Bank Balance Sheet vs Company Balance Sheet | Top Differences You Must know!

Bank Balance Sheet vs Company Balance Sheet | Top Differences You Must know!


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clicking the bell icon friends today we’re going to
learn a concept which is known as bank
balance sheet vs company’s balance
sheet we are going to discuss some of
the top 9 differences so let’s begin see
before we go into the nitty-gritty of
the balance sheet of the bank and of the
regular company first we need to look
into the nature of each see bank basically
it acts as in an intermediate area
between two parties so the job of the
bank is to basically assist to the
company which it can help I mean which
it can help so bank makes profits from
the thing called spread between the rate
it receives and the rate at pace on the
other hand a company operates to produce
goods or services and it ultimately
sells the goods or services to another
business and that’s the end consumer or
to the government so the objective of
running regular company is to generate
and maximize the wealth of the
shareholders right so as a nature both
of these entities is different so it
makes sense to prepare a unique balance
sheet for each of them let’s start
understanding the bank balance sheet was
his company’s balance sheet difference
with the help of the infographics the
first and foremost thing that we need to
go for is the bank balance sheet is
prepared as for the mandate by the
regulatory or through see regulatory
authority what means your you know about
the RBI or as for the Sevi norms and so
on and so forth so over here it has been
prepared by the regulatory authorities
the company balance sheet is prepared as
for the regulation of the International
Accounting standard board okay as per
thee in India it is called as the
India’s okay it is called as the IND is
which has now converged from their
accounting that was the AS to the
IND AS which is basically you know
converging from the Indian standards to
the IFRS norms
rest of the world they usually follow a
thing that’s called IFRS and in us they
follow the u.s. GAAP so this are the
three bifurcation this is what India
follows this is for the rest of the
countries of the world and this is for
USA so these are the three patterns in
which companies basically work with and
for regulatory authority we are talking
about the banks insurance right so they
have their own norms so like for banks
you know RBS operating IRDA is operating
over here for insurance and there are
companies for which you know Sebby also
comes into picture so this are the
regulatory authorid that comes into
picture into in terms of India this was
the part of definition let’s understand
the objective so the main objective is
to showcase an accurate trade-off
between the bank’s profit in the risk so
trade-off between the risk and the
profit is the main objective of the bank
but the main objective of the company is
to reflect the financial picture of the
organization to the stakeholder the
financial picture basically is been
disclosed in terms of the income
statement the balance sheet what we call
as the cash flows the CFS they have the
notes to accounts and they also have a
thing called change in the shareholders
equity so even by that the disclosures
have been made post that scenario if
there are any additional documents that
are to be issued so all this material
are going to help to depict the perfect
financial picture for the companies and
for the banks it is just not just it is
accurate trade-off between the bank
profit and the risk now what exactly is
the scope where exactly its horizon
stands the scope of the bank balance
sheet is limited since its applicability
is only for the banks it same goes for
the insurance you know if if it’s for
the insurance and it will be applicable
for the insurance company but in case of
the company’s the scope of the company’s
balance sheet is much more borrower since
it is applicable for all sorts of
companies like many many
manufacturing IT companies automobiles
pharmaceuticals and so on and so forth there
are tons of Indus in the country so
probably all the norms of the companies
will be applied so the scope is much
bigger over here this is like
specialized thing and this is more of a
customized thing you know for every
industry there’s a different sort of
accounting standard there’s no one sort
of accounting standard that would be
applicable to one single industry will be
different sort of accounting
standards that would be applicable for
different sort of industry because their
operations will differ according to that
the norms and the standards will differ
which should be more appropriate right
so this is about this scope be horror or
we can call the horizons in which it
stands the next is the equation assets
is equal to the liabilities plus
shareholders equity the bank’s assets
and liabilities are much different than
that of the regular company so what
exactly here we are talking about here
is the assets over here it’s the
liability sorry and on this side there
is assets right let’s say just right
serial number this is how the balance
sheet is basically performed you know
this is how it is actually been
disclosed the serial number over here
let’s write amount over here and on this
hand there there is a data for
shareholders equity and below that there
is a detail of non current liability and
current liability so this gives our
total right here xxx you can just write
right and over here there are non
current assets which includes your
tangible assets and there is a non
current liability which gives over total
and over here to xxx right so
assets is equal to your liabilities
plus shareholders equity as we saw in
the liability side we have shared as
equity plus liability and over here
assets is equal to liabilities plus
shoulders equity but your assets and
liability are much more different
because deposits and withdrawals and
other online items that have been
included and which is actually different
from what the companies have to disclose
now what is the level of the complexity
see preparation of the balance sheet for
bank is quite complex since the bank
needs to calculate the net loans and
it’s a
or tiring to us to do that well it
involves a late a lot of aunt of the
complexity over here but in case of the
company’s it’s a it’s much simpler
because you just need to comply with the
norms how things have to go
things have to be worked upon but here
there are much more compliance is that
you need to be followed and so as to
disclose a fair view of the financial
statement now what is the time
consumption the bank balance sheet needs
a lot of time to prepare but the
company’s balance sheet does not take a
lot of time to prepare as because of the
complexity the time consumption is more
because of the simplicity the time
consumption is less now what are the key
concepts loans short-term investments
see loan are the they are the bread and
butter for the banks but short-term
investments with the help of the amount
of deposits they either give loans or
whatever deposits they receive they make
loans or either they make investments
allowance for the losses of loans we
hear assets liabilities and the
shareholders equity are the three main
important thing in in case of companies
now what are the mention able documents
bank balance sheet mentions reference
through these schedules right there
different schedules in that and
company’s balance sheet mentions its
reference via its notes to accounts
right so here the details have been
mentioned into the notes of notes to
accounts as I’ve recently told you that
you know there is a notes to accounts
section in the companies a data as you
can see income statement balance sheet
CFS note to accounts change changes to
shareholders equity and the documents so
there are details that needs to be
complied in the notes accounts well in in
banks it is schedules
it’s just change of name what are the
type of the balances balances in bank
balance sheet the type of the balances
average and here it is the ending
balance ending balance means that the
balance that are as on the 31st March
23rd 2018 or 2019 whatever we be the
scenario or if it is a calendar year
than 31st of December 2018 or 2019 so
ending balance and over here the average
is taken so this is the difference
between the bank balance sheet and the
company’s balance sheet so finally let
me conclude
this if you look at the balance sheet of
the regular company you will have a
surface level of idea about how a
balance sheet works the balance sheet of
the bank is arranged in a similar manner
but the items under the heads are
different whatever you know Bank use the
as we just saw average average balances
for the balance sheet which is quite
unique but if we compare it with the
regular company’s operation even if the
balance sheets are quite different in
scope the objective of both of them is
quite similar right that is to disclose
the accurate picture of the financial
affairs of the organisation so that’s it
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