The charts of accounts

8/7/2019 The charts of accounts

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The charts of accounts

� To recording the transactions , maincomponent the accounting equations can bedivided into separate categories , called

accounts.� Assets loans outstanding , fixed assets

� Liabilities borrowing , saving , outstanding

expenses� Capital share capital, retained earnings ,

donated equity



Count.

� Accounts are used to record similar

transactions at one place , these accounts are

part of the ledger and skeleton of the general

ledger is called the chart of accounts.



Uses

� Provide information to the management acc

to the type

�

Able to access and analyze information



Financial reporting formats

1. Balance sheet it shows the financial position

of an enterprise on a particular date in terms

of its assets liabilities and equity



Items in an MFI`s balance sheetAssets

CASH and due from banks Cash on hand , sight deposits , checkingaccounts or other instruments paying

little or no interest

Reserve in central bank Relevant only for licensed financial

intermediaries

Short term investments in money marketinstruments

Interest bearing deposits and investmentsin financial instruments, where the

principal purpose is liquidity management

Loan portfolio Total outstanding balances of loans to

clients , including loans past due but not

written off

Loan loss reserve A negative asset account: set aside for

estimated future losses on problems loans

that have not yet been written off

Other short term assets Other long term, illiquid ,assets that earn

returns



Long term investments Accounts receivable, accrued interest on

loan portf olio

Net fixed assets Land building, equipment, net of

accumulated depreciationTotal assets

Liabilities

Savings accounts : compulsory Compulsory savings required as part of

the credit methodology

Saving accounts : voluntary Liquid deposits from the general publicTime deposits Certificates of deposits from general

public

Loan : commercial Loans to mFI at market rates from banks

or other financial institutions

Loans : central bank Rediscount or other special lines of creditfrom the central banks`

Other short term liabilities Accounts payable , accrued interest to be

paid on loans and deposits etc

Other long term liabilities Long term loans for property etc

Loans : subsidized Concessional loans from donorsTotal liabilities



Capital

Paid in equity from shareholders Equity contribution of owners of stock

Donated equity prior years cumulative Equity contribution of the owners of stock

Donated equity current year All cash grants donations

Prior years retained earnings/losses not

including cash donations

Accumulated earrings from prior period

only

Current year profit/loss current year operating profit/loss

Other capital accounts Any special reserves or other capital

accounts

Total capital

Total liabilities and equity



Formats of balance sheet

� The format in which the balance sheet ispresented is dependent , to a great extent ,onthe legal forms in which the MFI is registered

� Example if the MFI is registered as acompany it will follow the rules of theCompanies Act .

or if the MFI is registered as asociety , it will follow the formats prescribedunder the Societies Registration Act



Assets

Cash assets

Cash and deposits

1. cash in hand and at bank

2. interest bearing deposits

3. Total cash and deposit

LOAN OUTSTANDING

4. Regular

5.Past due

6. Restructured

7. Gross loan outstanding8.(loan loss reserve)

9. Net loan portf olio(6-7)

10. Other current assets

11. Total current assets

LONG TERM ASSETS

12. Long term investments13. Fixed assets at cost

14. (accumulated depreciation)

15. Net fixed assets

16. Total long term assets

17. Total assets

Mar 06

1,500

2,000

3,500

40,000

0

0

40,000-100

39,900

400

43,800

200500

-350

150

350

44,150

Mar 07

4,000

2,500

6,500

6,5000

0

0

65,000-200

64,800

500

71,800

300800

-600

200

500

72,300



Liabilities

Current liabilities

18. Short term borrowings(commercial)

19. Short term (concessional)20. Client savings

21. Other current liabilities

22. Total current liabilities

Long term liabilities

23. Long term debt(commercial)

24. Long term debt(concessional)25.Deffered

26.Total long term liabilities

27. Total liabilities

Capital/equity

28.Paid up equity

29.Donated equity

30. Retained earnings

31. Current year`s earnings

32.Total net worth

33. Total liabilities and net worth

Mar 06

4,250

1,000

5,250

34,000

34,000

39,250

1,000

3,000

900

4,900

44,150

Mar 07

5,750

2,000

7,750

56,000

56,000

63,750

2,000

4,500

900

1,150

8,550

72,300



2. Income and expenditure statement

� Income and expenditure statement is also

called the profit and loss statement.

