LOVELY PROFESSIONAL UNIVERSITY

School of Mittal School of Business Faculty of Business and Arts.

Name of the faculty member: DR. RAJNI CHABBRA.

Course Code: ACC105 Course Title: FINANCIAL ACCOUNTING.

Academic Task No: 1 Academic Task Title: Assignment 1

Date of Allotment: 19.09.2022 Date of Submission: 03.10.2022

Student Roll No: RQ2210A37 Student Reg. No: 12215007

Term: 1 Section: Q2210

Max. Marks: 30 Marks. Obtained:

Evaluation Parameters

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other
students’ work or from any other source except where due acknowledgement is made explicitly
in the text, nor has any part been written for me by any other person.

Evaluation Criterion: Rubrics on different parameters

Student’ Signature: DIPANKAR CHOUDHARY

Evaluator’s Comments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of assignment

 HISTORY

AU Small Finance Bank Limited is an Indian scheduled commercial bank that was
founded as vehicle finance company AU Financiers (India) Ltd in 1996 and converted
to a small finance bank on 19 April 2017. AU Small Finance Bank serves low- and
middle-income individuals and micro and small businesses that have limited or no
access to formal banking and finance channels. The Bank offers loans, deposits and
payment products and services.
The company was founded by Sanjay Agarwal (managing director and CEO of AU Small
Finance Bank) as a private limited company, and publicly listed in an IPO on 29 June
2017. A merit holder Chartered Accountant and a first-generation entrepreneur, he holds
~28.5% stake in the Bank. He is supported by a team of 23,486 employees.
AU Small Finance Bank is listed on NSE & BSE with market capitalization of ~Rs. 37,942
crores.
On its first day of trading, the stock rose 51% to be the most expensive bank in India based
on price-to-book.
In November 2017, the Reserves bank of India added the bank its schedule of commercial
bank, further improving the bank's growth prospects by reducing the cost of short-term funds
and improving the bank's ability to provide services.

VISION
To be the world’s most trusted retail bank and conveted employer that is admired as the
epitome of financial inclusion and economic success, where ordinary people do extraordinary
things to transform society at large, thereby guaranteeing trust, confidence, and customer
delight.
 MISSION
To build one of India’s largest retail franchise that is admired for:
➢ Making every customer feel supreme while being served.
➢ Aspiring that no Indian is deprived of banking.
➢ Bias for action, dynamism, detail orientation and product & process innovation.
➢ Globally respected standard of integrity, governance, and ethics.
➢ Being an equal opportunity employer, providing a collaborative and rewarding
platform to all its employees.

BUSINESS OF THE COMPANY(SERVICES)

Due to its history as a vehicle finance company, as of March 2018 almost all the loans
made by AU Small Finance Bank were secured, unlike most small finance banks that
have unsecured loans due to their background in microfinance. This provides lower
yields (lower interest rates) than unsecured loans, so the bank has been particularly
active in growing its deposits, as bank deposits have lower cost than other sources of
funds. It has also sought to diversify into savings products like deposits, payment /
transaction banking, distribution of third-party products, and additional loan products
thereby positioning itself as a holistic financial products and services provider.

At AU Bank, we take pride in asking questions. We have always made efforts to push
boundaries by questioning the way things are done. In an industry governed by
formulas, we ask ‘Aisa Kyun?’ AU Bank takes joy in doing small things ‘differently,’
while following all norms, that make a positive difference to our customers’ banking
experiences. It is this ideology that seamlessly translates into our tagline ‘Badlaav
Humse Hai’.

MANAGEMENT OF COMPANY
(Board of directors)

(Names) (Designation)
Mr. Raj Vikash Verma Chairman
Independent director
Mr. Krishan Kant Rathi
Additional director
Mr. Pushpinder Singh
Additional director
Professor M.s Sriram
Additional director
Mr. V.G Kannan
Non-executive director
Mr. Narendra Ostawal
Managing director & CEO
Mr. Sanjay Agarwal
Whole-time Director
Mr. Uttam Tibrewal
 COMPETITORS OF AU SMALL FINANCE BANK LTD.

1.

IDFC First Bank (formerly IDFC Bank) is an Indian Private Sector Bank that is owned
by IDFC, an integrated infrastructure finance company. The bank started operations on 1
October 2015, after receiving a universal banking licence from the Reserve Bank of
India (RBI) in July 2015. It is listed on BSE and NSE.

2.

