HBL Cantt Branch Accounting Cycle Study

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

Group Members
Abrar Awais Bukhari Muhammad Zahid Muhammad Ashraf Malik Muahmmad Mehran

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

History Of HBL
HBL established operations in Pakistan in 1947 and moved its head office to Karachi. Our first international branch was established in Colombo, Sri

Lanka in 1951 and Habib Bank Plaza was built in 1972 to commemorate
the banks 25th Anniversary. With a domestic market share of over 40%, HBL was nationalized in 1974

and it continued to dominate the commercial banking sector with a major

market share in inward foreign remittances (55%) and loans to small industries, traders and farmers. International operations were expanded to

include the USA, Singapore, Oman, Belgium and Maldives and the
Netherlands.
Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014 3

On December 29, 2003 Pakistan's Privatization Commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees. Now HBL has more than 1500 branches all over the world.

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

ACCOUNTING CYCLE
The Accounting Cycle is a series of steps. Starts with making accounting entries for each transaction and goes through closing the books.

DEFINITION
The accounting cycle refers to nine steps, repeated in each reporting period, to verify transactions and prepare financial statements for internal and external users.

These 9 steps areAnalyze Journalize Post A Business Transaction Unadjusted Trial Balance Adjusting Preparing Preparing Financial Statements Closing the account Post-Closing Trial Balance

9-Post closing Trial Balance 8-Closing Account 1-Analyze

7-Preparing Financial Statement

2-Journalize

Accounting Cycle

6-Preparing

3-Post A Transaction

5-Adjusting

4Unadjusted Trial Balance

1-Analyze The first step of accounting cycle. First analyze a transaction and its source documents. Apply double-entry accounting to recognize its effect on account balances.

2- Journalize Transactions are recorded in a General Journal. Journalizing leaves a record of all transactions in one document. Helping to prevent mistakes and linking the debits and credits for each transaction.

3-Post A Business Transaction The third step in the accounting cycle is posting. Also known as LEDGER Account. After recording in the journal, transaction are transferred and posted to the ledger. All transactions for the same account are collected and summarized. It is important to leave this paper trail to verify accuracy and troubleshoot later in the process if accounts are not adding up.

4-Prepare An Unadjusted Trial Balance

Preparing an unadjusted trial balance tests the equality of debits and credits as recorded in the general ledger. Additionally, this provides the balances of all the accounts that may require adjustment in the next step.

 Debit and credit merely signify position left and right, respectively . Both sided recorded amount must be equal.

5-Adjusting of Trial Balance The fifth step, adjusting, accounts for internal transactions, like the use of prepaid rent or unearned revenue. Adjustment may be required to record an expense that may have been incurred but not yet recorded.

6-Prepare an adjusted trial balance The sixth step is the preparation of the adjusted trial balance. Again tests the equality of debits and credits, encompassing all internal and external transactions for the reporting period.

7-Preparing Financial Statements1. 2. Financial statements are prepared. The Income Statement and Statement of Owner's Equity are prepared first, followed by the Balance Sheet, which pulls information from the Statement of Owner's Equity. 3. These are one of the primary outputs of the financial accounting system.

8-Closing the account

The eighth step in the accounting cycle is to close accounts in preparation for the next accounting period. Temporary or nominal accounts are closed, while permanent or real accounts carry their balances into the next period. Once completed, all revenue, expense, withdrawal and Income Summary balances should be zero.

9-Post-Closing Trial Balance Finally, the post-closing trial balance lists the balances of the accounts that were not closed, such as assets, liabilities, and owner's equity. This trial balance helps verify that permanent accounts balance, with equal debit and credit sums, and that all temporary accounts were closed properly.

 DEFINITION Series of steps in recording an accounting event from the time a transaction occurs to its reflection in the financial statements; also called bookkeeping cycle, The order of the steps in the accounting cycle are: recording in the journal, posting to the ledger, preparing a trial balance, and preparing the financial statements.

Income Statement HBL Cantt Branch Year Ended 31-12-2011

Revenue
1) Working capital finances
Markup on Running Finance Markup on Cash Finance Markup on Seasonal Finance Markup on Easy Running Finance Markup on Small Medium Enterprises Markup on Term Deposit Rate Markup on A/F Production Markup on A/F Development
Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014 20

15.915 M 2.767 M 2.800 M 0.830 M 1.700 M 0.170 M 5.500 M 0.500 M

Term Finances Markup on Auto lease

Markup on House Finance Markup on Personal Loan

Total Interest Revenue

0.100 M 19.50 M 4.40 M 3.00 M 0.700 M _____________ 33.98 M _____________

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

21

Profit on Saving Accounts Total Profit on Fixed Deposits FCY Deposits

11.00 M 1.00 M 0.424 M

Fee/Commission Charges
1) 2) 3) 4) Debit Card/ ATM Card Charges Credit Card Fees On-Line Charges DD/Banker Cheque Charges 2.50 M 1.50 M 5.50 M 2.00 M

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

22

Other Revenues
1) 2) 3) 4) 5) Cheque Book Charges On-Line Clearing Charges Statement Charges Stop Payment Charges Commission on Bills
( WASA, WAPDA, PTCL, SNGPL)

0.70 M 0.20 M 0.30 M 0.03 M 1.00 M 35.15M 33.98M __________ 69.14M __________

Total Revenues

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

23

Expenses
1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) Salaries & Allowances Rent Expenses Travelling Expenses Entertainment Expenses Stationary & Printing Repairing & Maintenance Law Charges Courier Charges Telephone Charges Electricity Charges Non-Markup interest Expenses Security Charges 2.500 M 1.000 M 0.500 M 0.500 M 1.100 M 0.900 M 1.100 M 0.300 M 0.400 M 0.800 M 40.00 M 0.500 M
24

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

13) Diesel Expense 14) Cash Management

Total Expenses

0.45 M 4.80 M ____________________ 54.53 M

__________________________________________________

Net Income

14.61 M

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

25

Assets

HBL Cantt Branch Balance Sheet On 31-12-2011

150.74 M 45.820 M 47.208 M 69.560 M 58.005 M 137.34 M 99.728 M 79.970 M 75.300 M 89.933 M

Cash On Hand LCY Cash On Hand FCY National Price Bond Total Trade Finance HBL Easy Loan R/Fin Running Finance Cash Fin Seasonal Agri Fin Production Agri Fin Development Other Assets

Total Assets
Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014 26

. 653.039 M

Liabilities
Branch Account Business Value A/C Basic Banking A/C HBL Value A/C HBL Freedom A/C Other Liabilities Bankr Liab LC Bankr Liab L/G 7.000 M 295.0 M 31.90 M 83.98 M 96.17 M 294.8 M 1.674 M 28.47 M

Total Liabilities

. 838.994 M

Capital
Net Income

Total Liab and Capital

14.610 M 853.604 M

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

27

Prepared By: Malik Muhammad Mehran | MBA Executive 2012-2014

28