Corporate Accounting and Auditing · Accounts of Banking, Electricity and Insurance Companies

Final Accounts of Banking Companies (Form A and Form B)

Updated 10 October 2026 · Fact-checked

Final accounts of a banking company are its Balance Sheet (Form A) and Profit and Loss Account (Form B) in the Third Schedule of the Banking Regulation Act, 1949. To solve a question, adjust the trial balance first, build the income and expense schedules, find net profit, appropriate it, then prepare Form A so that both sides agree.

Understand Final Accounts of Banking Companies

A bank does not use the Schedule III format that other companies use. Under Section 29 of the Banking Regulation Act, 1949, every banking company incorporated in India must prepare a balance sheet and a profit and loss account as on the last working day of the year (or of the twelve-month period notified by the Central Government). They must be in the Forms set out in the Third Schedule, or as near to them as circumstances admit.

Form A is the Balance Sheet. The liabilities side has five heads: Capital, Reserves and Surplus, Deposits, Borrowings, and Other Liabilities and Provisions. The assets side has six: Cash and Balances with RBI, Balances with Banks and Money at Call and Short Notice, Investments, Advances, Fixed Assets, and Other Assets. Contingent liabilities are shown below the balance sheet and are not added into its totals.

Form B is the Profit and Loss Account. Income is Interest Earned plus Other Income. Expenditure is Interest Expended, Operating Expenses, and Provisions and Contingencies. The difference is the net profit, to which the profit brought forward is added. The total is then appropriated to statutory reserve, other reserves, proposed dividend and the balance carried to the balance sheet.

Each main head points to a schedule. In Form A, Schedules 1 to 5 cover liabilities, 6 to 11 cover assets and 12 covers contingent liabilities. In Form B, Schedule 13 is Interest Earned, 14 is Other Income, 15 is Interest Expended and 16 is Operating Expenses. Exam questions ask for the main statements and often for selected schedules.

The Act also says the Companies Act requirements on balance sheet and profit and loss account apply to a bank so far as they are not inconsistent with the Banking Regulation Act. Under Section 29(2), the statements are signed by the manager or principal officer. Where there are more than three directors, at least three directors also sign. Where there are not more than three, all of them sign. The Central Government may amend the Forms by notification, after giving at least three months' notice.

Key rules to remember

Interest earned (Schedule 13): Interest/discount on advances and bills + Income on investments + Interest on balances with RBI and other inter-bank funds + Others; Adjust discount on bills for rebate: add opening rebate, deduct closing rebate.
Rebate on bills discounted: Income for the year = Discount received + Opening rebate − Closing rebate; Closing rebate is the unearned discount. Show it under Other Liabilities and Provisions (Schedule 5).
Total expenditure: Interest expended (Sch. 15) + Operating expenses (Sch. 16) + Provisions and contingencies; Interest on deposits and borrowings goes to Schedule 15, not Schedule 16.
Net profit: Total income − Total expenditure; Income tax provision is part of Provisions and Contingencies, so net profit in Form B is after it.
Profit available for appropriation: Net profit for the year + Profit brought forward; If there is a loss, deduct it from the amount brought forward.
Statutory reserve: Transfer = at least 20% of the year's net profit; Transfer this before declaring any dividend. Use the rate or amount given in the question.
Balance carried to balance sheet: Profit available − Statutory reserve − Other reserves − Proposed dividend; Shown in Schedule 2 under Balance in Profit and Loss Account.
Form A check: Total of Capital and Liabilities = Total of Assets; Contingent liabilities and bills for collection are outside this total.

How to solve Final Accounts of Banking Companies questions

Use this order for any final accounts question on a bank. It prevents missed adjustments and keeps the two statements linked.

