to staff 2000
Communication 490
Electric charges 525
Depreciation 500
Total 3515
SCHEDULE 5
Share Capital
Particulars Amount
(Rs.)
Authorized, issued and paid up equity share capital 18500
Total 18500
SCHEDULE 6
Reserves and Surplus
Particulars Amount
(Rs.)
General reserve 2499
Add: transfer from P & L account 447.2 2 9 4 6 . 2
Investment fluctuation reserve 1090
Add: additional provision 370 1460
Balance of profit in P & L account 1788.8
Total 6195
SCHEDULE 8
Investments
Particulars Amount
(Rs.)
Investment in government bonds 9885
Investment in infrastructure bonds 3365
Total 13250
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SCHEDULE 9
Loans
Particulars Amount
(Rs.)
Loans given to other company 700
Total 700
SCHEDULE 10
Fixed Assets
Particulars Amount
(Rs.)
Leasehold property 865
Vehicles 207
Total 1072
SCHEDULE 11
Cash and bank balance
Particulars Amount
(Rs.)
Cash balance 488
Bank balance 4100
Total 4588
SCHEDULE 12
Advances and other Assets
Particulars Amount
(Rs.)
Application money for investment 8500
Advances to directors 6500
Agents balance 5000
Due from re-insurer 4050
Total 24050
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SCHEDULE 13
Current Liabilities
Particulars Amount
(Rs.)
Balance due to other reinsure 4870
Sundry creditors 961
Outstanding claims 644
Total 6475
SCHEDULE 14
Provision
Particulars Amount
(Rs.)
Reserve for unexpired risk 12600
Less: tax deducted at source (110)
Total 12490
Insurance is a contract of indemnity whereby the insurer
undertakes inconsideration for a fix ed sum of money, to make good
the loss suffered by the insured agai nst a specified risk or any other
contingency.
T h e b u s i n e s s o f i n s u r a n c e i n India is governed by The
Insurance Act, 1938 and regulat ed under the fr amework of
Insurance Regulation and Deve lopment authorities Act, 1999.
I n c a s e o f l i f e i n s u r a n c e a s p e c i f i e d a m o u n t b e c o m e s
payable on the death of the insured or on maturity of the policy.
General insurance covers losses c aused by fire, accident and loss
incidental to marine business.
T h e i n s u r a n c e c o m p a n i e s i n I n d i a n e e d t o m a i n t a i n s t a t u t o r y
books i.e. register of agents. Besides t hese books they also
maintain subsidiary books i.e. ledgers, journal cash book etc.
T h e r e a r e s o m e i m p o r t a n t t e r m s r e l a t e d t o I n s u r a n c e
Business.
2.11 SUMMARY 171
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P r e m i u m i s t h e a m o u n t p a i d b y t h e p o l i c y h o l d e r t o t h e
insurance company at regular intervals or at one stroke
C l a i m s is the amount payable by an insurer against the
policy either on maturity or on the death of the policy holder.
R e - i n s u r a n c e , the insurance company transfer part of its risk
on another insurance company in an anticipation for commission
against it, is known as reinsurance.
A n n u i t i e s is a fixed sum of money w h i c h t h e i n s u r a n c e
company pays periodically in a series to policy holder in return for a
lump sum paid in advance.
R e s e r v e f o r u n e x p i r e d r i s k : I n case of general insurance, the
reserve for unexpired risk is cr eated every year against the
premium received in advance, in or der to meet any loss that may
raise on any day during the lifetime of policy. The reserve for
unexpired risk should be 50% of net premium in case of fire and
other miscellaneous insurance and 100% of net premium in case of
marine insurance business.
T h e l i f e i n s u r a n c e c o m p a n i e s prepare its revenue account in
form A-RA, profit and loss account in form A-PL and balance sheet
in form A-BS where as general in surance companies prepare its
revenue account in form B-RA, profit and loss account in form B-PL
and balance sheet in form B-BS as prescribed in the Act . separate
revenue account is prepared for fire insurance, marine insurance
and other miscellaneous insurance.
Fill in the blanks :
1. The life insurance Fund account appears on the ___________
and the various securities that r epresent the investment of life
insurance fund appear on the ______________ .
2. Premium received for the first time of each insurance policy is
separately recorded in the _____________ book.
3. ____________ book is maintained to record second and
subsequent premium received after the first one.
4. The ceding company which gives business to a reinsurance
company is to receive commission from the later known as
______________ . 172
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5. The revenue account of a insurance company is to be
prepared in accordance with pr ovisions of ______________ .
6. The details of commission ex penses of a general insurance
company is show n under ________________.
7. Balance sheet of insur ance company is prepared in
_______________ as prescr ibed by IRDA.
8. The reserve for unexpired risk in case of Fire and
miscellaneous business is _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ o f t h e n e t
premium.
9. In case of general insur ance business, a reserve for
______________ is created every year so as to as certain the
profit.
10. ______________ means the business of effecting contracts of
insurance other than life insuranc e, fire insurance and marine
insurance.
Answers :
1. liabilities side, assets side;
2. new premium book;
3. Revenue premiums
4. reinsurance leded
5. IRDA regulations 2002
6. schedule – 3
7. vertical format
8. 50%
9. unexpired risk
10. miscellaneous insurance business
2. True or False :
1. A life insurance company maintenance life insurance fund
ledger, revenue ledger and miscellaneous ledger.
2. In case of a ‘without profits’ policy, the policy holder gets the
amount specified in the policy plus bonuses declared on each
valuation.
3. Reinsurance is the insurance of an already insured risk.
4. The annuity paid duri ng the lifetime of the policy holder, it is
called perpetuity.
5. The major sources of income of a life insurance company are in
the nature of interest / divided on securities and rent from
properties let out.
6. The main purpose of preparing pr ofit and loss account of Life
Insurance Company is to sh ow in a summarized form the 173
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income and expenditure relating t o l i f e i n s u r a n c e b u s i n e s s
during on accounting period.
7. The major items of expenditure of a general insurance company
are the payment of claims.
8. In case of general insur ance business a common revenue
account is prepared for fire, marine and other miscellaneous
insurance business.
Answers : 1-T, 2-F, 3-T, 4-T, 5-F, 6-F, 7-T, 8-F
3) Match the following :
I)
1) Investment of policy holder A) Schedule -5
2) Share holder’s fund B) Schedule – 8
3) Employees’ remuneration & welfare
benefits of life insurance business. C) Schedule – 8A
4) Investments of share holders fund D) Schedule – 3
5) Claims incurred in g e n e r a l i n s u r a n c e
business E) Schedule – 6
6) Reserve for unexpired risk F) Schedule - 6
G ) S c h e d u l e - 1 4
Answers : 1-C; 2-A; 3-D; 4-B; 5-E; 6-G
II)
1) Statutory books A) Form B-Bs
2) Revenue account of life insurance
business B) Income and
Expenditure ledger
3) Balance sheet of g e n e r a l i n s u r a n c e
business C) Expenditure
Cash book
4) Cash book D) Register of
Agents
E ) F o r m A - R A
F ) F o r m A - B S
Answers : 1-D; 2-E; 3-A; 4-C;
4) Explain the following terms :
i) Annuities
ii) Whole –life and endowment policies
iii) With profit and without profit polices 174
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iv) Bonus in reduction of premium
v) Statutory books
vi) Schedule
vii) Commission Expenses
5) Answer the following :
i) Explain the forms and requir ements of preparing final
accounts of life insurance business.
ii) Write a brief note on ‘val uation Balance Sheet’
iii) Distinguish between lif e insurance and General
insurance business.
iv) Explain the preparation of revenue account of general
insurance business.
v) What is ‘Reserve for unexpired risk’?
6) Jagrut Life Insurance company L t d . p r o v i d e s t h e f o l l o w i n g
information and ask to prepare val uation balance sheet and profit
distribution statement fo r the year ended on 31st March 2008. Also
given journal entries.
A m o u n t ( R s . )
life insurance fund as on 1-4-2007 5,51,595
Interim bonus paid 82,500
Balance of revenue account as on 31-3-2008 7,92,000
Net liability as per val uation as on 31-3-08 5,44,500
The company declared reversionary bonus of Rs. 210 per
Rs. 1,000 and gave the policy holder a n o p t i o n t o t a k e b o n u s i n
cash Rs. 120 per Rs. 1,000. Tota l business of t he company was
Rs. 22,44,000. The company issued with-profit polic y only, ¾ of
policy holder in value opted for cash bonus.
Answer : Amount due to policy holders Rs. 2,31,000.
7) Prepare revenue account of M a n o r a m a L i f e I n s u r a n c e
Company for the year ended 31st M a r c h 2 0 0 6 . A l s o p r e p a r e
valuation Balance Sheet.
Particulars Amount (Rs.)
Claims by death 5,32,980
Pension payment 2,10,770
First year premium 9,87,966 175
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Renewal premium 39,51,864
Consideration for annui ty granted 5,74,889
Claims by death paid against reinsurance
accepted 3,74,227
Transfer fees received 903
Balance of life insuranc e fund at the beginning
of the year 1,06,47,000
Expenses of management 2,23,440
Bonus paid in cash 16,912
Commission 67,018
Dividend paid to shareholders 38,500
Interest and dividend received 6,84,880
Income tax 24,99,740
Surrenders 91,980
Bonus in reduction of premium 6,860
Net liability as per v a l u a t i o n a s o n 3 1st M a r c h
2006 77,35,000
Answer : Balance of life insurance fund as on 31-3-06 Rs. 15,07,3,345 , Surplus
Rs. 73,38,345
8) Niraj Life Insurance company L t d . p r o v i d e s t h e f o l l o w i n g
balances as on 31st M a r c h 2 0 0 9 . Y o u a r e r e q u i r e d t o p r e p a r e
Revenue account, profit and loss account and vertical Balance
sheet as on that date.
Debit balances Amount (Rs.in ‘000)
Sundry debtors 6,300
Advances to directors 33,000
Deposits with RBI 13,050
Repairs and maintenance 300
Advertisement and publicity 1,230
Commission paid for renewal premium 2,328
Commission on reinsurance accepted 1,871.7
Interim Bonus paid 6,300
Provision for doubtful debts 1,050
Surrenders 15,750
Communication 360
Auditor fees related to insurance matters 750
Outstanding premium 9,963
Money at call and short notices 12,999 176
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Office equipment 6,000
Leasehold property 19,500
Underwriting commission 330
Insurance claims by maturity 70,257
Insurance claims by deaths 22,992
Investment in approved securities 68,253
Investment in debentures 32,430
Re-insurance accepted claims by maturity 24,357
Loans against mortgage of property 33,029.7
Amount due from other insurance company 9,900
Total 3,92,300.4
Credit balances Amount (Rs.in ‘000)
Surplus on revaluation of reversions 7,341
Balance due to other in surance company 5,183.4
Commission on reinsurance ceded 1,779
Renewal premium 1,58,832
Single premium 33,000
Deposits held on reinsurance ceded 10,173
Claims by maturity against reinsurance
ceded 6,372
Share capital 60,000
Borrowings from Indraprasad bank 14,850
Premium deposits 20,160
Profit on sale of investment 1,050
Balance of account at the beginning of the
year 58,560
General reserves 15,000
Total 3,92,300.4
Adjustment :
1. Issued, subscribed and paid up capital, 6,00,000 Equity
shares of Rs. 100 each.
2. Bonus utilized in reduction of premium Rs. 57,31,000.
3. Guarantees given by or on behalf of the company Rs.
87,50,000.
4. Outstanding advertisement a n d p u b l i c i t y 8,10,000 and
prepaid communication charges Rs. 2,49,000. 177
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5. Interest and rent accrued Rs. 17,70,000.
6. Allocate 20% of surp lus to general reserves.
Answer : Balance of fund as per revenue account Rs. 4,96,29,840.Total
sources / application of fund as per vertical balance sheet
Rs. 23, 02,77,300.
9) As per General Insurance Company Ltd. furnishes you with
following balances of its Fire insurance business as on 31st March
2005
Debit balances Amount (Rs.in ‘000)
Mutual fund 339
Survey expenses related to claims 33
Training provided to employees in respect
of insurance 53
Investments : Equity shares of Aryan
Company Ltd. 1,441
Claims less reinsurance 46
Other approved securities 1,990
Commission on direct business 14
Bad debts 13
Director’s setting fees related to insurance
business 45
Furniture and fittings 180
Claims o/s at the end 13
Land and building 210
Loss on sale of investment 62
Printing and stationery expenses incurred
for insurance 29
Cash and bank balance 101
o/s premium 73
Newspapers and periodicals 15
Sundry debtors 29
Miscellaneous expenses 25
Depreciation on furniture 36
Interest and bank charges 61
Total 4,808 178
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Credit balances Amount (Rs.in ‘000)
Amount due to directors 77
Share capital 750
Premium less reinsurance 1,889
Investment fluctuation reserve 363
Reserve for unexpired risk 990
Dividend received on Equity shares held 48
General reserve 310
Borrowings from ABC Ltd. 69
Additional reserves 85
Other reserve 85
Interest received on approved securities 110
Claims o/s at the beginning 32
Total 4,808
Adjustments :
1. Provision for tax to be made at 50%
2. Income Tax deducted at sour ce from interest and dividend
received Rs. 52,000.
3. Market value of investment as on 31st March 2005 is as
follows :
Equity shares of Aryan Com pany Ltd. Rs. 11, 30,000; mutual
fund Rs. 3,10,000 and other approved securities 18,00,000.
4. Provide for unexpired risk at 50% of net premium and
additional reserve at 12% of net premium.
You are required to prepare :
Revenue account, profit and loss account and Balance
Sheet as per the prescribed form.
Answer :
Operating profit from Fire insurance business Rs. 15,91,820.
Profit & Loss account balance Rs. 7,11,410.
Total sources / Application of fund Rs. 24,55,410
10) Gold General Insurance Company carries marine insurance
business and provides the information of its business as on 31st
March 2010.
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Debit balances Amount (Rs.in 100)
Establishment expenses 34,300
Contribution to provident fund 28,400
Rent paid 25,110
Depreciation on motor car 9,500
Claims paid directly 1,20,670
Commission 65,450
Income tax on interest 3,190
Investment : real estate 8,00,000
National saving ce rtificate 3,68,060
Shares in companies 1,50,000
o/s premium 83,000
Fired deposit with Aruna bank 50,000
Agents balances 60,000
Cash balances 29,600
Building 2,50,000
Directors traelling expenses 1,500
Printing and stationery 8,100
Motor car 1,10,000
Total 21,96,880
Credit balances Amount (Rs.in 100)
Interest rent and dividend received 88,270
Bad debts recovered 10,000
Reserve for unexpired risk 1,45,810
Additional reserve 76,790
Premium less reinsurance 3,04,810
Claims o/s at the beginni ng of the year 2,200
Miscellaneous receipts 3,000
Share capital 10,00,000
Employees security deposits 33,000
Contingency reserve 2,00,000
General reserve 2,50,000
Other reserve 83,000
Total 21,96,880
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Additional Information :
1. Equity share capital consist of 10,000 shares of Rs. 100 each.
2. Depreciation on building Rs. 25,000 is to be provided.
3. Direct claim includes Rs. 45,000 covered by reinsurer.
4. Provision for unexpired risk to be made at 100% of net premium
and additional reserve to be rais ed by 5% or net premium.
Prepare revenue account, profit & Loss account and vertical
Balance Sheet as at 31st March 2010.
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FOREIGN CURRENCY CONVERSION
Problems
A Foreign branch usually maintains a complete set of books under
double entry principles. So, the acc ounting principles of a Foreign
Branch will be the same as those applying to an Inland Branch.
Before a Trial Balance of the Fore ign Branch is incorporated in the
H. O. books, it has to be converted home currency.
In case of fluctuating rates of e x c h a n g e , t h e f o l l o w i n g r u l e s f o r
conversion are applied:
No Nature of Account Exchange Rate Applicable
1. Fixed Assets Rates ru ling at the time they
were acquired.
2. Fixed Liabilities Rates ruling as on the date of
the Trial Balance.
3. Current Assets &
Liabilities Rates ruling as on the date of
the Trial Balance.
4. Remittance sent by the
branch At the actual rates at which
they were made.
5. Goods received from H.
O. as well as goods
returned to H. O. At the rate ruling on the date of
dispatch or the date of receipt.
6. The Nominal A/c’s
(except next two) Average rate ruling during the
accounting period. 3
Accounting
3.4 Solved
3.5 Exercise
Unit Structure
3.1 Introduction
3.2 Rules for Conversion
3.3 Branch
3.1 INTRODUCTION
3.2 RULES FOR CONVERSION:
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7. Depreciation on Fixed
Assets Rate of conversion applicable
in case of the particular asset
concerned [as indicated in (a)
above].
8. Opening and Closing
stocks Rates ruling of on the opening
and closing dates respectively.
9. Balance in H. O. A/c Va lue at which the Branch A/c
appears in H. O. books on the
date.
ACCOUNTING (FOREIGN BRANCH)
FOREIGN BRANCHES
W h e n a b r a n c h i s e s t a b l i s h e d a b r o a d i t i s c a l l e d a s a
Foreign Branch. The accounting a rrangements for a foreign branch
are exactly the same as for any independent branch up to the Trial
Balance. But in this case accounts are maintained in foreign
currency to correspond with the lo cal conditions t he main problem
which the Head Office has to face is the restatement of accounts
one currency into another. In order to incorporate the Trial Balance
of a foreign branch in the boo ks of the head office it must be
translated (using appropriate exchange rates) into the currency of
the Head Office.
Rules for conversion of Branch Trial Balance when Exchange
Rates are ‘Stable’
Exchange rate is said to be stable, when it does not vary to a
great extent from time to time. In t h i s s i t u a t i o n , a f i x e d e x c h a n g e
rate can be used to convert the branch Trial Balance into the
currency of the Head Office with t he exception of (a) Remittances,
and (b) Head office Current Account.
a. Remittances: These are convert ed at the actual rates at which
they were made.
b. Head Office Current Account: T he actual figures shown for the
Branch Current Account in the boo ks of the Head Office (after
taking into consideration in-transit items).
When the foreign branch Trial Ba lance is converted into local
currency, a new Trial Ba lance takes birth known as “Difference on
Exchange Account” is opened to ma ke the Trial Balance agree.
3.3 BRANCH 183
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Closing of Difference on Exchange Account
i. For debit entry on trial
balance
Profit and Loss Account Dr.
OR
Exchange Reserve Account Dr. (if any)
To Difference on Exchange Account
ii. For credit entry on trial
balance
Difference on Exchange Account Dr.
To Exchange Reserve Account Big Differences)
(If the difference is very small, it can credited to Profit & Loss
account)
The format of the new Trial Balance of the branch is generally
drawn up as follows:
Foreign Branch Converted Trial Balance as at 31st December, 2006
Currency Rupees Sr.
No. Heads of
Accounts L. F.
Dr. $ Cr. $Rate of
Exchange Dr. Rs. Cr. Rs.
