BANKING LAW AND PRATICE

ASSIGNMENT-01
SUBMITTED BY: -
DILDAR HUSSAIN 051
ALINA SALEEM 001
RABIA RAFIQUE 038

SUBMITTED TO: -
MAAM SAMRA HASSAN

DATE: -
21-06-023
QUESTION: -

Write in detail about the accounts of trading organization, partnership firm, joint stock companies,
mercantile law agents, accounts of non-trading organizations and accounts of local bodies in banking
system

ANSWER: -

A-TRADING ORGANIZATION
A trading organization's accounts play a crucial role in monitoring and managing its financial activities.
These accounts provide a comprehensive record of transactions, financial position, and performance,
enabling the organization to make informed decisions and comply with regulatory requirements. Here,
I'll provide an overview of the typical accounts found in a trading organization.

1. Revenue Accounts: These accounts track the organization's income generated from trading activities.
Revenue accounts may include sales revenue, service revenue, rental income, commission income, and
any other sources of revenue specific to the organization's trading operations.

2. Expense Accounts: Expense accounts record the costs incurred by the organization in conducting its
trading operations. Common expense accounts include cost of goods sold (COGS), salaries and wages,
rent, utilities, marketing expenses, insurance, transportation costs, and any other expenses associated
with running the trading business.

3. Inventory Accounts: Inventory accounts are crucial for trading organizations that deal with physical
goods. These accounts track the cost of the inventory held by the organization. The inventory accounts
include raw materials, work-in-progress (if applicable), and finished goods. The value of inventory is
typically determined using a recognized accounting method such as FIFO (First-In, First-Out) or LIFO (Last-
In, First-Out).

4. Accounts Receivable: Accounts receivable represent the money owed to the organization by its
customers or clients for goods or services provided on credit. This account records the outstanding
invoices and the amount of money to be collected from customers. Proper management of accounts
receivable is essential for maintaining healthy cash flow and minimizing the risk of bad debts.

5. Accounts Payable: Accounts payable track the organization's outstanding bills and invoices owed to
suppliers, vendors, and other creditors. This account helps the organization manage its payment
obligations and ensures timely settlement of debts to maintain good relationships with suppliers.

6. Cash and Bank Accounts: These accounts record the organization's cash and banking transactions.
They include the organization's checking accounts, savings accounts, cash on hand, and any other liquid
assets. Cash and bank accounts provide an accurate picture of the organization's available funds and
enable efficient management of cash flow.

7. Equity Accounts: Equity accounts represent the organization's owners' or shareholders' equity in the
business. It includes capital contributions, retained earnings (profits reinvested in the business), and any
other equity-related transactions. Equity accounts provide insights into the organization's financial
health and value.

8. General Ledger: The general ledger is a comprehensive record of all financial transactions within the
trading organization. It serves as the central repository for all accounts, summarizing transactions, and
providing an audit trail. The general ledger ensures accurate reporting and allows for the preparation of
financial statements.

9. Financial Statements: Trading organizations prepare financial statements to present their financial
performance and position. These statements include the income statement (also known as the profit and
loss statement), balance sheet, and cash flow statement. The income statement shows revenues,
expenses, and net income, while the balance sheet presents assets, liabilities, and equity. The cash flow
statement displays the organization's cash inflows and outflows over a specific period.

10. Tax Accounts: Tax accounts record the organization's tax-related transactions, including income tax,
sales tax, payroll tax, and other applicable taxes. These accounts ensure compliance with tax laws and
regulations and facilitate the calculation and payment of taxes.

B-PARTNERSHIP FIRMS
A partnership firm is a type of business entity formed by two or more individuals who come
together to carry out a business venture with a shared goal of earning profits. In a partnership,
the partners contribute resources, skills, and expertise to the firm and share both the profits
and the risks.

Here are some key details about partnership firms:

1. Formation: A partnership firm is typically formed through a partnership agreement, which

outlines the terms and conditions of the partnership. The agreement includes details such as
the names of the partners, the nature of the business, the capital contributions, profit-sharing
ratios, roles and responsibilities of the partners, decision-making processes, and provisions for
the admission or retirement of partners.

2. Legal Status: Although a partnership firm is not considered a separate legal entity from its
partners, it can still enter into contracts, own assets, and sue or be sued in the name of the firm.
The partners, however, have unlimited personal liability for the debts and obligations of the
firm.

3. Number of Partners: A partnership firm must have a minimum of two partners, but there is
generally no maximum limit. The partners may be individuals, other partnership firms, or even
corporations. It is common for partners to have complementary skills or expertise that
contribute to the success of the business.

