AFB numericals

 Assets

Net Fixed Assets - 800
Inventories - 300
Preliminary Expenses - 100
Receivables - 150
Investment In Govt. Secu - 50
Total Assets - 1400
Liabilities
Equity Capital - 200
Preference Capital - 100
Term Loan - 600
Bank C/C - 400
Sundry Creditors - 100
Total Liabilities – 1400
1. Debt Equity Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 2:3
Ans - c
Explanation :
600 / (200+100) = 2 : 1
2. Tangible Net Worth = ?
a. 100
b. 200
c. 300
d. 400
Ans - b
Explanation :
Only equity Capital i.e. = 200
3. Total Liabilities to Tangible Net Worth Ratio = ?
a. 7:2
b. 11:2
c. 13:2
d. 15:2
Ans - b
Explanation :
Total Outside Liabilities / Total Tangible Net Worth : (600+400+100) / 200 = 11 : 2
4. Current Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 3:1
Ans - a

Explanation :
(300 + 150 + 50 ) / (400 + 100 ) = 1 : 1

Q.2

Assets

Net Fixed Assets - 265

Cash - 1

Receivables - 125

Stocks - 128

Prepaid Expenses - 1

Intangible Assets - 30

Total - 550

Liabilities

Capital + Reserves - 355

P & L Credit Balance - 7

Loan From S F C - 100

Bank Overdraft - 38

Creditors - 26

Provision of Tax - 9

Proposed Dividend - 15

Total - 550

1. Current Ratio = ?

= (1+125 +128+1) / (38+26+9+15)

= 255/88

= 2.89 : 1

2. Quick Ratio = ?

(125+1)/88

= 1.43 : 11

3. Debt Equity Ratio = ?

= LTL / Tangible NW

= 100 / (362 – 30)

= 100 / 332

= 0.30 : 1

4. Proprietary Ratio = ?

= (T NW / Tangible Assets) x 100

= [(362 - 30 ) / (550 – 30)] x 100

= (332 / 520) x 100

= 64%

5. Net Working Capital = ?

= CA - CL

= 255 - 88

= 167

6. If Net Sales is Rs.15 Lac, then What would be the Stock Turnover Ratio in Times ?

= Net Sales / Average Inventories/Stock

= 1500 / 128

= 12 times approximately

7. What is the Debtors Velocity Ratio if the sales are Rs. 15 Lac?



= (Average Debtors / Net Sales) x 12

= (125 / 1500) x 12

= 1 month

8. What is the Creditors Velocity Ratio if Purchases are Rs.10.5 Lac?

= (Average Creditors / Purchases ) x 12

= (26 / 1050) x 12

= 0.3 months

.............................................



Q.3 Current Ratio of a firm is 1 : 1. What will be the Net Working Capital ?

a. 0

b. 1

c. 100

d. 200

Ans - a

Explanation :

It suggest that the Current Assets is equal to Current Liabilities hence the NWC would be

0

(since NWC = C.A - C.L)

.............................................

Q.4 Suppose Current Ratio is 4 : 1. NWC is Rs.30,000/-. What is the amount of Current

Assets ?

a. 10000

b. 30000

c. 40000

d. 50000

Ans - c

Explanation :

Let Current Liabilities = a

4a - 1a = 30,000

a = 10,000 i.e. Current Liabilities is Rs.10,000

Hence Current Assets would be

4a = 4 x 10,000 = Rs.40,000/-

.............................................

Q.5 The amount of Term Loan installment is Rs.10000/ per month, monthly average interest

on TL is Rs.5000/-. If the amount of Depreciation is Rs.30,000/- p.a. and PAT is

Rs.2,70,000/-. What would be the DSCR ?

a. 1

b. 1.5

c. 2

d. 2.5

Ans - C

Explanation :

DSCR = (PAT + Depr + Annual Intt.) / Annual Intt + Annual Installment

= (270000 + 30000 + 60000 ) / 60000 + 12000

= 360000 / 180000

= 2

.............................................

Q. 6     A Company has Net Worth of Rs.5 Lac, Term Liabilities of Rs.10 Lac. Fixed Assets worth

RS.16 Lac and Current Assets are Rs.25 Lac. There is no intangible Assets or other Non

Current Assets. Calculate its Net Working Capital.

a. 1 lac

b. 2 lac

c. - 1 lac





d. - 2 lac

Ans - c

Explanation :

Total Assets = 16 + 25 = Rs. 41 Lac

Total Liabilities = NW + LTL + CL = 5 + 10 + CL = 41 Lac

Current Liabilities = 41 – 15 = 26 Lac

Therefore Net Working Capital = CA – CL = 25 – 26 = (-) 1 Lac

.............................................

Q. 7  Merchandise costs - Rs. 250000, Gross Profit - Rs. 23000, Net Profit - Rs. 15000. Find

the amount of sales.

a. 227000

b. 235000

c. 265000

d. 273000

Ans - d

Explanation :

Amount of sales = Merchandise costs + Gross Profit

= 250000 + 23000

= 273000

.............................................

Q.8 Total Liabilities of a firm is Rs.100 Lac and Current Ratio is 1.5 : 1. If Fixed Assets and

Other Non Current Assets are to the tune of Rs. 70 Lac and Debt Equity Ratio being 3 :

1. What would be the Long Term Liabilities?

a. 40 Lacs

b. 60 Lacs

c. 80 Lacs

d. 100 Lacs

Ans - b

Explanation :

Total Assets = Total Liabilities = 100 Lac

Current Asset = Total Assets - Non Current Assets

= Rs. 100 L - Rs. 70 L

= Rs. 30 L

If the Current Ratio is 1.5 : 1

then Current Liabilities works out to be Rs. 20 Lac.

That means, Net Worth + Long Term Liabilities = Rs. 80 Lacs.

If the Debt Equity Ratio is 3 : 1,

then Debt works out to be Rs. 60 Lacs and equity Rs. 20 Lacs.

Therefore the Long Term Liabilities would be Rs.60 Lac.

.............................................

Q.9 Current Ratio = 1.2 : 1.

Total of balance sheet being Rs.22 Lac.

The amount of Fixed Assets + Non Current Assets is Rs. 10 Lac.

What would be the Current Liabilities?

a. 10 Lacs

b. b. 12 Lacs

c. 16 Lacs

d. 22 Lacs

Ans - a

Explanation :

Total Assets is Rs.22 Lac.

Fixed Assets + Non Current Assets is Rs. 10 Lac

Then Current Assets = 22 – 10 = Rs. 12 Lac.

Current Ratio = 1.2 : 1

Current Liabilities = Rs. 10 Lac

.............................................


Q.10 M/s Raj&co's balance sheet included the following accounts:

Cash: 10,000

Accounts Receivable: 5,000

Inventory: 5,000

Stock Investments: 1,000

Prepaid taxes: 500

Current Liabilities: 15,000

Find the Quick Ratio

Quick Ratio = Cash + Cash Equivalents + Short Term Investments + Marketable

Securities + Accounts Receivable) / Current Liabilities

= (10000+5000+1000) / 15000

= 16000 / 15000

= 1.07

.................................

Q.11 M/s Raj&co's balance sheet included the following accounts:

Inventory : 5,000

Prepaid taxes : 500

Total Current Assets : 21,500

Current Liabilities : 15,000

Find the Quick Ratio

Quick Ratio = (Current assets – Inventory - Advances - Prepayments Current Liabilities) /

Current Liabilities

= (21500 - 5000 - 500) / 15000

= 16000 / 15000

= 1.07

.................................



Q.12 XYZ Pvt Ltd has the following assets and liabilities as on 31st March 2015 (in Lakhs) :

Non Current Assets

Goodwill 75

Fixed Assets 75

Current Assets

Cash in hand 25

Cash in bank 50

Short term investments 45

Inventory 25

Receivable 100

Current Liabilities

Trade payables 100

Income tax payables 60

Non Current Liabilities

Bank Loan 50

Deferred tax payable 25

Find the Quick Ratio

Quick Ratio = (Cash in hand + Cash at Bank + Receivables + Marketable Securities) /



Current Liabilities

= (25+50+45+100) / 160

= 220 / 160

= 1.375

.................................





