5.12 Query Form ‘B’ of the Third Schedule to Banking Regulation Act, 1949
In form ‘B’ of the Third Schedule to the Banking Regulation Act, 1949, the following appears at the top of income side: -
“Less: Provision made during the year for bad and doubtful debts and other usual or necessary provisions”.
Further, against each of the following items on the Income side, it is stated in brackets “Not credited to Reserve or any particular fund or account” :
1. Net profit on sale of investments, gold, silver, land, premises and other assets.
2. Net profit on revaluation of investments, gold, silver, land, premises and other assets.
I would like to seek advice whether any provision can be deducted from the above item or alternatively whether only transfers to reserves or any particular fund or amount can be made from these items?
Opinion April 5, 1979
Banking companies are allowed to show their income after deducting therefrom provision made during the year for bad and doubtful debts and other usual or necessary provisions. Net loss on sale or revaluation of investments, gold, silver, land, premises and other assets, if any, may also be deducted from income. The items of income from which these provision and losses have to be deducted are not specified. They may, therefore, be deducted usually from any items. The Provision for bad and doubtful debts is usually deducted from Interest and Discount. Losses on sale or revaluation may first be deducted from profit from similar sources of income and if there is no such profit, then, from “Interest and Discount”.
Reference to Institute’s publication on “Audit of Banks” (3rd edition 1978) para-I at page 78 (Chapter II) is invited. ________________________ |