Lesson No. 4 – GL

## NOMINAL ACCOUNTS as per Accounting Principals ##
All income/expenses and Profit and Loss ACS are Nominal ACS.
(They are not Nominal ACS what we term in Banking Parlance)
We will now discuss entries in respect of Income/Expenditure or Profit/Loss accounts.
The basic principal in respect of such accounts is
Debit all Expenses and Losses.
Credit all Incomes and Profits.
Similar to the Individual accounts in a Savings or Current or Fixed deposits ledgers Profit and Loss accounts (or Income/Expenses).
A banker pays Interest, incur expenses on stationery ,postage, rent,electricity, staff remuneration etc
They are Debited to the concerned ac and paid.
1.Debit Electricity bills ac Rs.1500
Credit Cash ac # Rs.1500
(‪#‎Real‬ ac Credit what goes out,cash will be taken from cashier and given to Electricity comp).
Similar entries for Telephone, Postage, Rent, Stationary expenses.
Credit to Cash ac
Debit Staff salaries say Basic,DA etc..
Credit to personal acs of Staff (credit client/ receiver in case of personal ACS).
Thus flow of entries for such expenses are PL ledger individual heads to GL Profit and Loss aggregate ac to GLBB(Trial Balance). It will appear as a Asset ac (Credit balance ) as the amount is ultimately recoverable from HO.
2.Entries for SB interest payment
Dr Interest on SB ACS
Cr Personal ACS of SB ac holders.
3. FD Interest payment
Dr Interest on FD/RD accounts
Cr Clients personal SB /CD ac or FD/RD ac of client if it is a reinvestment ac.
Thus all Expenses are accounted for by Debit to relevant head expenses and credit to Cash or (SBI ac ,if the SBI cheque is issued)

Now accounting for Income's.
Suppose Interest is to be charged for loans the entries will be
Debit Individual client a of DL /TL/OD/CC
Credit Interest ac Demand Loans
Term Loans
For Income recd as Commission on DDs, Neft, Rtgs,BC issued, Bills, Bank Guarantee, LC, Solvency certificate
Exchange on Forex,
Service charges on Safe custody vaults,
Postage recovered,
Renewal fees etc
Recovery of any expenses
Entries will be
Debit Personal ac or Cash(if cash is received)
Credit the relevant Income head
This will add to Profit and Loss ac in GL and GLBB (Trial Balance).

In totality the Profit and Loss ac will have Debits for expenses and Credits for Income or Recovery of expenses.
The Net balance in P & L will thus be either
Credit (It is a liability as the amount is ultimately payable to HO)
Debit (It is a fictitious Asset as the amount is ultimately to be recovered from HO).
An example of such an ac in GLBB

The GLBB or Day Book will look as
As at..............
Liabilities. | Assets
SB Dep. 328.00 | Cash on 18.50
CD. 117.50| SBI. 5.00
Furniture 10.00
FD. 515.00|Stationery. 2.00
| HO ac. 0.00
HO ac. 265 .00|DL. 200.00
| TL. 310.00 Profit&Loss$20.20| CC. 250.00
| OD. 450.00
Total. 1245.50|Total. 1245.50

$P& L ac is in credit it is a liability and payable to HO.

@@@@ NOMINAL accounts as per Banking Parlance (day to day transactions by a bank staff.)@@@

