ACCOUNTING FOR FINANCIAL INSTITUTION

SET-02
Below is a list of key revenue and expenditure items for banks in
Pakistan, as per the legal framework:
Revenue Items of Banks in Pakistan:
1. Net Interest Income (or Interest Income):
o Interest on Loans and Advances: This is the primary source of income for
banks, derived from interest charged on loans provided to individuals,
businesses, and other entities. It includes income from personal loans,
mortgages, business loans, and overdrafts.
o Interest on Investments: Income earned from interest-bearing securities
such as government bonds, corporate bonds, treasury bills, and Sukuk (Islamic
bonds).
o Interest on Balances with Other Banks: Interest earned on deposits held with
other financial institutions or the central bank (SBP).
2. Non-Interest Income:
o Fees and Commissions: Banks earn fees for various services, including:
▪ Account Maintenance Fees: Charges for maintaining customer
accounts.
▪ ATM and Card Fees: Fees for using ATMs or for issuing debit and credit
cards.
▪ Loan Processing Fees: Charges for processing and disbursing loans.
▪ Trade Finance Fees: Fees related to services such as letters of credit,
bills of exchange, and trade-related transactions.
▪ Wealth Management Fees: Fees for advisory and asset management
services provided to clients.
▪ Mortgage Fees: Charges related to property financing and home loans.
o Foreign Exchange Income: Banks earn revenue from foreign exchange
transactions, including buying and selling of foreign currencies and hedging
activities.
o Income from Investments: Banks may earn income from the sale of
investments, including gains from trading securities, dividends on stocks, and
capital gains on the sale of securities.
o Service Charges: Fees related to various banking services, such as penalties
for overdrafts or bounced checks.

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o Brokerage and Trading Income: Income earned from trading in financial
markets, including equities, bonds, and other securities.
o Islamic Banking Income: For Islamic banks, income is earned through profit-
sharing (like Mudarabah and Musharakah) or through fees charged for Islamic
financial services such as Murabaha (cost-plus financing) and Ijara (leasing).
3. Other Income:
o Dividend Income: Income earned from shares held in other companies.
o Gains on Sale of Assets: Banks may sell fixed assets, real estate, or other
investments, generating income.
o Recovery of Written-off Loans: In some cases, banks recover loans that were
previously written off, contributing to revenue.

Expenditure Items of Banks in Pakistan:

4. Interest Expense:
o Interest on Deposits: Banks pay interest to depositors on their savings,
current, and term deposits. The rate varies depending on the type of deposit
and the prevailing market interest rates.
o Interest on Borrowings: Banks incur interest expense on funds borrowed
from other financial institutions, the central bank (SBP), or from interbank
borrowings. This includes expenses related to short-term and long-term
borrowings.
o Interest on Debt Instruments: For banks issuing bonds or other debt
instruments, interest payments to bondholders represent a major expense.
5. Operating Expenses:
o Staff Salaries and Benefits: This includes salaries, wages, pensions, and other
benefits for employees working in various roles within the bank.
o Rent and Utilities: Costs for renting office space and utility bills such as
electricity, water, and telecommunication services.
o Depreciation and Amortization: Depreciation on tangible assets such as
buildings, vehicles, and office equipment, and amortization of intangible assets
like software or goodwill.

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o Advertising and Marketing Expenses: Banks incur costs for advertising,
promotions, and branding activities to attract new customers and retain
existing ones.
o Technology and IT Costs: Expenses for maintaining and upgrading IT
infrastructure, software, and cybersecurity measures.
o Legal and Professional Fees: Expenses for legal services, audits, and
consultancy fees.
o Insurance: Insurance premiums for covering operational risks, property, or
employee health insurance.
6. Provisions:
o Provision for Loan Losses: This is a significant expense for banks, as they
must set aside reserves to cover expected defaults or impairments on loans
(Non-Performing Loans or NPLs). This provision is mandatory as per the SBP’s
regulations and is intended to ensure the bank has enough resources to absorb
potential losses.
o Provision for Income Tax: Banks are required to account for tax liabilities
based on their income, including corporate income tax, and other applicable
taxes as per Pakistan’s tax laws.
o Provision for Contingencies: Banks set aside provisions for unforeseen
liabilities or legal claims, including potential disputes or regulatory fines.
2. Other Expenses:
o Losses on Sale of Investments: If the bank incurs a loss when selling assets
or securities, it is recorded as an expense.
o Write-offs: Banks may write off bad debts or loans that are considered
uncollectible.
o Foreign Exchange Losses: Losses incurred from foreign currency
transactions or foreign exchange fluctuations.
o Bank Charges and Penalties: Charges imposed by regulatory authorities,
such as penalties for non-compliance with banking regulations.
o Impairment Losses on Assets: In cases where the value of assets such as
securities, loans, or fixed assets has declined significantly, banks may need to
record impairment losses.