Q.14 GHI Ltd. manufacturers two products :Product G and Product H. The Variable cost of the manufacture is as

follows:

Product G Product H

Direct Material 3 10

Direct Labour (Rs.6 per hour) 18 12

Variable Overhead 4 4

JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS

 JAIIB – AFB (ACCOUNTING & FINANCE FOR BANKERS)

You are given a balance sheet of a business firm with following particulars. Work out the
ratios given at the end......
Liabilities 1st yr 2nd yr
Capital 40 40
Reserves 15 20
Debentures 70 60
Other Current Liabilities 18 24
Bank Working Capital Limits 37 36
Total Liabilities 180 180
Assets 1st yr 2nd yr
Fixed Assets 32 33
Advance for fixed assets 5 -
Security Deposits 4 6
Stocks 66 81
Book Debts 49 30
Sundry Debtors 16 24
Preliminary Expenses 8 6
Total Assets 180 180
Sales 312 390
Profits 8 9
Depreciation 3 3
1. The short term sources of funds and short term uses of funds during the first year
was......
a. 55 and 131
b. 37 and 131
c. 55 and 105
d. 37 and 105
Ans - a
.............................................
2. The long term sources of funds and long term use of funds during the 2nd year
was......
a. 120 and 45
b. 100 and 45
c. 120 and 39
d. 112 and 39
Ans - d
.............................................
3. The short term sources of funds during the 2nd year, compared to the 1st year
have......
a. shown increase
b. shown decline
c. shown no change
d. none of the above
Ans - a
.............................................
4. The long term of use of funds during the 2nd year, compared to the 1st year has ......
a. shown increase
b. shown decline
c. shown no change
d. none of the above
Ans - b
.............................................
5. Current Ratio and Quick Ratio for the 2nd year are respectively......
a. 2.20:1 and 0.8:1
b. 2.42:1 and 0.9:1
c. 2.25:1 and 0.9:1
d. 2.22:1 and 0.8:1
Ans - c
.............................................
6. What is the Debt-equity ratio for the 1st and 2nd year?
a. 1.11:1 and 1.49:1
b. 1.49:1 and 1.11:1
c. 1.32:1 and 1.11:1
d. 1.98:1 and 1.73:1
Ans - d
.............................................
7. Cash accrual for 1st and 2nd year respectively is......
a. 8 and 9
b. 9 and 8
c. 11 and 12
d. 12 and 11
Ans - c
.............................................
8. Net Working Capital of 2nd year, over the 1st year has shown......
a. no change
b. deterioration
c. increase
d. decline and improvement
Ans - b
.............................................
9. Net profit to sales ratio for the 1st year has been......
a. 2.3%
b. 2.5%
c. 2.9%
d. 3.4%
Ans - b
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Cost of asset = 1,00,000
Estimated residual value = 10,000
Estimated useful life of asset = 5 years
Find the book value at the end of 2nd year using double declining balance method.
a. 24000
b. 36000
c. 40000
d. 64000
Ans - b
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
(*) depreciation stops when book value = residual value
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
= 1,00,000 x 40% = 40,000
Accumulated depreciation at the end of year 1 = 40,000
Book value at the end of year 1
= 1,00,000 - 40,000 = 60,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
= 60,000 x 40% = 24,000
Accumulated depreciation at the end of year 2
= 40,000 + 24,000 = 64,000
Book value at the end of year 2
= 1,00,000 - 64,000 = 36,000
[Year 3]
Depreciation amount for year 3
= beginning book value x depreciation rate
= 36,000 x 40% = 14,400
Accumulated depreciation at the end of year 3
= 40,000 + 24,000 + 14,400 = 78,400
Book value at the end of year 3
= 1,00,000 - 78,400 = 21,600
[Year 4]
Depreciation amount for year 4
= beginning book value x depreciation rate
= 21,600 x 40% = 8,640
Accumulated depreciation at the end of year 4
= 40,000 + 24,000 + 14,000 + 8,640 = 87,040
Book value at the end of year 4
= 1,00,000 - 87,040 = 12,960
[Year 5]
Depreciation amount for year 5
= beginning book value x depreciation rate
= 12,960 x 40% = 5,184
[NOTE]
For year 5, depreciation amount will not be 5,184.
If 5,184 is depreciated,
--> book value = 12,960 - 5,184 = 7,776
--> book value < residual value
Depreciation stops when book value = residual value
--> depreciation amount for year 5 = 2,960
--> book value = 12,960 - 2,960 = $10,000
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the book value at the end of 1st year using double declining balance method.
a. 240000
b. 320000
c. 480000
d. 660000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
.............................................
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the accumulated depreciation for the 2nd year using double declining balance
method.
a. 312000
b. 424000
c. 512000
d. 604000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
4,80,000 x 40% = 1,92,000
Accumulated depreciation at the end of year 2
3,20,000 + 1,92,000 = 5,12,000
.............................................
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the book value at the end of 1st year using double declining balance method.
a. 240000
b. 320000
c. 480000
d. 660000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
4,80,000 x 40% = 1,92,000
Accumulated depreciation at the end of year 2
3,20,000 + 1,92,000 = 5,12,000
Book value at the end of year 2
8,00,000 - 5,12,000 = 2,88,000
2,88,000 x 40% = 1,15,200
5,12,000 + 1,15,200 = 6,27,200
8,00,000 - 6,27,000 = 1,72,800
1,72,800 x 40% = 69,120
6,27,200 + 69,120 = 6,96,320
8,00,000 - 6,96,320 = 1,03,680
1,03,680 - 80,000 = 23,680
6,96,320 + 23,680 = 7,20,000
8,00,000 - 7,20,000 = 80,000
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Sahil took a loan for 6 years at the rate of 5% per annum on Simple Interest, If the total
interest paid was Rs. 1230, the principal was
A. 4100
B. 4200
C. 4300
D. 4400
Ans - A
Explanation:
S.I.=P*R*T/100
=>P=S.I.*100/R/T
By applying above formula we can easily solve this question, as we are already having
the simple interest.
P = 1230*100/6/5
= 4100
.............................................
There was simple interest of Rs. 4016.25 on a principal amount at the rate of 9%p.a. in
5 years. Find the principal amount
A. Rs 7925
B. Rs 8925
C. Rs 7926
D. Rs 7925
Ans - B
Explanation:
S.I.=P*R*T/100
=>P=S.I.*100/R/T
P = 4016.25*100/9/5
= 8925
.............................................
Effective annual rate of interest corresponding to nominal rate of 6% per annum
compounded half yearly will be
A. 6.09%
B. 6.10%
C. 6.12%
D. 6.14%
Ans - A
Explanation:
Let the amount Rs 100 for 1 year when compounded half yearly, n = 2, Rate = 6/2 =
3%
Amount=100(1+3/100)^2=106.09
Effective rate = (106.09 - 100)% = 6.09%
.............................................
A sum of money invested at compound interest to Rs. 800 in 3 years and to Rs 840 in 4
years. The rate on interest per annum is.
A. 4%
B. 5%
C. 6%
D. 7%
Ans - B
Explanation:
S.I. on Rs 800 for 1 year = 40
Rate = (100*40)/(800*1) = 5%
.............................................
Find the rate at Simple interest, at which a sum becomes four times of itself in 15 years.
A. 10%
B. 20%
C. 30%
D. 40%
Ans - B
Explanation:
Let sum be x and rate be r%
then, (x*r*15)/100 = 3x [important to note here is that simple interest will be 3x not 4x,
beause 3x+x = 4x]
=> r = 20%
.............................................
At 5% per annum simple interest, Rahul borrowed Rs. 500. What amount will he pay to
clear the debt after 4 years ?
A. 750
B. 700
C. 650
D. 600
Ans - D
Explanation:
We need to calculate the total amount to be paid by him after 4 years, So it will be
Principal + simple interest. So,
=>500+500*5*4/100
=>Rs.600
.............................................
A sum of money amounts to Rs 9800 after 5 years and Rs 12005 after 8 years at the
same rate of simple interest. The rate of interest per annum is ......
a. 9%
b. 10%
c. 11%
d. 12%
Ans - d
Explanation:
We can get SI of 3 years = 12005 - 9800 = 2205
SI for 5 years = (2205/3)*5 = 3675 [so that we can get principal amount after deducting
SI]
Principal = 12005 - 3675 = 6125
So Rate = (100*3675)/(6125*5) = 12%
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
A man saves Rs 200 at the end of each year and lends the money at 5% compound
interest. How much will it become at the end of 3 years?
a. Rs 660
b. Rs 662
c. Rs 664
d. Rs 666
Ans- b
Explanation:
= [200(2120×2120×2120)+200(2120×2120)+200(2120)]
= 662

Regular Study - Accounting & Finance for Bankers

 

