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BFN 121 Balance Sheet.doc - DEPARTMENT OF BANKING AND...

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DEPARTMENT OF BANKING AND FINANCECOLLEGE OF DEVELOPMENT STUDIESCOVENANT UNIVERSITY, OTALECTURE NOTESTOPIC:THE BANK BALANCE SHEET STRUCTURE(DEPOSIT MONEY BANKS)INTRODUCTIONDeposit Money Banks plays a very significant role in the economic development of Nigeria, asthey perform the key function of financial intermediation along with other types of banks thatinterplay within the nation’s economy.The place of deposit money banks in the economy is prominent and pervading because of theirshare number and the magnitude of the funds they mobilized from the public and on-lend tobusiness both private and corporate for production of goods and services.The operations of banks calls for public interest for many reasons, one of which is to ensure thatthe funds invested in them by shareholders and depositors in various accounts operated by themare put to good use.The performance of banks are therefore of great concern to both the depositors, shareholders andGovernment Monetary Authorities in order to ensure that all stake holders do not suffer loss as aresult of possible distress in the banking system.The Central Bank in particular has put in placea robust system of monitoring the activities of banks through a report system known as Returnsto the Central Bank which the banks must compulsorily render at weekly, monthly, quarterly, bi-annually and annual intervals.These Returns are scrutinized by the CBN and NDIC to ensurethat their contents agree with the actual performances of the banks in the various areas for whichinformation has been called for.The accounting system of banks is a major area of concern to shareholders, customers andmonetary authorities.Their published accounts are expected to guide would-be investors,encourage existing investors, and assist the Monetary Authorities to assess the banks’performances accurately as well as plan adequately for the overall development of the bankingsystem and the economy in general.1
All banks adopt a uniform system in publishing their accounts.Three major segments of thebanks accounting system call for attention i.e.(i)Trading Profit and Loss Account(ii)Funds flow (Sources and Uses of funds)(iii)Balance sheetThough our concern for now is the balance sheet, it is necessary to high light, the majorcomponents of the trading profit and loss account and the funds flow aspects of the banksaccounting system.The Trading /Profit and Loss Account:This essentially reports the trading activities of thebank during the financial year in view.It records all earnings in the form of interests onloans/advances, commission earned on turn over (COT) on all current andoverdraft accountsand other earnings, particularly from foreign exchange transactions and other businesses of thebank.All these are matched with expenses incurred on interest paid on deposits, overheadexpenses in the maintenance of manpower and assets, plus all other trading expenses includingdepreciation and provision on bad credits.

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Term
Spring
Professor
NoProfessor
Tags
Balance Sheet, Fractional reserve banking, Money Banks, BANK BALANCE SHEET STRUCTURE

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