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Key Considerations:
• Prudential Regulations: The State Bank of Pakistan (SBP) issues prudential
regulations for banks to ensure that financial institutions are well-capitalized, liquid,
and able to meet their obligations. These regulations affect both the revenue and
expenditure items, particularly provisions for loan losses and capital adequacy.
• Risk Management: Banks also face various risks (credit, market, operational, etc.),
and their financial statements reflect how these risks are managed. Provisions for
loan losses and capital reserves are key measures taken to mitigate potential risks.
• Islamic Banking: Islamic banks in Pakistan follow the principles of Islamic finance,
which prohibits charging or paying interest (Riba). As such, their revenue and
expenditure structures differ, with income earned through profit-sharing, leasing,
and fee-based services rather than traditional interest-based income.
Conclusion:
The revenue and expenditure items of banks in Pakistan are defined by the banking laws and
regulations, including the Banking Companies Ordinance, 1962, SBP prudential regulations,
and IFRS standards. Key sources of revenue for banks include interest income, fees and
commissions, foreign exchange income, and investment returns. On the expenditure side,
banks incur interest expenses on deposits and borrowings, operating costs, provisions for
bad debts, and taxes. These financial items reflect the bank's operations and play a crucial
role in its profitability and financial stability.

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List The Assets And Liabilities Of Banks In Pakistan As Per Leagal
Framework
In Pakistan, the legal framework governing the assets and liabilities of banks is
regulated primarily by the State Bank of Pakistan (SBP), the central bank, under the Banking
Companies Ordinance, 1962 (amended from time to time), and other relevant laws,
regulations, and guidelines issued by the SBP. The framework ensures that banks maintain
sound financial practices, disclose accurate information, and comply with prudential norms
to protect depositors and the broader financial system.
Below is a list of key assets and liabilities for banks in Pakistan, as per the legal framework:
1. Assets of Banks in Pakistan:
The assets of banks in Pakistan can be broadly categorized into several categories:
A. Cash and Cash Equivalents
• Cash in Hand: Physical currency held by the bank in its vaults.
• Cash with the State Bank of Pakistan (SBP): Reserves and balances maintained
with the central bank as part of regulatory requirements.
• Cash with Other Banks: Deposits held in other financial institutions.
B. Loans and Advances
• Loans to Customers: Funds lent to individuals, businesses, and other entities for
various purposes, such as personal loans, business loans, and mortgages.
o Short-term Loans: Loans with a maturity of less than one year.
o Long-term Loans: Loans with a maturity of over one year.
o Overdrafts: Short-term loans extended to current accounts.
o Secured and Unsecured Loans: Loans backed by collateral or personal
guarantees.
C. Investments
• Government Securities: Bonds, treasury bills, and other debt instruments issued by
the government of Pakistan.
• Sukuk: Islamic bonds issued by the government or corporations.
• Corporate Bonds: Bonds issued by private sector companies.
• Equity Investments: Shares and other equity interests in publicly or privately held
companies.

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• Foreign Currency Investments: Investments in foreign assets, such as foreign bonds
and securities.
D. Fixed Assets
• Property, Plant, and Equipment: Land, buildings, branches, office equipment, and
other tangible fixed assets.
• Intangible Assets: Items like goodwill and software licenses.
E. Other Assets
• Receivables: Amounts due to the bank from customers, including accrued interest
and unpaid fees.
• Accrued Income: Interest or income earned but not yet received.
• Deferred Tax Assets: Taxes recoverable in future periods.
2. Liabilities of Banks in Pakistan:
The liabilities represent the obligations of the bank to depositors, creditors, and other
parties.
A. Deposits
Deposits are the primary source of funding for banks and are categorized into different
types:
• Demand Deposits: These are funds deposited by customers that can be withdrawn
at any time without notice, such as current accounts.
• Time Deposits: Deposits held for a fixed term or maturity, such as savings accounts
and fixed deposits (also called term deposits).
• Saving Deposits: Funds deposited with a bank that earn interest, typically with the
ability to withdraw without penalty, though subject to certain restrictions.
• Foreign Currency Deposits: Deposits made in foreign currencies (such as USD, EUR,
etc.), either in the form of current or savings accounts.
B. Borrowings
• Short-term Borrowings: Loans or lines of credit from other financial institutions or
the SBP that are repayable within one year.
• Long-term Borrowings: Loans or debt issued with a maturity of over one year.
• Repurchase Agreements (Repos): Short-term borrowing agreements where
securities are sold with the promise to repurchase them at a later date.

