Full Marks: 100
Pass Marks: 35
Course Objectives:
The objectives of the course are to provide the students with the basic knowledge required to handle the
accounting functions of banks. On completion of this course the students will be able to gain the knowledge of
total banking accounting practices of the banks. The course further aims at providing knowledge required to
analyze financial statements of banks.
Course Description
This course contains introduction, accounting for deposit, accounting for bills for collection, accounting for
guarantee and margin deposit, letter of credit (LC), accounting for remittance, accounting for credit and
advances, accounting for cash transactions, accounting for treasury management, banking technology products,
concept of BASEL framework, anti money laundering (AML, accounting for decision making, accounting for
control , preparation of financial statements, financial statements analysis.
Course Details:
Unit 1: Introduction LH 8
Concept of bank account; Rules and classifications of accounts ; Accounting assumptions, principles and
conventions ; Evolution of banking industry, Development of banking industry in Nepal; Meaning,
nature, objectives, importance and functions of banks; Types of Banks: Central Bank, Commercial Banks,
Development Banks, Financial Institutions, Micro Finance Institutions and Co-operative Banks ;
Opportunities and Challenges of Nepalese Banking Sector; Legal provisions under Banking and Financial
Institutions Act (BAFIA), 2063; Unified directives issued by Nepal Rastra Bank.
Unit 2: Accounting for Deposit LH 8
Account Opening, operations and closure of bank account; Concept and types of deposit: current, saving,
time or fixed account, hybrid or flexi deposit, calls deposit account, margin account, foreign currency
account, special foreign currency account; Process of opening accounts; Inter bank borrowing from other
banks and short term borrowing from NRB; Substitutes for vouchers – pay in slip and its meaning;
Cheques: meaning and types of cheques; Electronic cheque clearing (ECC); Service charges- concepts
and accounting procedures.
Unit 3: Accounting for Bills for Collection LH 8
Bills for collection: concept, types and necessity for banking business; Outward bills for collection
(OBC): concept and types; Service charges and accounting records for OBC; Endorsement: meaning and
accounting procedures; Procedures used in bills for collection; Inward bills for collection (IBC): concept
and importance; Document required for IBC; Service charges and accounting records for inward bills for
collection; Debit note and required reversal entry; Outgoing debit advice for uncollected or dishonored
bills.
Unit 4: Accounting for Guarantee and Margin Deposit LH 7
Concept, and types of guarantee deposit; Concept, needs and types of guarantee: Bid bond, Performance
bond, Advance payment guarantee, Counter guarantee, Financial guarantee, Standby letter of credit,
Bonded warehouse guarantee; Banker’s liabilities and customer’s liabilities toward guarantee issuance ;
Accounting treatment of guarantee issue (voucher and ledger); Margin deposit: concept, process and
evaluation ; Service charges and accounting treatment.
Unit 5: Letter of Credit (LC) LH 8
Letter of credit: concept, needs and types of LC; Parties involved in LC; Documents in LC; Trade
finance; International Chambers of Commerce and Universal Custom and Practices (UCP) for
documenting credit; NRB regulations for LC; Accounting treatment.
Unit 6: Accounting for Remittance LH 8
Remittance: concept and importance; Services rendered by remittance ; Types of remittance; Parties
involved in remittance ; Demand draft, accounting for advice received and un-received demand draft;
Account payee draft; Books of original entry for advice received and un-received; Telegraphic transfer
and mail transfer; Branch reconciliation.
Unit 7: Accounting for Credit and Advances LH 10
Credit creation; Concepts and importance of credit; Types of credit: Cash credit, Overdraft, Secured loan,
Micro credit, and other loans: auto, home, credit card, education and social; Security: types and
procedures/valuation of securities; Evaluation of feasibility study; Industry risk analysis and Business risk
analysis (using six C’s of credit); Accounting treatment of different types of credit; Loan processing
charges, interest and commission and their accounting treatment; Collection and recovery of loans method
applied and accounting treatment; Credit risk management; Credit creation.