Nominal ACS are intermediatory ACS and are used to facilitate/ pass certain accounting entries. They are maintained in two ways
1) Separate Nominal Current ac Ledger the aggregate of Credit balances in this ledger is added to Current account head in GLBB and aggregate of Debit balances is added to Current Overdraft accounts in GLBB.
2) Certain Nominal accounts which must show "NIL" balances are directly maintained in General Ledger.
A/C s are DD Issued account.
NEFT/RTGS issied acs,
DD/NEFT/RTGS paid ACS.etc.
Now look how entries float
Suppose ABC desires to have a DD ln Cash
Cash is recd hence entries will be
Dr Cash as Rs7100
Cr DD Issued ac. Rs 7,000
Commission ac Rs 100
Dr. DD issued ac 7,000.......@
Credit HO ac. 7,000.......@
Thus DD issued ac is nullified. And funds get transferred to HO.
The entries will be
Dr ABC ac (SB/CA/CC/OD/TL etc)
Cr DD issued ac
in case a cheque or debit to ac, entries @ will be same.
Thus result of remittance at issue branch will be P/L ac Credited and HO ac Credited.
Example - Paying a DD
Dr DD paid ac
Cr Cash ac
Or Cr AC of P
Dr HO ac
Cr DD paid ac
Net result DD paid ac is Nullified and funds are recovered from HO.
During a day DD issued ac looks
GL DD Issued ac
Dt Parti. Dr |. Cr. | Bal.
5/5/16 By dd Raipur.7,000.|Cr 7,000
-"- By N D Delhi. 5,000|Cr12,000
-"- By Surat. 10,000|Cr22,000

To HO Dr 22000 | o | NIL

The other type of Nominal Accounts maintain in a separate Current ledger, called as Nominal Ledger accounts.
The specialty of these accounts is that
1They have several entries or transactions.
2 The entries are for parking the amount or using the amount for sometime.(May be years)
3 The amount is to be ultimately Credited to P and L account or even to a personal deposit or Loan ac.
4 The amount may be first Debited to such account and subsequently recovered from other definite accounts.
1 Margin for issue of BG/LC
2 Margin on Bills Purchsed or discounted.
3 Subsidy on Govt Sponsored Schemes.
4 Sundry Creditor
5 Banker Cheques Issued accounts.
6 Advance rent recd on Safe deposit lockers.
7 Commission recd in advance on BG/LC.
8 Interest Provided in advance on deposit schemes.
9 Sundry Debtors (an advance given for a temporary period/purpose.)
10 Advance given to staff against Travelling allowance / Leave Travel expenses /Medical expenses etc.

"All the Banks have specific and well defined accounts. Any other accounts to be opened in this ledger require Special Sanction from competent authorities."
The Credit balances are Liabilities and added to the Current Deposits.
The Debit balances are added to Overdraft accounts. These adjustments are made in GLBB (Trial Balances).
Each Credit entry is reversed against one or more Debit entries.
Each Debit entry is marked against one or more Credit entries.
Some additional Authorisation may be required for Debit and/or Credit entries in CBS system. Entries in Such accounts are to be reconciled,now done automatically in CBS and old entries are persuaded.
In a branch Sundry Ledger have following accounts
ACs with Credit Balances
1Margin on BG/LC. Cr Rs.15,000
2 Bankers Cheque Issued 5,000
3 MGNAREGA subsidy recd. 7,000
4 Sundry Creditors. 1,000
TOTAL balance Cr 29,000

Adjusted in GLBB
Liability Side(left side -Cr balances)
Inside column CA deposit. 117.50
Sundry ledger credit balances. 0.29
Total. 117.79

Asset Side(right side -Dr balances)
1 Advance agst TA bills. 5,000
2------- '''''' -------- LFC bills. 10,000
3 Sundry Debtors. 6,000
TOTAL Balance. Dr 21,000
Adjustment on Asset side in GLBB
Inside column Overdraft 450.00
Sunday ledger debit balance 0.21
Total. OD. 451.21

Now or GLBB (Trial Balances)

The GLBB or Day Book will look as
As at..............
Liabilities. | Assets
SB Dep. 328.00 | Cash on 18.58
CD. 117.79| SBI. 5.00
Furniture 10.00
FD. 515.00|Stationery. 2.00
| HO ac. 0.00
HO ac. 265 .00|DL. 200.00
| TL. 310.00 Profit&Loss$20.20| CC. 250.00
| OD. 450.21
Total. 1245.79|Total. 1245.79

Good noon I am closing the discussion for the day.
Appeal to you
If you have any doubt pl raise the same.
ALL Senior colleagues pl add to discussion. If some other nomenclature or slightly different method is followed pl add/ modify.

Waman Gokhale


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