About BNP Paribas:
BNP Paribas is a 10 old ages old Gallic bank and is one of the strongest Bankss in the universe. It is said to be the first bank in Europe in footings of sedimentations and it is a 1 of the leaders of planetary banking and fiscal services in the universe ; based on several planetary evaluation companies and web sites. BNP Paribas operates in over 80 different states, all over the universe. It is a multi-national corporation, with over 200,000 employees. It has 3 chief fiscal services and divisions ;
1. Retail Banking
2. Corporate and investing banking
3. Investing solutions
BNP has 7 commercial subdivisions in the gulf part. One of BNP Paribas ‘ subdivisions located in the GCC is in the Kingdom of Bahrain, using about 320 employees and located in the Bahrain Financial Harbor. BNP ‘s chief purpose is to be stated and ranked as a bank with the best constitutions along with high merchandise and services quality, good client services and high invention degree.
BNP stated that “ We are by far the taking European bank who is most active in undertaking finance, export recognition, structured finance and fixed income. We besides have in-house expertness to supply consultative services to a wide scope of corporates in the field of telecoms, substructure undertakings and other acquisition and M & A ; A related activities.
In add-on the part hosts BNP Paribas Najmah, the Islamic banking Unit of the bank that provides Sharia’h compliant funding & A ; investing solutions to corporates and persons. ” [ 1 ]
The merchandises that BNP Paribas provide for the persons include current and savings histories, term sedimentations, all payment and aggregation services like international transportations and check books and electronic banking services. However, the subdivision of BNP Paribas located in the land of Bahrain does non supply the services of a commercial, and merely operates as a corporate bank.
Accounting Cycle in BNP Paribas:
To be able to happen out the maximal cognition about BNP Paribas and their accounting procedure ; BNP Paribas was visited and an interview was conducted with few of the staff members ( few officers ) of the finance section. The undermentioned information is the summarized information gathered from all the beginnings available. They describe all the books and stairss that are included in the accounting rhythm. It is besides shown below how BNP Paribas maintains their books of histories and what are the points included in some of their histories and books ; like the income statement and balance sheet.
The ground for the name ‘Accounting Cycle ‘ is because all the books to be maintained are connected to each other. For case, to fix the legers the diary has to be prepared foremost ; and to fix the test balance the leger has to be prepared before that. In add-on, unless the test balance is prepared the company can non travel on with the accounting procedure ; and therefore can non fix the income statement or the balance sheet. That is why ; it is of great importance that full attending is paid to all the accounting books get downing from diary to the balance sheet ; because a individual error in any of the accounting books will take to an mistake in the concluding histories.
Journal is the first measure of maintaining the accounting books. Whenever a dealing takes topographic point a diary entry is passed, and is recorded in the diary. The double facet construct of the accounting system is that there is a giver and a receiving system in every dealing. Hence, based on the type of the aspect/account, for illustration if it is a ‘Nominal Account ‘ , every facet of the dealing will be either debited or credited. Before any entry is recorded two determinations must be taken. The first determination is to make up one’s mind which histories are traveling to be affected ( e.g. the machinery history or the bank history ) and the 2nd determination will be to make up one’s mind which history is to be debited and which history is to be credited.
In BNP Paribas diaries are maintained. This is because maintaining diary is an indispensable portion of the accounting rhythm, as legers can non be prepared without mentioning to the diary entries recorded. Whenever a dealing takes topographic point, the diary entry is instantly recorded into the books of histories.
The diary entries kept are so transferred to the legers. They are recorded into the different histories in the legers harmonizing to their type and their history name. The legers are divided into several books which includes hard currency book, gross revenues twenty-four hours book, purchases twenty-four hours book, return inwards books, return outwards books and the general leger. The diary entries will be transferred to any one or more of the above parts of the legers. The legers show the T-Accounts of all the parties and facets of dealing available in a concern. At the terminal of the period ( e.g. a month ) , the histories are balanced, so these balances are entered into the test balance to cognize whether the sum of the debit balances and the sum of the recognition balances are ‘balanced ‘ .