Regular Study - Basic Accounting Terms
The understanding of the subject becomes easy when one has the knowledge of a few
important terms of accounting. Let us go through some of them.
Transactions
Transactions are those activities of a business, which involve transfer of money or goods or
services between two persons or two accounts. For example, purchase of goods, sale of
goods, borrowing from bank, lending of money, salaries paid, rent paid, commission
received and dividend received. Transactions are of two types, namely, cash and credit
transactions.
Cash Transaction is one where cash receipt or payment is involved in the transaction. For
example, When You buys goods from a seller paying the price of goods by cash
immediately, it is a cash transaction.
Credit Transaction is one where cash is not involved immediately but will be paid or
received later. In the above example, if You, do not pay cash immediately but promises to
pay later, it is credit transaction.
Proprietor
A person who owns a business is called its proprietor. He contributes capital to the business
with the intention of earning profit.
Capital
It is the amount invested by the proprietor/s in the business. This amount is increased by the
amount of profits earned and the amount of additional capital introduced. It is decreased by
the amount of losses incurred and the amounts withdrawn. For example, if Mr. Ram starts
business with Rs.10,00,000, his capital would be Rs.10,00,000.
Assets
Assets are the properties of every description belonging to the business. Cash in hand, plant
and machinery, furniture and fittings, bank balance, debtors, bills receivable, stock of
goods, investments, Goodwill are examples for assets. Assets can be classified into tangible
and intangible.
Tangible Assets: These assets are those having physical existence. It can be seen and
touched. For example, plant & machinery, cash, etc.
Intangible Assets: Intangible assets are those assets having no physical existence but their
possession gives rise to some rights and benefits to the owner. It cannot be seen and
touched. Goodwill, patents, trademarks are some of the examples.
Liabilities
Liabilities refer to the financial obligations of a business. These denote the amounts which a
business owes to others, e.g., loans from banks or other persons, creditors for goods
supplied, bills payable, outstanding expenses, bank overdraft etc.
Drawings
It is the amount of cash or value of goods withdrawn from the business by the proprietor for
his personal use. It is deducted from the capital.
Debtors
A person (individual or firm) who receives a benefit without giving money or money’s
worth immediately, but liable to pay in future or in due course of time is a debtor. The
debtors are shown as an asset in the balance sheet. For example, Mr. Ravi bought goods on
credit from Mr. Ram for Rs.10,000. Mr. Ravi is a debtor to Mr. Ram till he pays the value
of the goods.
Creditors
A person who gives a benefit without receiving money or money’s worth immediately but
to claim in future, is a creditor. The creditors are shown as a liability in the balance sheet. In
the above example Mr. Ram is a creditor to Mr. Ravi till he receive the value of the goods.
Purchases
Purchases refers to the amount of goods bought by a business for resale or for use in the
production. Goods purchased for cash are called cash purchases. If it is purchased on
credit, it is called as credit purchases. Total purchases include both cash and credit
purchases.
Purchases Return or Returns Outward
When goods are returned to the suppliers due to defective quality or not as per the terms of
purchase, it is called as purchases return. To find net purchases, purchases return is
deducted from the total purchases.
Sales
Sales refers to the amount of goods sold that are already bought or manufactured by the
business. When goods are sold for cash, they are cash sales but if goods are sold and
payment is not received at the time of sale, it is credit sales. Total sales includes both cash
and credit sales.
Sales Return or Returns Inward
When goods are returned from the customers due to defective quality or not as per the terms
of sale, it is called sales return or returns inward. To find out net sales, sales return is
deducted from total sales.
Stock
Stock includes goods unsold on a particular date. Stock may be opening and closing stock.
The term opening stock means goods unsold in the beginning of the accounting period.
Whereas the term closing stock includes goods unsold at the end of the accounting period.
For example, if 5,000 units purchased @ Rs. 30 per unit remain unsold, the closing stock is
Rs. 1,50,000. This will be opening stock of the subsequent year.
Revenue
Revenue means the amount receivable or realised from sale of goods and earnings from
interest, dividend, commission, etc.
Expense
It is the amount spent in order to produce and sell the goods and services. For example,
purchase of raw materials, payment of salaries, wages, etc.
Income
Income is the difference between revenue and expense.
Voucher
It is a written document in support of a transaction. It is a proof that a particular transaction
has taken place for the value stated in the voucher. It may be in the form of cash receipt,
invoice, cash memo, bank pay-in-slip etc. Voucher is necessary to audit the accounts.
Invoice
Invoice is a business document which is prepared when one sell goods to another. The
statement is prepared by the seller of goods. It contains the information relating to name and
address of the seller and the buyer, the date of sale and the clear description of goods with
quantity and price.
Receipt
Receipt is an acknowledgement for cash received. It is issued to the party paying cash.
Receipts form the basis for entries in cash book.
Account
Account is a summary of relevant business transactions at one place relating to a person,
asset, expense or revenue named in the heading. An account is a brief history of financial
transactions of a particular person or item. An account has two sides called debit side and
credit side.
Regular Study - Classification of Accounts
Classification of Accounts
Transactions can be divided into three categories.
i. Transactions relating to individuals and firms
ii. Transactions relating to properties, goods or cash
iii. Transactions relating to expenses or losses and incomes or gains.
Therefore, accounts can also be classified into Personal, Real and Nominal. The
classification may be illustrated as follows
Personal Accounts:
Accounts recording transactions relating to individuals or firms or company are known as
personal accounts. Personal accounts may further be classified as:
(i) Natural Person’s personal accounts: The accounts recording transactions relating to
individual human beings e.g., Anand’s a/c, Ramesh’s a/c, Pankaj a/c are classified as natural
persons’ personal accounts.
(ii) Artificial Persons’ Personal accounts: The accounts recording transactions relating to
limited companies, bank, firm, institution, club, etc., Delhi Cloth Mill; M/s Sahoo & Sahoo;
Hans Raj College; Gymkhana Club are classified as artificial persons’ personal accounts.
(iii) Representative Personal Accounts: The accounts recording transactions relating to
the expenses and incomes are classified as nominal accounts. But in certain cases (due to
the matching concept of accounting) the amount, on a particular date, is payable to the
individuals or recoverable from individuals. Such amount (i) relates to the particular head of
expenditure or income and (ii) represent persons to whom it is payable or from whom it is
recoverable. Such accounts are classified as representative personal accounts e.g., “wages
outstanding account”, pre-paid Insurance account, etc.
The proprietor being an individual his capital account and his drawings account are
also personal accounts.
Impersonal Accounts
All those accounts which are not personal accounts. This is further divided into two types
viz. Real and Nominal accounts.
i. Real Accounts: Accounts relating to properties and assets which are owned by the
business concern. Real accounts include tangible and intangible accounts. For example,
Land, Building, Goodwill, Purchases, etc.
ii. Nominal Accounts: These accounts do not have any existence, form or shape. They
relate to incomes and expenses and gains and losses of a business concern. For example,
Salary Account, Dividend Account, etc.
Rules of debit and credit (classification based)
1. Personal accounts : Debit the receiver - Credit the giver (supplier)
2. Real accounts : Debit what comes in - Credit what goes out
3. Nominal accounts : Debit expenses and losses - Credit incomes and gains

50 Banking terms Updated

 FIFTY BANKING TERMS FOR BANK INTERVIEWS/EXAMS

1. Repo Rate

1.When RBI provides a loan to the bank for short-term between 1 to 90, RBI takes some interest from the bank which is termed as Repo Rate.

2. Reverse Repo Rate

⏫When bank deposit it's excess money in RBI then RBI provides some interest to that bank. This interest is known as Reverse Repo Rate.

3. SLR –(Statutory Liquidity Ratio)

⏫Every bank has to maintain a certain % of their total deposits in the form of (Gold + Cash + bonds + Securities) with themselves at the end of every business days. Current SLR is 20.75%.

4. Retail banking

⏫Retail banking is a type of banking in which direct dealing with the retail customers is done.

⏫This type of banking is also popularly known as consumer banking or personal banking.

⏫It is the visible face of banking to the general public.

5. Bitcoin

⏫Bitcoin is a virtual currency/ cryptocurrency and a payment system.

⏫It can be defined as decentralized means of tracking and assigning wealth or economy, it is a software protocol.

⏫Bitcoin uses two cryptographic keys, one public (username) and one private (password) are generated.

⏫1Bitcoin= 108 Satoshi.

6. Call money

⏫Call/Notice money is the money borrowed on demand for a very short period. When money is lent for a day it is known as Call Money.

7. Notice money

⏫When the money is borrowed or lent for more than a day up to 14 days it is called Notice Money.

8. Difference between Capital market and Money market

⏫A capital market is an organised market which provides long-term finance for business.

⏫Whereas Money market provides short-term finance for business

9. Scheduled bank

Banks which are included in 2nd Schedule of RBI Act 1934 are known as a scheduled commercial bank. These banks should fulfil two conditions:

⏫Paid up capital and collected funds should not be less than Rs.5 Lacs.

⏫Any activity of the Bank should not adversely affect the interests of the customers.

10. Non Performing Assets

⏫NPA is an asset of a bank which is not producing any income.

⏫Bank Usually classify as nonperforming assets any commercial loans which are more than 90 days overdue and any consumer loans which are more than 180 days overdue.

11. Money Inflation

⏫Money Inflation is a State in which the Value of Money is Falling and the Prices are rising, over a period of time.

12. Negative interest rate

⏫When there is less demand for loans the banks park their excess fund with the central bank by which they get an interest.

⏫Negative interest rate policy (NIRP) means that central banks will deduct money from commercial banks for depositing their money with the central bank. Commercial banks, in turn, will do the same to common people.

⏫So the end effect is that people will have to pay money to banks to hold their cash.

13. Green Banking

⏫Green banking means promoting environmentally friendly practices and reducing your carbon footprints from your banking activities.

