JAIIB-AFB UNIT-13. BALANCE SHEET EQUATION : Analysis in lucid language

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This topic is very important from exam point of view as well as banker’s day to day work. From this topic 3 to 5  question generally asked in JAIIB exam. One question is fixed from this following equation :-

Assets = Capital + Liabilities

Or Liabilities=Assets – Capital

Or Capital = Assets – Liabilities

Or Assets = Equities (total claim)

-        Liabilities consist of claims of owners( =Net worth= Paid up capital + balance of reserves and surplus) and claims of outsiders.

-        As per concept of accountancy, the business and its owner are considered as to separate and distinct entities & All transactions of the business are recorded in the books of the business from the point of the business, not its owners.

Ø To understand Balance sheet  we must have  clear concept about Assets & liabilities . Following chart will help you in this.

Assets =	Capital +Liabilites
Cash Bank Bill Receivable Debtor Stock in trade Furniture Machinery Building	Capital + reserve & surplus Creditor Bill payable Outstanding expenses Bank overdraft

Nothing more than this you have to know for exam. For more clearance read transaction example from Mcmillan book.( Page-225)

Quiz-10

1.While considering loans for project financing, the promoters are required to bring in their share in the project as under:

a) 100% upfront

b) 75% upfront and remaining in stages

c) 40-50% upfront and remaining in stages

d) at the discretion of banks

e) None of the above

2.Which of the following categories of loans can be priced by banks without reference to the Base Rate?

a) DRI loans

b) Loans to members of staff

c) Loans to bank's depositors against their own deposit

d) All the above

e) None of the above

3.In case of Information Technology and Software development industry, the loans upto Rs.2 crores can be sanctioned as per:

a) MPBF method of Tandon Committee

b) Turnover method of Nayak Committee

c) Cash budget method

d) Any of the above

e) None of the above

4.Which of the following commodities are covered under RBI's restrictions under Selective Credit Control?

a) wheat and pulses

b) buffer stocks of sugar with sugar mills

c) imported oil and oil seeds

d) course grains

e) none of the above

5.With a view to preventing speculative holding of essential commodities with the help of bank credit and the resultant rise in their prices, RBI can impose restrictions on advances (called Selective Credit Control) against such commodities:

a) u/s 21 and 35 A of RBI Act

b) u/s 21 and 35 A of Banking Regulation Act

c) u/s 34 and 35 A of Banking Regulation Act

d) u/s 34 and 35 A of RBI Act

e) none of the above

6.Loans to senior officers or their relatives are required to be reported to Board of the bank.  For this purpose, the senior officer means an officer in _____________

a) scale IV or above

b) scale V or above

c) scale VI or above

d) scale VII

e) None of the above

7.Banks cannot grant loan to its own director, against which of the following security?

a) loans against govt. securities

b) life insurance policies

c) bank deposits

d) all the above

e) none of the above

8.A bank cannot grant any loans and advances on the security of its own shares under the provisions of 

a) Section 19(B) of Banking Regulation Act

b) Section 21(3) of Banking Regulation Act

c) Section 20(1) of Banking Regulation Act

d) Section 21(B) of Reserve Bank of India Act

e) None of the above

9.The base rate is required to be reviewed by banks at least ______.

a) once in a month

b) once in a quarter

c) once in a half year

d) once in a year

e) none of the above

10.In which of the following cases, an account becomes NPA?

a) where principal and / or interest in TL has become due and not paid by the borrower for 75 days

b) where the cash credit account has been out of order for more than 90 days

c) where the bill purchased / discounted has become overdue and continues to be overdue for 87 days

d) where amount remains unpaid for less than two crop seasons for long duration crop in case of all agriculture accounts

e) all the above

Ans:

1	2	3	4	5	6	7	8	9	10
c	d	b	b	b	a	d	c	b	b

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Quiz-7

Quiz-7

1.The loan given to retail trader, to be classified under Priority sector, the loan amount should not exceed Rs.____________________

a) 25 lakhs

b) 20 lakhs

c) 10 lakhs

d) 30 lakhs

e) None of these 

2.In the areas where the population is less than 10 Lakhs, the housing loans will be classified under Priority sector if the loan amount does not exceed Rs.