PROBLEMS
Q.1 A B C L t d . h a s a b r a n c h i n N e w Y o r k a s o n 3 1st March 2011
the trial balance of the branch was as follows:
Particulars Dr. $ Cr. $
Head office account - 8,500
Goods from head office 44,000 -
Furniture 9,000 -
Bank Balance 1,250 -
Cash 250 -
Rent 1,200 -
Outstanding Expenses - 800
Sundry debtors 3,150 -
Sales - 61,000
Stock – 1.4.2010 8,500 -
Salaries 2,800 -
Insurance 150
70,300 70,300 3.4 SOLVED 184
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The branch account in head o ffice shows debit balance Rs.
2,14,500 and goods sent to branch credit balance of Rs. 13,12,500.
Depreciation furniture @ 10% p.a.
Stock at branch 31st March 2011 was $ 7,500
Furniture was purchased in 1997 when 1$ = Rs. 20
Exchange Rates were:
On 1.4.2010 1$= Rs. 28
On 31.3.2011 1$= Rs. 30
Average rate 1$= Rs. 29
You are required to prepare branch trial balance by converting in
rupees and prepare branch trading and profit and loss a/c for the
year ended 31.3.2011 and balance sheet as on that date.
Solution:
Converted Trial Balance as on 31st March 2011
In the Books of Branch
Sr.
no. Particulars Dr. ($) Cr.
($) Rate Dr. ($) Cr. (Rs)
1 Head office
account 8,500 Actual - 214,500
2 Sales 61,000 29 - 1,769,000
3 Goods from
Head Office 44,000 - Actual 1,312,500
4 Stock on 1-4-
10 8,500 - 28 238,000
5 Furniture 9,000 - 20 180,000
6 Cash in box 250 - 30 7,500
7 Bank
Balance 1,250 - 30 37,500
8 Salaries 2,800 - 29 81,200
9 Rent 1,200 - 29 34,800
10 Insurance 150 - 29 4,350
11 Outstanding
expenses -8 0 0 2 9 2 4 , 0 0 0
12 Sundry
debtors 3,150 - 30 94,500 -
13 Difference in
Exchange -- 3 0 1 7 , 1 5 0 -
70,300 70,300 2,007,500 2,007,500
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In the books of Branch, Trading & Loss a/c
for the year ended 31st March 2011
Particulars Dr. Amt Particulars Cr. Amt
To Opening stock
a/c 238,000 By Sales 1,769,000
To Goods from H.
O. 1,312,500 By Closing stock 225.000
To Rent 34,800
To Gross profit c/d 408,700
1 , 9 9 4 , 0 0 0 1 , 9 9 4 , 0 0 0
To Salaries 81,200 By Gross profit b/d 408.700
To Insurance 4,350
To Depreciation 18,000
To Diff. in
exchange 17,150
To Net profit c/d 288,000
4 0 8 . 7 0 0 4 0 8 . 7 0 0
Balance sheet as on 31st March 2011
Liabilities Amt Assets Amt
Head office
a/c 2,14,500 Furniture 1,80,000
Add: Net
profit 2,88,000 5,02,500 Less:
Depreciation 18,000 1,62,000
C a s h i n b o x 7 , 5 0 0
Outstanding
expenses 2 4 , 0 0 0 B a n k
balance 3 7 , 5 0 0
S u n d r y
debtors 9 4 , 5 0 0
C l o s i n g
Stock 2 , 2 5 , 0 0 0
5 , 2 6 , 5 0 0 5 , 2 6 , 5 0 0
186
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Q.2 K e d a r L t d . M u m b a i h a d a b r a n c h in Washington U. S. A.
which is in the nature of an integral operation as defined under
AS 11.
The following Trial Balance as on 31st March 2011 is available from
respective books.
particular Mumbai H. O. Rs.
In thousand Washington Branch
(Dollars in
thousand)
Shares Capital - 2,000 - -
Branch and H. O.
Current A/c 120 - - 7
Reserves &
Surplus -1 , 0 0 0 - -
Commission
Receipts -2 5 6 - 1 0 0
Land 500 - - -
Building 1,000 - - -
Building
depreciation
provision -2 0 0 - -
Plant & Machinery 2,500 - 200 -
Depreciation
provision -6 0 0 - 1 3 0
Office Expenses 25 - 18 -
Rent - - 12 -
Stock 100 - 20 -
Branch stock
reserve & provision -4 - -
Wages & salaries 75 - 45 -
M D’s Salary 30 - - -
Debtors &
Creditors 280 200 60 30
Purchase & Sales 240 520 20 123
Goods sent to
branch -1 0 0 5 -
Cash and Bank 10 - 10 -
4,880 4,880 390 390 187
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The following additional information is also available;
a. Stock on 31.3.2011 at Mumbai Rs . 1,50,000 and at Washington
$ 3,125.
b. Head office sends goods to the foreign branch at cost plus 25%
c. Depreciation is to be pr ovided on building and on plant and
machinery @ 10% on written down values respectively.
d. Provide 5% for doubtful debts.
e. The managing director is entitled to 2% commission on net
profits and income tax is to be provided @47.5%.
f. The rates of exchange for conversion of foreign branch trial
balance are
O p e n i n g r a t e 1 $ = 2 C l o s i n g r a t e 1 $ = 2 4
A v e r a g e r a t e 1 $ = 2 2 f o r fixed assets 1$ = 18
You are required to:
a. Convert the Washington foreign branch trial into rupees.
b. Prepare the trading and P & L a/c for the year ended 31.3.2011
and the balance sheets showing the head office and branch
performance and position separatel y to the extent possible.
Solution:
Converted Branch Trial Balance as on 31st March 11
(in thousand)
Sr.
No. Particulars Dr
($) Cr
($) Rate Dr
(Rs) Cr
(Rs)
1 Plant & Machinery 200 - 18 3,600 -
2 Prov for plant n
machinery -1 3 0 1 8 - 2 , 3 4 0
3 Debtors n creditors 60 30 24 1,440 720
4 Stock as on 1-4-2004 20 - 20 400 -
5 Cash/bank balance 10 - 24 240 -
6 Purchases/Sales 20 123 22 440 2,706
7 Goods sent to Branch 5- A c t u a l 1 0 0 -
8 Wages/Salaries 45 - 22 990 -
9 Rent 12 - 22 264 -
10 Office expenses 18 - 22 396 -
11 Commission recd -1 0 0 2 2 - 2 , 2 0 0
12 Branch /H.O. Current a/c -7 A c t u a l - 1 2 0
13 Diff -- 2 1 6 -
390 390 8,086 8,086 188
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Trading & Profit and Loss a/c for the year ending 31st March
2011
Particular Amt Particular Amt
To opening
stock 100,000 400,000 By sales 520,000
To
purchases 240,000 440,000 By goods
sent to
branch 100,000
To wages &
salaries 75,000 990,000 By closing
stock 150,000
To goods
from H.O. - 100,000
To gross
profit c/d 355,000 851,000
7 7 0 , 0 0 0 2 , 7 8 1 , 0 0 0 7 7 0 , 0 0 0 2 , 7 8 1 , 0 0 0
To Office
Expenses 25,000 396,000 By gross
profit b/d 355,000 851,000
To M. D’s
salary 30,000 - By
opening
stock
reserve 4,000
To
depreciation - - By
commissi
on recd 256,000 2,200,000
Building 80,000 -
Plant &
machinery 190,000 126,000
To R. D. D. 14,000 72,000
To stock
reserve A/c 15,000 -
To M. D.
Commission 5,220 -
To rent - 264,000
To diff. in
exchange - 216,000
To provision
for tax 121,496 939,075
To net profit
c/d 134,284 1,037,925
6 1 5 , 0 0 0 3 , 0 5 1 , 0 0 0 6 1 5 , 0 0 0 3 , 0 5 1 , 0 0 0
189
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Balance sheet as on 31st March 2011
Liabilities Amt Assets Amt
Share Capital 2,000,000 Land 500,000
Reserve &
Surplus 1,000,000 Building 1,000,000
Profit & Loss a/c 1,172,209 Less: Prov for
Dep 280,000 720,000
Creditors 920,000 Plant &
Machinery 6,100,000
O/s M.D’s
Commission 5,220 Less: Prov for
Dep 3,256,000 2,844,000
Provision for L.T. 1,060,571 Debtors 1,720,000
L e s s : R D D
@5% 86,000 1,634,000
cash & Bank 250,000
closing stock 225,000
Less: Stock
reserve 15,000 210,000
6 , 1 5 8 , 0 0 0 6 , 1 5 8 , 0 0 0
Journal Entry for Stock Reserve:
1. F o r C l o s i n g S t o c k R e s e r v e -
P r o f i t & L o s s A / c D r 1 5 , 0 0 0
T o S t o c k R e s e r v e A / c C r 1 5 , 0 0 0
2. F o r O p e n i n g S t o c k R e s e r v e –
S t o c k R e s e r v e A / c D r 4 , 0 0 0
T o P r o f i t & L o s s A / c C r 4 , 0 0 0
190
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Q.3 The following balance appeared in the books of Surat branch
of firm in London as on 31st December 2010.
Particular Dr. Rs. Cr. Rs. Particular Dr. Rs. Cr. Rs.
Sales - 225,000 Stock as
on 1st J a n
2008 25,200 -
Debtors 78,000 - Purchases 150,000 -
Bills
Receivable 20,800 - Wages/sal
aries 9,600 -
Head Office
account -6 6 , 4 0 0 R e n t ,
Rates,
Taxes 7,200 -
Cash at Axis
Bank 57,980 - Furniture 9,820 18,200
Miscellaneous
Exp 3,000 - Bills
payable 52,000
C r e d i t o r s
361,600 361,600
Stock on 31st December 2010 was Rs. 65,00 0. Surat branch a/c in
the books of London head office showed a debit balance of Rs.
2.680 on 1st December 2010.
Furniture was purchased from a remittance of Rs. 350 received
from London H. O. which exactly co vered the cost of the item.
The rates of exchange were:
31.12.2009 Rs. 28/1 pound
31.12.2010 Rs. 26/1 pound
The average rate for 2008 may be taken at Rs. 24 per 1 pound.
Prepare the trading and p&I account and balance sheet of Surat
branch in the books of London H. O. assuming the branch
operations to be integral to the main operation.
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Solution:
Converted Trail Balance as on 31st Dec. 2010
Sr.
No. Particulars Rs. Rs. Rate Pound Pound
1 Stock as on
1.1.10 25,200 - 28 900 -
2 Purchases 1,50,000 - 24 6,250 -
3 Sales - 2,25,000 24 - 9,375
4 Debtors 78,000 - 26 3,000 -
5 Creditors - 52,000 26 - 2,000
6 Bills receivable 20,800 - 26 800 -
7 Bills payable - 18,200 26 - 700
8 Wages/Salaries 9,600 - 24 400 -
9 Rent, rates,
taxes 7,200 - 24 300 -
10 Miscellaneous
exp 3,000 - 26 115 -
11 Furniture 9,820 - - 350 -
12 Cash at Axit
Bank 57,980 - 26 2,230 -
13 Head office a/c - 66,400 - 2,680
14 Diff. in
exchange -- 4 1 0 -
1 4 , 7 5 5 1 4 , 7 5 5
Trading and profit n Loss a/ c for the year ending 31.12.2010
Particular Amt Particular Amt
To opening stock a/c 900 By sales 9,375
To purchases 6,250 By closing stock 2,500
To wages/salaries 400
To gross profit c/d 4,325
1 1 , 8 7 5 1 1 , 8 7 5
B y g r o s s p r o f i t b / d 4 , 3 2 5
To rent, rates and taxes 300
To difference in exchange 410
To N. P. c/d 3,615
4 , 3 2 5 4 , 3 2 5 192
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Balance sheet as on 31st Dec 2010
Liabilities Amt Assets Amt
Head office a/c 2,680 Debtors 3,000
Add: N. P 3,615 6,295 Bills Receivable 800
F u r n i t u r e 3 5 0
Creditors 2,000 Cash at Axis bank 2,230
Bills payable 700 Closing Stock 2,500
M i s c e l l a n e o u s E x p 1 1 5
8 , 9 9 5 8 , 9 9 5
Q.4 K a u n B a n g a K a r e d p a t i C o m p u t e r s L t d . h a s h e a d o f f i c e a t
Mumbai and Branch at Ca lifornia. The branch s ubmits the foll trial
balance as on 31st Mar. 2011.
Particulars Dr. US $ Cr. US $ Assets Dr. US $ Cr. Us $
Head office
a/c -1 1 , 6 0 6 S a l a r i e s 7 1 , 1 3 0 -
Goods
received Office rent 44,316 -
From H.O. 12,725 Taxes &
insurance 13,655 -
Purchases
& sales 5,06,323 7,87,777 Debtors
and 1,17,117 -
Stock
(1.4.10) 13,100 creditors 37,119 1,57,617
Plant &
machinery 27,650 Printing &
stationary 16,303 -
Furniture &
fixtures 18,220 Postage &
telegrams 14,784 -
Cash in
hand 3,233 Freight 14,784 -
Cost at
bank 60,180 conveyance 1,145 -
1. The branch a/c in H. O. showed a blebit balance of Rs.
5,11,100 and goods sent to branch a/c showed a credit blance
of Rs. 5,66,600.
2. Plant & machinery was acquired w h e n U S $ R s . 4 6 . f u r n i t u r e
was acquired by branch on 1st J a n ’ 1 1 w h e n R s . 1 0 0 w e r e
equivalent to US $ 2.50 H. O. office charges depreciation on
plant & machinery @20% p.a. & on furniture & fixture @10%
p.a. The closing stock as on 31st Mar’11 at branch was US $ 193
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16,550. The exchange rates were as under 1st A p r . ’ 1 0 U S $
38.50 31st Mar’11 US $ 2.50 Aug US $ 44 convert the branch
trial balance into rupees & prepare profit & loss a/c for the year
ended 31st Mar’11 prepare balance s heet of California branch
of Kaun Banega Karodpat i Ltd. as on 31st Mar’11 the foreign
operation is in the nature of an integral operation.
Solution:
Converted Trial Balance for the year ending 31st Mar’11
Particulars Dr. ($) Cr. ($) Rate Dr. ` C r . `
Head office a/c -1 1 6 0 6 A c t u a l 5 1 1 1 0 0
Goods received
from H. O. 12725 Actual 566600
Purchases &
sales 506323 787777 44 22278212 34662188
Stock (1.4.10) 13100 38.50 504350
Plant &
Machinery 27650 46 1271900
Furn & fixtures 18220 40 728800
Salaries 71130 44 3129720
Office rent 44316 44 1949904
Taxes &
insurance 13655 44 600820
Drs/ & creditors 117117 157617 40 4684680 6304680
Priting &
creditors 37119 44 1633236
Printing &
stationery 37119 44 717332
Postage &
telegram 16303 44 650496
Freight 14784 44 50380
Conveyance 1145 44 129320
Cash in hand 3233 40
Diff. in
exchanges 2407200
Cash at bank 60180 40 175018
Diff in exchange 41477968 41477968
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In the books of branch Trading and Profit & Loss a/c for year
ended 31st Mar’11
Particulars Amt Particulars Amt
To opening
stock 5,04,350 By sales 34662188
To purchases 2,22,78,212 6,62,000
To goods
from H. O. 5,66,600 By closing
stock (16550 x
40)
To gross
profit c/d 1,19,75,026
3 5 3 2 4 1 8 8 3 5 3 2 4 1 8 8
To salaries 31,29,720 By gross profit
b/d 1,19,75,026
To office rent 19,49,904
To taxes &
insurance 6,00,820
To printing &
stationary 16,33,236
To postage &
telegram 7,17,332
To fright 650496
To
conveyance 50380
To
depreciation 327260
To diff in
exchange 1,75,018
To net profit
c/d 27,40,860
1 , 1 9 , 7 5 , 0 2 6 1 , 1 9 , 7 5 , 0 2 6
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Balance sheet as on 31st Mar’11
Liabilities Amt Amt Assets Amt Amt
Head
office a/c 5,11,100 Plant &
mach. 12,71,900
(+) Net
profit 2740860 3251960 (-) &
fixtures 2,54,380 10,17,520
( - ) d e pn 7 2 8 8 0 0 6 , 5 5 , 9 2 0
creditors 63,04,680 Debtors 72,880 46,84,680
C a s h i n
hand 1 , 2 9 , 3 2 0
C a s h a t
bank 2 4 , 0 7 , 2 0 0
C l o s i n g
stock 6 , 6 2 , 0 0 0
9 5 5 6 6 4 0 9 5 5 6 6 4 0
Q.5 X Y L t d h a s a b r a n c h i n N e w Y o r k. At the end of each year
(Dec’ 31) a trial balance sent by the branch in dollar currency is
converted into rupee currency at the head office. (Bhopal)
T h e f o l l t r i a l b a l a n c e f o r t h e y e a r h a s b e e n c o m p l i e d a t t h e
branch as on 31st Dec.’10
Particulars Dr. $ Cr. $
Bill receivable 2,500 -
Sundry debtors 3,800 -
Sundry creditors - 1,100
Purchases 1,3,500 -
Sales - 22,800
Furniture & fixtures 1,340 -
Stock (1st Jan’10) 2,000 -
Establishment expenses 2,000 -
Salaries 1,400 -
Rent, rates & taxes 400 -
Sundry expenses 1,450 -
Depreciation on furniture & fixtures 128 -
Remittances to H. O. 1,502 -
Head office account - 6,920
Cash on hand & at bank 800
3 0 , 8 2 0 3 0 , 8 2 0 196
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T h e s t o c k i n h a n d o n D e c 3 1st ’10 was $ 2,500 the rates of
exchange were:-
Dec 31’09 to June 30’10 1 $ = 34 July 1st ’10 to 31st Dec ’10
1$ = 36.
In the Bhopal books the balanc e of New York branch a/c &
of the remittances from New Yo rk branch a/c appear as 1,78,847 &
Rs. 37,068 respectively. The original furniture & fixt ure were bought
when the rate of exchange was $ 1 = Rs. 30. Convest the above
trail balance into rupee currency & prepare the final a/c of the
branch.