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• Interbank Borrowings: Funds borrowed from other banks in the interbank market.
C. Bills Payable
• Payable to the State Bank of Pakistan (SBP): Includes obligations like reserve
requirements, clearing balances, or other balances owed to the SBP.
D. Provisions and Reserves
• Provision for Loan Losses: Reserves set aside to cover potential losses from defaults
on loans, which banks are required to maintain according to the regulatory guidelines
issued by SBP.
• Provision for Income Taxes: Amounts set aside for income taxes payable to the
government.
• Other Provisions: Includes provisions for contingencies, legal disputes, or other
unforeseen liabilities.
E. Subordinated Debt
• Long-term Borrowings with Subordinated Debt Status: Debt instruments issued
by banks that are subordinated to other liabilities in case of liquidation. These may
include debentures or bonds issued to enhance capital.
F. Shareholder's Equity
Although not technically a liability, equity capital represents the ownership interest in the
bank. It includes:
• Paid-up Capital: The funds raised from shareholders for equity investment in the
bank.
• Retained Earnings: Profits retained by the bank after the payment of dividends.
• Other Reserves: Amounts set aside for specific purposes, such as statutory reserves
and revaluation reserves.
G. Other Liabilities
• Accrued Expenses: Expenses incurred by the bank that have not yet been paid, such
as salaries, rent, or interest on borrowings.
• Deferred Tax Liabilities: Taxes payable in future periods based on timing
differences between accounting and tax treatments.
• Other Payables: Includes amounts payable to suppliers, contractors, or other financial
obligations.

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Regulatory Framework and Guidelines:
The SBP, as the regulatory authority, ensures that banks in Pakistan comply with the
following key regulations regarding their assets and liabilities:
• Capital Adequacy Ratio (CAR): Banks are required to maintain a minimum level of
capital to cover potential risks arising from their assets. The CAR is typically set
according to the Basel III standards.
• Liquidity Requirements: Banks must hold certain percentages of their assets in liquid
form to meet short-term obligations.
• Provisioning Requirements: Banks are required to maintain provisions for non-
performing loans (NPLs) as per SBP’s guidelines.
These regulations are designed to ensure that banks operate soundly and can meet their
obligations to depositors while maintaining financial stability

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THE SECOND SCHEDULE TO THE BANKING COMPANIES ORDINANCE, 1962
(See Section 34)

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED _________

Note (Current (Prior

Year) Year)
Rupees in ‘000

Mark-up/Return/Interest Earned 26 xxxxxxxx xxxxxxxx

Mark-up/Return/Interest Expensed 27 xxxxxxxx xxxxxxxx
Net Mark-up/ Interest Income xxxxxxxx xxxxxxxx

NON MARK-UP/INTEREST INCOME

Fee and Commission Income 28 xxxxxxxx xxxxxxxx

Dividend Income xxxxxxxx xxxxxxxx
Foreign Exchange Income xxxxxxxx xxxxxxxx
Income / (loss) from derivatives xxxxxxxx xxxxxxxx
Gain / (Loss) on securities 29 xxxxxxxx xxxxxxxx
Other Income 30 xxxxxxxx xxxxxxxx
Total non-markup/interest Income xxxxxxxx xxxxxxxx

Total Income xxxxxxxx xxxxxxxx

NON-MARK-UP/INTEREST EXPENSES

Operating expenses 31 xxxxxxxx xxxxxxxx

Workers Welfare Fund xxxxxxxx xxxxxxxx
Other charges 32 xxxxxxxx xxxxxxxx
Total non-markup/interest expenses xxxxxxxx xxxxxxxx

Profit / (Loss) Before Provisions xxxxxxxx xxxxxxxx

Provisions and write offs - net 33 xxxxxxxx xxxxxxxx
Extra ordinary / unusual items (to be specified) xxxxxxxx xxxxxxxx

PROFIT/(LOSS) BEFORE TAXATION xxxxxxxx xxxxxxxx

Taxation 34 xxxxxxxx xxxxxxxx

PROFIT/(LOSS) AFTER TAXATION xxxxxxxx xxxxxxxx

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 THE SECOND SCHEDULE TO THE BANKING COMPANIES ORDINANCE, 1962
(See Section 34)
ACCOUNTING FOR FINANCIAL INSTITUTION
STATEMENT OF FINANCIAL POSITION AS AT ________
SET-02

(Current (Prior
Note
Year) Year)
Rupees in '000
ASSETS
Cash and balances with treasury banks 5 xxxxxxxx xxxxxxxx
Balances with other banks 6 xxxxxxxx xxxxxxxx
Lendings to financial institutions 7 xxxxxxxx xxxxxxxx
Investments 8 xxxxxxxx xxxxxxxx
Advances 9 xxxxxxxx xxxxxxxx
Fixed assets 10 xxxxxxxx xxxxxxxx
Intangible assets 11 xxxxxxxx xxxxxxxx
Deferred tax assets 12 xxxxxxxx xxxxxxxx
Other assets 13 xxxxxxxx xxxxxxxx
xxxxxxxx xxxxxxxx

LIABILITIES
Bills payable 15 xxxxxxxx xxxxxxxx
Borrowings 16 xxxxxxxx xxxxxxxx
Deposits and other accounts 17 xxxxxxxx xxxxxxxx
Liabilities against assets subject to finance lease 18 xxxxxxxx xxxxxxxx
Subordinated debt 19 xxxxxxxx xxxxxxxx
Deferred tax liabilities 20 xxxxxxxx xxxxxxxx
Other liabilities 21 xxxxxxxx xxxxxxxx
xxxxxxxx xxxxxxxx
NET ASSETS xxxxxxxx xxxxxxxx