�

Record income and expenses arising out of theoperations in the form of statement to show

how much profit or loss has been generated

by the organization in the given period.

� And all the incomes and expenses resulting

from transactions



Income and expenditure statement for

the periodIncomes

Interest income from loans

Total income(TI)

Expenses

Interest expenses on borrowings

SalariesTravel

Total/expenses(TE)

Profit/loss(TI-TE)

Total

8,000

8,000

3,000

10,0003,000

16,000

(8,000)



Elements of the income statement

� Income

� Operating expenses

�Non operational income and expenses



Format of income statement

� As same as the balance sheet format



Sa-Dhan format income and

expenditure statementSr. income Yr ending

31 mar 06

Yr ending

31 mar 07

Income from loan portfolio

1 Interest on loan 10,000 8,500

2 Fess and services charges

3 Total income from loan port folio 10,000 8,500

4 Investment income 2,500 10,500

5 Total operating income 12,500 10,500

Expenses

Financial expenses

6 Interest expenses on debt 4,000 3,200

7 Interest expenses on savings 500 450

8 Total financial expenses 4,500 3,650

9 Gross financial margin 8,000 6,850



10 Provision fro loan loses 100 100

11 Net financial margin 7,900 6,750

Operating expenses

12 Salaries 3,000 2,400

13 Travel 2,500 2,000

14 Depreciation 300 250

15 Other administration expenses 1,200 950

16 Total operating expenses 7,000 5,600

17 Gross surplus/deficit from operations 900 1,15018 Grants and donations 1,000 1,500

19 Net surplus/deficit 1,900 2,650



3. Cash flow statements

� It is a financial statement that shows an

enterprise`s incoming and outgoing money

during a time period

� It is helpful to accesses the ability of

enterprise to generate cash and cash

equivalents and the timing and certainty of

generations.



Examples of cash flow statements

� Interest and fees income

� Interest expenses

�Salaries to employees

� Travel expenses



Investing activities

� Represent the extend to which expenditure

have been made for resources intended to

generate future income cash flow.



Financing activities

� Are those that take place between an

enterprise and provider of its funds



Format of cash flow statementSr. Cash f low from statement of mFI XYZ 2006

Cash flow from operational activities

1 Interest and fees receipts 28,447

2 Interest payments (23,463)

3 recoveries on loans previously written off 237

4 Cash payments to employees and suppliers (997)

5 Operating profit before changes in operating assets

(Increase)decrease in operating assets

4,224

6 Short term funds (650)

7 Deposits held for regulatory or monetary control purposes 234

8 Funds advanced to JLG customers (288)

9 Net increase in other SGH receivables (480)

10 Increase (decrease) in operating liabilities

11 Borrowing for on lending (short term) 600

12 Deposits from customers (200)



Sr. Cash f low from operating activities 2006

13 Net cash from operating activities before income tax 3,440

14 Income taxes paid (100)

Net cash from operating activities 3,340

Cash flows from investing activities

1 Dividends received 250

2 interest received 300

3 Proceeds from sales of permanents investing 1,200

4 Purchase of permanent investments (600)

5 Purchase of fixed assets (500)

Net cash from investing activities

Cash flow from financing activities

1 issue of shares 1,8002 Repayment of long term borrowings (200)

3 Net decrease in other borrowings (1,000)

4 Dividend paid (400)

Net cash from financing activities 200

Net inc in cash and cash equivalents 4,190

Documents

The charts of accounts