⏫Green banking aims at improving the operations and technology along with making the clients habits environment-friendly in the banking business.

⏫It is like normal banking along with the consideration for social as well as environmental factors for protecting the environment.

14. Blockchain system

⏫These days the transactions in the banking sector are becoming a very tedious task and so as to ensure that this tedious task to be removed, our banking sector is trying to emerge towards blockchain technology.

⏫To simplify the transactions without the help of any third party in a secure manner is really a great challenge, but to overcome this challenge an anonymous online ledger (collection of financial accounts) which uses the data structure to simplify it is called blockchain technology.

15. Balloon mortgage

⏫A mortgage is a transfer of a right to stable property for the security purpose of a loan amount.

⏫Balloon mortgages are just for short term and it has fixed rate mortgage.

⏫In balloon mortgage, a monthly payment is lower because of large payment at the end of a term.

⏫A balloon payment is for the honest and qualified borrowers who have the good credit history.

16. Retail credit operations

⏫Retail Credit Operations means the sequential process which involves screening, evaluation of risk(s), and ensuring that the bank lends to a creditworthy client from the asset products applications sourced.

17. Skimming

⏫Skimming is a method used by fraudsters to capture customer's personal or account information of credit card.

⏫Customer's card is swiped through the skimmer and the information contained in the magnetic strip on the card is then read into and stored on the skimmer or an attached computer.

⏫Skimming is a tactic used predominantly for credit-card fraud, but it is also a tactic that is gaining in popularity among identity thieves.

18. Money laundering

⏫Money laundering is a process of conversion of illegal money from various sources to appear to have originated from legitimated (Legal) source.

⏫The major sources of illegal money are tax evasion, bribe, Smuggling etc.

19. Cheque

⏫Cheque is an unconditional order addressed to a banker, signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of the certain person or to the bearer of the instrument.

20. Direct Debit

⏫Direct Debit is a financial activity in which one person withdraws funds from another person's bank account.

⏫It is a facility in which the payee withdraws the amount from the payer's account, the payer has instructed the bank to allow the payee directly withdraw the amount from the account.

21. Cash Credit

⏫Cash Credit is a proper limit sanctioned by the bank to the borrowing manufacturing/trading unit against the value of the raw materials, semi-finished goods and finished goods including stores.

22. Bill of Exchange

⏫A bill of exchange is a non- interest bearing written order which is used primarily in foreign trade which binds one party to pay a fixed amount of money to another party at a decided future date.

⏫A bill of exchange is signed by the creditor and accepted by a debtor.

23. Cash Reserves Ratio

⏫Every bank Maintain certain % of their total deposits with RBI in the form of Cash and Net demand & Time Liabilities.

⏫ Every Bank has to pay the amount to RBI on every 15 Days.

24. Bank Rate

⏫Bank rate is also termed as “Discount Rate”

⏫The rate through which RBI charges certain % for providing money to other banks without any security for a Long period of time for 90 Days 

25. Marginal standing facility

⏫MSF is the rate through which bank can borrow funds for Short time – Overnight basis.

26. Minimum Reserve system of RBI

⏫The current system of the Indian government to issue notes is “Minimum Reserve System”.

⏫Under this policy, the minimum reserves to be maintained in the form of gold and foreign exchange should consist of rupees 200 crores.

⏫Out this reserve, the value of gold to be maintained is rupees 115 crores.

⏫This system was introduced in 1956 replacing the proportional reserve system.

27. Clean note policy of RBI

⏫Lots of people in our country have a bad habit of writing something on the currency note, folding currency note, also somebody staple it which spoils the Note and reduces notes durability.

⏫So to avoid such occurrences RBI introduced the Clean Note Policy in 2001 in an order to increase the life of currency notes.

⏫The main objective of this Clean Note Policy is to provide good quality currency notes and coins to the citizens of our country.

28. CAMELS rating system

⏫CAMELS is a rating system developed in the US that is used by supervisory authorities to rate banks and other financial institutions.

⏫It applies to every bank in the U.S and is also used by various financial institutions outside the U.S.

Each factor is assigned a weight as follows:

⬅Capital adequacy 20 %

⬅Asset quality 20%

⬅Management 25%

⬅Earnings 15%

⬅Liquidity 10%

⬅Sensitivity 10%

29. Masala Bonds

⏫The bonds listed on the London Stock Exchange (LSE) is termed as Masala Bonds.

⏫These bonds are offered and settled in US dollar to hike Indian Rupee in International market .

⏫These bonds help to raise Indian rupees from International investors for infrastructural development in India.

⏫International Financial Corporation (IFC) converts bond from dollars into rupees and uses the rupees to finance private sector investment in India.

30. Core Banking Solutions

⏫Core Banking Solution (CBS) is networking of branches, which enables customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.

⏫The customer is no more the customer of a Branch.

⏫He becomes the Bank’s Customer.

31. Unified Payment Interface

⏫This interface will integrate the entire payment systems in India.

⏫It uses a single application programme interface with a series of Application Programme interface (API’S).

⏫The mobile devices are the primary object for all the payments.

32. Micro ATM S

⏫Micro ATMs are not any special type of ATMs

⏫It is the advanced version of Point of Sale (PoS) having an additional feature of Biometric scanning.

⏫It is also known as a mini version of ATMs.

⏫These machines are connected with the GPRS (General Packet Radio Service) mobile internet and it uses Core Banking Solution (CBS) platform to perform the different types of services.

33. Letter of Credit

⏫The letter of credit is one of the negotiable instrument.

⏫It is given by the bank, that guarantee’s buyer’s payment to the seller shall be received on time along with the proposed amount to be paid.

⏫In this instinct, if the buyer is unable to make the agreed payment to the seller, then the bank will cover the full or remaining amount of purchase.

34. Bancassurance

⏫Bancassurance is the concept of selling insurance products of insurance companies by banks.

⏫The bank acts as an agent and promotes Banca (bancassurance) products under section 6(1)(o) of the Banking Regulation Act, 1949.

⏫It was originated in Europe in the 1980s and was successful.

⏫The bancassurance business model is a globally accepted profitable business.

35. Banking Ombudsmen

⏫Banking Ombudsman is a senior official appointed by RBI.

⏫He handles and redresses customer complaints against deficiency in certain banking services.

⏫The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

36. The Balance of Trade

⏫The difference of the country’s exports and the value of its imports are known as the Balance of Trade.

⏫It normally incorporates trade in services unless mentioned as the balance of merchandise trade.

⏫It includes earnings (interest, dividends, etc.) on financial assets.

37. A Balance of Payments

⏫A list that states a country’s transactions with other countries for a certain time period (generally 1 year).

⏫Payments into the country (receipts) are entered as positive numbers, called credits.

⏫Payments out of the country (payments) are entered as negative numbers called debts.

⏫A single number summarises the country’s international transactions: the balance of payments surplus.

38. NOSTRO Account

⏫A NOSTRO account is one which is maintained by an Indian Bank in the foreign countries.

39. VOSTRO Account

⏫A VOSTRO account is one which is maintained in India by a foreign bank with their corresponding bank.

40. LIBOR

⏫The full form of LIBOR is London Interbank Offered Rate.

⏫It is the interest rate at which funds are borrowed by banks in marketable size, from other banks in the London interbank market.

41. MIBOR

⏫The full form of MIBOR is Mumbai Interbank Offered Rate.

⏫It is the interest rate at which funds are borrowed by banks in marketable size, from other banks in the Mumbai interbank market.

42. CASA Account

⏫CASA stands for Current Account Savings Account.

⏫The CASA ratio displays the value of deposits maintained in a bank in the form of current and savings account deposits in the total deposit.

⏫A higher CASA ratio means the better operating efficiency of the bank.

43. RAFA Account

⏫RAFA stands for Recurring Deposit Account Fixed Deposit Account.

⏫The RAFA ratio shows how much deposit a bank has in the form of Recurring and fixed deposits.

44. DEMAT account

⏫The full form of Demat Account is Dematerialized account.

⏫This is a type of bank account for citizens in India so that they can trade in stocks or debentures which are listed in the stock market.

⏫Just as a savings account contains money saved, a demat account has stocks saved.

45. Legal Tender

⏫As per provisions of coinage Act 1996, bank notes, currency notes and coins (Re. 1 and above) are legal tender for the unlimited amount.

⏫The subsidiary coins (below Re. 1) are legal tenders for the sum not exceeding Re 1.

⏫Issue of 1, 2 and 3 paisa coins discontinued wef Sep 16, 1981.

46. Currency Chest

⏫Currency chests are operated by the Reserve Bank of India (RBI) so that they can provide good quality currency notes to the public.

⏫However, RBI has appointed commercial banks to open and monitor currency chests on behalf of RBI.

⏫The money kept in currency chests in the commercial banks is considered to be kept in RBI.

47. Insolvency

⏫An organization, a family, person, or company is declared as insolvent when they are unable to pay their debts back on time.