REPRESENTED BY
Share capital (Issued and Paid up Capital) 22 xxxxxxxx xxxxxxxx
Reserves xxxxxxxx xxxxxxxx
Surplus/ (Deficit) on revaluation of assets 23 xxxxxxxx xxxxxxxx
Unappropriated/ Unremitted profit xxxxxxxx xxxxxxxx
xxxxxxxx xxxxxxxx

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(Current (Prior
Year) Year)
Rupees in '000
5
. CASH AND BALANCES WITH TREASURY BANKS
In hand
Local currency xxxx xxxx
Foreign currency xxxx xxxx
xxxx xxxx
With State Bank of Pakistan in
Local currency current account xxxx xxxx
Foreign currency current account xxxx xxxx
Local currency deposit account (to be specified) xxxx xxxx
Foreign currency deposit account (to be specified) xxxx xxxx
xxxx xxxx
With other central banks in
Foreign currency current account xxxx xxxx
Foreign currency deposit account xxxx xxxx
xxxx xxxx
With National Bank of Pakistan in
Local currency current account xxxx xxxx
Local currency deposit account (to be specified) xxxx xxxx
xxxx xxxx
Prize bonds xxxx xxxx
xxxx xxxx

(Current (Prior
Year) Year)
Rupees in '000
6
. BALANCES WITH OTHER BANKS
In Pakistan
In current account xxxx xxxx
In deposit account xxxx xxxx
xxxx xxxx
Outside Pakistan
In current account xxxx xxxx
In deposit account xxxx xxxx
xxxx xxxx
xxxx xxxx

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8. INVESTMENTS Current Year

8.1 Investments by type: Rupees in '000

Held-for-trading securities
Federal Government Securities xxxx
Provincial Government Securities xxxx
Shares xxxx
Non Government Debt Securities xxxx
Foreign Securities xxxx
Others (to be specified) xxxx
xxxx
Available-for-sale securities
Federal Government Securities xxxx
Provincial Government Securities xxxx
Shares xxxx
Non Government Debt Securities xxxx
Foreign Securities xxxx
Others (to be specified) xxxx
xxxx
Held-to-maturity securities
Federal Government Securities xxxx
Provincial Government Securities xxxx
Non Government Debt Securities xxxx
Foreign Securities xxxx
Others (to be specified) xxxx
xxxx

Total Investments xxxx

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(Current Year)

Rupees in '000
8.2 Investments by segments:

Federal Government Securities:

Market Treasury Bills xxxx
Pakistan Investment Bonds xxxx
Ijarah Sukuks xxxx
Others ( All investments to be
specified) xxxx
xxxx
Provincial Government Securities xxxx
Shares:
Listed Companies xxxx
Unlisted Companies xxxx
xxxx
Non Government Debt Securities
Listed xxxx
Unlisted xxxx
xxxx
Foreign Securities
Government securities xxxx
Non Government Debt securities xxxx
Equity securities xxxx
xxxx

Total Investments xxxx

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Total
9. ADVANCES:
Current
Prior Year
Year
Rupees in '000

Loans, cash credits, running finances, etc. 9.1 xxxx xxxx

Islamic financing and related
assets xxxx xxxx
Bills discounted and purchased xxxx xxxx
Advances - gross xxxx xxxx

(Current (Prior
Year) Year)
10. FIXED ASSETS Rupees in '000
Capital work-in-
progress 10.1 xxx xxx
Property and
equipment 10.2 xxx xxx
xxxx xxxx
Capital work-in-
10.1 progress
Civil works xxx xxx
Equipment xxx xxx
Advances to
suppliers xxx xxx
Others (to be
specified) xxx xxx
xxxx xxxx

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10. Property and
2 Equipment
Electric
Buildi Buildin al, office
Furnit
Leaseh ng on g on and
Freeho ure Tot
old Freeh Leaseh comput
ld land and al
land old old er
fixture
land land equipm
ent
At December
31, 20X1
Cost / Revalued xxx xxx xxx xxx xxx xxx
amount xxx
Accumulated xxx xxx xxx xxx xxx xxx
depreciation xxx
xxx xxx xxx xxx xxx xxx
Net book value xxx
Rate of
depreciation
(percentage)

13. OTHER ASSETS:

Income / mark-up accrued
Advances, deposits, advance rent and other prepayments
16 BORROWINGS (Current (Prior
Year) Year)
Rupees in '000
Secured
Borrowings from State Bank of Pakistan
Under export refinance scheme xxx xxx
Under Locally Manufactured Machinery xxx xxx
(LMM) scheme
Others (to be specified) xxx xxx
xxx xxx

Repurchase agreement borrowings xxx xxx

Borrowings from directors (including chief xxx xxx
executive) of the bank
Others (to be specified) xxx xxx
Total secured xxx xxx
Unsecured
Call borrowings xxx xxx