Unit 8: Accounting for Cash Transactions LH 7
Receiving cashier’s counter cash book ; Paying cashier’s counter cash book; General cash books, day
books and denomination books.
Unit 9: Accounting for Treasury Management LH 8
Concept of treasury management; Dimensions of treasury management; Market risk management;
Liquidity management; Investment portfolio management; Foreign exchange risk management; Assets
liability management ; Maintenance of agency ledger (NOSTRO and VOSTRO).
Unit 10: Banking Technology Products LH 9
Banking software; Card operation ; Tele banking; Mobile banking; Internet banking and e banking;
SWIFT (society for worldwide interbank financial telecommunication); Branch less banking.
Unit 11: Concept of BASEL Framework: LH 7
Concept and importance; Principles of capital measurement and capital standard
Unit 12: Anti Money Laundering (AML) LH 5
Concept, importance and AML Act; Know your customers (KYC)
Unit 13: Accounting for Decision Making LH 11
Capital Budgeting: Project evaluation on the basis of Pay-back period, Net Present Value, Profitability
Index and Internal Rate of Return; Cost Volume Profit Analysis for project evaluation.
Unit 14: Accounting for Control LH 8
General ledger: concept, needs and procedures of maintaining general ledgers; Comparison with
commercial accounting; Daily trail balance: concept, needs and preparation and tools for control of
general ledgers; Transaction list verification and operational procedures.
Unit 15: Preparation of Financial Statements LH 13
Concept and importance; Statement of profit and loss and other comprehensive income (Income
statement); Statement of financial position/balance sheet; Statement of cash flow statement; Statement of
changes in equity.
Unit 16: Financial Statements Analysis LH 18
Concepts and importance; Ratio Analysis: concept, importance and limitations.
Types of ratios:
Profitability ratios: Net interest income growth (NII growth), Interest yield, Net Spread, Operating profit
growth.
Shareholder ratios: Return on equity, Return on assets, Earning per share, Price earnings ratio, Market
price per share, Dividend payout ratios.
Liquidity ratios: Net liquid assets, Net liquidity ratios, Statutory liquidity ratio (SLR), Cash reserve ratio
(CRR), Gap analysis.
Activity ratios: Cost of fund, Base rate, Cost to income ratio, Credit deposit ratio, Net interest margin,
Non-funded income as a percentage of total operating income, Operating expenses ratio (interest to total
operating expense, office operating expense to total operating expenses and HR expenses to total
operating expenses) Staff efficiency (per employee income, per employee business i.e. deposit plus loan)
Gearing and Financial ratios: Total borrowing to shareholder fund, Total external liabilities to total
assets, Total assets growth, Net worth growth
Cash Flow ratios: Interest coverage ratio, Debt coverage ratio
Assets Quality ratios: Non-performing loans to total loans, Loan loss reserves to gross loan, Earning
coverage to loan losses, Increase in loan loss reserve to gross income
Earnings ratios: Net interest margin, Non-funded income expenses as a percentage of total operating
expenses
Capital Adequacy ratios: Capital fund as a percentage of risk weighted assets
Project Work LH 10
After the completion of fourth year concentration classes the students shall have to prepare and submit a project
work in the area they have specialized. The subject teachers have to discuss with students on possible topics of the
project work, availability and sources of literature, availability of data, data collection methods, appropriate tools
of data analysis, etc relevant to the subject within 10 lecture hours.
References:
Indian Institute of Banking and Finance, Accounting and Finance for Bankers, Macmillan India Ltd. Chennai
India
Jain, S. P. & Narang, K. L., Advanced Accounting, Corporate Accounting, Vol. 11, New Delhi: Kalyani
Publishers.
Battliboi, J. R. Advanced Accounting, Mumbai: Standard Accountancy Publication Pvt. Ltd.
Nepal Rastra Bank Act, 2058
Circulars issued by NRB (Banks and Financial Institution Regulation department and Foreign Exchange
Management Department)
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