⏫One of the most common solutions for insolvency is bankruptcy.

48. Bankruptcy

⏫Bankruptcy is a legal declaration of person who is unable to pay off debts.

⏫In generally, Bankruptcy is of two types- Reorganization and Liquidation bankruptcy.

⏫Under the bankruptcy of reorganization, debtors should restructure their bill plans to make them more easily met.

⏫Whereas under liquidation bankruptcy, Debtors has to sell their assets to make money so that they can pay off their creditors.

49. Amortisation

⏫Amortization is a periodic payment of a debt like a loan or a mortgage.

⏫Amortization is the arrangement of a lump sum cash flow into many periodic instalments over a span of time, which is also called amortization agenda.

50. Credit Crunch

⏫A credit crunch is also known as a Credit squeeze or credit crisis.

⏫A credit crunch is a condition in which there is an immediate decline in the availability of a loan or the credit.

⏫A situation in which suddenly the credit becomes difficult to get.

⏫Sometimes it can be done by reverse actions like by strict rules and regulations to avail the fund from the financial institutions like banks, NBFCs, and many other lenders.

Very important legal

 Sole Prop: 

Rationale: There is no difference between the sole proprietary account and individual account.  Hence RBI advised banks to extend the facility of nomination to proprietary concerns also for smooth settlement of accounts.  No legal existence separate from owner.

JOINT HINDU FAMILY (HINDU UNDIVIDED FAMILY) :

A JHF can be formed for ancestral business

A JHF is governed by Hindu Succession Act

Generations : 3

All male members of the family are called as Coparceners and after the amendment of Hindu Succession Act in 2005, even the daughter of a coparcener get the status of a coparcener 

In the Mitakshara school of Thought the son/daughter acquires the right over the JHF property by birth 

In Dayabhaga the son/daughter acquires the right only after the death of his father (West Bengal)

Karta is the eldest coparcener of the family

Karta can bind the share of all the coparceners in JHF property for payment of any loan taken by him for JHF activity

Karta’s liability is unlimited whereas the coparceners’ liability is limited to the extent of their share in the JHF property

Karta can give a mandate to other coparceners (senior) to operate the bank account but not to third parties

Every  6 months confirm / authorize transaction done

Loan  request / document to be signed by all coparceners 

When the Karta dies, the next senior most coparcener will take over as Karta

A JHF cannot be a partner in a partnership firm.

If Karta becomes insolvent, stop operations on the account and await the court order. 

In case of minor coparceners, a signature of guardian is obtained on his attaining majority, fresh HUF letter is obtained.

Bank has designed JHF letter COS 38

CLUBS / ASSOCIATIONS :

Society Registration Act 1860 

Clubs and Associations need not be registered but Banks does not open account for unregistered societies.

If to be registered, then they must be registered with Registrar of Societies

Resolution, Registration Certificate & Bye-Lawsare  important documents to be obtained at the time of opening the account

Any cheque issued by the Secretary can be paid by the banker if presented even after his death

No loans can be given as these are non-trading bodies          

Nonprofit making companies(sec 25 of companies act)

Generally for promotion of Art, Literature, Religion

Govt. approval is required

TRUSTS :

Indian Trust Act 1882 mainly deals with Private Trust

A- Creator/Author/Settler

B – Grand Son / Daughter (beneficiary)

C- Trustee (X/Y/Z)

The trustee is supposed to take care of the trust even after the death of the Creator

A trust can be a Private Trust or a Public Trust which is also known as Charitable Trust

Private Trust is governed by Indian Trust Act whereasPublic Trust is governed by Public Trust  Act of the State concerned

Private Trust can be registered with Registrar of Assurances whereas a Charitable Trust can be registered with Charity Commissioner

There is no ceiling regarding the number of trustees

Trustees are acting in fiduciary capacity

A cheque drawn by a trustee can be paid even after his deathwhereas in the case of a sole trustee it is not paid after his death

Rationale: Trustee of a Trust is acting in a fiduciary capacity.  His death will not affect the trust unless he is sole Trustee.  The Banker can pay the cheques drawn by the Trustee even after his death.  If sole Trustee dies, the cheque will not be paid.  Another Trustee to be appointed by Creator / Court/  Does not affect if there is more than one Trustee.

A trustee cannot delegate his authority to third parties

Sec 190 of Contract Act – A delegate cannot further delegate

All trustees should sign the account opening form

The bank has to go as per the provisions of the trust deed

The bank should not open an account in the name of a trust unless it is clearly indicated in the title of the account

Document to identify the Trustees,Trust deed, Regn Certificate of Charity Commissioner, Resolution to open account, Authorised persons, Power to borrow are to be verified.

Trust accounts are to be scrutinized by the Branch Manager at the time of takeover of the branch and thereafter annually.

An insolvent person can act as a trustee.

In the case of a public trust (chairtable trust), a resolution passed by board of trustees has to be obtained to know the names of the trustees who will be operating the bank account and the mode of operation. It should tally with the provision in the trust deed.

PARTNERSHIP FIRMS :

Partnership act 1932

There should be minimum two partners in a firm as per Sec.4 of Partnership Act and maximum 100 as per Sec.464 of Companies Act

A partner is an agent of firm and also agent of other partners (Sec.18)

A partner has no implied authority for opening a bank account of the firm in his personal name (Sec.19)

Sec 19(1) The partner can bind the firm only if he signs for and on behalf of the firm 

Implied authority of a partner can be curtailed or enlarged by all the partners (sec 20)

Partners’ liability is joint and several(Sec.25)

A minor can be admitted to the benefits of a partnership (sec 30)with the consent of all the partners within 6 months of attaining majority.

A partner cannot continue as a partner if he becomes an insolvent (Sec.34)

Death or insolvency of a partner dissolves the partnership firm unless otherwise stated in the  partnership deed (Sec.42)

When the assets of the firm are insufficient to liquidate its liabilities, then any surplus in the individual partners’ assets after paying off their personal liabilities is brought into the firm and firm’s liabilities are paid off (Sec.49)

Registration of partnership firm is optional (Sec.58) Banks will not give loan to unregistered firms.

But an unregistered firm cannot sue its debtors (Sec.69)

Sec 59 to 61 of act rule in Clayton’s case – 1st creditwill wipe out 1st debit in the Partnership account.

Two firmscannot form a third partnership firm

But two companies can form partnership provided their MOA allows it.

A partner cannot delegate his authority to third parties without the consent of  other partners

A JHF cannot be a partner in the firm

Partnership Deed, Letter, Address proof ,Tel Bill in Firm Name & Partners, Regr. Certificate

Partnership Letter – to inform the Bank any change.Undertaking by the partners that the liability is joint and several.

Identical Firms – where partners are same

Partnership at will – Anyone can retire by giving reasonable notice

The firm is compulsorily dissolved on the happening of any of the following events

       a)  All the partners become insolvent

 b) When the business of the firm becomes unlawful

 c) When a competent court passes an order for the dissolution of the firm

COMPANIES :

One Person Company: Single Man company is different entity / concept. No compulsion on AGM. Minimum Capital 1 lac. Paid up capital up to Rs.50 lacs Turnover upto Rs.2 crores. Convert to Pvt. / Pub Ltd. if crossed.

The minimum paid-up capital of a Private limited company should be NIL and that of Public limited company should be NIL(amended in 2015).

Minimum number of shareholders for a private limited company is 2 and maximum is 200.

Minimum number of shareholders for a public limited company is 7 and there is no restriction regarding the maximum number of shareholders 

The minimum number of directors for a Private limited company should be two and for that of Public limited company should be threemaximum 15 in both cases. Max directors can be increased with prior approval from the central government.

A person can be director of 20 companies; independent director of 7.

One woman director S149(1) Paid up capital 100 crore or more & TO 300 crore or more; one director should be resident Indian.

Directors are acting in fiduciary capacity

Rationale: A company is separate legal entity and the directors are acting in fiduciary capacity.  Therefore, the death of the director will not affect the company.  Hence, Banks do not stop operations on the account of the company.

An insolvent director cannot continue as a director of the company

Borrowing powers of the company is mentioned in the Memorandum of Association whereas the borrowing powers of the directors is mentioned in Articles of Association

A company cannot be declared as an insolvent but it can be wound up

Certificate of commencement of business is issued by the ROC only after 90% of shares of the company are subscribed by the public has been withdrawn now.

Escrow Account – A collection account to be opened for collection of application money (collection of cheque and drafts) No debits allowed only credits

When the entire share capital is held by the Government, the company is called Public Sector Undertaking

If the Government is holding majority share capital of not less than 51%, it is called a Government company

Memorandum of Association contains the objects of the company, its activities, borrowing powers etc.

Articles of Association contain what the Board of Directors can do on behalf of the company to carry on the activities of the company and their borrowing powers.