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Overdrawn nostro accounts xxx xxx
Others (to be specified) xxx xxx
Total unsecured xxx xxx

xxx xxx
17. DEPOSITS AND OTHER ACCOUNTS
Current Year
In Local In Foreign
Total
Currency currencies
Rupees in '000
Customers
Current deposits xxx xxx xxx
Savings deposits xxx xxx xxx
Term deposits xxx xxx xxx
Others xxx xxx xxx
xxx xxx xxx
Financial Institutions
Current deposits xxx xxx xxx
Savings deposits xxx xxx xxx
Term deposits xxx xxx xxx
Others xxx xxx xxx
xxx xxx xxx
xxx xxx xxx
21. OTHER LIABILITIES
Mark-up / return / interest payable
Unearned commission income
Accrued expenses
Unclaimed / dividend payable
Insurance payable

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Charts of Accounts in Banking Companies
Particulars / Accounts Groups
CASH AND BALANCES WITH
CASH AND BALANCES TREASURY BANKS
CASH AND BALANCES WITH
Cash in hand TREASURY BANKS
CASH AND BALANCES WITH
Deposit in transit TREASURY BANKS
Balance with State bank of Pakistan in Local CASH AND BALANCES WITH
Currency Current Accounts TREASURY BANKS
Balance with State bank of Pakistan in Foreign CASH AND BALANCES WITH
Currency current Accounts TREASURY BANKS
Balance with State bank of Pakistan in Cash CASH AND BALANCES WITH
Reserve Accounts TREASURY BANKS
Balance with State bank of Pakistan in Local CASH AND BALANCES WITH
Collection Account TREASURY BANKS
Balance with State bank of Pakistan in Local CASH AND BALANCES WITH
Collection Account TREASURY BANKS
Balance with National Bank of Pakistan in Local CASH AND BALANCES WITH
Currency Current Account TREASURY BANKS
Prize Bond Prize Bond
BALANCES WITH OTHER in Pakistan in current BALANCES WITH OTHER
accounts BANKS
BALANCES WITH OTHER outside Pakistan in BALANCES WITH OTHER
current accounts BANKS
LENDINGS TO FINANCIAL
Repurchase agreement lendings INSTITUTIONS
Securities held as collateral against amounts due LENDINGS TO FINANCIAL
from financial institutions INSTITUTIONS
LENDINGS TO FINANCIAL
Market Treasury Bills INSTITUTIONS
Shares Held-for-trading securities Investments by type:
Federal Government Securities available-for-sale
securities Investments by type:
Shares available-for-sale securities Investments by type:
Non Government Debt Securities available-for-
sale securities Investments by type:

Foreign Securities available-for-sale securities Investments by type:

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Units of Mutual Funds available-for-sale
securities Investments by type:
Federal Government Securities Held-to-maturity
securities Investments by type:

Foreign Securities Held-to-maturity securities Investments by type:

Associates Associates
invested in Market Treasury Bills issued by
Federal Government Investments by segments:
invested in Pakistan Investment Bonds issued by
Federal Government Investments by segments:
invested in Foreign Currency Bonds issued by
Federal Government Investments by segments:
invested in Naya Pakistan Certificates issued by
Federal Government Investments by segments:
invested in Naya Pakistan Certificates issued by
Federal Government Investments by segments:
invested in Term Finance Certificates issued by
Federal Government Investments by segments:
Purchased Shares of listed Company Investments by segments:
Purchased Shares of Oil and Gas Exploration
Companies Investments by segments:

Purchased Shares of Sugar and Allied Industries Investments by segments:

Purchased Shares of Textile Composite Investments by segments:
Purchased Shares of Insurance Investments by segments:
Purchased Shares of Fertiliser Investments by segments:
Purchased Shares of unlisted Company Investments by segments:
Purchased Shares of Society for Worldwide
Interbank Financial Telecommunication
(S.W.I.F.T) Investments by segments:

Purchased Shares of Khushhali Bank Limited Investments by segments:

Purchased Shares of 1LINK (Guarantee) Limited Investments by segments:

purchased Debt securities of listed company Investments by segments:

purchased Debt securities of Unlisted company Investments by segments:

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Purchased Securities issued by Govt of Egypt Investments by segments:

Purchased Securities issued by Govt of Sirilanka Investments by segments:

Purchased Securities issued by Govt of turkey Investments by segments:

Cash Credit Advances
Running Finance Advances
Bill Discounted and Purchased Advances
Islamic Finances and other assets Advances
Advances Advances
Provision against advances Advances
Civil works in Process Capital work-in-progress

Advance payment for purchase of equipments Capital work-in-progress

Advance payment towards suppliers, contractors
and property Capital work-in-progress
Consultants’ fee and other charges Capital work-in-progress
Leasehold Land Property and equipment
Building and Leasehold Land Property and equipment
Furniture and Fixture Property and equipment
Electrical, office and computer equipment Property and equipment
Vehicle Property and equipment
Accumulated depreciation Property and equipment
Computer Software INTANGIBLE ASSETS
Accumulated Amortization INTANGIBLE ASSETS
Bill Payable Borrowing
Borrowings from the State Bank of Pakistan Under
export refinance scheme Borrowing
Borrowings from the State Bank of Pakistan Under
renewable energy Borrowing
Borrowings from the State Bank of Pakistan Under
long term financing for imported and locally
manufactured plant and machinery Borrowing

