EXERCISES. Answer the following questions:

Answer the following questions:

1. What is balance sheet?

2. What is included into liabilities of commercial banks?

3. What is included into assets of commercial banks?

4. What do you know about checkable deposits?

5. What is included into non-transaction deposits?

6. Where do banks obtain funds from?

7. What is bank capital?

II. Balance Sheet Basics. Complete the text using the words in the box.

owns	cash held at bank	assets	liabilities
cash	depreciation	valuation	owes
lists	balance sheet	draw up	statement
scrap	debtors

Every year a business will(l) _______ a (2) ____ to see how it stands financially. This

document consists of two (3)____ and is called a (4)____. One list will contain all the things

the business (5) ____. These are its (6) ______. The other list consists of the things the

business (7)____ and these are its (8)_____. Every item has to be valued. One item will be

the amount of (9)____ the business has on its premises and another will be the amount

standing on the bank account. This is called (10)______. Some items can be valued exactly

but others can only be given an approximate (11) _______. Machinery or equipment, for

example, suffers from 'wear and tear' and gradually loses its value. This process of losing

value is assumed over a period of time and is called (12)______. When these items are sold,

the price is referred to as its (13)_____ value. Other assets include (14)_____. This item is the

total amount owed by customers.

PART III. BANKING

III. Balance Sheet I. Choose the words and word combinations on the right which have the same meaning as the ones on the left.

1. accounts receivable	a) minus
2. stock-in-trade	b) wear-and-tear
3. capital assets	c) land, building
4. ready-made goods	d) payment in advance
5. cost	e) current capital
6. prepayment	f) fixed assets
7. depreciation	g) finished products
8. circulating capital	h) receivables
9. less	i) inventory
10. premises	j) expense

IV Balance Sheet II. Match the terms and the definitions.

1. reserves	a) Money owed by the company.
2. share capital	b) Money from profit which is put back into the company.
3. liabilities	c) The amount of money invested by the shareholders to establish the company.
4. expenditure	d) The amount of money tied up in raw materials and finished goods not yet sold.
5. working capital	e) Money obtained from profit which is invested.
6. loan capital	f) Items which the company has an obligation to pay.
7 operating costs	g) Goods purchased by the company when it was established, such as machinery and equipment.
S. deficit	h) The fixed costs of running a business.
9. fixed assets	i) The period of the year on which tax is calculated.
10. investments	j) The amount of money paid out by a company.
11. fiscal	k) A minus amount on the balance sheet which shows that the company's costs were higher than its earnings.
12. bottom line	1) The final amount or figure on a page.

V Unusual Expressions in Accounting. Match the words and the definitions.

1. A gap in fiscal regulations allowing an entity to pay less tax.	a) accumulated depreciation
2. A ratio calculated to show the immediate liquidity of a company.	b) loophole
3. An accounting system which is presented to an external auditor.	c) management accounting
4. A note to the accounts which specifies the system of accounting followed to compile the results.	d) statement of accounting policy
5. Total figures at the bottom of a page of accounts.	e) revenues
6. Financial statements used for internal purposes by a company.	f) acid test
7. The total operating costs of a company.	g) financial accounting
8. The total deducted from the value of an asset to allow for wear and tear.	h) gearing
9. The ratio between the amount of money provided by shareholders and the amount of money a company owes its bank.	i) expenditure
10. Income generated by business activities.	j) footings

VI. Fill in each space with the appropriate word or words from a, b or c.

1. My wife hasn't received the money I asked you to_____ from my account to hers last

month.

UNIT 5. ASSETS AND LIABILITIES OF BANKS

a) transfer b) order c) send

2. I can't understand the long____ in sending the money.

a) break b) postponement c) delay

3. Can you please___ the order in writing.

a) confirm b) prove c) sign

4. I want to make a transfer, but I don't know the_____ account number.

a) drawee's b) beneficiary's c) debtor's

5. As our____ are dealt electronically, we only take the number into consideration.

a) standing orders b) bills of exchangee) payment orders

6. I've just received the____ for the transfer I asked you to make last week.

a) credit advice b) debit advice c) cheque

7. The bank sends me a detailed____ every month.

a) report b) account c) statement

8. I always fill in the____ when I write out a cheque.

a) counterfoil b) counterfeit c) counter

9. Don't worry. Scottish banknotes are_____ in England too.

a) currency b) foreign currency c) legal tender

10. I pay my rent by___. It saves me having to write a cheque every month.

a) paying-in slip b) standing order c) transfer order

VII. Complaints. Fill in each space with the appropriate word or words from the box.

impatient	image	explanation	complains	angry
fault	available	apologise	investigate	calm
transfer order	client	delay	annoyed	transfer

It is often very difficult to remain (1)_____ and polite when a client (2)_____. However, it

is extremely important not to get (3)_____. You should try to find out what the problem is.