Solution:
Converted trial bal. as on 31st Dec.’10 in bks of brch
Particulars Dr. $ Cr.$ Rate Dr.` C r . `
Bills
receivable 2500 36 90,000
Sundry
debtors 3,800 36 1,36,800
Sundry
creditors 1100 36 39,600
Purchases &
sales 13500 22800 35 472500 798000
Furn & fixtures 1340 30 40,200
Stock 1st J a n
2010 2000 34 68,000
Establishment
expenses 2000 35 70,000
Salaries 1400 35 49,000
Rent, rates &
taxes 400 35 14,000
Sundry
expenses 1450 35 50,750
Dep. On furn
& fixture 128 30 3840
Remittance to
H. O. 1502 Actual 37068
H O. account 6920 Actual 178847
Cash on hand
& at bank 800 36 28800
Diff in
exchange 44511
1 0 6 0 9 5 8 1 0 6 0 9 5 8
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In the books of XY Ltd Co. Trading & Profit and Loss a/c for
the year ending 31st Dec’10
Particulars ` Particulars `
To opening stock 68,000 By sales 7,98,000
To purchases 4,72,500 By closing stock ($
2500x 36) 90,000
To gross profit b/d 3,47,500
8 , 8 8 , 0 0 0 8 , 8 8 , 0 0 0
To establishment
exps 70,000 By gross profit b/d 3,47,500
To salaries 49,000 Bu diff. in exchange 44511
To rent rates &
taxes 14,000
To sundry expenses 50,750
To Depn on furniture 3,840
To net profit c/d 2,04,421
3 , 9 2 , 0 1 1 3 , 9 2 , 0 1 1
Balance sheet as on 31st Dec’10
Liabilities ` ` Assets `
H. O. current
a/c 1,78,847 Furn & fixture 40,200
(+) net profit 2,04,421
3 8 3 2 6 8 B i l l s r e c e i v a b l e 9 0 , 0 0 0
(-) remittance 37068 346200 Sundry debtors 1,36,800
Sundry
creditors 39,600 cash in hand &
at bank 28800
C l o s i n g s t o c k 9 0 , 0 0
3 , 8 5 , 8 0 0 3 , 8 5 , 8 0 0
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Q.1 W h i t e C o l l e r L t d h a v e branch in Canada. On 31st December
2010 the trial balance of the br anch was as given below.
Particulars Dr. $ Cr. $
Stock as on 1.1.2010 7,500 -
Head office account - 9,000
Sales - 81,000
Goods from head office a/c 45,000 -
Furnitures and fixtures 10,000 -
Owing for expenses - -
Rent 1,000 -
Taxes. Insurance etc 250 -
Salaries 13,000 -
Sundry debtors 12,250 -
Cash in hand 1,050 -
Cash in bank 950 1,000
91,000 91,000
T h e b r a n c h a c c o u n t i n t h e head office showed a debit
balance of Rs. 1,12,500 and goods sent to branc h account a credit
balance of Rs. 8,07,500.
F u r n i t u r e a n d f i x t u r e s a r e acquired on 1.1.2010. 1 pound =
Rs. 15. Provide depreciation @ 10% p.a.
T h e e x c h a n g e r a t e s w e r e : >
J a n u a r y 1 p o u n d = R s . 1 7 . 5 0
D e c e m b e r 1 p o u n d = R s . 1 8 . 5 0
A v e r a g e 1 p o u n d = R s . 1 8 . 0 0
T h e s t o c k a t b r a n c h o n 3 1st December 2010 were valued at
4500 pounds. Prepare Trading, P & L A/c Balance Sheet of Canada
branch account for the year ended 31.12.2010
Q.2 Z e n i t h C o m p u t e r s L t d . h a s H. O. at Mumbai and branch at
Boston U. S. A. The branch submit s the following tra il branch as on
31st March 2011.
3.5 EXERCISE 199
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Particular Dr. $ Cr. $
H. O. account - 12,707
Goods received from H. O. 11,600 -
Purchases and sales 387,516 610,416
Stock as on 1.4.2010 14,316 -
Plant & Machinery 34,120 -
Furniture and fixtures 16,316 --
Cash at bank 3,816 -
Cash in hand 1,314 -
Salaries 68,016 -
Office rent 42,340 -
Taxes and insurance 11,672 -
Debtors and creditors 125,430 127,977
Printing and stationary 12,148 -
Postage and telegram 11,010 -
Courier charges 6,316 -
Internet charges 2,718 -
Legal expenses 2,452 -
751,100 751,100
T h e b r a n c h a c c o u n t i n h e a d o f f i ce showed a debit balance
or Rs. 5,84,222 and goods sent to branch account showed a credit
balance of Rs. 5,56,800. Plant & Machinery was acquired by the
branch as on 31st December 2010, when 1US $ = Rs. 45. Furniture
& fixtures were acquired by the Boston branch on 30th June 2010
when Rs. 100 was equal to US $ 2.50. H. O. provides depreciation
on the P&M @ 25 % p.a. and on furnit ure and fixture @ 10% p.a.
T h e B o s t o n b r a n c h r e p o r t e d c l osing stock of US$ 15,350 on
31st March 2002. The exchange rates were at under.
1.4.2010 US $ 1 = 43.50
31.3.2011 Rs. 100 = US $ 2.00
Average US $ 1 = 45.50
C o n v e r t t h e b r a n c h t r i a l balance into rupees and prepare
branch profit and loss a/ c for the year ended 31st March 2011. also
you are required to prepare balance sheet of Boston branch Zenith
Computers Ltd. as on 31st March 2011.
200
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Q.3 G H C L & C o . h a s h e a d o f f i c e at New York (U.S.A.) and
branch at Mumbai (India). Mumbai branch furnishes you with its
trail balance as on 31st March 2011 and the additional information
given thereafter.
Particulars Dr.
Rs. Cr.
Rs. Particulars Dr.
Rs. Cr.
Rs.
Stock on
1.4.2004 300 - Rent, rates &
taxes 360 -
Purchases and
sales 800 1,200 Sundry
charges 160 -
Sundry debtors 400 - Computers 240 -
Sundry
creditors -3 0 0 B a n k b a l a n c e 4 2 0 -
Bills of
exchange 120 240 New York
office a/c - 1,620
Wages and
salaries 560 -
3 , 3 6 0 3 , 3 6 0
Additional Information:
1. Computers were acquired from a remittance of US $ 6,000
received from New York head office and paid to the suppliers.
Depreciate computers at 60% for the year.
2. Unsold stock of Mumbai br anch was worth Rs. 4,20,000 on
31st march 2011.
3. The rates of exchange may be taken as follows:
a. On 1.4.2010 @ Rs. 40 per US $
b. On 31.3.2011 @ 42 per US $
c. Average exchange rate for the year @ Rs. 41 per US $
d. Conversion in $ shall be made upto two decimal accuracy.
You are asked to prepare in US $ the revenue statement of the
year ended 31st March 2011 and the balance sheet as on that date
of Mumbai branch as would appear in the book of New York head
office of GHCL & Co.
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You are informed that Mumbai branch account showed a debit
balance of US $ 39,609.18 on 31 .03.2011 in New York books and
there were no items pending reconc iliation. The foreign operation is
in the nature of an integral operation.
Q.4 T h e f o l l . B a l a n c e a p p e a r e d i n the books of PQR Branch of
the firm in Sydney on 31st Dec. 2010.
Particulars Dr. Rs. Cr. Rs. Particular
s Dr. Rs. Cr. Rs.
Stock as on
1st Jan ‘10 50,400 Wages &
salaries 19,200
Purchases 3,00,000 Rent rates
& taxes 14,400
Debtors 1,56,000 Miscellane
ous exp 6,000
Bills
receivable 41,600 Furniture
& fitting 19,640
Sales 4,50,000 Cash at
bank 1,15,960
Creditors 1,04,000 Head
office a/c 1,32,800
Bills payable 36,400
7,23,200 7,23,200
1. Stock as on 31st Dec’10 was Rs. 1,43,000 PQR Branch a/c in
the books of Sydney head office showed Dr. balance on
£5,360 on 31st Dec’10.
2. Furniture which exactly were purchased from a remittance of £
700 received from Sydney head office which exactly covered
the cost of item.
3. The rates of exchange were: 31st D e c ’ 0 9 R s . 2 8 p e r £ , 3 1st
Dec’10 Rs. 26 per £. Average ra te for year 2010 may be taken
at Rs. 24 per £.
4. Prepare trading profit and loss a/ c and balance sheet of PQR
branch in the books of Sydney head office assuming branch
operation to be integral to the main operations.
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Q.5 K B K L t d h a s a b r a n c h i n S y d n e y , Australia at the end of 31st
Mar 2011 the foll. ledger of the Sydney office.
Sydney (Australia Dollars thousand)
Particulars Dr.
A$ Cr.
A$ Particulars Dr.
A$ Cr.
A$
Plant & machinery
(cost) 200 - Goods sent to
branch 5
Prov. For plant Wages & salaries 45
& machinery - 130 Rent 12
Debtors / creditors 60 30 Office expenses 18
Stock (1.4.10) 20 Commission
receipts 1 0 0
Cash/bank balance 10 Branch H. O.
Purchases/sales 20 123 Current a/c 7
3 9 0 3 9 0
Theory Question
1. What is Foreign Branch Accounting.
2. Short note on Conversion of Fo reign Branch Trial Balance .
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4
ACCOUNTING FOR CO-OPERATIVE
SOCIETY
Unit Structure
4.1. Introduction
4.2. Maharashtra state Co-oper ative society Act and Rules.
4.3. Types of Co-operative Society
4.4. Calculation of Net Profit
4.5. Appropriation of Net Profit
4.6. Explanation of va rious items in the final Accounts & other
related matters.
4.7. Applicability of various Taxes
4.8 Solved Problem
4.9 Exercises
4.1 INTRODUCTION
Co-operative society came into existence due to the
exploitation of the economically a nd socially weaker section of the
society; by manufactures / big businessmen / whole / Retailers.
T h e C o - o p e r a t i v e m o v e m e n t first started in Europe;
particularly in England and Germany.
W h e n w e a k e r s e c t i o n o f s o c i e t y a r e f i n d i n g o u t d i f f i c u l t w i t h
less earning; they were organised them self for mutual help. These
organizations lead to firm a Co-operative society.
I n M a h a r a s h t r a C o - o p m o v e m e n t s, give way to Co-op. Sugar
Factories, Left Irrigation, and Co-op Housing Society.
A C o - o p e r a t i n g s o c i e t y i s a v o l u n t a r y o r g a n i s a t i o n f o r m e d f o r
the purpose of promoting & protecti ng interest of its members. The
main objective of Co-operative societ y is to protecting interest of its
members. it does earn profit whic h may be partly distributed among
its members and partly kept as reserves.
A C o - o p e r a t i v e s o c i e t y c a n b e defined as an association of
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organisation making equitable contri bution to the capital required
and excepting a share and risks and benefits of the organisation.
Normally a Co-operative society is a service organizations is not
interested in making profit.
A C o - o p e r a t i v e s o c i e t y i s most important form of
organisation in Indian economic scr een. Co-operative societies are
covered by different state Laws which differs from state to state. In
Maharashtra, we have State Co- operative Societies Act & Rule
1961.
4.2 MAHARASHTRA ST ATE CO-OPERATIVE
SOCIETIES ACT
T h e C o - o p e r a t i v e C r e d i t S o c i e t i e s A c t , 1 9 0 4 w a s f i r s t L a w
was comes in forces. At present, Co-operative societies are
established in numerous economic activities such as : Banking,
farming, credit, housing, marketing, c o n s u m e r c o - o p , e t c . T h e r e
has been a central legisl ation, i.e. The Co-oper ative societies Act,
1912. However, most of states have enacted their separate Co-
operative societies Act. In state of Maharashtra have separate Act,
known as The Maharashtra Co-oper ative Societies Act, 1960. The
Maharashtra Co-operative societ ies Rules 1961 a nd Maharashtra
Ownership Flats Act, 1963.
T h e s e A c t s h a s d e f i n e v a r i o u s i m p o r t a n t t e r m s , A c c o u n t i n g
system and final Accounts format and so on.
4.2.1 Definitions :
U n d e r M a h a r a s h t r a C o - o p e r a t i v e s o c i e t i e s A c t .
1) Co-operative Society : Under section 2(27) of the Act
Society means a co-operative soci ety registered or deemed to be
registered under this Act. Co-operativ e society is distinct from its
members.
2) Members : M e m b e r m e a n s a p e r s o n j o i n i n g i n a n
application for the registration of a Co-operative society which is
subsequently registered or a person dually admitted to a
membership of existing society and includes associate member or
nominal member.
a) Associate Member means a me mber who holds jointly a share
of society with others. such members name appears in share
certificate subsequent to t he name of member. (i.e. 2nd name)
b) Nominal member means a person admitted to membership as
such after registration in accordance with its Laws. 205
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c) Sympathizer member means a person who sympathies with
aims and objects of the society.
3. Co-operative Year : The Act has Fixed 30th June, as accounting
year. However most of societies, wit h prior approval of Registrar of
Co-operative society follows 31st March, (i.e. financial year) as the
year ending to confirm with Income Tax Act. On March 31st.
4. Working Capital : U n d e r s e c t i o n 2 ( 3 1 ) o f t h e A c t , w o r k i n g
capital means funds at the disposal of society inclusive of paid-up
share capital, funds built up ou t of profits a money raised by
borrowing & other means.
5. Bye Law : U n d e r S e c t i o n 2 ( 5 ) B y e L a w m e a n s b y e - l a w
registered under Act for the time being in force and includes
registered amendments of such by e law. The provisions of bye
laws can not be contrary to the pr ovisions of Co-operative society
Act. The bye laws generally includes various provisions relating to
internal management & obj ect of society.
T h e B y e - l a w s g e n e r a l l y i n c l u d es the following clauses for
internal management of Co -operative society.
a) Name and Address
b) Area of operation
c) The manner in which the funds of society raised and limits of its
funds.
d) Objects of society
e) Minimum amount of share c apital held by each member.
f) Terms and Qualifications fo r admissible to a member.
g) Nomination to be made by existing member.
h) Right, duties and liabilities of me mber as well as its managing
committee members.
i) Maximum Loan admissible to a member.
j) Disposal of net profit.
k) Responsibility for maintaini ng and preserving the records.
Audit : A s p e r R u l e 6 9 o f C o - o p e r a t ive society audit shall be
conducted by the certifi ed auditors. The certified auditors includes
the following :
a) Practing Chartered Accounts.
b) A person holding Government di ploma in Co-operative dept. of
accounts & audits.
c) Retired officers of the state Government Co-operative
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4.2.2 Management and Administration
I n a n y C o - o p e r a t i v e s o c i e t y , i t is not possible that members
should look for day to day administration like a company,
management of the day to day ve sts in the hands of managing
committee. (sec. 73), however some powers are vested in General
Body.
• G e n e r a l B o d y : G e n e r a l B o d y o f C o - operative society is Final
Authority. The following importa nt powers are onl y with General
Body.
1. Amalgamation of one soci ety with other society.
2. Amendment of bye-laws by 2/3 majority.
3. Adoption of accounts, appropriation of profits.
4. Sanction of written of f the Bad debts and Loss.
• M a n a g i n g C o m m i t t e e : M e m b e r s o f s o c i e t y e l e c t s s o m e
members and form managing committ ee, to look for the whole
of the day to day management of so ciety. For division of labour,
different sub-committees are formed such as purchase
committee, Repair & maint enance committee, Accounts
committee etc. as per need & type of the society.
The administrative functi ons includes following :
a) Proper custody and maintena nce of records as well as
properties of society.
b) To summon all meetings, incl uding Annual General Body and
records the proceedings.
4.2.3 Accounting System :
T h e A c c o u n t i n g S y s t e m o f Co-operative societies are on
same time than of any commercial system.
R u l e N o . 6 5 o f M a h a r a s h t r a C o -operative societies Act gives
a specific list of the following books to be maintain by society.
• Accounting Books / Records
• C a s h B o o k
• G e n e r a l L e d g e r & P e r s o n a l L e d g e r
• Stock Register
• P r o p e r t y R e g i s t e r .
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b) Register of members.
c) Minutes Books.
A n d a n y o t h e r r e g i s t e r w h i c h may be require as per needs of
society as well as which are specified by the Government.
4.2.4 According to Rule 61 of the Ac t, & Rules; the society has to
prepare, financial stat ements within 45 days of the close of
accounting year. It contains.
i) Receipts & disbursement A/c
ii) Profit & Loss A/c
iii) Balance Sheet
Rule 62 provides prescribed form of financial statement (in form N)
4.3 STATUTORY FORMATS OF FINAL ACCOUNTS
I) Trading A/c : There is no prescribed format for trading A/c.
it should prepared in t he usual manner disclosin g gross profit or
gross loss as the case may be.
FORMAT OF PROFIT AND LOSS A/C (N TYPE)
Particulars Amt. Amt. Particulars Amt. Amt.
To Gross Loss (if any) -- -- By Gross Profit (if any) -- --
To Interest Paid -- -- By Interest Recd. On
Loans/investment -- --
Add : Outstanding -- -- By Dividend on Shares
Less : Prepaid -- -- By other Incomes - -- --
To Bank Charges -- -- a) Share Transfer fee
To Salaries and
Allowances -- -- b) Rent Received -- --
To Contribution -- -- c) Discount and Interest
Received
To Provident Fund -- -- d) Income from sale of
Forms
To Managing Director’s -- -- e) Sundry Income
Allowance and Salaries -- -- By Net Loss transferred
To Managing
Committee’s
Remuneration -- -- -- --
To Rent, Rates & Taxes -- -- -- --
To Postage and
Telegram -- -- 208
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To Audit Fees -- --
To Printing & Stationery -- --
To Supervision Charges -- --
To Depreciation on
Assets -- --
To Reserve for Doubtful
Debts -- --
To Other Expenses &
Fees, if any -- --
To Net Profit transferred -- --
Balance Sheet (N Type)
Fig. of
Previous
Year Liabilities Amt. Fig. of
Previous
Year Assets Amt.
-- Share capital -- -- Cash Balance --
A u t h o r i z e d , I s s u e d
& paid-up O n h a n d
P u r c h a s e d b y t h e
Government A t B a n k
P u r c h a s e d b y C o -
operative Societies ( a l s o c a l l e d
Deposits)
P u r c h a s e d b y
individuals - - Investments --
S h a r e s i n A d v a n c e G o v e r n m e n t
Securities
-- Less : Calls in
Arrears S h a r e s i n C o -
operative
institutions
A d d : C a l l s i n
Advance F i x e d D e p o s i t s w i t h
Banks
S u b s c r i p t i o n /
Deposits towards
Shares - - Provident Fund
Investment --
-- Reserve Fund and ( i n c l u d i n g
advances to
provident fund)
-- Other Funds, And -- -- Loans &
Advances --
R e s e r v e F u n d L o a n s
B u i l d i n g F u n d C a s h C r e d i t s
D e v e l o p m e n t F u n d D u e s f r o m t h e
Managing
Committee 209
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R e s e r v e f o r
Doubtful Debts D u e s f r o m
Employees
D e p r e c i a t i o n F u n d - - Sundry Debtors --
D i v i d e n d F u n d F o r C r e d i t S a l e s
B o n u s E q u a l i s a t i o n
Fund F o r A d v a n c e s
Other Equalisation
Fund Current Assets --
-- Staff Provident
Fund T o o l a n d
equipments
D e b e n t u r e s C l o s i n g S t o c k
Cash Credit Work in Progress
O v e r d r a f t s - - Fixed Assets
L o a n s L a n d a n d B u i l d i n g
G o v e r n m e n t L o a n s P l a n t & M a c h i n e r y
O t h e r S e c u r e d
Loans L i v e s t o c k s
-- Unsecured Loans -- Deadstocks
F r o m B a n k s V e h i c l e s
F r o m G o v e r n m e n t - - Other Expenses & --
B i l l s P a y a b l e L o s s e s ( n o t w r i t t e n
off)
O t h e r s P r e l i m i n a r y
Expenses
-- Deposits A d v a n c e s
F i x e d D e p o s i t s P a y m e n t o f T a x e s
S a v i n g s D e p o s i t s G o o d w i l l
-- Recurring Deposits Deferred Revenue
Expenses
O t h e r D e p o s i t s E x p e n s e s i n
connection with
issue of
Debentures
-- Current Liabilities
& Provisions -- -- Other Debtors --
Sundry Liabilities Advances paid
O u t s t a n d i n g
Salaries etc. I n t e r e s t A c c r u e d
but not received
A d v a n c e s O t h e r D u e s
-- Unclaimed
Dividend -- -- Losses 210
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-- Interest due but
not paid -- Add : Current Loss --
-- Other Liabilities --
-- Profit & Loss
Appropriation --
O p e n i n g B a l a n c e
A d d : C u r r e n t y e a r s
profit
e) Section 66 requires the societie s to maintain Reserves fund,
by transferring annually 25% of net profit.
f) Rule 52 empowers the society to create Bonus/Dividend
Equalisation fund, amount not exceeding 2% of paid up
capital may be transferred each year, however accumulated
balance should not exceed 9% of paid up capital.
g) Any society should not pay dividend exceeding 15% of the
capital. However, after getting approval from registrar of co-
operative societies. Society can pay higher rate of dividend.
h) Section 69 of the Act provi der that society may set aside
amount not exceeding 20% of t he net profit for charitable
purpose.
i) Investment of funds.