Borrowings from the State Bank of Pakistan Under

modernization of small and medium enterprises Borrowing
Borrowings from the State Bank of Pakistan Under
women entrepreneurship Borrowing

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Borrowings from the State Bank of Pakistan Under
financing facility for storage of agricultural Borrowing
produce

Borrowings from the State Bank of Pakistan under

Borrowing
refinance facility for combating COVID-19

Borrowings from the State Bank of Pakistan Under

Borrowing
temporary economic refinance facility
Repurchase agreement borrowings Borrowing
Borrowings from financial institutions Borrowing
Unsecured Borrowings Borrowing
DEPOSITS AND OTHER
Customer Current deposits
ACCOUNTS
DEPOSITS AND OTHER
Customer Savings deposits
ACCOUNTS
DEPOSITS AND OTHER
Customer Term deposits
ACCOUNTS
DEPOSITS AND OTHER
Current deposits of Financial Institution
ACCOUNTS
DEPOSITS AND OTHER
Savings deposits of Financial Institution
ACCOUNTS
DEPOSITS AND OTHER
Term deposits of Financial Institution
ACCOUNTS
SUBORDINATED DEBT SUBORDINATED DEBT
Mark-up / return / interest payable in local
OTHER LIABILITIES
currency
Unearned commission income OTHER LIABILITIES
Accrued expenses OTHER LIABILITIES
Unclaimed / dividend payable OTHER LIABILITIES
Payable to defined benefit plan OTHER LIABILITIES
Charity payable OTHER LIABILITIES
Payable to SBP / NBP OTHER LIABILITIES
Insurance payable OTHER LIABILITIES
Authorised Capital Capital
Issued, subscribed and paid up capital Capital

SURPLUS ON REVALUATION OF ASSETs Surplus

General Reserves Reserve

Debentures Redemption Reserve Reserve
Dividend Equalization Reserve Reserve

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Unappropriated Profit Unappropriated Profit
Unremitted Profit Unappropriated Profit

Practice Questions related with Profit and Loss Accounts

Q#1: From the following particulars, prepare a profits and loss A/c of Fancy Bank Ltd. for the
year ended on 31 December 2010:
Particulars Rupees Particulars Rupees
(in lakhs) (in lakhs)
Interest on Loans 130 Interest on Cash Credits 112.5
Interest on Fixed Deposits 140 Rent and Taxes 10
Rebate on Bills Discounted 25 Interest on Overdrafts 28
Commission Charged to 4.5 Director’s and Auditor’s Fees 2
Customers
Establishment Expenses 28 Interest on Savings Bank A/c 35
Discount on Bills Discounted 100 Postage & Email 1
Interest on Current A/c 22.5 Sunday Charges 1
Printing & Advertisements 1.5

Q#2: From the following information, prepare the profit and loss A/c of Merchant Bank
Ltd. for the year ended on 31 March 2011 in the prescribed form:
Particulars Rupees

Interest on Loan 518,000

Interest on Fixed Deposits 550,000
Rebate on Bills Discounted Required 98,000
Commission 16,400
Establishment 108,000
Discount on Bills Discounted 390,000
Interest on Cash Credit 446,000
Interest on Current Account 84,000
Rent and Taxes 36,000
Interest on Overdraft 308,000

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Director’s Fees 6,000
Auditor’s Fees 2,400
Interest on Savings Bank Deposits 136,000
Postage, Phone, Internet Expenses 2,800
Printing and Stationery 5,800
Sundry Charges 3,400
Bad debts to be written off amounted to 80,000. Provision for taxation may be made @
50%. Balance of profit from last year was 240,000. The Directors have recommended a dividend
of 40,000 for the shareholders.
Q#3: The following figures are extracted from the books of Lucky Bank Ltd. for the year
ending on 31 March 2011:
Particulars Rupees

Interest and Discount Received 6,090,000

Interest Paid on Deposits 3,606,000
Issued and Subscribed Capital 1,500,000
Reserve under Section 17 1,050,000
Commission, Exchange and Brokerage 270,000
Rent Received 90,000
Profit on Sale of Investments 285,000
Salaries and Allowances 315,000
Director’s Fees and Allowances 36,000
Rent and Taxes Paid 162,000
Stationery and Printing 36,000
Postage and Phone 75,000
Other Expenses 36,000
Audit Fees 12,000
Depreciation on Bank Properties 37,500