BNP Paribas keeps the histories of all the facets of minutess that take topographic point in the concern. One of the chief histories that are kept in the legers of BNP is their clients ‘ histories ; whether they are the deposits histories or loan histories ( i.e. either the client is their debitor or creditor ) . With the aid of these legers, the test balance is so produced.
The test balance shows all the debit and recognition balances transferred from the leger ‘s histories. If the entire debit balances and the entire recognition balances are the same so the diary entries recorded earlier are likely entered right. However if there was an mistake and the balances were non the same so a error has been made in the accounting procedure. Such errors might originate due to several grounds, these include inaccuracies incurred while entering the diary entries, reassigning the entries to the leger histories, reassigning the histories ‘ balances from the legers to the test balance, some entries might hold non been recorded in the diary or leger, or a leger ‘s balance was non transferred to the test balance.
BNP Paribas besides maintains the test balance. This is because test balance helps BNP to look into whether the diary entries kept were entered right or have an mistake. As an mistake in the test balance or any of the old accounting paperss will intend that the whole accounting rhythm will be inaccurate. This is because informations in every accounting papers is dependent on the information in the other accounting paperss.
The income statement is prepared by all the concerns that use the double-entry book maintaining system. The income statement is normally made up of two subdivisions, the ‘Trading history ‘ and the ‘Profit and Loss Account ‘ . The trading history will cipher the entire gross net income ; whereas the net income and loss history will cipher the net income.
In BNP Paribas the Net income and Loss history or the Income Statement ‘s format is somewhat different. This is because BNP Paribas ‘ income statement should be of a suited format for a bank. Furthermore, BNP Paribas is a transnational corporation, with many operations all over the universe ; hence their income statement will be different than the 1s prepared by the fabrication companies and different than the 1s prepared by retailing concerns.
BNP Paribas ‘ income statement is divided into several subdivisions. The first subdivision calculates the net banking income, and it is the sum of all the net incomes calculated in the same subdivision. The net incomes includes cyberspace of points like net involvement income, net committee income, net additions on trading history securities, net additions on securities available for sale, net other banking income and net income from other activities. Along with the given net incomes, the net banking income besides consists of other points like income on equities and other variable income instruments and subventioning consequence and net investing income of insurance companies. The sum of all the given points will be the Net Banking Income.
The following subdivision of the income statement calculates the Gross Operating Income. This is found by deducting the entire operating disbursals ( like wages and other administrative disbursals ) and the depreciation, proviso and amortisation on touchable and intangible assets from the net banking income.
The 3rd subdivision calculates the Operating Income ; which is found by deducting net add-ons to commissariats for recognition and state hazard from the gross operating income.
Then, the following subdivision will cipher the income before revenue enhancement, non-recurring points, amortisation of Goodwill and motion in the militias in the general banking hazards. Then the ‘share of net incomes of companies carried under the equity method ‘ , and the additions on long-run investings and alterations in commissariats are added to the operating income found in subdivision three.
The concluding subdivision is used to cipher the Net Income. To add on, for happening the net income all the undermentioned points should be added together ;
- Net non-recurring disbursal
- Corporate income revenue enhancement
- Amortization of Goodwill
- Motions in the modesty for general banking hazards
- Minority involvements.
In the terminal of the amalgamate net income and loss history of BNP Paribas two more points are shown. These are the Basic net incomes per portion, and the Diluted net incomes per portion ( in Euros ) .
The last, but perfectly non the least, subdivision of the book maintaining procedure is the Balance Sheet. This papers is considered to be the most of import papers of the accounting rhythm. This is because it shows the overall public presentation of the concern and where the concern really stands.
The balance sheet is normally made up of three subdivisions ; the assets, the liabilities and the capital. This is the format of the balance sheet prepared by most of the retailing concerns. However ; as a immense transnational corporation with many sections and activities, BNP Paribas ‘ balance sheet is, to some extent, different than the 1s with the normal format.
