CMA Intermediate · Corporate Accounting and Auditing
Accounts of Banking, Electricity and Insurance Companies
This chapter teaches you to prepare final accounts for regulated entities whose formats are fixed by law, not by Schedule III. For banks you use the Third Schedule formats and NPA norms. For electricity companies you use the regulated-business approach. For general insurers you use revenue account, profit and loss account and balance sheet formats.
What this chapter covers
This chapter covers three regulated sectors. Each has its own prescribed format for final accounts, because the usual company format does not fit a business that handles public deposits, public electricity supply or insurance risk. You learn the format, the special rules that feed into it, and the adjustments that come before the final figures.
For banks, you prepare the profit and loss account and balance sheet, and you apply income recognition and asset classification norms. The NPA part is the most numerical and the most tested portion of the banking topic. For electricity companies, you work with a regulated business where revenue and returns are tied to the regulatory framework, so the accounts show items such as capital base and reasonable return. For general insurers, you prepare revenue accounts by class of business, then the profit and loss account and balance sheet.
This chapter sits within Paper 10 alongside company accounts and auditing topics. It builds on your Paper 6 and company accounts basics: adjustments, provisions, and the habit of presenting figures in a fixed layout. The skill here is the same as in other final accounts: place each item in the correct head and show working notes.
Questions from this chapter often ask for a full set of final accounts or a classification and provisioning computation, and both reward a neat layout and clear working notes. The content is rule-based, so marks depend on following the prescribed format and applying each norm exactly. A student who learns the formats and practises a few NPA and insurance problems can score steadily in both the compulsory MCQ section and the written questions, which makes the effort well spent.
Accounts of Banking, Electricity and Insurance Companies: topics in the order to study them
- 1Final Accounts of Banking CompaniesStart here because it sets up the idea of a prescribed format with schedules, which the other topics repeat.
- 2Income Recognition and Asset Classification (NPA)It follows banking final accounts because the provision and the income you leave out feed straight into the bank's profit and loss account.
- 3Accounts of Electricity CompaniesTake it after banking because it is a separate, shorter, more conceptual topic that needs fresh attention and a different format.
- 4Final Accounts of General Insurance CompaniesLeave it last because it has the most statements, including class-wise revenue accounts, and you need your format discipline by then.
How to prepare Accounts of Banking, Electricity and Insurance Companies
Treat this chapter as a formats-plus-rules chapter. First fix the layouts in your memory, then practise the adjustments that fill them.
- Learn the bank profit and loss account and balance sheet layouts head by head, and write them from memory until you stop missing heads.
- Study the main banking adjustments such as interest on advances, rebate on bills discounted and provisions, and note which head each one affects.
- Learn the NPA categories, the time test for each, and the provisioning approach. Then solve small classification problems before attempting full ones.
- Read the electricity company topic for its concepts and layout, and make a one-page note of the main terms and statements.
- For insurance, learn the revenue account, profit and loss account and balance sheet layouts, then practise the adjustments for claims, premium and reserves.
- Attempt one full set of final accounts for each sector under timed conditions, and show working notes for every adjusted figure.
- Revise by reading your layout notes and rule lists, then solve a few MCQs on each topic to test quick recall.
Common mistakes in Accounts of Banking, Electricity and Insurance Companies
Using the general Schedule III format for a bank or insurer.
Fix: Check the entity type first, then write the layout that belongs to it before you enter any figure.
Classifying an asset wrongly in NPA problems.
Fix: Write the due date, the period overdue and the category in a small table before computing the provision.
Computing provision on the wrong base.
Fix: Note the base for each category beside its rate, and state it in your working note.
Missing the effect of an adjustment on the second statement.
Fix: After each adjustment, tick both the account and the balance sheet head it touches.
Skipping working notes in long final accounts.
Fix: Keep a short working note for every derived figure, since step marks depend on it.
Mixing up class-wise items in insurance accounts.
Fix: Prepare each class's revenue account separately, then combine only where the format requires it.
Last-day revision: Accounts of Banking, Electricity and Insurance Companies
- Banks and insurers use formats prescribed by their governing laws, not the general company format.
- Learn each statement as a list of heads in order, then fill in the figures.
- Show working notes for every adjusted figure to earn step marks.
- NPA classification depends on how long the account has stayed overdue or unrecognised.
- Income on an NPA is not recognised as income in the usual way, so check what you must exclude.
- Provision rates depend on the asset category, so memorise the categories before the rates.
- Electricity company accounts follow the regulated-business idea, so link figures to the regulatory framework.
- Insurance accounts are prepared class by class, so keep each class of business separate.
- Adjustments for outstanding items and reserves change both the revenue account and the balance sheet.
- In MCQs, read the exact wording of the term and pick the option that matches the rule, not general accounting habit.
Accounts of Banking, Electricity and Insurance Companies practice questions
- Under section 32(2) of the Banking Regulation Act, 1949, the Reserve Bank under section 27(2) requires an additional statement from a bankin…
- The text of section 32(1) of the Banking Regulation Act, 1949 refers to accounts and balance-sheet furnished in accordance with which sectio…
- A bank's interest on advances for the year is Rs 900 lakh, interest on investments is Rs 300 lakh and interest on balances with RBI is Rs 50…
- According to Section 32 of the Banking Regulation Act, 1949 as reproduced, when a banking company furnishes its accounts and balance-sheet u…
- Under the Banking Regulation Act, 1949 as reproduced, when a banking company furnishes its accounts and balance-sheet under section 31, what…
- A bank's accounts are furnished under section 31 of the Banking Regulation Act, 1949. The bank then sends the registrar copies and later als…
- Under Section 11 of the Insurance Act, 1938 (as substituted in 2015), which of the following must every insurer keep as separate accounts?
- Section 11(3) of the Insurance Act, 1938 requires the signed accounts to be accompanied by a statement and a report. Which pair correctly de…
Accounts of Banking, Electricity and Insurance Companies in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Accounts of Banking, Electricity and Insurance Companies: frequently asked questions
Which topic in this chapter should I study first?
Start with the final accounts of banking companies. It teaches you how a prescribed format works and gives you the base for the NPA topic. After that, move to NPA, then electricity, then insurance.
Is the NPA topic numerical or theoretical?
It is mainly numerical, with a rule-based theory part. You need the categories and their tests, and you then apply them to compute provisions. Practise small problems first so that full questions feel routine.
How should I prepare formats for banks and insurers?
Write each statement from memory as a list of heads, then check against your notes. Repeat until you stop missing heads. Then practise filling the format with figures from a problem.
Can I get MCQs from this chapter?
Yes. Section A has 15 compulsory MCQs of 2 marks each, and there is no negative marking. Expect questions on formats, terms and NPA rules, so keep your rule lists handy for revision.