a) 25 lakhs

b) 15 lakhs

c) 10 lakhs

d) 30 lakhs

e) None of these

3.As per new guidelines all small loans not exceeding Rs.______________ per borrower will be classified under Micro Credit

a) 25000

b) 50000

c) 40000

d) 20000

e) None of these 

4.The activity which will not be classified under Micro and small enterprises is

a) SSI

b) Small business

c) Loan to Medium enterprises

d) Professional & self employed 

e) Small Road and Water Transport Operators 

5.An agriculture loan of Rs.16 crores is sanctioned to a Public Limited Company. The amount to be classified under direct agriculture sector will be

a) 10 crores

b) 16 crores

c) 6 crores

d) 11 crores

e) None of these

6.The fresh guidelines on Priority Sector Lending were recommended by the working group headed by

a) M V Nair

b) K C Chakraborty

c) Usha Thorat

d) C S Murthy

e) None of these

7.The new guidelines on Priority Sector came into effect from

a) 31st March 2012

b) 30th April 2007

c) 30th June 2012

d) 20th July 2012

e) None of these

8.In the year ________ the banks agreed to raise the proportion of their advances to priority sector to ______% by March 1985 a) 1980, 40

b) 1975, 33.33

c) 1979, 40

d) 1980, 33.33

e) None of these

9.Description and concept of the priority sector was formalized in the year

a) 1968

b) 1979

c) 1972

d) 1980

e) None of these

10.When RBI wants to reduce liquidity in the banking system:

a) it increases the CRR

b) it increases the SLR

c) it increases the Repo Rate

d) it increases the reverse repo rate

e) none of the above

Ans:

1	2	3	4	5	6	7	8	9	10
b	b	b	c	e	a	d	a	a	a

Quiz-6

Quiz-6

1.Which of the following are the requisite of a promissory note

a) It must be in writing and contain an unconditional undertaking to pay

b) It must be signed by the maker and the parties thereto must be designated with reasonable certainty

c) The medium of payment must be expressed in money only and the sum payable is to be certain

d) All of these

e) None of these

2.The term ‘drawee in case of need’ refers to

a) The person from whom money may be demanded in case of need

b) Indigenous bankers who finance traders in case of need

c) The person to whom a bill has got to be presented for payment when it is dishonoured by the drawee

d) All of these

e) None of these 

3.In order to operate as a valid bill of exchange, the instrument must satisfy the following conditions

a) It must be in writing and signed by the drawer

b) The drawee, the drawer and the money ordered to be paid must be certain

c) The payee must be a certain person or bearer of the instrument d) All of these

e) None of these

4.A Bill of exchange is defined by

a) Sec 12 of B R Act 

b) Sec 10 of NI Act

c) Sec 5 of NI Act

d) Sec 13 of NI Act

e) None of these

5.Mr Ram is the holder of a cheque payable to ‘Ram or order’. He simply transfers the cheque to ‘Ashok’ without endorsing it. In this case Mr.Ashok would be

a) Only assignee of a chose in action and takes bill subject to all defects

b) Holder in due course

c) Holder for value

d) Illegal Holder

e) None of these 

6.You have allowed overdraft against a cheque sent in clearing. In the event of dishonour of the cheque

a) Bank will not be a holder in due course since full consideration was not parted with while allowing overdraft against the dishonoured cheque

b) Bank will be a holder in due course if it took the same under the circumstances mentioned in section 9 of NI Act

c) Bank may proceed only against its customer who was allowed the overdraft but not against the drawer/endorser

d) All of these

e) None of these

7.A person cannot sue on the basis of a negotiable instrument

a) Unless he is named therein as the payee

b) Unless he becomes entitled to it as endorsee

c) Unless he becomes bearer of an instrument payable to bearer d) All of these

e) None of these

8.A person cannot claim to be a holder in due course but may at most be a holder if he takes

a) An instrument which is irregular on the face of it

b) An instrument which is overdue

c) An inchoate instrument

d) All of these

e) None of these

9.In case of death of a customer banking accounts of that customer are stopped only when a banker receives

a) An order issued by a court of competent jurisdiction

b) On production of the death certificate issued by the corporation or local bodies

c) A legal notice from the survivors of the deceased

d) Actual or constructive notice of a customer’s death 

e) None of these

10.Which of the following are the rights of the holder

a) A holder can convert the blank endorsement to an endorsement in full

b) A holder can obtain a duplicate of the lost bill giving an indemnity if so required by the drawer 

c) A holder has the right to sue in his own name on the instrument

d) All of these

e) None of these

Ans:

1	2	3	4	5	6	7	8	9	10
d	c	d	c	a	b	d	d	d	d