Directors’ liability is limited to the extent of shares held by them in the company. Hence while  sanctioning a loan to the company, personal guarantee of the directors is obtained to make them personally liable

Death of a director does not dissolve the company. Bank need not stop operations on the account as long as the minimum number of directors as stipulated is maintained

The official liquidator is appointed by the Court when a company goes for compulsory winding up.

If the company decides to wind up voluntarily, then the board of directors appoint a liquidator after taking the approval of the shareholders in the general body meeting

A cheque drawn by a director can be paid even after his death since the director acted in fiduciary capacity. A company is defined as a separate legal entity with perpetual succession.

No separate introduction is obtained while opening an account in the name of company – because the memorandum, articles of association and certificate of incorporation provides enough documentary evidence to prove that the company has come into existence.  These documents can be accessed by the banks online in the website of the ROC.  Therefore, banks do not insist for separate third party introduction.

Board resolution is obtained at the time of opening an account in the name of company – as the resolution authorizes the company to appoint a particular banker as the banker of the company.  Further it also furnishes the name of the officials of the company who are authorized to operate the bank account together with the mode of operation.

DRT MATTERS

1. The normal cut off limit to file an application in DRT shall be Rs.  20 Laksand above

2. Where the cases before Debt Recovery Tribunal are decided, Tribunal awards Certificate of

Recovery (RC – Recovery Certificate).

3. The appeal on a DRT judgment is to be filed at Appellate Tribunal at respective centres

4. Whether already decreed accounts in various courts can be transferred to DRT YES, Where E P

amount reaches Rs. 20 Lakhs & above

5. Cases before DRT are presented by- Empanelled Advcoate

6. An appeal against the decision of DRT can be filed by customers - Before appellate tribunal (DRAT)

7. Time limit for filing application with DRT for Recovery Certificate in respect of civil court decrees

passed for less than Rs.20 lakhs 3 years from the date when the decretal amount accrues to Rs. 20

lakhs

GENERAL ASPECTS

1. Garnishee order is issued by: Any competent court

2. An income tax attachment order has been received in the name of Mr. Mishra who has an FDR

with your branch. The FDR has already matured for payment. Before payment to IT authorities -The

bank need not insist on production of FDR

3. A banker owes to his customer certain duties as implied contract out of which the most important

duty is - Duty of secrecy

4. Under Bankers Book Evidence Act, 1891 certified copies of banks books are admissible as

evidence in the court.

5. Bank A requests the Bank B for opinion on one of its customers. Bank B Will give information in

general terms disclaiming any responsibility

6. The person attesting the thumb impression/furnishes the attestation in Form No.821 must know

the language in which the loan documents are executed

7. Following documents need not be witnessed Agreement, hypothecation, Pledge etc

8. Which of the following documents need attestation? Mortgage Deed, Sale Deed, Will, Indemnity

Bond etc

9. When an advance is made to a Joint Hindu Family, the Loan documents are to be Signed by Only

the Kartha. However it is advisable to get it signed by all major members including female members

and minors to be represented by respective natural guardians.

10. Registration of documents is compulsory under Section 17 of the Registration Act in the case of

Gift, Sale Deed, Simple Mortgage etc

11. Payment of a cheque is complete: When cash is parted with

12. The Registration of a Will is: Optional

 

13. Average Clause ― in the insurance policy restricts the amount of claim in proportion to amount

of insurance and value of security.

14. Following documents can be treated as legally valid only originally typed copy of loan agreement

(not on copy/ carbon copy)

15. Legally, Bank is in order if part of the blank columns in the loan papers are filled up subsequent

to execution, if The executants put their signature authorising such filling up, after filling up

16. Stop payment instructions can be issued by Drawer

17. When cheques or bills of exchange are collected by the bank on behalf of its customer, the

relationship between them is that of A principal and an agent

18. What is the alternative if presenter of a cheque refuses to sign on its reverse? Money can be paid

after obtaining receipt on separate paper

19. A corporate customer requests the bank for returning to them the cheques drawn by them and

already paid by the bank - The cheques can be returned periodically after retaining the true copies

on record. The cost to be borne by the customer

20. Can the original cheques be returned to the drawer after payment?

YES, the bank can return the paid cheques if requested within the period for which bank is required

to preserve them

21. The banker and purchaser of a demand draft have a relationship of Seller and purchaser

22. The Banker can disclose information about the customer - When the customer expressly or

impliedly permits disclosure/when the Banker is compelled by law/when the Banks own interest is to

be protected.

23. In case of telegraphic transfer (RTGS/NEFT) of funds the relationship between the banker and

the remitter is that of Principal and agent

24. Collection of supply bills is undertaken by banks on the strength of Power of Attorney given by

supplier in favour of bank

25. Presentment of the bills received for collection to the drawees is done at - The address

mentioned in the bill/hundi

26. Whether protection is available to the bank for collection of inward bills received by it Under N I

Act NO

27. Banks keep cash in currency chest as a bailee

28. Supply bills are Not accompanied by Document of Title to Goods, are actionable claims and not

governed by N I Act

29. A suit against a common carrier for loss of or injury to goods entrusted to him for carriage

cannot be filed - Unless a written notice of such a loss is given within 6 months from the date of

notice of loss before institution of suit

30. Whether partner‘ s interest in a firm can be attached before judgment YES

31. The time limit for impleading legal heirs in a pending suit is 90 days from the notice of the date

of death

32. The Stop-Payment Instruction given by one of the two joint account holders can be lifted by:

Both of them jointly

33. The periodical interest payable on such deposits should be credited... Credited to respective loan

account, if any loan is a sanctioned against it.

34. With in how many days the rectification and compliance report of shortcomings pointed by

Labour enforcement officials during their inspection under Payment of Gratuity Act, 1972, Equal

Remuneration Act, 1976 and Payment of Bonus Act, 1965 should be sent to Deputy Chief Labour

Commissioner/Regional Lab

our Commissioner and Labour Enforcement Officer -Within 2 days by

Regd Post

SARFEASI ACT

• The act has two parts, first part stands for securitization and reconstruction of financial assets and

other part is enforcement of security interest.

• Eligible assets under the act may be enforced without intervention of court or tribunal with the laid

down procedure under the act.

• If party failed to deposit the amount, possession of charged/ secured assets is obtained from the

bank under section 13(4) of the act. Publication of possession notice in the act within 07 days is

mandatory.

• No secured creditor shall exercise any right, unless exercise of such right is agreed upon by the

secured creditors representing not less than 3/4th in value of the amount outstanding.

• If borrower restricts the bank to take physical possession of secured assets, petition is filed under

section 14 of the act to the CMM/DM praying to get the physical possession of the assets.

• No action is taken before 45 days of taking possession, as 45 days time is given under the act to

appeal against the action of the bank.

• Appeal with DRT can be filed by the party only after taking possession of the assets under section

17 of the act. Thereafter appeal can also be filed with DRAT under section 18 of the act. Civil court

does not jurisdiction to entertain any suit under provision of the act.

• Secured assets can be disposed off / sold giving 30 days notice to the parties concerned followed

by 30 days publication of sale through auction/ tender notice of these assets in the vernacular

newspaper and national daily.

• 60 days notice is served under 13(2) of SARFEASI

• Action is taken for the dues exceed Rs.1 lakh

• Agriculture Land and lease hold property can not be enforced

• Appeal is made within 45 days of possession of secured asset 

• 30 days notice is served indicating there in the sale of asset

• 30 days publication is made for auction of secured assets

• Possession of property is obtained under 13(4) SARFEASI Act

• Publication of possession of property -within 7 days from the date of possession.

• SERFEASI ACT 2002 does not apply to the following assets –

A -lien on any goods, money or security.

B -A pledge of moveable.

C – Creation of any security in any aircraft or vessel.

D – Any property that can not be attached under any other law.

E – Any security interest for securing repayment any financial asset not exceeding Rs.1 lac.

F – Any case in which the amount due is less than 20% of the principal amt.

G – Any interest created in agriculture land.

SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF

SECURED ASSETS ORDINANCE 2002 - SARFAESI Act - 2002

1. Is it necessary to classify the account as NPA for initiating action under the Act? YES

2. The above Act is applicable in respect of debts due to Nationalised Banks only

3. The Provisions of the Act are applicable in respect of All NPA a/cs with liability above Rs. 1 lac

4. Enforcement is not possible under this Act in respect of Time barred debts, where the present

liability is less than 20% of principal + int. &where the secured asset is an Agricultural Land

5. Whether limitation is suspended or saved while proceeding under the act? No

6. Movables seized under this Act have to be got valued by Valuer in the panel approved by the

Board of the Bank

7. When there is more than one creditor in respect of a secured asset, action under this Ordinance

can be initiated only if 75% of creditors in value agree

8. Whether advocate can issue notice under the Act? No.

9. Under SARFAESI ACT 2002 whether demand notice is required to be issued to Guarantor also?

Only when the guarantor extends his property as a security apart from his Personal guarantee

10. Can appeal under SARFAESI ACT 2002 would be made to DRT even in cases for claims less than

10 lakhs Appeal can be made with DRT in all the cases

11. For an agricultural loan, if any security other than agricultural land is taken whether it can be

enforced under the act? The Act is not applicable only where the security is agricultural land and

hence, we can enforce the securities in the referred case.