4. Capital Contributions: Partners contribute capital to the partnership firm, either in the form
of cash, assets, or services. The partnership agreement specifies the amount of capital each
partner is required to contribute and the proportionate share of profits or losses they will
receive. Capital contributions determine the ownership interest and the financial stake of each
partner in the firm.

5. Profit Sharing: Partners share the profits and losses of the partnership firm according to the
agreed-upon profit-sharing ratios outlined in the partnership agreement. Profit sharing is
typically based on the partners' capital contributions or other predetermined factors, but it can
also be adjusted to reflect the partners' efforts, time devoted to the business, or other
considerations.
6. Management and Decision Making: In a partnership firm, partners usually have equal rights
to participate in the management and decision-making processes unless specified otherwise in
the partnership agreement. Major decisions, such as the admission of new partners, changes to
the business structure, or entering into significant contracts, may require the unanimous
consent of all partners. Day-to-day operations, however, may be managed by one or more
designated partners or a management team.

7. Taxation: Partnership firms are typically subject to partnership taxation, where the firm itself
does not pay income taxes. Instead, the profits or losses of the partnership are "passed
through" to the individual partners, who report their respective shares on their personal income
tax returns. Partnerships often need to file an annual partnership return to report the income
distribution among the partners.

8. Dissolution: Partnership firms can be dissolved due to various reasons, such as the expiration
of a fixed term specified in the partnership agreement, the mutual agreement of the partners,
the death or bankruptcy of a partner, or a court order. Dissolution involves settling the firm's
debts and obligations, distributing the remaining assets, and terminating the business
operations.

c-JOINT STOCK COMPANIES

Joint stock companies, also known as corporations, are a form of business organization that allows
multiple individuals or entities to pool their resources and share ownership through the issuance of
shares of stock. Here are some details about joint stock companies:

1. Legal Structure: Joint stock companies are separate legal entities distinct from their owners. They are
typically established and governed by specific laws and regulations in the country where they are
incorporated. The company's structure, rights, and responsibilities of shareholders, and other important
aspects are defined by the applicable corporate laws.

2. Limited Liability: One of the key features of joint stock companies is limited liability. Shareholders are
not personally liable for the company's debts and obligations beyond their investment in the form of
shares. This means that their personal assets are generally protected from business-related liabilities,
reducing their financial risk.
3. Shareholders and Shares: Joint stock companies have shareholders who invest capital by purchasing
shares of the company. The ownership of the company is divided into shares, and each share represents
a portion of ownership. Shareholders have rights, such as voting rights in corporate decisions, and are
entitled to a share of the company's profits in the form of dividends.

4. Management Structure: Joint stock companies have a hierarchical management structure.

Shareholders elect a board of directors who are responsible for overseeing the company's strategic
decisions and appointing top executives, such as the CEO, who are responsible for day-to-day operations.
The board of directors and executives have a fiduciary duty to act in the best interests of the company
and its shareholders.

5. Capital Formation: Joint stock companies are well-suited for raising capital. They can issue shares to
the public through initial public offerings (IPOs) or private placements to attract investment from a wide
range of investors. The capital raised through the issuance of shares can be used for various purposes,
such as expanding operations, investing in new ventures, or paying off debts.

6. Transferability of Shares: One advantage of joint stock companies is the ease of transferring ownership
through the buying and selling of shares. Shareholders can sell their shares in the open market, subject
to any restrictions outlined in the company's bylaws or applicable securities regulations. This liquidity of
shares provides investors with flexibility and the ability to exit their investment if desired.

7. Disclosure and Reporting: Joint stock companies are generally required to adhere to transparency and
reporting requirements. They must disclose financial information and other relevant details to
shareholders, regulatory authorities, and the public. This promotes transparency, helps investors make
informed decisions, and ensures compliance with applicable laws and regulations.

8. Perpetual Existence: Joint stock companies have perpetual existence, meaning they can continue to
operate even if there are changes in shareholders or management. The company's existence is not
dependent on the lifespan of individual shareholders, providing stability and continuity to its operations.

9. Expansion Opportunities: Joint stock companies often have greater opportunities for expansion and
growth compared to other forms of business organizations. They can raise additional capital through
secondary offerings, issue debt instruments, acquire other companies, or enter into strategic
partnerships. These opportunities can facilitate business expansion, diversification, and market
dominance.
10. Regulatory Compliance: Joint stock companies are subject to various legal and regulatory
requirements, such as filing annual reports, conducting shareholder meetings, maintaining proper
accounting records, and complying with securities laws. These regulations ensure corporate governance,
protect shareholder rights, and promote fair and transparent business practices.