S e c t i o n 7 0 p r o v i d e s t h a t f u n d s of co-operative society shall
be invested in a specific form only as given below.
i) Central Bank or St ate co-operative Bank.
ii) Trust Securities
iii) Any security issued by ot her societies having limited
liabilities.
iv) Co-operative Bank
v) Specified by order of the Government.
4.4 TYPES OF CO-OPERATIVE SOCIETIES :
The Maharashtra Co-operative societies Act classifies
societies under variou s categories as under :
4.4.1 Credit Co-operative Society :
T h i s i s o l d e s t t y p e o f c o - o p e r ative in India. It come into
existence around 1904 wit h the passing of co- operative societies
Act 1904.
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T h e m a i n p u r p o s e o f t h i s t y p e o f societies is to provide loans
to members, at low rate of interest.
4.4.2 Consumers co-operative society :
I t i s f o r m e d b y c o n s u m e r s . T h e c o n s u m e r s c o - o p e r a t i v e
society purchases in bulk and in la rge quantities and sells it to
members / to consumers at r easonable prices and also good
quality.
T h e r e f o r e c o n s u m e r s c o - operative society eliminate
intermediaries between buyers and sellers / manufacturers.
Categories :
C o n s u m e r s c o - o p e r a t i v e s o c i e t y c a n b e c l a s s i f i e d a s u n d e r :
1) Primary Consumers society :
Such societies meets needs of direct customers. The
controller goods purchased from centra l stores to which affiliated
and others in bulk purchases in open market and sales at reasonal
price to members, in some cases to non-members also.
2) Central Whole Stores :
These type of society deal in whole-sale business, and fulfil
the needs of primary society.
3) Departmental stores :
In cities super market / Depar tmental stores are set up which
stock are requirement of consumers under one roof. These type of
societies need substantia l amount for capital.
4.4.3 Industrial Co-operative Society :
I t i s o r g a n i s e d b y s m a l l p r oducers to carry out certain
production activities e.g. sugar mills / milk / cotton cloths co-
operative societies.
4.4.4 Agricultural Marketing Society :
i) It means that a society wh ich is marketing agricultural
produce
ii) At least ¾ of its me mber are agriculturist.
4.4.5 Co-operative Bank :
For doing banking business as per section 5 of Bank
Companies Act. / For doing Banki ng business permission of R.B.I.
required. 212
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4.4.6 Co-operative Housing Societies :
These type of societies are formed for the purpose providing
to its members dwelling houses or f l a t s a c q u i r e d b y i t s m e m b e r s
with common amenities and services. In Maharashtra house
construction activities are regulat ed by Maharashtra Ownership Flat
Act, 1963.
4.4.7 Apex society
4.4.8 Central Bank
4.4.9 Farming society
4.4.10 Crop protection society
4.4.11 Federal society: It is a society which has not less than five
members are societies and has also regulated 80% of voting rights
is held by co-operative societies.
4.4.12 Lift Irrigation society.
4.5 CALCULATION OF NET PROFIT:
4.5.1 Net Profit
In accordance with Rule 49 A, net p r o f i t c a n b e a r r i v e d a t , b y
deductions the following expanses losses from the gross profit:
1. All interest paid + Accrued
2. All establishment & administrate expenses.
3. Depreciation
4. Provision for Taxation
5. Contribution to t he education fund.
6. R.D.D.
7. Contribution to the Co-oper ative cadre employment fund.
8. Investment fluctuation fund.
9. Provision for capi tal Redemption fund.
10. Provision for retirement benef its to the employees of the
society.
11. Contribution to sinking fund.
Net profit plus balance of pr ofits brought forwards from
previous year, shall be available for appropriation.
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4.5.2 Appropriation of profits:
A s p e r s e c t i o n 6 5 ( 2 ) s t a t e s t h a t n e t p r o f i t m a y b e
appropriation by society, only after its approval in General Body.
S o c i e t y m a y a p p r o p r i a t e i t s p r o f it for transfer to Reserve
fund, or any other fund, Bonus / Dividend to its members on their
shares.
A c c o r d i n g s e c t i o n 6 8 , e v e r y s o ciety shall contribute annually
towards the education fund and Rule No. 53 prescribed the rate of
contribution.
C l a s s o f s o c i e t y R a t e
1 Primary Consumers society 2 ps. Per ` 1 0 0 o f w o r k i n g c a p i t a l ,
maximum ` 1000/-
2 Urban Credit society 10% of the working capital, subject to
maximum ` 500/-
3 Co-operative Sugar Factory 25 ps. Per ton of sequence crused
subject to maximum ` 25,000/-
4 Backword class Housing society
class Housing society. ` 1, per member
` 10 per member
5 Urban Credit Society 110% of working capital subject to a
maximum of ` 1000.
4.6 EXPLANATIONS OF V A R I O U S I M P O R T A N T
ITEMS IN FINAL ACCOUNTS.
4.6.1 Liabilities Side :
1 Share Capital :
Contribution by government and other co-operat ive societies
should be shown separately.
T e r m s o f r e d e m p t i o n o r c o n v e r s i o n o f a n y r e d e e m a b l e
Preference should be shown.
C a l l s r e c e i v e d i n a d v a n c e s h o u l d b e a d d e d t o s h a r e c a p i t a l .
2 Reserve Fund & other Funds :
Funds Statutory Reserves f unds and other f unds should be
shown separately. 214
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Bad and doubtful Debts reserve should be shown under this
head, not to deducted from sundry Debtors.
Any addition or deduction should be shown separately.
3 Secured Loans :
N a t u r e o f s e c u r i t y s h o u l d b e s h o w n i n e a c h c a s e .
I f l o a n h a v e b e e n g u a r a n t e e d b y government or other Co-
operative society etc. should mentioned.
4 Contingent liabilities wh ich have not been provided
should be shown by way of note on liability side.
5 Credit Balance in profit & Loss A/c :
S h o u l d b e s h o w n o n l i a b i l i t i e s s i d e a t l a s t i t e m .
4.6.2 Assets side :
Fixed Deposits and call deposits with central Bank should be
shown under heading “Investment” not as Balance with Bank.
1 Investments :
The nature of each investment and mode of valuation should
be maintained.
I n v e s t m e n t o f s t a f f P . F . is to be shown under separate
heading.
Q u o t e d a n d u n q u o t e d i n v e s t m ent should be separately.
2 Sundry Debtors :
S u n d r y D e b t o r s a r e s h o w n under separate head, and not
under the head current assets, it in cludes advances to members of
other debtors.
3 Current Assets :
C u r r e n t A s s e t s i n c l u d e s v a r i o u s type of stock in trade; only.
M o d e o f v a l u a t i o n s h o u l d b e o f e a c h t y p e o f s t o c k s h o u l d b e
maintained.
4 Fixed Assets:
F i x e d A s s e t s a r e s h o w n i n order of permantancy.
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U n d e r e a c h h e a d , c o s t o f f i x e d at the beginning of year,
additions or sale if any should b e m e n t i o n e d . T o t a l b a l a n c e i n
accumulated depreciation should deduct from cost of fixed Assets.
G o o d w i l l i s n o t b e s h o w n a s F i x e d A s s e t s . H o w e v e r i t i s t o
be shown under the head miscellaneous Expenses.
5 Accumulated losses, after adjusting the reserves should be
shown on Assets side.
C u r r e n t y e a r l o s s e s s h o u l d shown separately on Assets
side.
6 Maximum cash Balance :
R u l e 1 0 7 C p r e s c r i b e d t he maximum amounts of cash
allowable to be kept by different ty pes of society. i.e. Rs. 5,000 by
Sugar Factory, Rs. 300 by housing society.
7 Payment by Cheques :
A s p e r R u l e 1 0 7 D , all payments exceeding ` 1000 shall be
made by cheques, except loan sanction to members.
8 Federation :
H o u s i n g s o c i e t i e s h a v e t o c o mpulsorily become member of
the District Housi ng Federation.
4.7 APPLICABILITY OF VARIOUS TAXES :
A Co-operative society is liable to file return of income & pay
income Tax if it has a taxable income.
• A s a l l C o - o p e r a t i v e s o c i e t i e s a r e subject to audit, therefore the
due date for filing return of inco me for them is September 30th.
• U n d e r s e c t i o n 1 9 4 C , w h i l e making payments to employee,
contractors etc., society should deduct Income Tax, if payments
exceeds particular amount, & pay TDS to the credit of Central
Government on or before 7th of the subsequent month.
• S o m e s o c i e t i e s p r o v i d e s v a r i o u s s e r v i c e s t o m e m b e r s a s w e l l
as non-members. these charges are recovered from members
other persons, may be subject to service Tax. The above
charges collected by society may be chargeable to service tax
under the category “Club or Association service.” 216
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• M V A T a n d P r o f e s s i o n T a x – T he definition of person under
section 2(17) of MVAT, includes society. Thus society is a
person under MVAT. If particular soci ety is dealer a its turnover
exeeds prescribed limited under M VAT, then it may required to
register and pay tax.
• S i m i l a r l y , a s o c i e t y c h a r g e d i n a n y p r o f e s s i o n , t r a d e e t c . ,
providing services to non-mem bers may required to obtain
certificate of enrolment and pay professional Tax.
• I f s o c i e t y h a v e e m p l o y e d p e r s o n s , w i t h m o n t h l y s a l a r i e s / w a g e s
exceeding 5,000 on more, than so ciety is required to deduct
profession tax and pay it to Go vernment in such case also,
society has to obtain certificate of Registration under profession
Tax Act.
217
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4.8 SOLVED PROBLEMS
I l l u s t r a t i o n 1 :
A c t u a l F i n a n c i a l s t a t e m e n t o f K e t a n Co-operative Housing Societ y Ltd. are given herewith, to get idea about the
manner in which the are prepare.
The Ketan Co-operative H ousing Society Limited
Balance Sheet as on 31st March, 2011
Previous
year Liabilities Amount Rs.
& Ps. Amount Rs.
& Ps. Previous
Year Assets Amount Rs.
& Ps. Amount Rs.
& Ps.
C a s h & B a n k B a l a n c e s
20,00,000.00 Authorised Capital 2 0 , 0 0 , 0 0 0 . 0 0 3 , 6 7 , 1 3 8 . 7 7 U n i o n Bank of India 17,076.27
2,80,500.00 Issued, Subscribed
& Paid up 2,80,500.00
8,663.45Maharashtra State Co-
operative Bank Ltd. 8,712.45
R e s e r v e & O t h e r
Funds 63,929.90 Central Bank of India 45,482.90
4,26,362.00 Building Repair
Fund 4,26,362.00 0.00 Cash on Hand 0.00
4 , 3 9 , 7 3 2 . 1 2 7 1 , 2 7 1 . 6 2
R e s e r v e F u n d I n v e s t m e n t s ( A t C o s t )
0.00 Opening Balance 2,53,433.38 Shares Of
2,53,433.38 Add: Trf. Fees &
Admission Fees 10,500.00 100.00 Bombay Co-op. Housing 100.00
2,53,433.38 2,63,933.38 Federation Ltd.
S i n k i n g F u n d s 5 , 0 0 0 . 0 0 M a h a r a s h t r a C o - o p .
Housing 5,000.00
8,91,574.00 Opening Balance 9,93,472.00 Society Ltd.
7,436.00 Add: Additions
During The Year 7,436.00 Fixed Deposit with
94,462.00 Accrued Interest On
F.D. 86,176.00 2,20,302.00 Union B ank of India 2,46,541.00 218
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9,93,472.00 10,87,084.00 M aharashtra State Co-op.
1 0 , 1 4 , 8 0 0 . 0 0 B a n k L t d . 1 1 , 1 7 , 2 0 0 . 0 0
60,004.00 Reserve for
Construction Cost 60,004.00 1,56,821.00 Central Bank of India 2,13,906.00
78,000.00 Premium shares 78,000.00 1,18,275. 00 Accrued Interest on F.D. 1,07,564.00
U n s e c u r e d L o a n s 1 5 , 25,298.00 16,90,311.00
4,67,500.00 Contribution to
Capital Cost 4,67,500.00 11,40,000.00 Bonds of Rural
Electrification Corp. Ltd. 11,40,000.00
S e c u r e d L o a n s 3 6 , 9 2 0 A c c r u e d I n t e r e s t O n B o n d s 3 7 , 5 9 4 . 0 0
6,27,000.00 Debentures 6,27,000.00 Loans & Advances
M e m b e r s D u e s
M e m b e r s
Contribution To: 8,95,068.00 (As Per Schedule) 11,27,760.00
1,43,100.00 Lease Land 1,43, 100.00 38,000.00 Staff Loan 31,000.00
M a j o r R e p a i r s 2 , 5 6 3 . 0 0 A d v ances Against Exp. 2,563.00
50,473.48 Opening Balance 1,10,559.48 10,970.00 B.e.s.t. Deposit 10,970.00
6,87,786.00 Add : Additions
During The Year 1,66,000.00 Deposit With Registrar of
7,38,259.48 2,76,559.48 1,305. 00 Co-op Societies 1,305.00
6,27,700.00 Less : Trf. To
Income & Exp. A/c 2,76,559.48 5,300.00 Water Depo sit With B.M.C. 5,300.00
1,10,559.48 0.00 1,050.00 Elec tricity Deposit 1,050.00
T a x D e d u c t e d A t S o u r c e 1 , 4 4 3 . 0 0
D e p o s i t c u m
Advances Fixed Assets
2,345.00 Tax Deducted At
Source 0.00 9,59,755.00 (As Per Schedule) 9,09,028.00
1,29,918.00 Payable To
Contractors 0.00
2,00,905.00 Outstanding
Expenses 1,45,703.00 219
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3,33,168.00 1,45,703.00
S u s p e n s e A c c o u n t
(B-28)
4,86,912 Opening Balance 7,09,240.00
A d d
2,22,328.00 Dues From Other
Member 2,84,170.00
7,09,240.00 9,93,410.00
22,600 Retention Money 0.00
35,500.00 Garbage & Debris
Deposit 40,500.00
90,000.00 55,000.00 Deposit for Major
Repairs
1,13,100.00 1,30,500.00
I n c o m e &
Expenditure A/c
7,38,398.39 As per Last Balance
sheet 4,66,186.26
18,778.75 Less : Deficit For the
Year 1,39,677.02
2,53,433.38 Transferred To
Reserve Fund 0.00
0.00 Add : Excess for the
year 0.00
4,66,186.26 3,26,509.24
50,61,615.12 50,29,595.62 50,61,615.12 50,29,595.62
As Per Our Report of Even Date Attached For The Ketan Co-operative Housing Society Ltd.
Chartered Accountants 220
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The Ketan Co-operative Housing Society Ltd.
Income And Expenditure Account for the year ended 31st March, 2011
Previous Year Expenditure Amount
Rs. P. Previous Year Income Amount
Rs. P.
TO PROPERTY EXPENSES BY CONTRIBUTION FROM
MEMBERS
89,439.00 Municipal Taxes 98,504.00 92,719.00 Municipal Taxes 1,01,802.00
1,68,459 Water Charges 2,03,579.00 7,13,116.00 Maintenance 7,25,116.00
2,00,613.00 Electricity Expenses 2,00, 233.00 2,50,396.00 Water Charges 2,10,078.00
2,56,333.00 Repairs & Maintenance 1,07,159.00 BY OTHER COLLECTION
0.00 Major Repairs Expenses 3,79,778.00
21,700.00 Ground Rent 21,700.00 2, 232.00 Service Charges 1,478.00
10,892.00 Pest Control Charges 17,110.00 6, 151.00 Interest on Members Dues 5,370.00
TO ADMINISTRATIVE EXPENSES 48,350.00 Half Rent 72,175.00
3,78,780.00 Salary & Staff Welfare 4,31,912.00 6,500.00 Tran sfer fees 0.00
25,102.00 Security Charges 30,750.00 BY OTHER INCOME
INTEREST
22,336.00 Insurance Premium 29,453.00 On Saving Bank 7,442.00
22,871.00 Office Expenses 13,047.00 8, 974.00 On Fixed Deposit 23,523.00
0.00 Meeting Expenses 24,576. 00 27,677.25 On Bonds 84,510.00
3,251.00 Audit Fees 3,251.00 91,535.00 Miscellaneous Income 2,371.00
258.00 Education Fund 258.00 1,140.00 Sale of Scrap 0.00 221
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24,815.00 Festival Expenses 36,431.50 26, 500.00 Sundry Balances W/back 11,183.00
0.00 Printing, Stationery & Photocopy 7,604.00 0.00 BY TRF FROM MAJOR
REAIRS FUND
2,76,559.48
4,000.00 Legal & Professional Fees 2,550.00 BY EXCESS OF
EXPENDITURE OVER
INCOME 1,39,677.02
0.00 Name Plate Making Charges 11,790.00
170.00 Postage Telegram & Bank Charges 697.00 18,778.75
175.00 Administrative Expenses 175.00
48,877.00 Depreciation 50,727.00
16,498.00 Sundry Balance W/off 0.00
0.00 TO EXCESS OF INCOME OVER
EXPENDITURE 0.00
12,94,069.00 16,71,284.50 12,94,069.00 16,71,284.50
As Per Our Report of Even Date Attached For The Yash Co-op. Housing Society Ltd.
Chartered Accounts
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The Ketan Co-operative Housing Society Ltd.