After all, it may be the bank's (4)______. If it is, the client has the right to be (5)_______. If it

isn't, it damages the bank's (6)_____ if an employee is (7)____ with a client.

Suppose the trouble is that the (8)_____ asked for a transfer to be made to his wife. He

did this more than a month ago, but his wife still hasn't received the money. Naturally, he'd
like to know the reason for the (9)_____.

You check up, and you find that the (10)______ was made out correctly. Therefore, the

delay is not the client's fault. As the (11)______ is being made to a person overseas, it will

probably take you some time to find out where the problem lies. In this case, you can

immediately (12)____ to the client for the delay. You can then promise to (13)______, and to

let him know as soon as you have an (14)______. You must also do everything possible to

make sure that the money is made (15)____ without any further delay.

VIII. Technical Words IV. Choose the correct answer.

1. Which of the following describes 'a standing order'?

a) At the end of each month my credit card automatically debits my bank account for the amount I owe them for that month.

b) I have instructed my bank to transfer $2,000 every month from my bank account and to put it in another account.

c) My overdraft limit is $3,000.

d) My bank has suddenly asked me to repay all the loan.

2. Which of the following describes 'disintermediation'?

a) Storm Ltd. wants to raise money so it has asked a merchant bank to help.

b) The government sells bonds directly to the public - not through a bank.

c) The government sells bonds through a bank.

d) The bank sells its own shares to the public.

3. Which of the following means 'endorsement'?

a) A signature on the back of a cheque.

b) A cheque.

PART III. BANKING

c) Giving a cheque to another person.

d) Changing the name of the person on a cheque.

4. Which of the following describes an EGM?

a) The shareholders of a company meet at the Annual General Meeting (which takes place every year).

b) The Annual General Meeting has been cancelled this year because something extraordinary has happened.

c) Another meeting of shareholders has been called because something extraordinary has happened.

d) Some shareholders disagreed with some decisions and decided to sell their shares.

5. Which of the following sentences explains what a 'doubtful debt' is?

a) It is a loan which has special conditions attached to it.

b) It is a debt which the borrower is disputing.

c) It is a debt which the lender wishes to extend.

d) It is a loan which might be repaid one day.

6. Which of the following sentences explains what a 'bad debt' is?

a) A bad debt is a loan in which the borrower can't pay because the terms are unfair.

b) A bad debt is a loan which the borrower can't pay back.

c) A bad debt is a loan which is not approved but is still granted.

d) A bad debt is any kind of loan which cause the borrower to seek legal action.

7. Which of the sentences below includes a bank's assets?

a) Financial Assets such as loans, bills etc. - Fixed Assets such as cash deposits -Intangible Assets such as goodwill.

b) Financial Assets such as loans, bills etc. - Fixed Assets such as buildings -Intangible Assets such as overseas investments.

c) Financial Assets such as loans, bills etc. - Fixed Assets such as buildings -Intangible Assets such as goodwill.

d) Financial Assets such as invoices etc. - Fixed Assets such as buildings - Intangible Assets such as goodwill.

8. Which of the following statements describe 'a balloon'?

a) It is a loan in which the repayments are bigger at the beginning of the repayment period.

b) It is a loan in which the repayments are identical throughout the repayment period.

c) It is a loan in which the repayments are bigger towards the end of the repayment period.

d) It is a loan with interest rate fixed by the government.

9. Which of the people or companies mentioned below might need 'a bridging loan'?

a) A company with a temporary cashflow problem.

b) Somebody whose company has just gone bankrupt.

c) A company whose liquidity is too high.

d) A company which has just been paid by its main customer.

10. What does it mean if a bank has a high capital ratio?

a) Its capital and reserves are much higher than its total assets.

b) It is lending too much.

c) Its capital and reserves are worth just more than its total assets.

d) Its total assets are too high.

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