12. Can the Bank entrust the work of taking possession of securities to seizure agent? Authorised

officer alone is entitled to take possession of the property

13. Who is the authority to fix the reserve price when the assets are auctioned? Authorized officer in

consultation with the appropriate authority

14. Who can issue the sale certificate under the act? Authorised officer (SMGS IV and above)

15. Whether Banks attach salary of the borrower/guarantor under the act? No, as these are not

secured assets

16. Provisions of SARFAESI Act 2002 enables the Bank to sell their financial assets to Asset

reconstruction company AND Securitisation company

17. When Mortgaged property is a tenanted property before the mortgage whether under SARFAESI

Act Tenant can be evicted NO Bank has to evict the tenant only through eviction proceedings as per

Law covered under Indian Tenancy Act.

18. Whether the Lease/tenancy created after the Mortgage will bind the Bank No it is not binding

on the Bank

19. Whether the Mortgagor has powers to lease the property As per Sec 65A of Transfer of Property

Act the Mortgagor can lease the property but not for more than 6 months and that too the lease is

subject to mortgage

EXECUTORS / ADMINISTRATORS :

 EXECUTORS / ADMINISTRATORS :

• Executor is a person whose name is mentioned in the Will & Administrator is the person who is appointed by the Court

• Administrator is appointed when the executor refuses to execute the Will or when a person dies without leaving a Will (Intestate  death)

• Executor derives his power from the Will whereas Administrator derives his power from the Letter of Administration issued by the court and both of them cannot delegate this power to others

• Both of them are acting in a fiduciary capacity or representative capacity

ATTORNEY / AGENTS :

 ATTORNEY / AGENTS :

• A Power of Attorney executed outside India must be stamped within 3 months of its receipt in India. As per stamp act of the state concerned.

• A Power of Attorney should be unconditional

• Death, insolvency or insanity of the account holder terminates the Power of Attorney

• Minor cannot give a POA to others

• A Power of Attorney holder cannot overdraw/close/transfer the account of the Principal.  Registration of POA is optional

• Sec 201 of Indian contract act cancels the POA if POA holder dies, become insane or insolvent.

• Mandate letters do not attract stamp duty whereas Power of Attorney attracts stamp duty

Rationale: Mandate letter do not attract stamp duty because these letters are considered on as an operational instruction to the banker.  Such letters are exempted from stamp duty as per Indian stamp act.   Mandate letters should not be witnessed, otherwise it will attract stamp duty   

POA – Delegatee cannot further delegate. Sec 190 Indian Contract act. 

INSOLVENTS :

 INSOLVENTS :

Insolvency is civil death

Sec 4 of Insolvency Act 1920 – It is a state of Bankruptcy

Bankruptcy – Legal status of a person or organisation – imposed by Court order 

• An insolvent person cannot be a partner in a firm (S.34 of Partnership Act) including a sleeping partner.

• An insolvent person cannot be a director of a company (S.164 of new Companies Act)

• An insolvent person can be an agent, trustee, secretary etc 

• An un-discharged insolvent is a person who is unable to repay his liabilities

• Bank should stop operations on the joint account when one of the joint account holder becomes insolvent irrespective of mode of operation

• In the case of an insolvent, the Official Receiver will be the true owner to receive the money belonging to that person. 

If a credit is received, it should not be credited to insolvent but only to Official Receiver.

Rationale: Banks do not open account for un-discharged insolvent.  Assets of insolvent person rest with official receiver appointed by court.  Banks may have to handover the deposit to official receiver in case such an account is opened.

Liquidation: Company/Business/Firm terminated. After creditors are paid share holders get the remaining. 

PARDANASHIN LADY:

 PARDANASHIN LADY:

One who lives in exclusion of outside world; Orthodox lady. She lives in exclusion

• A contract with a pardanashin lady is voidable - Presumption of undue influence ; – free consent unavailable

Signature to be attested by husband if married

Signature to be attested by father if unmarried

• Banks do not open an account for an illiterate pardanashin lady

• It is the responsibility of banks to prove that the contract with a pardanashin lady was free from undue influence.

• Banks can open an account for literate pardanashin lady provided she completes the formalities of giving photographs and complying with KYC norms

• A pardanashin lady can be a partner in a partnership firm 

• A muslim pardanashin lady cannot be the natural guardian of a Muslim minor

• Banks do not open a current account for a pardanashin lady even if she is a literate as she may not understand the complexities of current accounts

MARRIED WOMEN :

 MARRIED WOMEN :

• Hindu married women are governed by Hindu Succession Act whereas for other religion it is Indian Succession Act / Married Women’s Property Act.

Changing name is permitted after getting evidence

She can enter into contract and enforceable against her separate estate.

Cannot be declared insolvent

• According to law, a married woman is defined as a person who has no independent of source of income and is dependent on her husband for her neccessaries of life.

• A married woman cannot be arrested or imprisoned for non-payment of a loan as per Civil Procedure Code (S.56) (1909) 

• Any loan sanctioned to a married woman for her necessaries with the consent of her husband, can be recovered from her husband

BLIND PERSONS:

 BLIND PERSONS:

• The bank can open all types of deposit accounts in the name of blind persons with single or joint operations. Cheque book facility can also be provided.

• Current account can also be opened in the name of a blind person.

Rationale: Chief Commissioner of Physically disabled - Court has given a judgement that the blind persons should be considered on par with other normal persons and all types of banking facilities should be extended to such persons. Accordingly RBI has advised all banks to provide all types of banking facilities to such persons.

Branch & ATMs : Provision of Ramps and Brailee Key Pads

ILLITERATES :

 ILLITERATES :

• An illiterate can enter into valid contracts.

• An illiterate can give a Power of Attorney to a person to operate his account.

• Banks do not open cheque book facility a/c for an illiterate only for operational difficulties. Those who do not desire should not be given ATM card.

• Banks also do not open current account for illiterates.

• Banks always take only left hand thumb impression on the withdrawal slip for an illiterate.

• Two illiterates can open a joint SB account on E or S basis.

• Such accounts are to be witnessed       

Illiterate’s Photo in Pass  Book : Ghosh Committee

JAIIB legal Minors

 MINORS :

• Under sec 3 of Majority act 1875 a person is a minor as per law if he has not attained 18 years of age.

• Also applicable in case of court appointed guardian.

• A minor cannot ratify the debt incurred by him during his minority after he attains majority.

• A contract with a minor is void ab-initio (Sec.11 of IC Act)

• The legal heirs of a minor are his natural guardians. 

Guardian appointed by Court : Legal Guardian

By will of father – Testamentary Guardian (only after death of Father and Mother)

• Supreme court judgement allows the Bank to open and operate account solely in the name of mother when father is alive. Father & Mother are natural guardians. 

• A minor cannot be a partner in the firm. He can be admitted only for the benefits (Sec.30 of partnership Act)Cannot be a director Sec 164 of Companies Act

• A minor can ratify the transactions of the firm only if he decides to become a partner of the firm.  In that case the bank has to obtain a ratification letter confirmation letter) from him to make him liable for all the activities of the firm during his minority.

• A minor cannot appoint an agent but he can be an agent (Sec.183 of IC Act) but he will not be personal liable, only the prinicpal will be liable for all the acts of the minor agent.

• Any necessaries supplied to the minor, it can be recovered out of his estate (S.68 of Indian Contract Act.

• Even if any loan is taken by the minor by misrepresenting his age, it cannot be recovered after he attains majority 

Rationale: If any loan is granted to the minor by taking a guarantee, it cannot be recovered either from the minor or from the guarantor since the guarantor’s liability exists only along with the borrower’s  liability. If the borrower is not liable, than the guarantor is also not liable.

Minor cannot nominate, however, personally authorized to act (guardian) on behalf of the minor can nominate.

• In the case of a Muslim minor, mother will not be a natural guardian. It is only the father, or executor of father’s will or father’s father or executor of father’s father’s will or court appointed guardian.

• Two minor can open a Joint SB account but to be operated jointly. No E or S account will be opened as it would amount to entering into a contract which is void.

• A minor cannot be declared insolvent. Since an insolvent is a person who cannot repay the liability as he has no assets to repay. But a minor cannot incur any liability as he is incapable of entering into contract. Hence he cannot be declared insolvent.

• Minor 10 years and above – SB / TDR account max Rs.2 lacs TDR period max 10 years – uniform signature. Banks risk. 14 years ATM classic card

• By guardian no age restriction. Consolidated balance Rs.20 lacs max. 