Income & Expenditure Account For The Year Ended 31/03/2011
Previous
Year Expenditure Wing A Amount B Previous
Rs. P. Income
Year Wing Amount
A B Rs. P.
3,78,780.00 To Salary & Staff Welfare 2,63,923.00 1,67,989.00 4,31,912.00 Interest
89,439.00 Municipal Taxes 33,192.00 65,312.00 98,504.00 8,974.00 On saving Bank 1,447.00 5,995.00 7,442.00
1,68,459.00 Water Charges 64,620.00 1,38,959.00 2,03,579.00 6,151.00 On Members Dues 3,246.00 2,124.00 5,370.00
21,700.00 Ground Rent 8,170.00 13,530.00 21,700.00 27,677.25 On Fixed Deposit 9,038.00 14,485.00 23,523.00
2,56,333.00 Repairs & Maintenance 44,283.00 62,876.00 1,07,159.00 91,535.00 On Bonds 0.00 84,510.00 84,510.00
0.00 Major Repairs Expenses 22,481.00 3,57,297.00 3,79,778.00
P o s t a g e , T e l e g r a m & 2 , 2 3 2 . 0 0 S e r v i c e C h a r g e s 7 7 4 . 0 0 7 0 4 . 0 0 1 , 4 7 8 . 0 0
170.00 Bank Charges 474.00 223.00 697.00 6,500.00 Transfer Fees 6,500.00 3,500.00 10,000.00
24,315.00 Festival Expenses 29,391.00 7,040.00 36,431.50 48,350.00 Hall Rent 0.00 72,175.00 72,175.00
2,00,613.00 Electricity Expenses 1,11,470.00 88,763.00 2,00,233.00 0.00 Membership Fees 200.00 300.00 500.00
25,102.00 Security Charges 0.00 30,750.00 30,750.00
10,892.00 Pest Control Charges 8,050.00 9,060.00 17,110.00 Members Contribution
22,336.00 Insurance Premium 14,726.50 14,726.50 29,453.00 92,719.00 Municipal Tax 33,186.00 68,616.00 1,01,802.00
3,251.00 Audit Fees 1,210.00 2,041.00 3,251.00 7,13,116.00 Maintenance 4,64,400.00 2,70,716.00 7,35,116.00
0.00 Meeting Expenses 0.00 24,576.00 24,576.00 2,50,396.00 Water Charges 80,880.00 1,29,198.00 2,10,078.00
48,877.00 Depreciation 20,290.00 30,436.20 50,727.00 7,436.00 Sinking Fund 3,340.00 4,096.00 7,436.00
22,871.00 Office Expenses & Conv. 4,778.00 8,269.00 13,047.00 6,93,186.00 Major Repairs 94,000.00 72,000.00 1,66,000.00
175.00 Administrative Exp. 175.00 0.00 175.00
0.00 Printing, Stationery &
Zerox 2,504.00 5,100.00 7,604.00 1,140.00 Miscellaneous Income 296.00 2,075.00 2,371.00
0.00 Name Patte Making
Expenses 0.00 11,790.00 11,790.00 0.00 Sundry Balances
W/Back 9,315.00 1,873.00 11,188.00
4,000.00 Legal & Professional Fees 0.00 2,550.00 2,550.00 26,500.00 Sale of Scrap 0.00 0.00 0.00
7,436.00 Trf. To Sinking Fund 3,340.00 4,096.00 7,436.00 Net Consideration
From
258.00 Education Fund 96.00 162.00 258.00 0.00 Sale of Basement -
1483.25SFT 0.00 0.00 0.00
6,93,186.00 Trf. To Major Repairs Fund 94,000.00 72,000.00 1,66,000.00 Trf. From Major
Repairs Fund 94,000.00 1,82,559.48 2,76,559.48
16,498.00 Sundry Balances W/off 0.00 0.00 0.00
T r f . T o R e s e r v e F u n d 6 , 7 0 0 . 0 0 3 , 8 0 0 . 0 0 1 0 , 5 0 0 . 0 0 E x c e s s o f
Expenditure over
E x c e s s o f I n c o m e O v e r 1 8 , 7 7 8 . 7 5 I n c o m e
0.00 Expenditure 66,747.20 (2,06,419.22) (1,39,672.02)
19,94,691.00 Total 8,00,622.00 9,14,926.48 17,15,548.48 19,94,691.00 Total 8,00,622.00 9,14,926.48 17,15,548.48 223
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Rakesh Co-operative Consumer’s Society Ltd.
Balance Sheet as on 31st March, 2011
Liabilities Rs. Rs. Assets Rs. Rs.
I. Share Capital : I. Cash & Bank Balances :
Authorized Cash on Hand 25,000
20,000 shares of Rs. 10 each 2,00,000 Cash at Bank 1,70,000 1,95,000
Subscribed II. Investments 1,00,000
16,000 shares of Rs. 10 each III. Sundry Debtors 30,000
Fully paid up 1,60,000 Salary Advance 3,000
(-) Calls in Arrears (10,000) 1,50,000 IV. Current Assets :
II. Reserve Funds & Other Funds : Closing Stock 1,40,000
Reserve Fund : V. Fixed Assets
Opening Balance 15,000 Land 9,000
Add : Transfer 84,875 99,875 Furniture 48,000
Common Book Fund 5,000 Less : Depreciation (2,400) 45,600
Education Fund : Equipment 20,000 74,600
Opening Balance 8,000 VI. Other Items
Add : Transfer 100 8,100 Interest Accrued
III. Current Liabilities & Provisions : on Investment 2,000
Creditors 20,000
Outstanding Salaries 2,000
Outstanding Rent 1,000
Commission Payable 4,000 27,000
IV. Profit & Loss A/c :
Opening Balance -
Add : Net Profit for the year 3,39,500
Less : Transfer to Reserve Fund (84,875)
2 , 5 4 , 6 2 5 - -
5 , 4 4 , 6 0 0 5 , 4 4 , 6 0 0
224
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The Ketan Co-operative H ousing Society Ltd.
Fixed Assets
ASSETS RATE
OF
DEP. W.D.V. AS
ON
01/04/10 ADDITIONS
DURING
THE YEAR TOTAL DEPRECIATION W.D.V.AS
ON
31/03/11
Buildings 5% 859733.00 0.00 859733.00 42987.00 816746.00
Suction Tank 5% 45252.00 0.00 45252.00 2263.00 42989.00
Furniture &
Fixtures 10% 3796.00 0.00 3796.00 380.00 3416.00
Water Pump 10% 6404.00 0.00 6404.00 640.00 5764.00
Intercom 10% 44570.00 0.00 44570.00 4457.00 40113.00
9 5 9 7 5 5 . 0 0 0 . 0 0 9 5 9 7 5 5 . 0 0 5 0 7 2 7 . 0 0 9 0 9 0 2 8 . 0 0
The Ketan Co-operative Housing Society Ltd.
DUE FROM MEMBERS
B WING AMOUNT
SMT. K. A. GUJAR 1099434.00
A 1099434.00
A WING
SMT. N. M. GANDHI 28331.00
B 28331.00
TOTAL (A + B) 1127765.00
OUTSTANDING EXPENSES A WING B WING
WATER CHARGES 15673.00 8160.00
ELECTRICITY 13665.00 17896.00
AUDIT FEES 1210.00 2041.00
GROUND RENT 32680.00 54120.00
EDUCATION FUND 96.00 162.00
63324.00 82379.00
TOTAL (A WING + B WING) 145703.00
Illustration 2 :
A s h o k C o - o p e r a t i v e s o c i e t y L t d . i s l o a n s a n d R a t i o n i n g
facilities to its members. The tria l balance of the society as on 31st
March, 2011 is as follows.
225
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Trial Balance
Particulars Dr. Rs. Cr. Rs.
Share capital 40000
Bank Loan (Simple) 45000
Sahakari Sangh Share purchased 10000
Stationery and Printing 4000
Bank share purchased 2000
Dead Stock 6000
Interest on Members Loans 25000
Member’s Loan 100000
Member’s deposit 75000
Purchase of rationing Grains 208900
Discount 3000
Commission 10000
Stock of rationing grains 2000
Sale of rationing grains 206000
Office rent 20000
Salaries 12000
Traveling Expenses 4800
Freight 200
Coolie charges 2000
Bank Current A/c 21000
Bank Interest 46000
Reserve Funds 60000
Cash Balance 5100
4 5 4 0 0 0 4 5 4 0 0 0
Adjustments :
1. Provide for audit fees due Rs. 2600
2. Provide depre on dead stock at 10%
3. Outstanding office salaries is Rs. 4000, rent Rs. 2000
4. Closing stock of rationing grains on 31.03.2011 was Rs. 106500
You are required to prepare tradi ng, Profit & Loss A/c for the
year ending on 31.03.2011 and balance sheet as on that date.
226
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Solution :
Ashok Co-operative Society Ltd.
Trading and Profit & Loss A/c for the year ended 31.03.2011
Particulars Rs. Particulars Rs.
To Opening Stock 2000 By Sales of rationing
grains 206000
To Purchase of rationing grains 208900 By closing stock 106500
To Freight 200
To Coolies charges 2000
To Gross Profit 99400
3 1 2 5 0 0 3 1 2 5 0 0
To Printing & Stationery 4000 By Gross Profit 99400
To Rent, Rates & Taxes
Add : Outstanding 20000
2000 22000 By Interest on
Members Loan 25000
To Salaries & allowances 12000
Add : Outstanding Salary 4000 16000 By Discount 3000
To Bank Interest 46000
To Outstanding audit fees 2600
To Depreciation on dead stock 600
To other expenses & fees, if any
Traveling expenses
To Commission 4800
To Net Profit 21400
1 2 7 4 0 0 1 2 7 4 0 0
Balance Sheet as on 30.03.2011
Liabilities Rs. Assets Rs.
Share Capital Cash Balance 5100
Issued & paid up 40000 Bank Current A/c 21000
Reserve Fund & other Funds Investments
Depreciation Fund 600 Sahakari Sangh Share purchase 1000
Other 6000 Bank Share Purchased 2000
Staff Provident Fund NIL Provident Fund Investment NIL
Secured Loans NIL Loans & Advances
Unsecured Loans Member’s Loan 100000
Bank Loans 45000 Sundry Debtors NIL227
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Deposits Current Assets
Member’s deposit 75000 Stock 106500
Current Liabilities & Provision Fixed Assets
Outstanding rent rates 2000 Dead stock 6000
Outstanding audit fees 2600 Other Expenses & Losses
Outstanding office salaries 4000 Other Debtors NIL
Unclaimed dividend NIL Losses NIL
Internet due but not paid NIL
Other liabilities NIL
Profit & Loss Appropriation A/c 21400
2 5 0 6 0 0 2 5 0 6 0 0
Illustration : 3
F r o m t h e f o l l o w i n g T r i a l B a l ance Damu Co-operative credit
society Ltd. as on 30th June 2011 and other international prepare
profit and loss A/c for the year ended 30th June, 2011 and Balance
Sheet as on that date.
Trial Balance as on June 30th, 2011
Particulars Rs. Particulars Rs.
Cash in hand 10700 Share Capital 800000
Cash with Bank 14000 Reserve Fund 20000
Fixed Deposit with M.S. Co-
operative Bank 155000 Member’s Deposits 2287200
Office furniture 17000 Dividend Equilisation Reserve 21000
Interest on Deposits 80000 Staff Provident fund 15000
Interest due on loans 8000 Profit & Loss Appropriation A/c
Bal. 61000
Salary and allowances 3000 Interest 189000
Establishment for Executive
officer 15000 Sundry Income 1000
Printing and stationery 1400 Education fund 1500
Traveling and conveyance 1600
Insurance premium 4000
Contribution to Provident Fund 12000
Loan due from members 3050000
3 3 9 8 7 0 0 3 3 9 8 7 0 0
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1. Interest due to members deposits Rs. 12000/-
2. Interest accrued due but not received Rs. 8000/-
3. Addition to Furniture dur ing the year Rs. 7000/- charge
Depreciation at 10% on closing Balances.
4. Salary due but not paid Rs . 4000/- whereas are employee is
given salary in advances on 30/06/2003 Rs. 1000/-
5. Audit fees unpaid for the year Rs. 5000/-
6. Authorized capital was Rs. 200000/- shares of Rs. 10 each.
7. Directors propose the followi ng appropriations for the current
year.
a) Dividend to share holders at 6%
b) Necessary amount to reserve Fund.
c) 5% of Net Profit (after cont ribution to Reserve Fund) to Co-
operative Development Fund.
d) Contribution to Dividend caualisation Reserve Rs. 500/-
e) Transfer to Building Fund Rs. 2000/-
Damu Co-operative Credit Society Ltd.
Profit and Loss A/c for the year ended 30/06/2011
Particulars Rs. Particulars Rs.
To Interest on
Deposits 80000 By interest 189090
Add: Interest due 12000 92000 Add: Interest due 8000 197000
To Salary and
allowance 3000 By other income
Add: Outstanding 4000 By Sundry income 1000
3 4 0 0 0
Less: Advances 1000 33000
To Printing and
stationery 1400
To Contribution to
provident fund 12000
To Depreciation on
Furniture 1700
To Outstanding
Audit Fees 5000
To Other expenses
and fees
-Establishing for
creative officer 15000
-Traveling &
Conveyance 1600
-Insurance Premium 4000 20600
To Net Profit 32300
1 9 8 0 0 0 1 9 8 0 0 0
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Damu Co-operative Society
Balance Sheet as on 30/06/2011
Liabilities Rs. Assets Rs.
Share capital Cash Balance
Authorized Capital Cash in Hand 10700
2000000 200000 Shares of
Rs. 10 each Cast at Bank 14000
Issued Capital Investments
80000 Shares of
Rs. 10 each 800000 F.D. with M.S. Co-
operative Bank 1 5 5 0 0 0
Reserve Fund and
other funds Provident Fund Investment NIL
Reserve Fund 20000 Loans and Advances
Dividend
Equalisation
Reserve 21000 Loan due from Members 3050000
Staff Provident
Fund 15000 Sundry Debtors NIL
Co-operative
Development Fund 3000 Current Assets
Education Fund 1500 Interest due on loans 8000
Depreciation Fund 700 Add : Interest due 8000 1 6 0 0 0
Staff Provident
Fund NIL Fixed Assets
Secured Loans NIL Office furniture 10000
Unsecured Loans NIL Add : Addition 7000 17000
Deposits Other Expenses & Losses
Members Deposits 2287200 Advance Salary 1000
Current Liabilities &
Provisions Other Debtors
Outstanding Salary 4000 Losses NIL
Outstanding Audit
Fees 5000
Unclaimed
Dividend NIL
Interest due but not
paid
Interest due on
Member’s Deposits 2000
Other Liabilities NIL
P & L appropriation
A/c
Opening 61000
Current Year 32300
3 2 6 3 7 0 0 3 2 6 3 7 0 0
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Memorandum Profit and Loss Appropriation Account
Particulars Rs. Particulars Rs.
To Dividend 48000 By Balance b/d 61000
To Reserve Fund (25%) 8075 By Net Profit 32300
To Co-operative Development Fund 1211
To Dividend Equalisation Fund 500
To Building Fund 2000
To Balance c/d 33514
9 3 3 0 0 9 3 3 0 0
N o t e : N o a p p r o p r i a t i o n o u t o f c u r r e n t y e a r ’ s p r o f i t c a n b e
made without the approval of the general body.
Illustration 4:
T h e f o l l o w i n g a r e t h e b a l a n ce of Katha Co-operative
Housing Society Ltd. For the year ended on 30/06/2004.
Dr. Cr.
Purchase of Land 600000
Share Capital 75000
Construction of Building 1800000
Reserve Fund 11600
Architect Fees for Building 40000
Investment in Shares of Maharashtra Co-
operative Society 8000
Investment in shares of Mumbai Dist Co-op
Bank 7000
Audit Fees 1000
Contribution from Members for Land 640000
For Building 951000
For Road Construction 51000
For shares M Co-operative Housing 45000
For Administrative Expenses 11500
Land Revenue 400
Insurance Premium 5,000
Electric Charges 1,800
Printing & Stationery 1,200 231
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Salaries to staff 2,400
Members personal A/c 14,000
Flat transfer premium 15,100
Dividend on shares 7,200
Interest on saving A/c 360
Furniture & Dead Stock 6,100
Electrical Motors & Pumps 7,200
Non Occupancy charges 4,000
Loans to members 6,20,000
Fixed Deposit with (Mumbai Dist. Co-op) 80,000
Saving A/c (MDCO-op) 3,100
Cash on Hand 750
Electrical Fittings 15,000
Wages of cleaning water 3,300
Income & Expenditure A/c (1.7.2011) 10,390
Loan from (M. Co-op Housing) 13,66,100
3 2 0 2 2 5 0 3 2 0 2 2 5 0
Adjustments :
1. Transfer of flat charges of 2 members during the year at Rs.
8000 per Flat is Receivable from member.
2. Provide Depreciati on at 10% Furniture, E l e c t r i c a l M o t o r
Pumps.
3. Interest Rs. 6000 on fix deposit with Bank is due but not
received.
4. Bill of Rs. 500 for repairs of electrical motors is unpaid.
From the above ment ioned information, y ou are required to
prepare income and expenditure account for the year ended
30/06/2011 and Balance sheet as on that date.
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Solution :
Katha Co-operative Housing Society Ltd.
Income and Expenditure Account for the year ended
30-06-2011
Dr. Cr.
Expenditure Rs. Income Rs.
To Audit Fees 1000 By Contribution of Members
for Administration Expenses 11500
To Land Revenue 400 By Dividend on Shares 7200
To Insurance Premium 5000 By Interest on Saving
Account 360
To Electric Charges 1800 By Non-occupancy Charges 4000
To Printing and Stationery 1200 By Outstanding interest on
Fixed Deposit 6000
To Salaries to Staff 2400
To Wages for Cleaning
Water-tanks 3300
To Depreciation :
Furniture 610
Electric Motor & Pumps 720 1330
To Repairs of Electric Motor 500
To Excess of Income over
Expenditure 1213
2 9 0 6 0 2 9 0 6 0
Balance Sheet as at 30-06-2011
Liabilities Rs. Assets Rs.
Share Capital Cash Balance
1500 Shares of Rs. 50
each fully paid 75000 Cash on hand 750
Reserve Fund and
Other Fund Saving A/c with Mumbai 3100
Reserve Funds 11600 Dist. Co-op. Bank
Flat Transfer Premium
15100 Investments
Add: Receivable for the
year 8000 23100Shares of Maharashtra Co-
op. Housing Finance
Society 8000
Contribution of Members : S hares of Mumbai Dist. Co-
op. Bank 7000 233
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For Land 640000 Fixed Deposits with
Mumbai Dist. Co-op. Bank
80000
For Construction of Building 951000 Add : Outstanding Interest
6000
86000
For Road Construction 51000 Loans and Advances
For Shares of Maharashtra
Co-op Housing Finance
Society 45000 Loan to Members 620000
Secured Loans Transfer Premium 8000
Loan from Maharashtra Co-
op. Housing Finance
Society 1366100 Fixed Assets
Other Liabilities Purchase of land 600000
Member’s Personal A/c 14000 Construction of building
1800000
Unpaid Expenses of Motor
Repairing 500 Add: Architect Fees 40000 1 8 4 0 0 0 0
Profit & Loss Appropriati on Furniture & Dead Stock
6100
Last Year’s Balance
10390 Less : Depreciation (610) 5 4 9 0
Add: Excess of Income of
Current year 12130 22520Electric Motor & Pumps etc.