D-MERCHANTILE LAW AGENTS

Joint stock companies, also known as corporations, are a form of business organization that allows
multiple individuals or entities to pool their resources and share ownership through the issuance of
shares of stock. Here are some details about joint stock companies:

1. Legal Structure: Joint stock companies are separate legal entities distinct from their owners. They are
typically established and governed by specific laws and regulations in the country where they are
incorporated. The company's structure, rights, and responsibilities of shareholders, and other important
aspects are defined by the applicable corporate laws.

2. Limited Liability: One of the key features of joint stock companies is limited liability. Shareholders are
not personally liable for the company's debts and obligations beyond their investment in the form of
shares. This means that their personal assets are generally protected from business-related liabilities,
reducing their financial risk.

3. Shareholders and Shares: Joint stock companies have shareholders who invest capital by purchasing
shares of the company. The ownership of the company is divided into shares, and each share represents
a portion of ownership. Shareholders have rights, such as voting rights in corporate decisions, and are
entitled to a share of the company's profits in the form of dividends.

4. Management Structure: Joint stock companies have a hierarchical management structure.

Shareholders elect a board of directors who are responsible for overseeing the company's strategic
decisions and appointing top executives, such as the CEO, who are responsible for day-to-day operations.
The board of directors and executives have a fiduciary duty to act in the best interests of the company
and its shareholders.

5. Capital Formation: Joint stock companies are well-suited for raising capital. They can issue shares to
the public through initial public offerings (IPOs) or private placements to attract investment from a wide
range of investors. The capital raised through the issuance of shares can be used for various purposes,
such as expanding operations, investing in new ventures, or paying off debts.

6. Transferability of Shares: One advantage of joint stock companies is the ease of transferring ownership
through the buying and selling of shares. Shareholders can sell their shares in the open market, subject
to any restrictions outlined in the company's bylaws or applicable securities regulations. This liquidity of
shares provides investors with flexibility and the ability to exit their investment if desired.

7. Disclosure and Reporting: Joint stock companies are generally required to adhere to transparency and
reporting requirements. They must disclose financial information and other relevant details to
shareholders, regulatory authorities, and the public. This promotes transparency, helps investors make
informed decisions, and ensures compliance with applicable laws and regulations.

8. Perpetual Existence: Joint stock companies have perpetual existence, meaning they can continue to
operate even if there are changes in shareholders or management. The company's existence is not
dependent on the lifespan of individual shareholders, providing stability and continuity to its operations.

9. Expansion Opportunities: Joint stock companies often have greater opportunities for expansion and
growth compared to other forms of business organizations. They can raise additional capital through
secondary offerings, issue debt instruments, acquire other companies, or enter into strategic
partnerships. These opportunities can facilitate business expansion, diversification, and market
dominance.

10. Regulatory Compliance: Joint stock companies are subject to various legal and regulatory
requirements, such as filing annual reports, conducting shareholder meetings, maintaining proper
accounting records, and complying with securities laws. These regulations ensure corporate governance,
protect shareholder rights, and promote fair and transparent business practices.

It is important to note that the specific characteristics and regulations governing joint stock companies
may vary from country to country. Therefore, it is essential for individuals considering investment or
forming a joint stock company to consult with legal and financial professionals familiar with the specific
jurisdiction's laws and regulations.

E-ACCOUNTS OF NON-TRADING ORGANIZATION

Accounts in non-trading organizations, such as nonprofit organizations, governmental entities, and
educational institutions, serve a different purpose compared to those in trading organizations. While
trading organizations focus on revenue generation and profit, non-trading organizations prioritize the
achievement of their mission and the effective utilization of resources. Here are the key accounts
typically found in non-trading organizations:

1. Revenue Accounts: Non-trading organizations receive revenue from various sources, including
donations, grants, membership fees, program fees, and fundraising activities. Revenue accounts
categorize these income streams and track the funds received for different purposes.

2. Expense Accounts: Expense accounts in non-trading organizations track the costs associated with their
operations and programs. Common expense accounts include salaries and wages, rent, utilities, office
supplies, professional fees, marketing expenses, program expenses, and administrative costs.

3. Fund Accounts: Non-trading organizations often segregate their financial resources into different funds
based on their purpose or restrictions. For example, a nonprofit may have a general fund, restricted
funds, endowment funds, and special project funds. Each fund has its own set of accounts to track
revenue, expenses, assets, and liabilities specific to that fund.

4. Accounts Receivable: Non-trading organizations may have accounts receivable if they provide services
or bill for certain activities. For instance, a membership-based organization might bill its members
annually or a nonprofit might invoice for services provided to other organizations or individuals.

5. Accounts Payable: Similar to trading organizations, non-trading organizations have accounts payable to
track outstanding bills and invoices owed to suppliers, vendors, and other creditors. These accounts
ensure proper management of payment obligations and help maintain good relationships with the
organization's stakeholders.

