Compare And Contrast A Bank Balance Sheet

A bank balance sheet is different from that of a typical company. Explain the difference A balance sheet is a financial statement which shows the states of financial affairs of a particular business at a particular point in time. The balance sheet discloses the assets, liabilities and equities of the business at a particular point in time. A Bank balance sheet is a typical statement of financial position of the bank. Bank balance sheets are substantially different from company balance sheets, which summarize the net assets of a company by subtracting total liabilities from total assets to arrive at total equity. Many of the differences between the assets and liabilities of banks and those of other companies lie in the ways they are recorded

Loan asset constitute a significant proportion of the asset of the bank (64%) as seen in the balance sheet given in this unit assignment. The composition of the loan may include some or all of the followings: real estate financing, personal loan, farm loan, automobile loan and so on. Bank management adjusts loan composition based on economic expectations. However, in a typical company balance sheet, loan mostly falls under the liability (either short or long term liability) except where the loan was giving as finance to another party or entity, in which case such loan may fall under asset

This was followed by securities constituting 20% of total assets while cash is the least with 4% and other assets with 12%. The liability shows that deposit constitute the most material aspect of the total liabilities and equity with 61% followed by borrowings with 28% and shareholders equity with 11%. This shows that the bank is illiquid and invariably insolvent. This is because the bank’s ability to meet demand on deposit and short term liabilities (61%) with available cash (4%) is very