7200
L e s s D e p r e c i a t i o n ( 7 2 0 ) 6 4 8 0
E l e c t r i c F i t t i n g s 1 5 0 0 0
3 1 9 9 8 2 0 3 1 9 9 8 2 0
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Illustration 5 :
A cricket club gives you the following information :
Income and Expenditure Account for the
year ended 31-12-2011
Dr. Cr.
Expenditure Rs. Income Rs.
To Remuneration to coach 18000 By Donations &
Subscriptions 102000
To Salaries and Wages 24000 By Bar Room :
To Rent 12000 Receipts 24000
To Repairs 11000 Less : Expenses (20000) 4 0 0 0
To Miscellaneous expenses 7000 By Bank Interest 2000
To Honorarium of Secretary 18000 By Hire – Club Hall 12000
To Depreciation on
Equipment 5000
To Surplus 25000
1 2 0 0 0 0 1 2 0 0 0 0
Balance Sheet As at 31/12/2011
Rs. P. Liabilities Rs. P. Rs. P. Assets Rs. P.
2010 2011 2010 2011
Capital Fund as on
31.12.2002 48000 25000 Equipment 2000
E n t r a n c e F e e s 1 0 0 0 0 6 0 0 0 Outstanding
Subscription 8000
S u r p l u s 2 5 0 0 0 5000 Cash in hand 4000
48000 83000 2500 Cash at bank 10000
4000 Subscriptions in advance 3000 20000 Fixed Deposit 50000
O u t s t a n d i n g L i a b i l i t i e s :
1500 Miscellaneous Expenses 1000
2000 Salary & wages 3000
3000 Honorarium to secretary 2000
58500 92000 58500 92000
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P r e p a r e t h e R e c e i p t s a n d P a y m e n t s Account of the Club for
the year ended 31st December, 2011.
Solution :
Receipts & Payments Account
Of the Club for the year ending 31st December, 2011
Dr. Cr.
Receipts Rs. P. Payments Rs. P.
To Balance b/d By Remuneration to coach 18000
Cash in hand 5000 By Salaries and Wages
(Note I) 23000
Cash at bank 2500 By Rent 12000
To Donations &
Subscriptions (Note IV) 99000 By Repairs 11000
To Bar receipts 24000 By Miscellaneous expenses
(Note II) 7500
To Bank Interest 2000 By Honorarium to Secretary
(Note II) 19000
To Hire-Club hall 12000 By Fixed Deposit 30000
To Entrance Fees 10000 By Bar expenses 20000
B y B a l a n c e c / d
C a s h i n h a n d 4 0 0 0
C a s h a t b a n k 1 0 0 0 0
1 5 4 5 0 0 1 5 4 5 0 0
Working Notes :
R s .
I. Salaries and Wages :
A s p e r i n c o m e a n d e x p e n d i t u r e a c c o u n t 2 4 0 0 0
A d d : o u t s t a n d i n g a t t h e b e g i n n i n g o f t h e y e a r 2 0 0 0
2 6 0 0 0
L e s s : O u t s t a n d i n g a t t h e e n d o f t h e y e a r ( 3 0 0 0 )
2 3 0 0 0
W. Note II Misc. Exp. Hon to Sec. Donations &
Subscription
As per Income – Exp A/c 7000 18000 102000
Add: Op. Outstanding 1500 3000 6000
Add: Cl. Received in Advance - - 3000
8 5 0 0 2 1 0 0 0 1 1 1 0 0 0
Less : Cl. Outstanding (1000) (2000) (8000)
Less : Op. Received in Advance - - (4000)
7 5 0 0 1 9 0 0 0 9 9 0 0 0 236
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Illustration 6 :
T h e f o l l o w i n g i s t h e r e c e i p t s a n d p a y m e n t s o f a B o o k s &
Periodicals society for t he year ended March 31, 2011.
Dr. Cr.
Receipts Rs. P. Payments Rs. P.
To Cash at bank 12500 By Salaries 2500
To Subscriptions 52500 By Printing and Stationery 1250
To Annual day Receipts 26800 By Annual day expenses 1500
To Mushaira receipts 22500 By Mushaira expenses 10000
To Dividend on shares 2500 By Telephone charges 2500
B y S u n d r y e x p e n s e s 2 0 0 0
B y S h a r e s p u r c h a s e d 7 5 0 0 0
B y P o s t a g e a n d t e l e g r a m s 2 2 0 0
B y B u i l d i n g m a i n t e n a n c e 6 3 4 0
B y C a s h a t b a n k 1 3 5 1 0
1 1 6 8 0 0 1 1 6 8 0 0
The following further information is furnished :
1. The value of the building ow ned by the society stood at Rs.
50000 as at 1st April, 2010 Depreciation at 5 percent has to be
provided.
2. there were 200 members paying s ubscription at the rate of Rs.
250 per annum each.
3. As on 1st April, 2010 subscription had been received in advance
but subscriptions were outstanding to the extent of Rs. 1000. As
at 31st March, 2011 subscriptions outstanding were Rs. 15000.
4. Postage stamps worth Rs. 250 we re with the secretary at the
beginning of the year and the st amps at the end of the year
were of the value of Rs. 150.
5. The investment in shares at t he beginning of the year was to the
extent of Rs. 5000.
6. The amount of Rs. 250 in re spect of the annual day receipts
was yet to be received.
7. the rent of the theatre (a mounting to Rs. 25000), where the
mushaira (poetic symposium) was held is still to be paid.
8. Hire of telephone to the extend of Rs. 300 is paid in advance.
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You are required to prepare the income and expenditure
account for the year ended March 31, 2011 and the Balance Sheet.
Solution :
Opening Balance Sheet as on 1st April, 2010
Liabilities Rs. Assets Rs.
Capital Fund (balancing figure) 68750 Building 50000
I n v e s t m e n t 5 0 0 0
S u b s c r i p t i o n s o u t s t a n d i n g 1 0 0 0
P o s t a g e s t a m p s 2 5 0
C a s h a t b a n k 1 2 5 0 0
6 8 7 5 0 6 8 7 5 0
Income and Expenditure Account for the year ended
31st March, 2011.
Dr. Cr.
Particulars Rs. Particulars Rs.
To salaries 2500 By Subscriptions 50000
To Printing and
stationery 1250 By Annual day
receipts 26800
To Telephone
charges 2500 Add : Due 250 2 7 0 5 0
Less : paid in
advance (300) 2200
To Sundry expenses 2000 Less : Expenses 1500 2 5 5 5 0
To Postage &
telegrams 2200 By Mushaira
receipts 22500
Add stamps on
1/4/10 250 Less : expenses
including
outstanding (12500) 1 0 0 0 0
2 4 5 0 By Dividend on
shares 2 5 0 0
Less : Stamps on 31-
03-11 (150) 2300
To Building
maintenance 6340
To Depreciation on
building 2500
To Excess of income
over expenditure 68960
8 8 0 5 0 8 8 0 5 0
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Note :
Subscriptions due for 200 members @ Rs. 250 = Rs. 50000
Subscriptions actually received during the year = 52500
Add: outstanding at the end of the year = 1500
5 4 0 0 0
Less : outstanding at the beginning of the year = 1000
5 3 0 0 0
Subscriptions due for the year (200 × 250) = 50000
Subscriptions received in advance = 3000
Balance Sheet of the Literary Society as on 31st March 2011.
Liabilities Rs. Assets Rs.
Capital Fund Buildings 50000
Opening balance 68750 Less depreciation (2500) 4 7 5 0 0
Add : excess of
income Investments in
shares 5000
Over expenditure 68960 137710 Add purchased
during the year 75000 8 0 0 0 0
Outstanding rent 2500 Postage stamps 150
Subscriptions
received in advances Subscriptions
outstanding 1 5 0 0
(as per note) 3000 Annual receipts
due 2 5 0
P r e p a i d t e l e p h o n e
charges 3 0 0
C a s h a t B a n k 1 3 5 1 0
1 4 3 2 1 0 1 4 3 2 1 0
Illustration : 7
F r o m t h e f o l l o w i n g T r i a l B a lance of Hari Co-operative
Purchases and Sales Society Lt d. as on 31.3. 2011; prepare
Trading and Profit & Loss Account for the year ended 31.3.2011
and Balance sheet as on that d a t e a f t e r c o n s i d e r i n g t h e
adjustments given thereafter.
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Trial Balance as on 31.3.2011
Particulars Dr. Rs. Cr. Rs.
Share capital - 3,36,000
Reserve Fund - 60,000
Creditors - 40,000
Profit and Loss A/ c 1.4.2010 - 1,76,000
Opening Stock 3,92,000 -
Furniture and Equipment 1,24,000
Container Deposit 32,000
Salaries 3,00,000
Sundry Debtors 60,000
Commission 88,000
Rent and Taxes 60,000
Postage 8,000
Traveling and Conveyance 18,000
Printing and Stationery 14,000
Admission Fees - 2,000
Purchase 63,40,000 -
Coolie Charges, Freight and Cartage 1,60,000 -
Investments 2,40,000 -
Sales - 76,20,000
Cash in hand 6,000 -
Bank Balance 4,00,000 -
Development Fund - 8,000
8 2 , 4 2 , 0 0 0 8 2 , 4 2 , 0 0 0
Adjustments :
1. Closing Stock is valued at Rs. 4,40,000.
2. Outstanding Rent Rs. 4,000 and Commission Payable Rs.
20,000.
3. Rs. 8,000 Salary was paid as advance as on 31.3.2011.
4. Accrued Income on Investment Rs. 20,000.
5. Provide 10% depreciation on furniture and equipments.
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Solution :
Hari Co-operative Society Ltd.
Trading A/c for the year ended 31.3.2011
Dr. Cr.
R s . R s .
To opening Stock 3,92,000 By Sales 76,20,000
To Purchases 63,40,000 By Closing Stock 4,40,000
To Coolie Charges,
Freight and Cartage 1,60,000
To Gross Profit
transferred to Profit
and Loss A/c 11,68,000
8 0 , 6 0 , 0 0 0 8 0 , 6 0 , 0 0 0
Profit and Loss A/c for the year ended 31.3.2011
Dr. Cr.
R s . R s .
To Salaries 3,00,000 2, 92,000 By Gross Profit 11,68,000
Less : Advance 8,000 B y A c c r u e d I n c o m e o n
Investments 20,000
To Traveling & Conveyance 18,000 By Admission Fees 2,000
To Rent & Taxes 60,000
Add: Outstanding Rent 4,000 64,000
To Postage 8,000
To Printing & Stationery
To Provision for Audit
Fees 600
To Depreciation on
furniture and
Equipments 12,400
To Commission 88,000
Add: Outstanding 20,000 1 , 0 8 , 0 0 0
To Education Fund 170
To Net Profit 6,72,830
11,90,000 11,90,000
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Profit & Loss Appropri ation A/c [Memorandum]
For the year ended 31.3.2011
Dr. Cr.
R s . R s .
To Reserve Fund (25% of N.P.) 1,68,208 By Balance b/d 1,76,000
To Balance Carried to
Balance Sheet 6,80,622 By Net Profit 6,72,830
8 , 4 8 , 8 3 0 8 , 4 8 , 8 3 0
Note : Contribution to Education Fund is as per the rate prescribed.
Hari Co-operative Society Ltd.
Balance Sheet as on 31.3.2011
Liabilities Rs. Assets Rs.
I. Share Capital I. Cash & Bank Balance
Authorised … shares of Rs.
…. Each ?C a s h o n H a n d 6 , 0 0 0
Subscribed … shares of Rs.
…. Each 3,36,000 Cash at Bank 4,00,000
II. Reserve Funds and other
Funds : II. Investments
Reserve Fund: Investments 2,40,000
Opening Balance 60,000 Container Deposits 32,000
Add: Transfer 1,68, 208 2,28,208 III. S undry Debtors 60,000
Development Fund 8,000 Salary Advance 8,000
Current Liabilities and
Provisions IV. Current Assets
Creditors 40,000 Closing Stock 4,40,000
Outstanding Rent 4,000 V. Fixed Assets
Education Fund 170 Furniture and Equipments
1,24,000
Commission Payable 20,000 Less : Depreciation
12,400 1,11,600
Audit Fees payable 600 64,770 VI. Other Items
P. & L A/c Interest Accrued 20,000
Opening Balance 1,76,000
Add : Net profit for the year 6,72,830
8 , 4 8 , 8 3 0
Less : Transfer to Reserve
fund 1,68,208 6,80,622
1 3 , 1 7 , 6 0 0 1 3 , 1 7 , 6 0 0
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Illustration 8 :
F r o m t h e f o l l o w i n g T r i a l B a l ance of Rakesh Co-operative
Consumers Society Ltd., Pune as o n 3 1 . 3 . 2 0 1 1 , p r e p a r e T r a d i n g
and Profit & Loss Account for the year ended on 31.3.2010 and
Balance Sheet as on that date after consi dering the adjustments
given.
Trial Balance as on 31.3.2011
Particulars Dr. Rs. Cr. Rs.
Share capital - 1,60,000
Calls in arrears 10,000 -
Reserve Fund - 15,000
Common Goods Fund - 5,000
Opening stock of Consumer’s Goods 1,10,000 -
Furniture 48,000 -
Education Fund - 8,000
Sundry Creditors - 20,000
Sundry Debtors 30,000 -
Commission Payable - 4,000
Salaries 71,000 -
Commission 17,400 -
Rent, Rate and Taxes 20,000 -
Postage 12,100 -
Land 9,000 -
Interest on Investment - 10,000
Equipment 20,000 -
Purchases 16,40,000 -
Investment 1,00,000 -
Sales - 20,60,500
Cash in hand 25,000 -
Cash at Bank 1,70,000 -
2 2 , 8 2 , 5 0 0 2 2 , 8 2 , 5 0 0
Adjustments :
1. Outstanding rent payabl e on 31.3.2011 was Rs. 1,000.
2. Charge 5% depreciation on furniture.
3. Closing Stock of consumer’s g o o d s i s v a l u e d a t c o s t R s .
1,40,000.
4. Interest accrued on Investment Rs. 2,000.
5. Outstanding salary on 31st March, 2011 was Rs. 2,000 & Rs.
3,000 paid in advance.
6. Authorized capital 20,000 shares of Rs. 10 each.
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Solution :
Rakesh Co-operative Consumers Society Ltd.
Trading A/c for the year ended 31.3.2011
Dr. Cr.
R s . R s .
To opening Stock 1,10,000 By Sales 20,60,500
To Purchases 16,40,000 By Closing Stock 1,40,000
To Gross Profit
transferred to Profit
and Loss A/c 4,50,500 -
2 2 , 0 0 , 5 0 0 2 2 , 0 0 , 5 0 0
Profit and Loss A/c for the year ended 31.3.2011
Dr. Cr.
R s . R s .
To Salaries 71,000 By Gross Profit 4,50,500
Add : Outstanding 2,000 By Interest on
investment 10,000
73,000 Add : Accrued 2,000 12,000
Less : Advance 3,000 70,000
To Rent, Rates and
Taxes 20,000
Add : Outstanding
Rent 1,000 21,000
To Education Fund 100
To Postage 12,100
To Depreciation on
Furniture 2,400
To Commission 17,400
To Net Profit 3,39,500
4,62,500 4,62,500
Profit & Loss Appropri ation A/c [Memorandum]
For the year ended 31.3.2011
Dr. Cr.
R s . R s .
To Reserve Fund 84,875 By Net Profit 3,39,500
To Balance Carried to
Balance Sheet 2,54,625
3 , 3 9 , 5 0 0 3 , 3 9 , 5 0 0
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Illustration 9:
F r o m t h e f o l l o w i n g T r i a l B a l ance of Sadu Consumer’s Co-
operative Society Ltd. as on 31st M a r c h 2 0 1 1 p r e p a r e t h e F i n a l
Accounts in the prescribed format.
Particulars Dr. ` C r . ` Particulars Dr. ` C r . `
Share Capital 1,00,000 Purchases 12,05,000
Deposit from
Members 5 0 , 0 0 0 Due from
Customers 56,000
Sales 14,50,000 Carriage
inwards 4,000
Purchases
Returns 6,000 Sales Returns 3,000
Due to Suppliers 11,000 Rent (for 10
months) 10,000
Interest on
investment 11,000 Audit Fees 2,000
Rebate
Received 2,000 Sales Tax 3,000
Common Good
Fund 4 , 0 0 0 S t a f f S a l a r y 5 0 , 0 0 0
Price fluctuation
Fund 3 , 0 0 0 Printing and
Stationery 10,000
Reserve fund 25,000 Investments 2,00,000
Cash in Hand 200 Stock in Trade 30,000
Cash at Bank 76,200 Interest Paid 2,6000
Furniture 10,000
1 6 , 6 2 , 0 0 0 1 6 , 6 2 , 0 0 0
Adjustments :
1. value of closing stock on 31st March, 2011 was ` 75000.
2. depreciation on Furniture @ 10% p.a. for full year.
3. Interest accrued on Deposits ` 5,000 and interest accrued on
investment ` 1,200.
4. salary includes advance of ` 6,000 paid against salary of April,
2011.
5. outstanding Sales Tax of ` 2,000. (Mar. 04, adapted)
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Solution :
In the Books of Sadu Consumer Co-operative Society Ltd.
Profit & Loss Account for the year ended 31-3-2011
Dr. Cr.
Particulars Rs. Particulars Rs.
To opening Stock 30,000 By Sales
To Purchases 12,05,000 Less : Returns 14,50,000 14,47,000
Less : Returns 6,000 11,99,000 By Closing Stock (-3,000) 7 5 , 0 0 0
To Carriage Inwards 4,000
To Gross Profits 2,89,000
15,22,000 15,22,000
To Interest Paid 2, 600 By Gross profit b/d 2,89,000
Add : Outstanding 5,000 7 , 6 0 0 , B y I n t e r e s t R e c e i v e d 1 2 , 2 0 0
To Salaries 44,000 By Rebate Received 2,000
To Rent 12,000
To Sales Tax 5,000
To Audit Fees 2,000
To Printing and
Stationery 10,000
To Depreciation on
Furniture 1,000
To Net Profit Ltd. to B/s 2,21,600
3,03,200 3,03,200
Balance Sheet as at 31-3.2011
Liabilities ` A s s e t s `
Share Capital Cash Balance
Authorized, issued & paid up 1,00,000 On hand 200
Reserve Fund and other Funds At Bank 76,200 7 6 , 4 0 0
Reserve Fund 25,000 Investments
Common Good Fund 4,000 Investments 2,00,000
Price Fluctuation Fund 3,000 32,000 Add : Interest
accrued 1,200 2 , 0 1 , 2 0 0
Staff Provident Fund NIL Provident Fund vestments NIL
Secured Loans NIL Loans & Advances NIL
Unsecured Loans NIL Sundry Debtors 56,000
Deposits Current Assets
Deposits from Members 50,000 Closing stock 75,000
Add : Interest Accrued 5,000 55,000 Fixed Assets
Current Liabilities & Provision F u r n i t u r e 9 , 0 0 0
Suppliers 11,000 Other Expenses & Losses (not
w/o)
Rent Payable 2,000 Salary 6,000
Sales Tax Payable 2,000 15,000 Losses
Unclaimed Dividend NIL
Interest due but not paid NIL
Other liabilities NIL
Profit & Loss Appropriation
Opening Balance ?
