Bank Theory

An Overview of Cost & Management Accounting An Overview of Cost & Management Accounting 1. Introduction to Cost Accounting Cost Accounting is the process of recording, classifying, analyzing, summarizing and allocating costs associated with a process, and then developing various courses of action to control the costs. It helps businesses determine the actual cost of production or service. Evolution: Cost Accounting emerged during the industrial revolution when manufacturing became more complex. The focus was to determine accurate production costs to set competitive selling prices. Objectives: Ascertain cost of product/service Cost control and cost reduction Assist in decision-making Scope: It includes cost computation, cost reduction, budgeting, and performance evaluation of cost centers. 2. Concepts and Classification of Cost Direct Cost: Directly attributable to a product (e.g., raw material) ...

Balance Sheet Equation and Computation Balance Sheet Equation and Its Computation 1. Concept of Balance Sheet Equation The Balance Sheet Equation is a fundamental principle in accounting and banking. It establishes a relationship between the assets owned by a bank and the claims against those assets in the form of liabilities and capital (owner’s equity). The equation is represented as: Assets = Liabilities + Capital (Owner’s Equity) This equation must always balance. It forms the foundation of preparing a balance sheet, which shows the financial position of a bank or business at a given point in time. 2. Explanation of Components Assets: Resources owned by the bank (e.g., cash, loans, buildings). Liabilities: Obligations to outsiders (e.g., customer deposits, borrowings). Capital: The owner’s claim or equity in the business. 3. Example of Balance Sheet Equation A bank has the following: Cas...