ELEMENTS OF BANKING

ANALYSIS OF THE BALANCE SHEET ITEMS

Application of funds

1.  Cash This comprises notes and coins in the till that is tied to satisfy both cash reserves requirements and customers requests for money. 
2.  Near Money Assets (short tern funds) These are mainly market instruments such as treasury bills, treasury certificates, money at call, stabilization securities. They also include current account held at CBN and Inter-Bank placements.
3. Investment These are placements mainly in the capital market. They include bonds, stocks, shares, etc 
4.  Loans and Advances These are financial accommodation to customers. 
5. Other Assets and Deferred Charges 
6. These include inter-branch claims, prepayments, interest and fees receivable, etc. 
7.  Fixed Assets Fixed assets include land and building, machinery and equipment, furniture and fittings, other moveable assets such as vehicles. 

Sources of Fund

1. Deposits and Ancillary Accounts These include savings, demand and time deposits. It also includes domiciliary accounts. 
2. Taxation Tax liability of the bank not been remitted to the relevant tax authority.
3. Dividends Dividends approved for shareholders but not yet appropriated.
4. Other Liabilities and Charge These include interest charges due to customers and other liabilities not yet liquidated. 
5. Debenture Stock 
   Debenture is a debt instrument. It is issued by the bank to raise capital. 
6. Share Capital This represents the equity (ordinary share) interest of the Share holders that is issued and fully paid. Preference sharp ray also be issued as part of equity. 
7. Statutory Reserves This is the balance compulsorily required by the monetary authorities to be reserved by the banks. 
8.  Other Reserves These include other non-statutory reserves which may include special, redemption, revaluation, etc. 
9. Retained Profit This is part of profit after tax not appropriated as dividend. 
10. Acceptances, Guarantees, etc. These include instruments consisting claim on the bank that must be made good on maturity. They include instruments accepted, guaranteed by the banks on behalf of customers. These items appear on the asset side of the balance sheet because as they constitute claim on the bank by third parties, they also impose claims on the customer in favour of the bank.  
11. Contingent Liabilities This represents expenses that may arise from litigations and disagreements. 

Self assessment exercise

State sources of funds of a commercial bank

3.4 Functions of Commercial Banks

The introduction of the Universal banking system has delimited the functions of commercial banks in Nigeria. The post Universal functions
Include:

1. Mobilization of Funds The commercial banks primarily mobilize savings, demand, time deposits from the surplus unit of the economy. 
2. Financial Intermediation A certain percentage of the mobilized funds is channeled to the deposit unit of the economy for development purposes.
3.  Lending The commercial banks offer financial accommodation to customers and non-customers alike inform of loans and advances.
4. Implementing Standing Orders Banks carry out various instructions of their customers to debit their accounts at various intervals (weekly, monthly, etc) for specific purposes. 
5. Safekeeping of Valuables Banks undertake to keep such valuables as jewelries, bangles, trinkets, certificates, etc for customers. 
6. Status Report Commercial banks do cooperate with other banks to release status report on customers if such request is made. However, this is done in absolute caution to avoid the violation of the duty of secrecy obligation owed every customer. 
7.  Insurance Marketing The commercial banks now engage in underwriting of risks and insurance marketing though mainly through their subsidiaries. 
8. Issuance of Travelers' Cheques and other Settlements Systems Banks facilitate trade and commerce through the issuance of travelers' cheques, letter of credit, and provision of ATMS, credit and debit cards. 
9.  Other Services The other functions rendered by commercial banks include unit trusts, Trustship account, and Pension funds management financial consulting, etc. 
10. Payment and Collection of Cheques The commercial banks pay and collect instruments to and for their customers respectively. 

4.0 CONCLUSION

In this unit it was concluded that Commercial banks are very bivalent in any economy because they are structured to provide working capital loans to the deficit sectors of economy