Add : Current Year’s
Profit 2,21,600 2,21,600
4 , 2 3 , 6 0 0 4 , 2 3 , 6 0 0246
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Illustration 10 :
F r o m t h e f o l l o w i n g T r ial Balance of M.K.J. Consumer Society
as on 31st March, 2011, prepare Final Accounts in the prescribed
format.
Particulars ` Particulars `
Cash in Hand 80,500 Share Capital 5,00,000
Cash at Bank 20,500 Deposit from Members 5,00,000
Furniture 1,00,000 Sales 13,80,000
Purchase 12,15,000 Purchases Return 15,000
Debtors 58,000 Creditors 28,000
Carriage inward 7,000 Interest on investment 80,000
Sales Return 15,000 Rebate Received 3,000
Staff Salary for (11
Months) 55,000 Reserve Fund 12,000
Rent for (13 months) 13,000
Audit Fees 6,000
Printing and Stationery 8,000
Investments @ 10% p.a. 9,00,000
Stock in Trade 40,000
25,18,000 25,18,000
Adjustments :
1. Value of Closing stock as on 31st March, 2011 ` 85,000.
2. Depreciation of Furniture @ 10% p.a.
3. Interest Accrued on Deposits 56,000.
4. sales Tax 4,500 to be provided.
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Solution :
M. K. J Consumer Society Limited
Balance Sheet as on 31st March 2011
Liabilities ` ` Assets ` `
I. Share Capital I. Cash Balance
Authorized Issued and
Paid-up 5,00,000 On hand 80,500
II. Reserve Fund and
Other Funds A t B a n k
(including
Deposits) 20,500 1,01,000
Reserve Fund 12,000 II. Investments
III. Staff Provident Fund NIL Other /
Miscellaneous 9,00,000
IV. Secured Loans NIL Add : Interest
accrued 10,000 9,10,000
V. Unsecured Loans NI L III. Provident Fund
Investments NIL
VI. Deposits I V . L o a n s a n d A d v a n c e s N I L
Deposit from
members 5,00,000 V. Sundry Debtors
Add : Interest
accrued on
above 56,000 5 , 5 6 , 0 0 0 F o r C r e d i t S a l e s 5 8 , 0 0 0
VII. Current Liabilities
and Provisions V I . C u r r e n t A s s e t s
Sundry
Liabilities 28,000 Closing Stock 85,000
Outstanding Expenses VII. Fixed Assets
- Salaries 5,000 Deadstocks 1,00,000
- Interest 4,500 3 7 , 5 0 0 L e s s :
Depreciation 10,000 90,000
VIII. Unclaimed Dividend NIL VIII. Other Expenses and
Losses (not w/o) NIL
IX. Interest due but not
paid NIL IX. Other Debtors
X. Other Liabilities NIL Advances paid 1,000
XI. Profit and Loss
Appropriation X . L o s s e s N I L
Opening Balance ?
Add : Current
Year’s profit 1,39,500 1,39,500
Total 12,45,000 12,45,000
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Profit and Loss Account for the Year ending 31st March 2011
Particulars ` P a r t i c u l a r s `
To Interest Paid 56,000 By Gross Profit b/d 2,03,000
To Salaries and Allowances 55,000 By Interest Received 80,000
Add : Outstanding 5,000 60,000 By Interest Accrued 10,000
To Rent, Rates and Taxes 12,000 By Other Incomes
To Audit Fees 6,000 Rebate received 3,000
To Printing and Stationery 8,000
To Depreciation on Assets furniture 10,000
To Other Expenses and Fees Sales
tax 4,500
To Net Profit transferred 1,39,500
Total 2,96,000 Total 2,96,000
Illustration 11 :
F r o m t h e f o l l o w i n g T r i a l B a lance of Maru Co-operative
society, for the year ended 31-12-2011 as follows :
Trial Balance
Particulars ` P a r t i c u l a r s `
Investments in Shares 50,000 Share Capital 1,00,000
Printing and Stationery 10,000 Bank Loan @ 10% Interest
P.A. 3,50,000
Investment in Bank Shares 70,000 Interest on Members Loan 3,50,000
Fixed Assets 50,000 Members Deposits 5,00,000
Members Loan 8,00,000 Sales 13,00,000
Purchase 11,90,000 Reserves and Other Funds 4,00,000
Office Rent 1,00,000
Salaries 1,00,000
Traveling Expenses 18,000
Freight 12,000
Coolie Charges 10,000
Bank Balance 3,30,000
Bank Interest Paid 2,60,000
3 0 , 0 0 , 0 0 0 3 0 , 0 0 , 0 0 0
i) Provide Audit Fees for ` 6,000/-.
ii) Provide Depreciation on fixed Assets @ 5%.
iii) Outstanding Office Salaries ` 10,000.
iv) Closing Stock ` 3,20,000.
You are required to prepare Trading, Profit and Loss
Account for the ended 31st March, 2011 and Bal ance Sheet as on
that date. (Oct. 05, adapted) 249
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Solution :
Maru Co-operative Society Limited
Balance Sheet as on 31st December 2011
Liabilities ` ` A s s e t s ` `
I. Share Capital I. Cash Balance
Authorized Issued and
Paid-up 1,00,000 At Bank (including
deposits) 3,30,000
II. Reserve Fund and
Other Funds II. Investments
Reserve Fund 4,00,000 Other 1,20,000
III. Staff Provident Fund NIL III. Provident Fund
Investments
NIL
IV. Secured Loans NIL IV. Loans and Advances
V. Unsecured Loans
From Banks 3,50,000Loans 8,00,000
VI. Deposits V. Sundry Debtors NIL
Other Deposits 5,00,000 VI. Current Assets
VII. Current Liabilities and
Provisions Closing Stock 3,20,000
Outstanding Expenses VII. Fixed Assets
- Salaries 10,000 Other / Miscellaneous 47,500
- Audit Fees 6,000 16,000 VIII. Other Expenses and
Losses (not w/o) NIL
VIII. Unclaimed Dividend NI LI X . O t h e r D e b t o r s N I L
IX. Interest due but not
paid NIL X. Losses NIL
X. Other Liabilities NIL
XI. Profit and Loss
Appropriation
Opening Balance --
Add : Current
Year’s profit 2,51,000 2 , 5 1 , 5 0 0
Total 16,17,500 Total 16,17,500
Trading Account for the Year ended 31st December 2011
Particulars ` Particulars `
To Purchases 11,90,000 By Sales 13,00,000
To Freight 12,000 By Closing Stock 3,20,000
To Coolie Charges 10,000
To Gross Profit c/d 4,08,000
Total 16,20,000 Total 16,20,000
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Profit and Loss Account for the Year ending
31st December 2011
Particulars ` ` P a r t i c u l a r s `
To Interest Paid 2,60,000 By Gross Profit b/d 4,08,000
To Salaries and Allowances 1,00,000 By Interest Received 3,50,000
Add: Outstanding 10,000 1,10,000
To Rent, Rates and Taxes 1,00,000
To Audit Fees 6,000
To Printing and Stationery 10,000
To Depreciation on Assets 2,500
To Other expenses and Fees
Travelling 18,000
To Net Profit transferred 2,51,500
Total 7,58,000 Total 7,58,000
Illustration 12 :
T h e B a l a n c e S h e e t a n d R e c e ipt and Payments Accounts of
Kadia Consumer’s Co-operative St ores Ltd. Mumbai are given
below :
Kadia Consumer’s Co-opera tive Stores Ltd. Mumbai
Balance Sheet as on 31st March, 2010
Liabilities ` Assets `
Share Capital 60,000 Cash 2,500
Deposits from Members 37,500 Bank 1,000
Reserve Fund 10,000 Investment (Shares of DCCB) 8,000
Interest due 200 Government Securities 5,000
Creditors 3,000 Fixed Deposits 8,500
Sales Tax due 800 Interest due 300
Salaries Payable 500 Furniture 5,000
Dividend Payable 1,500 Debtors 38,500
Profit and Loss A/c 5,800 Stock 50,500
1,19,300 1,19,300
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Receipt and Payment A/c for the year ended 31st March, 2011
Receipts ` Payments `
To Balance b/d By Share Capital 1,000
Cash 2,500 By Deposit Repaid 24,000
Bank 1,000 By Purchases 5,55,000
To Share Capital 3,000 By Sales Returns 3,500
To Deposits from member 5,000 By Carriage inward 10,000
To Sales 6,50,000 By Commission 2,500
To Purchases Returns 12,500 By Interest 2,150
To Sundry Income 2,000 By Sales Tax 5,500
To Sundry Debtors 6, 30,000 By Dividend paid 3,250
To Sundry Creditors 4,70,000 By Bank charges 225
To Fixed Deposits 1,000 By Salaries 17,000
To Interest 3,000 By Contribution to PF 1,200
To Dividend 800 By Travelling Expenses 5,550
B y R e n t 4 , 8 0 0
B y A l l o w a n c e t o M D 5 0 0
By Postage & Telephones 1,490
B y P r i n t i n g a n d S t a t i o n e r y 4 , 6 0 0
B y A u d i t F e e s 7 5 0
B y S u n d r y E x p e n s e s 3 8 5
B y D e b t o r s 6 , 1 5 , 0 0 0
B y C r e d i t o r s 4 , 6 0 , 0 0 0
B y F u r n i t u r e 5 , 0 0 0
B y F i x e d D e p o s i t s 3 2 , 0 0 0
B y B a l a n c e c / d
C a s h 4 , 4 0 0
B a n k 2 1 , 0 0 0
17,80,800 17,80,800
Adjustments :
a) Authorized Capital was 25,000 shares of ` 10 each.
b) Stock on 31st March, 2008 was ` 55,000.
c) Depreciate Furniture by ` 375.
d) Provide for Doubtful Debts 300.
e) Appropriation out of Profits of the year 2010-11 were as
follows :
Reserve Fund ` 2,000
Dividend ` 600
Education Fund ` 1,000
P r e p a r e F i n d A c c o u n t s s t r i c t ly as per Rule No. 61 of
Maharashtra Co-operative Societies Rules, 1961.
( M . C o m P a r t - 1 , O c tober 2008, adapted) 252
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Solution :
Kadia Consumer’s Co- operative Society Ltd.
Trading and Profit and Loss A/c for the year ended
31st March 2011
Dr. Cr.
Particulars ` P a r t i c u l a r s `
To Opening stock 50,000 By Sales 6,50,000
To Purchases 5,55,000 Less : Return 3,500 6,46,500
Less : Return 12,500 5,42,500 By closing Stock 55,000
To Carriage Inward 10,000
To Gross Profit c/d 98,500
7 , 0 1 , 5 0 0 7 , 0 1 , 5 0 0
To Interest 2,150 By Gross Profit b/d 98,500
Less : Interest due (Op.) 200 1,950 By Interest 3,000
To Sales Tax 5,500 Less: Receivable (Op.) 300 2,700
Less : Due (Op.) 800 4,700 By sundry Income 2,000
To Salaries 17,000 By Dividend 800
Less : Due (Op.) 500 16,500
To Dividend 3,250
Less : Payment 1,500 1,750
To Depreciation on
Furniture 3 7 5
To R & D 300
To Commission 2,500
To Bank charges 225
To Postage 1,490
To Contribution to PF 225 1,200
To Travelling
Expenses 1,490 5,550
To Rent 4,800
To Allowance 500
To Printing and Stationery 4,600
To Audit Fees 750
To Sundry
Expenses 3 8 5
To Education Fund 1,000
To Net Profit c/d 55,425
1 , 0 4 , 0 0 0 1 , 0 4 , 0 0 0
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Profit & Loss Appropriation A/c
Particulars ` Particulars `
To Reserve Fund 2,000 By Opening 5,800
To Dividend Fund 600 Add : Current Year 55,425 6 1 , 2 2 5
To P/L transferred to B/S 58,625
6 1 , 2 2 5 6 1 , 2 2 5
Balance Sheet as on 31st March, 2011
Liabilities ` A s s e t s `
Share Capital Cash / Bank Balances
Authorized Capital : Cash 4,400
25,000 shares of ` 10 each 2,50,000 Bank 21,000
Issued, Subscribed & paid
up Capital 62,000 Investment 52,500
Reserves and other Funds I n v e s t m e n t i n P F
Reserve Fund 12,000 Loans and Advances
Staff Provident Fund - Sundry Debtors 23,200
Secured loans - Current Assets
Unsecured loans - S t o c k 5 5 , 0 0 0
Deposits 18,500 Fixed Assets
Current Liabilities F u r n i t u r e 1 0 , 0 0 0
Creditors 13,000 Less : Depreciation 375 9,625
Proposed Dividend 600 Other Items -
Unpaid Dividend - P & L A/c -
Interest accrued - Current losses -
Other Liabilities
Education Fund 1,000
P & L A/c 58,625
1 , 6 5 , 7 2 5 1 , 6 5 , 7 2 5
Illustration 13 :
F r o m t h e f o l l o w i n g T r ial Balance of Nitin Co-operative Credit
Society Ltd. as on 30th June 2011 and other information, prepare
Profit and Loss A/c for the year ended 30th June, 2011 and Balance
Sheet as on that date.
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Trial Balance
Particulars ` Particulars `
Cash in Hand 700 Share Capital 7,50,000
Cash with Banks 14,000 Reserve Fund 50,000
Fixed Deposit with M.S.
Co-operative Bank 1,55,000 Members Deposits 22,47,750
Office Furniture 7,000 Unpaid Dividend 2,100
Interest on Deposits 80,000 Dividend Equalisation
Reserve 18,000
Interest due on Loans 8,000 Staff Provident Fund 20,000
Salary and Allowances 30,000 Profit & Loss Appropriation
A/c Balance 31,000
Establishment for
Executive Officer 5,000 Interest 1,78,000
Printing and Stationery 400 Renewal Fees 4,000
Traveling and Conveyance 600 Sundry Income 300
Insurance Premium 1,000 Co-operative Development
Fund 2,000
Contribution to Provident
Fund 2,000 Education Fund 500
Loan due from Members 30,00,000
33,03,700 33,07,700
Adjustment :
1. Interest due to members deposits ` 5,000.
2. interest accrued due but not received ` 2,000.
3. Addition to Furniture during the year ` 1,000. Charge
depreciation at 10% on closing balance.
4. Salary due but not paid 300, whereas one employee is given
salary in advance on 30-6-2011 ` 500.
5. Audit fee unpaid for the year ` 3,000.
6. Authorised Capital was ` 1,00,000 shares of 10 each.
7. Directors propose the followi ng appropriations for the current
year.
a) Dividend to shareholders at 5%.
b) Necessary amount to Reserve Fund.
c) 5% of Net Profit (after cont ribution to Reserve Fund) to Co-
operative Development Fund.
d) Contribution to Divid end Equalisation Reserve ` 2,000.
e) Transfer to Building Fund ` 10,000. (Oct.07, adapted)
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Nitin Co-operative Credit Society Ltd.
Profit & Loss Account For the year ended 30-6-2011
Dr. Cr.
Particulars ` Particulars `
To Interest on
Deposits 80,000 By interest 1,78,000
Add: Interest due 5,000 85,000 A dd: Interest due 2,000 1,80,000
To Salary and
allowance 30,000 By other income
Add: Outstanding 300 -Renewal Fees 4,000
3 0 , 0 0 0 - S u n d r y I n c o m e 3 0 0 4 , 3 0 0
Less: Advances 500 29,800
To Printing and stationery 400
To Contribution to provident fund 2,000
To Depreciation on Furniture 700
To Outstanding Audit Fees 3,000
To Other expenses and fees
-Establishing for
Executive officer 5,000
-Traveling & Conveyance 600
-Insurance Premium 1,000 6,600
To Net Profit 56,800
1,84,300 1,84,300
Balance Sheet as on 30-6-2011
Liabilities ` A s s e t s `
Share capital C a s h B a l a n c e
Authorized Capital C a s h i n H a n d 7 0 0
1,00,000 Shares of ` 10
each 10,00,000 Cast at Bank 14,000
Issued Capital Investments
75,000 Shares of ` 1 0
each 7,50,000 F.D. with M.S. Co-operative Bank 1,55,000
Reserve Fund and
other funds Provident Fund
Investment NIL
Reserve Fund 50,000 Loans and Advances
Dividend Equalisation
Reserve 18,000 Loan due from Members 30,00,000
Staff Provident Fund 20,000 Sundry Debtors NIL
Co-operative
Development Fund 2,050 Current Assets
Education Fund 500 Interest due on loans 8,000 256
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Depreciation Fund 700 Add : Interest due 2,000 1 0 , 0 0 0
Staff Provident Fund NIL Fixed Assets
Secured Loans NIL Office furniture 6,000
Unsecured Loans NIL Add : Addition 1,000 7 , 0 0 0
Deposits Other Expenses &
Losses
Members Deposits 22,47,750 Advance Salary 500
Current Liabilities &
Provisions Other Debtors
Outstanding Salary 300 Losses NIL
Outstanding Audit Fees 3,000
Unclaimed Dividend NIL
Unpaid Dividend 2,100
Interest due but not
paid
Interest due on
Member’s Deposits 5,000
Other Liabilities NIL
P & L appropriation A/c
Opening 31,000
Current Year 56,800 8 7 , 8 0 0
3 1 , 8 7 , 2 0 0 3 1 , 8 7 , 2 0 0
4.9 EXERCISES:
Theory Questions :
1. What are the special features in case of Co-operative society in
Maharashtra?
2. Write short notes on
i) Managing Committee
ii) Bye-Law of Co-operative Society.
iii) Education Fund
iv) Consumer Co-operative society
3. What are Books of Accounts ma intain by Co-operative Society.
4. How is the net profit is calc ulated by the Co- operative Society.
5. What are the different types of Co-operative Societies.
6. Write short notes on return s of Co-operative societies?
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Particulars Questions :
1. The following particulars relate to a sports club :
Receipts and Payments Accounts for the year ended
31st December 2010.
Particulars Rs. Particulars Rs.