BNP Paribas ‘ balance sheet is divided into two subdivisions ; Assetss, and Liabilitiess and Shareholders ‘ equity. In the amalgamate balance sheet of BNP, the first subdivision is the Assets ‘ subdivision. In this subdivision the Total Assets are calculated, and the committednesss given are shown every bit good. In order to cipher the entire assets the undermentioned points should be calculated and so added together ;
- Entire interbank and money market points
- Entire client points
- Chemical bonds and other fixed income instruments
- Equities and other variable income instruments
- Insurance company investings
- Entire Investings in non-consolidated projects, and other take parting involvements and equity securities held for long-run investing
- Entire investing in companies carried under the equity methods
- Tangible and intangible assets
- Good will
- Accrued income and other assets
After the entire assets are found, the committednesss given are shown.
Then the following subdivision is prepared ; the Liabilities subdivision. In this subdivision the entire liabilities and the stockholders ‘ equity is calculated. The undermentioned points should be calculated and so added together to happen the entire liabilities and the stockholders ‘ equity ;
- Entire interbank and money market points
- Customer points
- Entire debt securities
- Technical militias of insurance companies
- Accrued disbursals and other liabilities
- Commissariats for eventualities and charges
- Subordinated hazards
- Militias for general banking hazards
- Minority involvements in amalgamate subordinates
- Entire stockholders ‘ equity
After the entire liabilities and stockholders ‘ equity is found, the committednesss received are shown. This is the concluding portion of BNP Paribas ‘ balance sheet.
A transcript of BNP Paribas Group ‘s amalgamate net income and loss history, and amalgamate Balance Sheet for the twelvemonth 2004 is shown in the Appendix.
BNP Paribas besides prepares other paperss and studies like the hard currency flow statement and statement of returned net incomes. The hard currency flow statement shows the influx and escape of hard currency into and out of the bank ; and the statement of maintained net incomes shows the alterations in the maintained net income of the bank over a specific period of clip.
BNP Paribas ‘ Accounting System:
There are two types of accounting system. Single-entry and double-entry book maintaining system.
Single-entry book maintaining system is such a system where minutess are merely written down in a individual column account/table. The minutess are merely listed with no history for the different types of minutess ( for illustration, is it an disbursal, plus, etc ) . Single entry bookkeeping systems are used in order to maintain everything simple. It is less expensive as compared to a dual entry bookkeeping system in footings of care. This is chiefly because such accounting bookkeeping systems do non ask a trained employee.
However, since merely one facet of an accounting dealing is recorded in the books of accounting, all necessary information needed by directors for an effectual and efficient manner of pull offing a concern is normally unavailable. Furthermore, unlike a dual entry clerking system, a individual entry system does non show a confirmation cheque against bookkeeping mistakes. This is one of the most terrible drawbacks of a individual entry clerking system. Omission of important informations is really likely to go on since most of the points of peculiar minutess are non recorded in the books of histories. To add on, robbery and other types of loss of information can non easy be noticed and discovered with such system. Normally, this type of bookkeeping system directs to an inefficient direction of the information recorded in an organisation. And seeking for such information proves to be really hard. Such system allows the users to cipher the income of the organisation but it does n’t exemplify its fiscal place.
As mentioned, the drawbacks of single-entry book maintaining system overcome its advantages. For this ground, BNP Paribas implements the double-entry book maintaining system. This is because ; BNP Paribas looks for flawlessness when coming to maintaining the accounting books.