Pehli Udan – 10 years & above Uniform signature. Cheque leaf 10, ATM photo id card, ATM withdrawal 5,000; INB Rs.5000; MBS Rs.2000 A/c Rs.5 lacs; CIF Rs.10 lacs

Pehla Kadam – Jt. Operation or single operation by parent

Sole Name of Minor: on attaining majority formalities: a) confirm balance b) submit fresh SS/Photo; c) Declaration and Proof of majority; d) Form 60/61 or PAN card.

• Acc to Sec 26 of NI act, minor can draw, endorse or negotiate a cheque or Bill of Exchange but he cannot be held liable.  He cannot be sued. Bill is valid, other parties are liable.

Rationale : Minor cannot be declared insolvent – Insolvent is a person who is not capable of repaying his liabilities because he has no assets to repay whereas a minor cannot incur any liabilities during his minority since he is incapable of entering into contract as per sec 11 of contract act.  Hence a minor cannot be declared as an insolvent.

Rationale: Bank has to obtain rectification letter from the minor who has attained majority and has become a partner in a firm – This letter is obtained from him in order to make him liable for all the debts and liabilities incurred by the firm during his minority otherwise he may try to escape the liability of the firm incurred in the past.

Accountant Standards:-List of ICAI’s Mandatory Accounting Standards (AS 1~29)

 Updated list of accounting standards:-

AFB 

Accountant Standards:-List of ICAI’s Mandatory Accounting Standards (AS 1~29)

Download PDF copy of Mandatory Accounting Standards of ICAI (as on 1 July 2017 and onwards), as under:

Description

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories (amended) *

AS 3 Cash Flow Statements

AS 4 Contingencies and Events Occurring after the Balance Sheet Date *

AS 5 Net Profit or Loss for the period,Prior Period Items and Changes in Accounting Policies

AS 6 Depreciation Accounting (withdrawn) *

AS 7 Construction Contracts (revised 2002)

AS 8 Accounting for Research and Development (withdrawn for AS 26)

AS 9 Revenue Recognition

AS 10 Accounting for Fixed Assets (amended) *

AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003) **

AS 12 Accounting for Government Grants

AS 13 Accounting for Investments (amended) *

AS 14 Accounting for Amalgamations (amended) *

AS 15 Employee Benefits (revised 2005)

AS 16 Borrowing Costs

AS 17 Segment Reporting

AS 18 Related Party Disclosures

AS 19 Leases

AS 20 Earnings Per Share

AS 21 Consolidated Financial Statements (amended) *

AS 22 Accounting for Taxes on Income

AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

AS 24 Discontinuing Operations

AS 25 Interim Financial Reporting

AS 26 Intangible Assets

AS 27 Financial Reporting of Interests in Joint Ventures

AS 28 Impairment of Assets

AS 29 Provisions,Contingent Liabilities and Contingent Assets (amended) *. List of ICAI’s Non-Mandatory Accounting Standards (AS 30~32)

ICAI has announced on 15 Nov. 2016 that ‘AS 30- Financial Instruments: Recognition and Measurement’, ‘AS 31- Financial Instruments: Presentation’, ‘AS 32- Financial Instruments: Disclosures’ stands withdrawn

PPB recollected questions on 06.12.2020

 06.12.2020

SMA-0 Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress

SMA-1 Principal or interest payment overdue between 31-60 days

SMA-2 Principal or interest payment overdue between 61-90 days

Governor of the Reserve Bank of India – Chairperson, ex officio; (Shri Shaktikanta Das) of MPC

5 Mark's question are easy just odd one out you can manage them easily

Many questions on ethics and professionalism

One question was there on there on LC financing

Call money

Locker nomination

CRR

Conflict of interest

Penetration marketing

Minor do not want to be a partner

Basel 2 and 3,

Marketing mix,

case studies on nomination in locker accounts,

LANS,

business value,

Ethical dilemma,

pledge,

hypo, .

mortgage and assignment match the following,

numerical on NPA provision for doubtful assets.

Priority sector advances to weaker sections,

updated investment and turnover for micro industries,

diversification,

MKIS

customer banker relationship

question regarding SWITF

PMJDY

PMAPY

PMJJBY

PMSBY

Fair practice of lending

Non popular social networking site

Code of conduct for Direct Sales Agent made by?

Valuation of Mutual fund on...

Pre shipment credit

FCNR(B) is ___ form of term deposit

Data mining tools

Frauds committed by large number of customers

Call money market

Minor who doesn't want to be in partnership should do...

Business facilitator work on behalf of...

Ethical Dilemma

Increase in CRR...

type of mergers

Locker operation related

current ratio compare

Liberalized Remittance scheme related

marketing 15 question

ethics 15 questions

Cash management services related

Mutual fund scheme

NPA- D1, D2 related questions

Provisioning numerical

Priority sector related

Identify weaker section

Endorsement case study

Banking regulation act ke question

Rangarajan Committee

Narasimham committee

Classification of Assets 

Computerization in Banks 

Priority Sector – Target 

Money Market 

Marketing Ethics 

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc 

Provision of Doubtful Assets 

Banking Regulation ACT 

NPA 

General Banking – Either or Survivor 

MSME 

TNW 

Current Ratio 

SWIFT – related working DAYS 

CRILC – who developed (Ans: RBI) 

REPO RATE – Definition 

MICRO/SMALL /MEDIUM 

ISO Standards for smart cards – ISO 7816

ATM 

Weaker sections in PSL 

PMJJBY 

Mortgage 

MCLR 

PRODUCT MIX 

Ex-Officio chairman of MPC (Ans: RBI Governor)

Penalty of non-maintenance of CRR 

Debt Market 

Marketing & Product Development 

Product Life Cycle Stages 

NRLM Objective 

Letter of Credit 

Commercial Paper 

MKIS(Marketing Information System)

 Rangarajan Committee

Narasimham committee

Classification of Assets 

Computerization in Banks 

Priority Sector – Target 

Money Market 

Marketing Ethics 

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc 

Provision of Doubtful Assets 

Banking Regulation ACT 

NPA 

General Banking – Either or Survivor 

MSME 

TNW 

Current Ratio 

SWIFT – related working DAYS 

CRILC – who developed (Ans: RBI) 

REPO RATE – Definition 

MICRO/SMALL /MEDIUM 

ISO Standards for smart cards – ISO 7816

ATM 

Weaker sections in PSL 

PMJJBY 

Mortgage 

MCLR 

PRODUCT MIX 

Ex-Officio chairman of MPC (Ans: RBI Governor)

Penalty of non-maintenance of CRR 

Debt Market 

Marketing & Product Development 

Product Life Cycle Stages 

NRLM Objective 

Letter of Credit 

Commercial Paper

Business value

Ethical dilemma

Pledge, hypo, mortgage and assignment match the following

Numerical on NPA provision for doubtful assets

Priority sector advances to weaker sections

Updated investment and turnover for micro industries

Diversification

MKIS

Basel 2 and 3

Marketing Mix

Case studies on nomination in locker accounts

LAN

Questions on cheque conversion

call money market

PMJDY

Fair practice of lending

Non popular social networking site

Code of conduct for Direct Sales Agent made by?

Valuation of Mutual fund on…

Pre shipment credit

FCNR(B) is _ form of term deposit

Data mining tools

Frauds committed by large number of customers\

Call money market

Minor who doesn’t want to be in partnership should do…

Business facilitator work on behalf of…

Ethical Dilemma

Increase in CRR…

PMAPY

PMJJBY

PMSBY

Banking definition

Accept deposit purpose

Bank interest rates in marketing

Which one is not mkis

gross advance

Net working capital

Weaker section categories

Fair practice of lender 2 to 3 questions

mutual fund related 1

Rangarajan Committee

Narasimham committee

Classification of Assets

Computerization in Banks

Priority Sector – Target

Computerization in Banks

Priority Sector – Target

Money Market

Marketing Ethics

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc

Provision of Doubtful Assets

Banking Regulation ACT

NPA

General Banking – Either or Survivor

MSME

TNW

Current Ratio

SWIFT – related working DAYS

CRILC – who developed (Ans: RBI)

REPO RATE – Definition

MICRO/SMALL /MEDIUM

ISO Standards for smart cards – ISO 7816

ATM

Weaker sections in PSL

Mortgage

MCLR

PRODUCT MIX

Ex-Officio chairman of MPC (Ans: RBI Governor)

Penalty of non-maintenance of CRR

Debt Market

Marketing & Product Development

Product Life Cycle Stages

NRLM Objective

Letter of Credit

Marketing Ethics

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc

Provision of Doubtful Assets

Banking Regulation ACT

NPA

General Banking – Either or Survivor

MSME

TNW

Current Ratio

SWIFT – related working DAYS

CRILC – who developed (Ans: RBI)

REPO RATE – Definition

MICRO/SMALL /MEDIUM

ISO Standards for smart cards – ISO 7816

ATM

Mortgage

MCLR

Marketing & Product Development

Product Life Cycle Stages

NRLM Objective

Letter of Credit

Commercial Paper

MKIS(Marketing Information System)