Question

1. Explain why the Financial statements of banks and those of non-bank financial resemble each other?(2 marks) They are similar many in aspects. The general structure formula of the balance sheet is the same Assets= Liabilities + Equity. So the left side of the balance sheet is the uses of fund and the left side is the sources of funds. 2. Do they have any differences? If so explain as much as you can?(3 marks) Yes, the balance sheet formula for the banks and financial sector is much complicated and detailed than the non-bank

Answer 1

Q No 1 .

Ans : The Bank and non bank financia statement are some what similar because according to balance sheet equation, i.e

Assets = Liabilites + shareholders equity,

which signifies both banks and non banks companies have Assets which is deposits ( soures of funds) and liabilities which is funds available for use for stake holders.. they both take short term and long term loans , advances and investment also. in otherhand they also make huge payment to their custmers. in this way their financial statements are similar.

QNo 2.

Ans: There are some difference in bank and non bank companies financial statements these are as follows:

- Bank balance sheet is prepared as per mandate by RBI Regulatory authorites whereas non bank comp balnace sheet is prepared by regulation of international accounting standards Board (IASB).

- The bank Balance sheet is limited since it is only applicable for banks where as non bank comp balance sheet is broader since it applicable for all sorts of companies.

- the banks balance sheet is much complicated as it needs to calculate net loans where as non banks comp balance sheet is much simpler.

-Banks balance sheet mentions reference through 'schedules' where as non banks companies balance sheet mentions its refernce through "notes".

- The structure and type of balance in banks balance sheet is different from that of non banks.