Nedbank Group was formed after a merger in 1973. The group is a result of the alliance
between Syfrets South Africa and Union Acceptances and NBCV (the bank has evolved
from NBZA, NBSA, and by that merger time, it was known as Nedbank). By 1986, Old
Mutual became the major shareholder, with more than 50% of the total share.
 3.

Bank Leumi. In 1950, the bank was renamed Bank Leumi Le-Israel (National Bank of Israel).
When the Bank of Israel was established in 1954, Bank Leumi became a commercial bank. In
1971, Bank Leumi acquired Arab Israel Bank (Ai Bank; est. 1960), which serves mainly the
Arab Citizens of Israel in the north of the country.

4.

The Bank of Montreal (BMO), or also known as BMO Financial Group in the U.S., is a
Canadian financial services company with the head office in Montreal, Quebec, Canada, but
with its operational headquarters and executive offices located in Toronto, Ontario, Canada.

It was founded on 23 June 1817, when a group of eight merchants signed the Articles of
Association to establish the Montreal Bank. The signors of the document were: Robert
Armour, John C. Bush, Austin Cuvillier, George Garden, Horatio Gates, James Leslie,
George Moffatt, John Richardson, and Thomas A. Turner.
 5.

Ujjivan Small Finance Bank Limited is an Indian small finance bank based in Bangalore,
which commenced operations on 1 February 2017. Ujjivan Financial Services holds an 80
percent stake in the bank.
Ujjivan Small Finance Bank is licensed under Section 22 (1) of the Banking Regulation Act,
1949 to carry out small finance bank business and received Scheduled bank status from the
Reserve Bank of India in August 2017.

ACCOUNTING CONCEPT

(AU SMALL FINANCE BANK LTD. ANNUAL REPORT)

1. BUSINESS ENTITY CONCEPT: According to business entity concept owner of

business is different from business and accounting is done by the point of view of
business not for the business every money lend by the owner is called capital and is
treated as liability and business need to pay interest on this capital and business need
to repay it back to the owner at the time of closing of the bank and AU Small Bank
Limited also follow this principle as the shareholders fund is shown under the equities
and liabilities.
2. ACCOUNTING PERIOD CONCEPT: According to accounting period concept the
life of business is into small period of to judge the financial performance of the
business the period may of one year, quarter or six months depending up on the
requirement of firm period can be a accounting year or a calendar year as suitable for
the bank au small finance bank limited also follow this principle as the above
screenshot show that the annual report is for the year 31 march,2020 this shows that
AU Small Finance Bank Limited has also divided it life span into small-small periods.

3. REALIZATION CONCEPT: According to this concept profit is earned when the

good or services are provided/ transferred to customer. Thus, it is incorrect to record
profit when order is received or when the customer pays for the goods Revenue is
recognized by the banker when it is earned irrespective of weather cash for the
transaction is received or not. AU Small Finance Bank limited also follow this
principle as in the above screenshot from the annual report of AU Small Finance Bank
ltd. We can see the trade receivable account which show that company has done some
of the credit transaction it that company records transaction when take place
irrespective of payment is received or not hence it follows Revenue realization
concept.
 4. BALANCESHEET EQUATION: According to this concept after every
transaction Assets is equal to capital + liabilities mean each transaction affects the
financial statement in such a way that it satisfies balance sheet equation Au Small
Finance Bank Ltd. Also follow this concept as in the above screenshot of financial
statement of Au Small Finance Bank Ltd. we can see that total of assets for the year
2020 is 2431.30 crore and total of equities (capital) is 1062.20 crore and total of
liabilities + equities are 2431.30 which is equal to assets.
 5. MATCHING CONCEPT: The matching principle ensures that revenues and all
their associated expenses are recorded in the same accounting period the matching
principle is the basis on which the accrual accounting method of book-keeping is built
and Au Small Finance Bank Ltd. This concept as in the above screenshot we can see
that depreciation for the year is charged and it is treated as expense of the year hence
it should be adjusted against the profit of current year to obtain the correct profit and
results in the follow of Matching Concept.

CONCLUSION
The main objective behind setting up AU Small finance bank limited was to cut down the
cost of banking and serve the rural and semi-urban areas of the country. This would be done
through the strategy of giving better rates to the consumer for savings and loans. AU Small
finance bank are instituted to service the small business of the country which is hugely
dependent on the high rate unorganised lending sector for their financial needs. AU Small
finance bank limited is a huge step towards financial inclusion and financial literacy of the
masses by the central bank. Only the time will tell if they are successful enough to help bring
change in the banking sector.