1Read the adjustments first. Mark rebate on bills discounted, accrued interest, outstanding expenses, depreciation, tax provision, dividend and any transfer to reserves.
2Compute Schedule 13 (Interest Earned). Apply the rebate adjustment to the discount on bills before adding investment income and other interest.
3Compute Schedule 14 (Other Income) from commission, exchange, brokerage and profit on sale of investments or assets.
4Compute Schedule 15 (Interest Expended) from interest on deposits and borrowings, and Schedule 16 (Operating Expenses) from salaries, rent, printing, fees, depreciation and other expenses.
5Prepare Form B. Add Schedules 13 and 14, deduct Schedules 15 and 16, deduct provisions and contingencies to get net profit, add profit brought forward, then show the appropriations.
6Prepare the schedules for Form A. Group deposits as demand, savings and term. Place closing rebate, bills payable, tax provision and proposed dividend under Other Liabilities and Provisions as the question directs.
7Prepare Form A with the appropriate schedule numbers. Add the updated reserves and the balance of profit carried forward, then check that both sides agree.
8Show contingent liabilities (Schedule 12) below the balance sheet. Add working notes for every figure you derived.

Quickest way: Skeleton-first method

When to use it: Use it when time is short and the trial balance is long, which is common in the 14-mark question.

Draw the Form B skeleton with Schedule numbers 13 to 16 before touching the data.
Go through the trial balance once, writing each item's schedule number next to it (13, 14, 15, 16, or a Form A schedule).
Settle the few adjustments next, such as rebate, depreciation and tax, and note their effect on the schedule totals.
Total the schedules, fill Form B, then fill Form A and check that the two sides agree.
If Form A does not agree, recheck the closing balance of profit carried forward, then the rebate, then the tax provision.

Common mistakes in Final Accounts of Banking Companies

Treating the whole discount on bills as income of the year.
Students forget that part of the discount received relates to the next period.
Fix: Deduct the closing rebate from income and show it as a liability in Schedule 5. If an opening rebate is given, add it to income.
Showing interest paid on deposits under Operating Expenses.
Both are expenses, so they get lumped together.
Fix: Interest on deposits and borrowings goes to Schedule 15. Schedule 16 is for staff, rent, printing, fees, depreciation and similar costs.
Skipping the transfer to statutory reserve, or computing it on profit before tax.
The transfer is a statutory requirement and is not always stated in the data.
Fix: If the question mentions it, compute at least 20% of the year's net profit as given. Follow the question's instruction and state your assumption.
Adding contingent liabilities into the balance sheet total.
Schedule 12 appears below the liabilities and looks like part of them.
Fix: Show contingent liabilities and bills for collection separately. They never enter the total of Form A.
Mixing up Form A and Form B, or using the Schedule III format.
Students are used to the company format from other chapters.
Fix: Remember that A is the balance sheet and B is the profit and loss account. Write the Form name and schedule numbers clearly on the answer.

Worked examples

Example 1

From the following (₹ in lakh) of a banking company for the year ended 31 March, prepare the Profit and Loss Account in Form B. Interest and discount received 1,200; interest on investments 300; interest on deposits 700; interest on borrowings from RBI 50; commission and exchange 80; profit on sale of investments 20; salaries 150; rent and taxes 40; printing 10; directors' fees 5; auditors' fees 5; depreciation 20; postage 5; other expenses 15. Adjustments: rebate on bills discounted: opening 20, closing 30 (the interest and discount received of 1,200 is before this adjustment). Provision for tax 50. Profit brought forward 40. Transfer to statutory reserve 20% of net profit. Proposed dividend 100.

Show the solution

Schedule 13: Interest and discount on advances = 1,200 + 20 (opening rebate) − 30 (closing rebate) = 1,190. Add income on investments 300. Interest earned = 1,490.
Schedule 14: Other income = 80 + 20 = 100.
Total income = 1,490 + 100 = 1,590.
Schedule 15: Interest expended = 700 + 50 = 750.
Schedule 16: Operating expenses = 150 + 40 + 10 + 5 + 5 + 20 + 5 + 15 = 250.
Provisions and contingencies (tax) = 50. Total expenditure = 750 + 250 + 50 = 1,050.
Net profit = 1,590 − 1,050 = 540.
Add profit brought forward 40, giving 580 available for appropriation.
Statutory reserve = 20% × 540 = 108. Proposed dividend = 100. Balance carried to balance sheet = 580 − 108 − 100 = 372.