6. Cash and Bank Accounts: Cash and bank accounts in non-trading organizations function similarly to
those in trading organizations. They record the organization's cash and banking transactions, including
donations received, expenses paid, and any other financial activities. These accounts provide an
overview of available funds and support cash flow management.

7. Equity Accounts: Equity accounts in non-trading organizations represent the accumulated surpluses or
deficits resulting from the organization's operations and activities. Unlike trading organizations, where
equity may be related to ownership, non-trading organizations use equity accounts to track the
organization's net assets, which are the difference between total assets and liabilities.
8. General Ledger: The general ledger in non-trading organizations serves as the central repository for all
financial transactions. It records transactions from various accounts and maintains a complete record of
financial activity. The general ledger ensures accurate financial reporting and allows for the preparation
of financial statements.

9. Financial Statements: Non-trading organizations prepare financial statements to communicate their

financial performance and position. These statements include the statement of activities (similar to the
income statement), statement of financial position (similar to the balance sheet), and statement of cash
flows. These statements provide transparency and accountability to stakeholders and assist in decision-
making.

10. Fundraising Accounts: Non-trading organizations often have dedicated accounts to track fundraising
efforts and related expenses. These accounts help monitor the organization's fundraising activities,
donor contributions, and the allocation of funds to specific programs or projects.

F-ACCOUNTS OF LOCAL BODIES IN BANKING SYSTEM

Local bodies, such as municipalities, city councils, or local government entities, often have accounts
within the banking system to manage their financial transactions and funds. These accounts serve to
ensure proper financial management, transparency, and accountability. Here are some details about the
accounts of local bodies in the banking system:

1. Current Accounts: Local bodies typically have current accounts with banks. These accounts are used
for day-to-day financial operations, including receiving revenue, making payments, and managing regular
transactions. Current accounts allow for frequent deposits and withdrawals and often come with
checkbook facilities.

2. Revenue Accounts: Revenue accounts are specifically designated to record and manage the local
body's income sources. These accounts track revenue generated from various activities such as taxes,
fees, fines, grants, and other sources. Revenue accounts provide a clear picture of the local body's
income streams and help in budgeting and financial planning.
3. Expense Accounts: Expense accounts are utilized to track the local body's expenditures. These
accounts record various expenses incurred, including administrative costs, employee salaries and
benefits, infrastructure development, maintenance and repairs, public services, utilities, and other
operational expenses. Expense accounts enable proper monitoring of spending and assist in controlling
costs.

4. Capital Improvement Fund Accounts: Local bodies often establish capital improvement fund accounts
to manage funds allocated for long-term infrastructure development projects. These accounts help
segregate and track funds specifically designated for capital investments, such as constructing roads,
bridges, parks, public buildings, and other infrastructure projects. Capital improvement fund accounts
ensure that funds are allocated appropriately and used for their intended purposes.

5. Grants and Aid Accounts: Many local bodies receive grants and aid from government agencies,
international organizations, or other entities for specific projects or programs. These accounts are set up
to manage these funds separately. They help in monitoring the inflow and outflow of grant funds,
ensuring compliance with donor requirements, and facilitating proper utilization of grants and aid.

6. Fixed Deposit Accounts: Local bodies may also open fixed deposit accounts with banks to earn interest
on surplus funds. These accounts provide a means to invest idle funds temporarily, generating additional
income for the local body. Fixed deposit accounts offer higher interest rates compared to regular savings
accounts and provide a secure way to preserve and grow funds.

7. Trust Accounts: In some cases, local bodies may establish trust accounts to manage funds held on
behalf of the community or specific purposes. Trust accounts are set up with specific guidelines and
restrictions to ensure the appropriate use and safeguarding of the funds. These accounts are subject to
additional regulations and oversight to maintain transparency and accountability.

8. Escrow Accounts: Local bodies may utilize escrow accounts for specific transactions that involve a third
party holding funds until certain conditions are met. Escrow accounts ensure the security and integrity of
financial transactions, especially in cases where large sums of money are involved, such as land
acquisitions or infrastructure projects. These accounts help build trust between the local body and other
parties involved in the transaction.

9. Treasury Single Account (TSA): Some local bodies may adopt a Treasury Single Account system, where
all funds received or disbursed by the local body are consolidated into a single account. The TSA
promotes centralized control, efficient cash management, and better oversight of funds. It enhances
transparency and prevents fragmentation of funds across multiple accounts.
10. Reporting and Auditing: Local bodies are required to maintain accurate records of their banking
transactions. Regular reporting and auditing of the accounts are essential to ensure transparency,
accountability, and compliance with financial regulations. These reports provide insights into the
financial position of the local body and help in identifying any discrepancies or financial irregularities.