In double-entry book maintaining system, every dealing will be recorded harmonizing to a certain set of regulations and format. Each dealing should impact at least two different histories. The chief and most of import advantage of a dual entry clerking system is that it takes into history and records both sides of an accounting dealing. That is, the debit every bit good as the recognition side. In other words, a full history of a peculiar dealing is kept. Because both facets of an accounting dealing are recorded, the debit side should ever be the recognition side. Meaning that, for each debit journal entry, there is a related recognition entry, and both sides must hold a similar sum. This helps in look intoing the truth of the accounting information recorded. A Trail Balance shows the entire sums of the recognition and debit side of all the minutess for a given fiscal twelvemonth. Hence, an Income Statement can be prepared really easy because, since both sides of a dealing is available, all the information related to income/expenses/revenues/losses can be used and so the organisations outcome will be determined with complete truth. The fiscal place of an organisation can be effortlessly determined by fixing the Balance Sheet. All the information related to assets and liabilities will be used in the procedure. By utilizing this system, mistakes can easy be spotted. This applies an ethical force per unit area on all of the accounting staff in order to acquire their occupation done right. Besides, this system allows the users to acquire statistics, which helps in the procedure of decision-making and allows the organisation to run efficaciously and expeditiously. To add on ; every individual information available about a peculiar dealing can be obtained really instantly and without trouble. For security intents, the users can do certain that the entire sums of histories receivable and histories collectible are shown with entire truth.
On the other manus, nil is perfect. Hence, as everything else, this book maintaining system has few drawbacks. These include that such system is really hard to understand for a regular individual. Whoever is traveling to work as an comptroller and maintain path of fiscal information of an organisation that uses a dual entry bookkeeping system will certainly necessitate preparation ; and developing employees adds to the entire costs of an organisation. As compared to a individual entry clerking system, this system is really time-consuming. This is evidently because it records both facets of an accounting dealing and provides every necessary item. Furthermore, an accountant utilizing such system demands to be highly careful. This is because mistakes committed could be really serious and rectifying them could be hard and time-consuming.
Since BNP Paribas Group is a big, Multinational Corporation ; and they have a batch of complicated histories, so they use a computerized system alternatively of manual system. This is because ; a manual double-entry book maintaining system will be even more clip and attempt consuming. To add on, a manual system will be uneffective for such a big international bank as it has a batch of histories from all over the universe, and they all should be in the same format and mistake free.
BNP Paribas ‘ employees use SAP to fix the fiscal statements. SAP is package that helps in fixing fiscal statements, by entering the minutess and so fixing the studies and histories at the terminal of a specific period of clip. BNP Paribas uses this package to fix diaries, general and subordinate legers, budgets, etc. SAP besides has package that helps the bank in entering the assets it purchased. SAP besides helps in fixing the fiscal studies that include income statement, balance sheet, hard currency flow statement and statement of maintained net incomes.
Strengths and Failings of BNP Paribas ‘ Accounting System:
Every accounting system has its ain deductions, nevertheless it differs from each company to another how to take the maximal advantage of the strengths and get the better of the failings.
BNP Paribas ‘ accounting system is a really well-organized and extremely efficient system. The chief ground is because BNP is a really big corporation and since it is based in many states it is really important to hold an efficient accounting system. Furthermore, unless the accounting system is strong, 100 % mistake free, extremely efficient and organized, it is hard to hold high control over the financess available in the bank.
Furthermore, diary is an easy signifier to enter the minutess and it has a standardized layout which makes it easy to mention back to it in the hereafter ( for illustration if an mistake is to be found ) , otherwise it will be really hard to happen the minutess if they are recorded in different signifiers, utilizing different methods. To add on, each dealing is recorded in the diary at the same clip so there is a less opportunity that a dealing will be missed out and be omitted from the books of accounting. With the being of diaries, it is really easy to keep legers.
Keeping legers is really utile. This is because all minutess that are related to a individual, disbursal, liability or an plus are recorded individually in an history which makes it easier to be understood and to be referred to whenever needed. These histories are really good to a bank as they will let the bank to cognize how much they own by others, and how much they owe to others. They can besides cognize the value of what they own ; how much worth of each plus they have, and how much liability. These histories will besides enable the bank to equilibrate them, and utilizing these balances and history information they can pull up the test balance, income statement and balance sheet.
Pulling up the test balance will assist the bank to cognize if the histories in the legers were right, and if the diary entries recorded were error free or if they had inaccuracies. Furthermore, normally a balanced test balance will let the bank to travel further and fix an mistake free and accurate income statement and balance sheet ; the most of import paperss of the accounting rhythm.