Answer: Interest earned ₹1,490 lakh; other income ₹100 lakh; total income ₹1,590 lakh; total expenditure ₹1,050 lakh; net profit ₹540 lakh. After the appropriations, ₹372 lakh is carried to the balance sheet.

Example 2

Continuing Example 1 (₹ in lakh), prepare the Balance Sheet in Form A. Capital 500; statutory reserve before the current year's transfer 300; share premium 100; deposits: demand 900, savings bank 1,500, term 2,600; borrowings from RBI 200; bills payable 60. Cash in hand 80; balance with RBI 420; balances with other banks 300; investments 2,000; advances 3,000; fixed assets 520; other assets as per the balancing figure. Show the tax provision, closing rebate and proposed dividend in Other Liabilities and Provisions.

Show the solution

Schedule 1 Capital = 500.
Schedule 2 Reserves and Surplus: statutory reserve = 300 + 108 = 408; share premium 100; balance in Profit and Loss Account 372. Total = 880.
Schedule 3 Deposits = 900 + 1,500 + 2,600 = 5,000.
Schedule 4 Borrowings = 200 (borrowings in India from RBI).
Schedule 5 Other Liabilities and Provisions = bills payable 60 + rebate on bills discounted 30 + provision for tax 50 + proposed dividend 100 = 240.
Total capital and liabilities = 500 + 880 + 5,000 + 200 + 240 = 6,820.
Schedule 6 Cash and Balances with RBI = 80 + 420 = 500. Schedule 7 Balances with Banks = 300. Schedule 8 Investments = 2,000. Schedule 9 Advances = 3,000. Schedule 10 Fixed Assets = 520.
Schedule 11 Other Assets = 6,820 − (500 + 300 + 2,000 + 3,000 + 520) = 6,820 − 6,320 = 500.

Answer: Total capital and liabilities = total assets = ₹6,820 lakh. Other assets (balancing figure) = ₹500 lakh. Contingent liabilities, if any, are shown separately.

Exam tips

Write the Form name and schedule numbers on the answer. Form headings and the correct grouping carry marks, not only the final profit figure.
Read the adjustments line by line. The rebate on bills discounted, tax provision and statutory reserve are the usual hidden items.
Keep schedule workings as numbered notes. If the final figure is wrong, you still earn step marks for correct schedules.
For MCQs, learn the schedule numbers and the heads under each form. Many questions ask which schedule an item belongs to, or whether an item sits in Form A or Form B.
Check that Form A balances before you finish. A mismatch usually points to the closing profit balance or an item shown on the wrong side.

Practice questions from Accounts of Banking, Electricity and Insurance Companies

Final Accounts of Banking Companies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Final Accounts of Banking Companies: frequently asked questions

Which forms does the Banking Regulation Act prescribe for bank final accounts?

Section 29 requires a balance sheet and a profit and loss account in the Forms set out in the Third Schedule, or as near thereto as circumstances admit. Form A is the balance sheet and Form B is the profit and loss account. The Central Government can amend the Forms by notification after at least three months' notice.

Who signs the final accounts of a banking company?

For a bank incorporated in India, the manager or principal officer signs. Where there are more than three directors, at least three of them also sign. Where there are not more than three directors, all of them sign.

Where does rebate on bills discounted appear in a bank's accounts?

Closing rebate is the unearned portion of the discount. You deduct it from the income of the year and show it as a liability under Other Liabilities and Provisions (Schedule 5). The opening rebate of the previous year is added to the current year's income.

Is contingent liability part of the bank balance sheet total?

No. Schedule 12 is shown below the balance sheet as a separate disclosure. It is not added into total liabilities or total assets.