PROF.NAEEM 22
 ACCOUNTING FOR FINANCIAL INSTITUTION
SET-02
Other information:
(i) A customer, to whom a sum of 750,000 has been advanced, has become insolvent and it is
expected that 40% can be recovered from his estate. Interest due at 15% on his debt has not been
provided in the books.
(ii) Provision for bad and doubtful debts on other debts necessary is 150,000.
(iii) Rebate on bills discounted as on 1 April 2010 is 22,500
(iv) Provide 500,000 for income tax.
(v) The directors decide to declare 10% dividend.
Required: Prepare the profit and loss A/c in accordance with law. Make necessary
assumptions, wherever necessary.
Q#4: Some of the items in the trial balance of Delhi Bank Ltd. as on 31 December 2010
were as follows:
Particulars Rupees Particulars Rupees
(in lakhs) (in lakhs)
Loan & Advances 3,575,000 Interest on Cash Credits 52,500
Current Accounts 3,300,000 Commission Earned 23,250
(Including O/D of ` 7,50,000)
Bills Discounted and 960,000 Loss on Sale of Investments 17,000
Purchased
Interest on Fixed Deposits 77,500 Salaries and Allowances 41,000
Interest on Loans 112,500 Printing and Stationery 2,250
Discount (Subject to 100,500 Interest on SB Deposits 37,500
Unexpired
Discounts ` 15,000)
Provision for Bad Debts 21,000 Auditor’s Fees 2,500
(1 January 2010)
Bad Debts 10,500 Director’s Fees 1,250
Provision for Income Tax 33,000 Interest on O/D 47,500
(1 January 2010)
Income Tax Paid for the Year 27.000
2010
You are required to prepare the P & L A/c of the bank, maintaining the provision for income tax
at 42,000 and provision for bad debts at 26,000 for the year ended on 31 December 2010.
All workings should form part of your answer.

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 ACCOUNTING FOR FINANCIAL INSTITUTION
SET-02
Q#5: The following fi gures are extracted from the books of Modern Bank Ltd. as on 31 March
2011.
Particulars Rupees

Interest and Discount Received 18,47,869

Interest Paid on Deposits 10,16,226
Commission, Exchange & Brokerage 1,00,000
Rent Received 27,500
Profi t on Sale of Investments 1,00,000
Salaries and Allowances to Staff 1,00,000
Director Fees and Allowances 15,000
Rent and Taxes Paid 50,000
Postage and Internet Expenses 25,143
Depreciation on Bank’s Property 15,000
Stationery 25,000
Preliminary Expenses 7,500
Audit Fees 2,500

The following further information are also given:

(i) A consumer to whom 500,000 has been advanced has become insolvent and it is expected that
only 50% can be recovered from his estate.
(ii) There were also other debts for which a provision of 75,000 was found necessary by the
auditors.
(iii) Rebate on bills discounted as on 31 March 2010 was 6,000 and rebate on bills discounted as
on 31 March 2011 was ` 8,000.
(iv) Provide 300,000 for income tax.
(v) Write off all preliminary expenses.

PROF.NAEEM 24
 ACCOUNTING FOR FINANCIAL INSTITUTION
SET-02
Practice Questions related with Balance Sheet

Q#1: On 31 December 2022, the following balances stood in the books of ABC Bank
Ltd., after preparation of its P & L A/c:
(Rs. in ’000)
Share Capital: Issued and Subscribed 8,000
Reserve Fund 12,200
Fixed Deposits 85,200
Savings Bank Deposits 38,000
Current Accounts 46,400
Money at Call & Short Notice 3,600
Investments 50,000
Bank Properties 5,900
Cash in Hand 760
Cash with SBP 20,000
Cash with Other Banks 12,000
Bills Discounted and Purchased 7,600
Loans, Cash Credits and Overdrafts 102,000
Bills Payable 140
Unclaimed Dividend 220
Short Loans (Borrowing from Other Banks) 9,500
Furniture 2,328
Other Assets 672
Net Profit for 2010 5,200

Q#2: From the following particulars of XYZ Bank Ltd., having its own premises,
prepare the balance sheet in the prescribed form as on 31 December 2020.
Rs. (in ’000)
Authorized Capital 20,000
Subscribed Capital and Paid Up Capital:
1,000,000 Shares of Rs.10 Each 10,000
Investments in Shares 35,000
Bills Discounted and Purchased 80,000
Profit & Loss (Cr.) 5,250
Cash with Federal Reserve System 45,000
Cash in Hand 10,000
Cash with Treasury Bank 20,000
Reserves 15,000
Cash Balances with other banks 20,000
Telegraphic Transfer Payable 4,000
Bank Drafts Payable 3,000
Other Liabilities 50

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 ACCOUNTING FOR FINANCIAL INSTITUTION
SET-02
Call Borrowings 200
Loans and Advances 50,000
Borrowings from State Bank of Pakistan 3,000
Cash Credits 50,000
Overdrafts 5,000
Current and Deposit Accounts 280,000
Investment in Govt. Securities 500
Premises (Freehold) 6,000
Accumulated Depreciation (Premises) 1,000