The income statement measures the public presentation of a company over a period of clip. It shows the overall net income of the company over a period of clip and it besides shows the exact inside informations of the accounting minutess that took topographic point over the same period. The bank can besides cognize all the disbursals that it incurred while bring forthing the grosss that it earned.
By fixing the balance sheet the bank can cognize where it stands financially. Furthermore, balance sheets enable the bank to cognize how much it grew over a period of clip ; by comparing the balance sheets with the balance sheet of the old old ages. To add on, there are many of import ratios that show where a concern really stands on many bases ; for case acerb trial ratio which shows how liquid the bank is. Therefore, by fixing a balance sheet, such ratios can be calculated ( current ratio, acerb trial ratio, return on equity etc ) .
To add on, by fixing the hard currency flow statement, BNP will be able to happen out the exact sum of hard currency entrance and go forthing the bank. This will assist the bank in calculating if there is traveling to be any hard currency jobs in the close hereafter. Fixing hard currency flow statements is really of import since hard currency is the life blood of every organisation.
On the other manus, as there are strengths of the accounting system used by BNP, there are besides few failings. These failings include that if the test balance was balanced it does non turn out that it is error free. Mistakes such as mistake of skip, mistake of committee, counterbalancing mistakes, and so on might happen but they will non be known, as the test balance is non affected by such mistakes and this will take to inaccurate concluding histories.
Furthermore, balance sheets do non give the current value of the assets and liabilities ; since they are prepared once a twelvemonth. Hence, if any comparing has to be done so the value of the assets and liabilities are non the current value, alternatively it ‘s the value of the assets and liabilities at the terminal of the old fiscal twelvemonth ; when the balance sheet was drawn.
Recommendation and Decision:
However, BNP Paribas has a really strong accounting system ; hence the failings are surely being overcome. For case the job of the un-identified mistakes is solved by the being of hearers. BNP Paribas Bahrain has two sets of hearers ; internal and external hearers. These hearers help to demo the true and just image of the histories. Therefore, if any mistake that has no consequence on the test balance exists, the hearers will assist in happening them out.
The other job of the concluding histories is solved, as BNP Paribas prepares the concluding histories more than one time a twelvemonth. In this manner, the assets and liabilities values are more up-to-date and demo a more true value.
BNP Paribas is really cautious when it comes to fixing the histories. This is due to many grounds. One of the major grounds is because these histories are published to the populace over a period of clip, since BNP Paribas is a public limited company. BNP Paribas issue studies twice every 6 months during the fiscal twelvemonth. Their fiscal twelvemonth ends on the 31st of December of every twelvemonth. Furthermore, the histories are discussed in the Annual General Meetings, therefore if any mistake or deceptive figure exists the bank might be sued and this will be them a batch. For this ground, hearers invariably audit the bank accounts to do certain that they are accurate and error free. BNP makes full usage of the strengths of its accounting system and takes the maximal safeguards to avoid its failings.
BNP Paribas makes the maximal usage of its concluding histories. The undermentioned figures were published by BNP Paribas from and utilizing the concluding histories ;
Figures of 2009 ( All BNP corporations )
- Grosss: ?40,191 million
- Gross runing income: ?16,851 million
- Net income group portion: ?5,832 million
- Net incomes per portion: ?5.20
- Tax return on equity: 10.8 %
- Market capitalisation: ?66.2 billion
BNP Paribas prepares all the histories ; diaries, legers, test balance, income statement and balance sheet. Furthermore, BNP besides prepares studies that show the consequences of nucleus concerns. They prepare the studies that show the pre-tax income of several subdivisions and divisions. These studies besides show the % alteration in some of the figures ; like the net banking income, gross runing income etc, over the period of a twelvemonth. A transcript of such study is shown in the appendix.
BNP Paribas besides prepares the other accounting paperss, such as control histories, proviso for dubious debts, etc. There are 30 employees working in the finance section of BNP Paribas Bahrain. These 30 employees put their full attempts in fixing these concluding histories. Their attempts double during the terminal of the fiscal period ; terminal of December. This proves the importance of keeping an efficient and well-organized accounting system in BNP Paribas Bahrain.
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