Banking Fundamentals Training

1. Banking Fundamentals Training SESSION-2

2. ACCOUNTING PRINCIPLES PRINCIPLES OF ACCOUNTING Single entry book keeping Only one entry No traces of other part Difficult to reconcile Double entry book keeping Two entries Debit and Credit Amount matches Tracing is easy Reconciliation is easy

3. Types of accounts Real accounts Assets – Land, Buildings, Furniture, Cash etc Liability – Capital, Reserves Profit and Loss account is also a real account. It can be either Asset or Liability depending upon the balance in the account Credit means loss Debit means profit Accounting Debit what comes in Credit what goes out ACCOUNTING PRINCIPLES

4. Types of accounts Nominal accounts Income accounts – Interest, Discount, Exchange, Commission Expenditure accounts – Rent, Taxes, Salary etc Accounting Debit all expenses Credit all income ACCOUNTING PRINCIPLES

5. Types of accounts Personal accounts All customer accounts Both Asset and Liability accounts Assets – Loans and Advance Liability – Deposit accounts Accounting Debit the receiver Credit the giver ACCOUNTING PRINCIPLES

6. ACCOUNTING PRINCIPLES Types of accounts Impersonal Accounts All Office Accounts Both Asset and Liability accounts Assets – Suspense Account Liability – Sundry Account Other Office Accounts are also impersonal accounts. They can be either Asset or Liability depending upon the balance in the account Accounting Debit what goes out Credit what comes in

7. Examples for accounting Customer walking into Bank and depositing money Two accounts are involved Cash Customer Cash is a real account Customer is a personal account Transaction would be Debit Cash – Principle Debit what comes in Credit customer – Principle Credit the giver ACCOUNTING PRINCIPLES

8. Other accounts in Banking Contingent accounts Are internal accounts Used for control and monitoring purposes Used to know the exposure These are not real asset or real liability accounts Chances of it either becoming an actual asset or liability are there Example: Issue of a Bank Guarantee Debit Constituent liability for Bank guarantee issued – Reference customer – customer wise Credit Bank Guarantee issued account – reference – total bank guarantee issued at any point of time ACCOUNTING PRINCIPLES

9. Other accounts in Banking Control accounts Used for control and monitoring purpose Useful for follow up Example Bills or Cheques sent for collection Debit Cheque/Bill sent for collection – Reference – Total of receivable Credit Cheques/Bills under collection – Reference – Liability towards customer ACCOUNTING PRINCIPLES

10. Contingent or Control accounts are normally an information as a part of the balance sheet Contingent or Control accounts are mandatorily reflected as foot-notes in the balance sheet ACCOUNTING PRINCIPLES

11. INSTRUMENTS Cheque Draft or Payorders are called Instruments in Banking Parlance May be Negotiable or Non-Negotiable May be Crossed or Un-Crossed Payable to the bearer or to the Order of Payee

12. TRANSACTIONS Transactions are operations in accounts that are required either to deposit or to withdraw from the account Modes of Transactions: Cash Clearing Transfer

13. Thank You