Q#3: From the following figures taken from the books of Commercial Bank Ltd., you
are required to draft a balance sheet as per law at 31st March 2021:
Rs. (in ’000)
10,000 Shares of Rs. 100 Each 1,000
Reserve Fund 700
Fixed Deposit Accounts 1,900
Saving Bank Accounts 6,000
Current Accounts 16,000
Money as Call and Short Notice 600
Investments in Shares of Pepsi Co. 6,000
Premises at cost 2,600
Accumulated Depreciation 200
Cash in Hand (Local Currency) 80
Profit and Loss Account (CR.) 1,060
Investment in Securities (Govt. of Turkey) 1,500
Cash in Hand (Foreign Currency) 40
Cash Balance with State Bank of Pakistan 3,000
Borrowings from CEO 1,300
Lending to Financial Institutions 2,500
Cash Balances with Other Commercial Banks 2,600
Cash Balance with Royal Bank of Scotland 1,500
Repurchase Agreement Borrowings 1,200
Borrowed from Banks 1,400
Bills Discounted and Purchased 1,200
Overdrawn Nostro Accounts 1,000
Bills Payable 1,600
Subordinated Debt 2,500
Loans, Overdrafts and Cash Credits 14,000
Unclaimed Dividends 60
Prize Bond 500
Sunday Creditors 70

PROF.NAEEM 26
 ACCOUNTING FOR FINANCIAL INSTITUTION
SET-02
(i) Allow 5% depreciation on premises on original cost.

Q.4 On 31 December 2023, the following balances stood in the books of ABC Bank Ltd.,
after preparation of its P & L A/c: You are required to prepaper Balance sheet as on
31-12-2023.
(Rs. In (Rs. In
Particulars Particulars
’000) ’000)
Balances With Other Outside 43200
Cash In Hand 150000
Pakistan In Current Accounts
Borrowings From The State Repurchase Agreement
45630
Bank Of Pakistan Under Export 68000 Borrowings
Refinance Scheme
Balance With State Bank Of Securities Held As Collateral
68900 34500
Pakistan In Cash Reserve Against Amounts Due From
Accounts Financial Institutions
Borrowings From The State
Mark-Up / Return / Interest 3450
Bank Of Pakistan Under 35000
Payable In Local Currency
Renewable Energy
Customer Current Deposits 314000 Unearned Commission Income 2300
Issued, Subscribed and Paid Up
Federal Government Securities 14800 100000
Capital
Available-For-Sale Securities
200000 Shares@ Rs.500 Each
Non-Government Debt
13640 Unremitted Profit
Securities Available-For-Sale 89540
Securities
95640 Foreign Securities Held-To- 22400
Customer Term Deposits
Maturity Securities
Invested In Pakistan Investment
23404
Accrued Expenses 145 Bonds Issued By Federal
Government
6540 Purchased Shares Of Textile 28400
Surplus On Revaluation Of Asset
Composite
General Reserves 3256 Cash Credit 84311
Purchased Shares Of Oil And Gas 31000 11036
Vehicle
Exploration Companies
Islamic Finances And Other Advance Payment For Purchase Of 45000
56000
Assets Equipment
Electrical, Office And Computer 98500 Accumulated Depreciation
150
Equipment
Computer Software 8650 Accumulated Amortization 90

Accumulated Depreciation On;

Vehicle 50
Electrical, Office and Computer Equipment 100

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 ACCOUNTING FOR FINANCIAL INSTITUTION
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Suggested Total of B/S (763501)
Q.5 On 31 December 2022, the following balances are derived from the books of
United Bank Limited after preparation of its P & L A/c: You are required to prepare
Balance sheet as on 31-12-2022.

Particulars (Rs. In Particulars (Rs. In

’000) ’000)
Cash And Balances 172500 Deposit In Transit 79235
Unclaimed / Dividend Payable 1211 Subordinated debt 5433
Prize Bond 39675 Balance With State Bank Of 49680
Pakistan In Local Collection
Account
Borrowings From The State 78200 Unearned Commission 2645
Bank Of Pakistan Under Income
Modernisation Of Small And
Medium Enterprises
Repurchase Agreement Lending 15686 Balance With National Bank Of 17020
Pakistan In Local Currency
Current Account
Issued, Subscribed and Paid Up 115000 Unsecured borrowings 40250
Capital
115000 shares @ of Rs.1000
each
Repurchase Agreement 52475 Market Treasury Bills 25760
Borrowings
Purchased Shares Of Listed 26915 Building and Leasehold Land 113275
Company
Current Deposits Of Financial 109986 Running Finance 35650
Institution
Purchased Shares Of Insurance 32660 Customer Current Deposits 361100
Furniture And Fixture 49500 Islamic Finances And Other 64400
Assets
Cash Credit 96958 Vehicle 32691
Computer Software 25132 Accumulated Amortization 104

Mark-Up / Return / Interest 3968 Advance Payment Towards 76750

Payable In Local Currency Suppliers, Contractors And
Property
Insurance Payable 167 Surplus on revaluation of 7521
assets
Dividend Equalization Reserve 3744 Un-appropriated Profit 102971
Customer Savings Deposits 68540

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 ACCOUNTING FOR FINANCIAL INSTITUTION
SET-02
Accumulated depreciation on;
Building and Leasehold Land 69
Furniture and Fixture 45
Vehicle 59
Suggested Total of B/S (953210)

PROF.NAEEM 29