Every bank has to publish its balance sheet at fixed intervals as laid down by the law of the country. The real financial position of the bank can be known only after an analysis of its balance sheet. The balance sheet also tells us about the assets as well as the liabilities of the bank.
Specimen of a Balance Sheet of a commercial bank may be as under:-
Liabilities
The liabilities refer to those items on account of which the bank is liable to pay an amount to others. They represent others claims on the bank. The various items on the liabilities side of the balance sheet are the following:-1. Capital
Capital of a commercial bank may take the various forms as under:(a). Authorized Capital
The authorized capital is the maximum amount of capital that the bank is authorized to raise from the public in the form of shares. Generally speaking, the entire authorized capital is not raised from the public.(b). Issued Capital
That part of the authorized capital which is issued in the form of shares for public subscription is know as issued capital.(c). Subscribed Capital
Subscribed capital is that part of the issued capital which is actually subscribed by the public. There is no guarantee that the whole of the issued capital shall be subscribed by the public. A part of the subscribed capital may remain unsubscribed for a number of years.(d). Paid-up capital
It is that part of the subscribed capital which the subscribers are actually called upon to pay. Generally speaking only a part of the subscribed capital is called to be paid and the other part is kept as a reserve.The bank raised capital from the public by issuing various types of shares such as ordinary, Preferences, deferred shares etc.
2. Reserve Fund
Every bank maintains a reserve fund. This fund is constituted by the accumulated profits of the bank.It is used by the bank to offset its unexpected losses in certain years. The reserve fund of the bank should be equal to its paid-up capital. The bank is required by law to transfer 20 per cent of its annual profits to the reserve fund does not become equal to the paid-up capital.3. Deposits
This includes those deposits which are received by the bank from the public. In fact, the deposits constitute the working capital of the bank. After keeping a certain cash reserve, the bank invests the balance in securities or utilizes it for giving loans and advances to its customers.4. Loans From Other Banks.
Under this head, the bank shows those loans which it has received from other banks. As is well known, the bank takes loans from other banks especially the central bank, in certain extraordinary circumstances.5. Bills Payable
Under this head are included those bills which it is the responsibility of the bank to pay from its resources.6. Bills For Collection
Under this head, the bank shows the total amount of those bills which it has accepted from its customers for collection. the amount when collected is credited to the accounts of the customers. Hence, the amount under this head is shown in both the columns of the balance sheet.7. Acceptance For Endorsements
An important function of the bank, as already stated, is that of accepting or endorsing the bills of exchange on behalf of the customers. When the bank accepts the bill of exchange on behalf of its customers, it simply means that the bank accept the responsibility of paying the bill in case the customer fails to settle it at the time of its maturity. Hence, this is a liability for the bank.8. Contingent Liabilities
Under this head, the bank shows those liabilities which are not known in advance or which are unforeseeable. Every bank makes some provision for these liabilities in its balance sheet.9. Profit & Loss
The profit earned by the bank in the course of the year is shown under this head. Since the profit is payable to the shareholders, it represents the liability of the bank.Assets
We shall now analyses the various items on the assets side. The term "assets" refers to those items on account of which the bank is to receive an income others. The various items that figure on the assets side of the balance sheet are as follows:1. Cash
Every bank has to keep some cash with itself to meet the requirements of its depositors. In addition, the bank also maintains some cash reserve with the other banks or with the Central Bank of the country.2. Call Money
Under this head are shown those loans which are repayable to the bank on demand. Such types of loans are given to the customers for a maximum period of 15 days and the bank can recall them at its own option. The call loans are of three types; (1). Loans which are given for one night only; (2) Loans which can be recalled by the bank without notice; and (3) Short-period loans which are repayable to the bank within 15 days.3. Bills Discounted
Under this head, the bank shows the total amount of those exchange and treasury bills which it has discounted itself. The bank collects the amount of these bills when they mature. In case, the bank needs cash before the maturity of these bills, it can be get them re discounted by the Central Bank of the country.4. Bills For Collection
As already stated, this item figures both on the liabilities as well as on the assets side. Before collection, these bills represent the assets but after collection they become the liabilities of the bank. Hence, this item appears on both sides of the balance sheet.5. Investments
Under this head, the bank shows the total amount of its profit- yielding assets. The different types of investments are shown separately in the balance sheet. The amount invested in government and non-government securities is also indicates separately.6. Loans & Advances
Under this head, the bank shows the total amount of loans and advances that it has extended to its customers. These loans and advances are given against certain physical securities offered by the borrowers. This item represents the "Fourth Line of Defense" of the bank.7. Building, Furniture And Other Properties
Under this head is included the total volume of the movable and immovable properties of the bank. It includes the office buildings, furniture, stationery and other miscellaneous assets of the bank. This is often referred to as "dead stocks".The relative importance of different types of assets or the proportion in which the bank distributes its total resources among the different assets varies form country to country, depending upon the economic and financial situations in the country. It is, therefore, not possible to lay down certain ratios or norms of distribution to be followed by all the banks in all the countries and at all times.