To Balance 1st January 8,400 By Secretary’s salary 2,000
To Admission fee 09 2,000 By Printing & Stationery 5,200
To Admission fee 10 20,000 By Publicity 3,200
To Subscriptions 09 1,200 By Fire insurance 2,400
To Subscriptions 10 30,000 By Investments purchased 40,000
To Subscriptions 11 800 By Balance, 31st December 15,600
To Rent received 6000
6 8 , 4 0 0 6 8 , 4 0 0
Income and Expenditure Account for the year ended
31st December, 2010
Particulars Rs. Particulars Rs.
To Secretary’s salary 3,000 By Admission fee 21,000
To Printing & Stationery 4,000 By Subscriptions 31,200
To Publicity 3,200 By Rents received 8,000
To Audit Fees 1,000
To Fire insurance 2,000
To Depreciation on equipment 18,000
To Balance (Excess of income over
expenditure) 28,600
6 0 , 2 0 0 6 0 , 2 0 0
The assets on 1st January, 2010 included : `
Advance to staff 10,000
Club Grounds and Pavilion 88,000
Sports Equipment 1,50,000
Furniture and Fixtures 28,000
Prepare the opening and closing Balance Sheets
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Exercise 2
From the following Tr ial Balance Natu Co -operative Consumers
Society Ltd. Pune as on 31-3-20 11, prepare Trading and Profit and
Loss Account for the year ended on 31-3-2011 and Balance Sheet
as on that date after consider ing the adjustments given.
Trial Balance
Particulars Dr. Rs. Cr. Rs.
Share capital - 1,60,000
Calls in arrears 10,000 -
Reserve Fund - 15,000
Common Goods Fund - 5,000
Opening stock of Consumer’s Goods 1,10,000 -
Furniture 48,000 -
Education Fund - 8,000
Sundry Creditors - 20,000
Sundry Debtors 30,000 -
Commission Payable - 4,000
Salaries 71,000 -
Commission 17,400 -
Rent, Rate and Taxes 20,000 -
Postage 12,100 -
Land 9,000 -
Interest on Investment - 10,000
Equipment 20,000 -
Purchases 16,40,000 -
Investment 1,00,000 -
Sales - 20,60,500
Cash in hand 25,000 -
Cash at Bank 1,70,000 -
2 2 , 8 2 , 5 0 0 2 2 , 8 2 , 5 0 0
Adjustments :
a) Outstanding rent payable on 31-03-2011 was ` 1,000.
b) Charge 5% depreciation on furniture.
c) Closing Stock of consumers’ goods is valued at cost ` 1,40,000.
d) Interest accrued on Investment ` 2,000.
e) Investment includes ` 75,000 be investment of staff P.F. 259
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Exercise 3 :
Co-operative Society r endering Loans and Rationi ng facilities to its
members has the Trial Balance as on 31.3.2011 as follows :
Trial Balance
Particulars Dr. Rs. Cr. Rs.
Member Share Capital -- 14,100
Member’s Deposit -- 30,000
Dead Stock 7,000 -
Stationery and Printing 750 -
Bank share Purchased 5,000 -
Sahakari Sangh Share Purchased 2,000 -
Bank Loan (Simple) - 31,000
Members’ Loan 83,250 -
Interest on Members Loans - 53,150
Purchase of rationing Grains 1,20,000 -
Sale of rationing grains - 1,27,500
Office rent 9,000
Salaries 10,550 -
Traveling Expenses 1,250 -
Freight 1,300 -
Coolie charges 900 -
Bank Current A/c 33,500 -
Bank Interest 26,250 -
Reserve and Other Funds - 45,100
Cash Balance 100 -
3 , 0 0 , 8 5 0 3 , 0 0 , 8 5 0
Adjustments :
1. Closing Stock of Rationing Grains on 31.3.2011 was Rs.
35,000/-.
2. outstanding Office Rent is Rs. 1,000/-.
3. provide for Audit Fees due Rs. 600/-.
4. Provide depreciati on on Deadstock at 5%.
5. Provide Bad Debts Reserve Rs. 1,500/-.
Y o u a r e r e q u i r e d t o p r e p a r e T r ading, Profit & Loss Account
for the year ending on 31.3.2011 and Balance Sheet as on that
date. 260
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Trial Balance of Ramkupa Co-operative Society as on
31.3.2011
D r . R s . C r . R s .
Purchases 24,00,000 Interest 89,000
Freight Inward 1,000 Transfer Fees 200
Stock (1-4-2011) 1,20,000 Dividend 23,000
Rent 5,600 Sales 28,00,000
Postage 2,000 Commission 32,000
Bank Interest 62,000 Rent received 6,000
Subscription to Periodicals 1,000 Share Capital 6,00,000
Advertisement 7,000 Reserve Fund 1,00,000
Staff Salaries 17,000 Building Fund 79,000
Electricity Charges 1,600 Bad Debts Funds 32,000
Repairs 1,000 Share Capital
Meeting Expenses 2,000 Redemption Fund 16,000
Printing & Stationery 5,700 Depreciation Fund 5,000
Traveling Expenses 1,800 Education Fund 1,000
Cash 12,200
Bank 52,000
Shares in Co-op. societies 39,000
Fixed Deposit 2,00,000
Deposit with M.S.E.B. 500
Library 300
Building 3,91,500
Debtors 4,60,000
3 7 , 8 3 , 2 0 0 3 7 , 8 3 , 2 0 0
Adjustments :
a) Closing stock was valued at Rs. 1,50,000.
b) Depreciate Building at 5% p.a.
c) Provide for audit fees Rs. 5,000 and salary Rs. 15,000.
d) Interest due but not received Rs. 700.
e) Advance salary Rs. 1,500.
f) Transfer Rs. 2,000 to Share Capital Redemption Fund.
g) Transfer to education Fund Rs. 500.
Prepare Trading and Pr ofit & Loss Account for the year ended
31.3.2011 and Balance sheet as on that date.
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Exercise 5
F r o m t h e f o l l o w i n g T r i a l B a l a nce of Bharat Co-operative
Purchase and Sales Society Ltd. as on 31.3.2011, prepare Trading
and Profit & Loss Account for the year ended 31.3.2011 and
Balance Sheet as on that date.
D r . R s . C r . R s .
Opening Stock 1,90,000 Share Capital 2,50,000
Furniture 60,000 Reserve Fund 50,000
Deposits 20,000 Creditors 30,000
Sundry Debtors 40,000 Profits & Loss A/c (1-4-2010) 90,000
Staff Salaries 1,50,000 Profit & Loss A/c (1-47-2010) 10,000
Commission 40,000 Admission Fees 2,000
Rent 20,000 Sales 39,00,000
Postage & Telegram 5,000 Co-operative Development
Fund 5,000
Conveyance 10,000
Printing & Stationary 6,000
Dividend paid 6,000
Purchases 32,00,000
Freight & Cartage 90,000
Investments 1,50,000
Cash 3,000
Bank Balance 3,47,000
43,37,000 43,37,000
Adjustments :
a) Closing stock was valued at Rs. 3,00,000.
b) Rent payable Rs. 3,000.
c) Commission due but not paid Rs. 15,000.
d) Salary of Rs. 500 was paid in advance.
e) Outstanding audit fees amounted to Rs. 6,000.
f) The society declared 5% dividend on its paid up capital as on
31.3.2010 for the year 2009-10. It tr ansferred 25% of its profits
for the year ended 31.3.2010 to R e s e r v e F u n d a n d a l s o
transferred Rs. 5,000 to Co-operative Development Fund.
These appropriations were app roved in the general meeting
held on 1-09-09.
g) Interest on investment due but not received Rs. 5,000.
h) The Directors propose to recommend dividend of 10% for the
current year.
i) Depreciate furniture by 5%. 262
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Exercise 6.
F r o m t h e f o l l o w i n g Trial Balance of Manu Consumers Co-
operative Society Ltd. prepare Trading and Pr ofit & Loss Account
for the year ended 31.3.2011 and a Bal ance Sheet as on that date.
Dr. Rs. Cr. Rs.
Purchases : Sales :
Provisions 1,29,000 Provisions 1,35,000
Cloth 25,000 Stationary 90,000
Stationary 60,000 Sugar 1,20,000
Sugar 1,14,000 Cloth 40,000
Freight & Octroi 7,000 Miscellaneous Income 500
Salary to Employees 25,000 Dividend 200
Printing & Stationary 1,500 Discount Received 3,500
Miscellaneous
Expenses 500 Interest 1,200
Telephone Charges 500 Bills Payable 16,000
Commission 100 Security Deposit from
Employees 5,000
Repairs 400 Share capital 4,00,000
Meeting Expenses
and Conveyance 3,000 Reserve Fund 12,000
Contribution to Staff
Provident Fund 3,000 Investment
Professional Tax 1,000 Fluctuation Fund 10,000
Bonus to Staff 4,000 Share Capital
Discount allowed 3,300 Redemption Fund 9,000
Interest 1,000 Depreciation Fund 6,000
Cash at Bank 90,000 Staff Provident Fund 25,000
Share of M.S.C.F. 3,500
Advances 600
Loans against Rebate on Purchases 7,000
Staff provident Fund 10,000
Opening Stock 65,000
Building 2,88,000
Furniture 20,000
Staff P.F. investment 25,000
6,80,400 6,80,400
Additional Information :
a) Closing stock was valued at Rs. 6,00,000.
b) Outstanding audit fees Rs. 2,000.
c) Depreciate Building and Furniture by 5% and 10%
respectively.
d) Interest due but not received Rs. 4,000.
e) Directors propose to recommend dividend at 5%. 263
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7. Ganesh Consumer’s Co-operative Stores Ltd. Parel
Balance Sheet as on 31.3.2010
Liabilities ` A s s e t s `
Share Capital 60,000 Cash 2,500
Deposits from Members 37,500 Bank 1,000
Reserve Fund 10,000 Investment (Shares of DCCB) 8,000
Interest due 200 Government Securities 5,000
Creditors 3,000 Fixed Deposits 8,500
Sales Tax due 800 Interest due 300
Salaries Payable 500 Furniture 5,000
Dividend Payable 1,500 Debtors 38,500
Profit and Loss A/c
Last Year 800
2009-10 5,000 5 , 8 0 0Stock 50,500
1,19,300 1,19,300
Receipts and Payments A/c fo r the year ended 31.3.2011
Receipts ` Payments `
To Balance b/d By Share Capital 1,000
Cash 2,500 By Deposit Repaid 24,000
Bank 1,000 By Purchases 5,55,000
To Share Capital 3,000 By Sales Returns 3,500
To Deposits from member 5,000 By Carriage inward 10,000
To Sales 6,50,000 By Commission 2,500
To Purchases Returns 12,500 By Interest 2,150
To Sundry Income 2,700 By Education Fund 5,500
To Sundry Debtors 6,30, 000 By Honorarium 3,250
To Sundry Creditors 4,70,000 By Sales Tax 5,500
To Fixed Deposits 1,000 By Dividend paid 3,250
To Interest 3,000 By Bank Charges 225
To Dividend 800 By Salaries 17,000
B y C o n t r i b u t i o n t o
Provident Fund 1,200
B y T r a v e l l i n g E x p e n s e s
Directors 800
S t a f f 4 , 7 5 0
B y R e n t 4 , 8 0 0
B y A l l o w a n c e t o M D 5 0 0
By Postage & Telephones 1,490
B y P r i n t i n g a n d S t a t i o n e r y 4 , 6 0 0 264
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B y A u d i t F e e s 7 5 0
B y S u n d r y E x p e n s e s 3 8 5
B y D e b t o r s 6 , 1 5 , 0 0 0
B y C r e d i t o r s 4 , 6 0 , 0 0 0
B y F u r n i t u r e 5 , 0 0 0
B y F i x e d D e p o s i t s 3 2 , 0 0 0
B y B a l a n c e c / d
C a s h 4 , 4 0 0
B a n k 2 1 , 0 0 0
17,80,800 17,80,800
Adjustment :
a) Authorised Capital 2,00,000 shares of Rs. 10 each.
b) Stock on 31.3.2011 Rs. 1,05,000.
c) Depreciate Furniture Rs. 500.
d) Provide for Doubtful Debts Rs. 800.
e) Outstanding on 31.3.2011.
Rs.
Salaries 1,000
Interest Receivable 150
Interest Payable 100
Sales Tax due 1,200
f) Appropriation out of p r o f i t s o f t h e y ear 2009-2010 were as
follows :
Rs.
Reserve Fund 7,000
Dividend 3,000
Honorarium 600
Education Fund 200
P r e p a r e f i n a l a c c o u n t s s t r i c t l y a s p e r M S C A c t :
Exercise 8
Following is the trial ba lance of a S.I.E.S. College
Employees Consumers Co-operative Society as on 31.3.2010.
Prepare Trading Account and Profit & Loss Account for the year
ended 31.3.2011 and Balance Sheet as on that date.
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D r . R s . C r . R s .
Stock (1-4-2011) 16,000 Sales 6,45,900
Purchase 6,25,000 Returns 70
Carriage 3,750 Reserve Fund 9,000
Salaries 8,000 Govt. Loans 1,200
Miscellaneous Expenses 900 Govt. Grants 800
Interest on Govt. Loan 150 Education Fund 2,000
Legal Charges 100 Creditors 6,000
Printing & Stationery 1,000 Building Fund 35,330
Cash and Bank 31,000
N.S.C. VIIth issue 500
Deposit with Govt. 200
Electricity 300
Advances 4,000
Dead Stock 500
Deposit with Consumers Federation 8,900
7,00,300 7,00,300
Adjustments :
a) Audit fees due Rs. 4,000.
b) Provide depreciation on Dead Stock at 10%.
c) Provide for Bad Debts Rs. 100.
d) Stock at the end of the year is valued at Rs. 15,000.
e) Interest Accrued on investment Rs. 2,000.
Exercise 9.
F o l l o w i n g i s t h e t r i a l balance of Madadev Co-
operative Credit society Ltd. on 31.3.2010.
P r e p a r e F i n a l A c c o u n t s f o r t he ended 31.3.2011 after taking
into consideration additional information.
D r . R s . C r . R s .
Loans due 3,70,000 Share Capital 1,00,000
Contribution to Provident
Fund 300 Reserve Fund 10,000
Insurance 200 Deposit from Members 2,70,000
Traveling Expenses 250 Dividend payable 300
Printing & Stationary 100 Dividend
Salaries 5,000 Equalization Fund 4,000
Interest due on Bonus 1,000 Staff Provident Fund 3,000
Interest on Deposits 9,000 Profit & Loss
Appropriation A/c 4,500
Furniture 900 Interest 25,000
Fixed Deposit with
Saraswat Co-op.Bank 29,150 Co-operative
Development Fund 500
Cash with Bank 2,000 Education Fund 100
Cash 200 Miscellaneous Income 700
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Additional Information :
a) Interest due on members’ deposits Rs. 4,000.
b) Interest due but not received Rs. 1,000
c) Outstanding salary Rs. 2,000.
d) Unpaid audit fees Rs. 1,000.
e) Authorized capital 50,000 shares of Rs. 10 each.
f) Directors propose to recommend dividend at 5%.
Objective Question :
Answer in brief :
1. Define Co-operative Society.
2. Define Co-operative year.
3. Define Bye-Laws of a Co-operative society.
4. State different type of member of a society.
5. Mention two powers of managing committee of Co-operative
Society.
6. What is Education Fund.
7. State different types of cons umers Co-operative society.
8. Mention two items shown under heading Current Assets.
9. Give two examples of contingent Liabilities.
10. Who Can became Nominal member of Co-operative Society.
Multiple Choice Questions :
1. Under The Maharashtra Co- operative Act, a society must
prepare final A/c for the year ended.
i) In form VI ii) in forms N
i i i ) A s p e r s c h e d u l e V I A i v ) i n c a s h B a s i s
2. Persons who keeps custody / maintains Accounting Records.
a ) T h e m e m b e r b ) T h e C h a i r m a n
c ) A c c o u n t a n t d ) T h e m a n a g i n g c o m m i t t e e
3. Day to day management of society vests in
a ) G e n e r a l B o d y b ) S t a f f
c ) A u d i t C o m m i t t e e d ) T h e m a n a g i n g C o m m i t t e e
4. Explanation of a member can be done
a) by Registrar b) by the Chairman
c ) G e n e r a l B o d y d ) m a n a g i n g c o m m i t t e e 267
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5. As per society Act no part of p r o f i t d i s t r i b u t e d b y w a y o f
Dividend.
a ) A p p r o v a l o f G e n e r a l B o d y b ) B o a r d o f D i r e c t o r s
c ) M a j o r i t y M e m b e r d ) N o n & A b o v e
6. Receipts & payment A/c can be prepared by a Co-op. Society.
a ) u / s 7 9 o f M S C A b ) R u le 61 of M.S.C.S. Rule
c) not required d) u/s 50 of Income tax Act 1961
7. Under M.S.C.S. Act, a societ y must prepared the following
financial statement for accounting year.
a ) P r o f i t & L o s s A / c b) Receipts a payment
c) Balance sheet d) All the above.
8. Under the Maharasht ra Co-operative society Act, Audit of a Co-
operative society can be conducted by
a ) A c h a r t e r e d A c c o u n t s b ) C o s t A c c o u n t a n t
c ) E m p l o y e e & C o - o p e r a t ive d) Non of above
9. A member who holds jointly share of society, a his name
appears first in share certificate.
a ) N o m i n a l m e m b e r b ) A s s o c i a t e m e m b e r
c ) S y m p a t h i z e s m e m b e r d ) N o n o f t h e a b o v e
10. Amendment of Bye-Laws of the society can be done.
a) by General body ½ members
b ) b y p a s s i n g i t i n managing committee meeting.
c) by Registrar of societies
d) by General Body by ⅔ m a j o r i t y s u b j e c t t o a p p r o v a l f r o m
Registrar.
11. Every society earning income, must pay Income Tax.
a ) o n l y o n i t s T a x a b l e i n c o m e
b ) I n c o m e o f s o c i e t i e s a r e n o t t a x a b l e
c ) O n G r o s s P r o f i t , i f i t i s consumer Co-operative society.
d ) O n l y i f i t s a l e s g o o d s t o n o n - m e m b e r .
12. A consumer society can sale Goods
a) To member b) non-members
c ) o n l y o n c a s h / c r e d i t d ) A l l t h e a b o v e
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13. Goodwill is shown in the Ba lance sheet of a Co-operative
society under heading.
a ) F i x e d A s s e t s b ) I n v e s t m e n t
c) Miscellaneous Expenditure
d ) N o n - o f t h e a b o v e .
14. Cash & Bank balance shown under hading in the Balance
Sheet.
a ) C u r r e n t A s s e t s b ) L o a n s a A d v a n c e
c ) S u n d r y A s s e t s d ) N o n o f t h e a b o v e
15. Reserve for Bad a doubtful de bt is shown under heading in
Balance Sheet of Co -operative society.
a ) D e d u c t e d f r o m d e b t o r s b ) R e s e r v e & o t h e r r e s e r v e
c) Contingent liabilities d ) N o n - o f t h e a b o v e .
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