The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Build an original loss-recognition question with enough figures to reconcile both sides independently. A repayment and a loss can both reduce loans but affect other entries differently. An original checkpoint is: After the stated loss, what is the bank’s equity? Supported answer: 25 units. Explain the decisive fact, then alter one condition and solve again. This is an original practice method, not a claim that the question appeared in an official past paper.
02 / UNDERSTANDING
The concept in context
An accounting asset is not necessarily immediately spendable or certain to retain its recorded value. A useful study check is to write the balance-sheet identity from memory, then trace a loss through both accounting sides. Explain why the method fits the stated facts before applying it to a changed situation.
03 / UNDERSTANDING
A worked learning case
A fictional bank has cash of 20 and loans of 180, funded by deposits of 170 and equity of 30. Assets and funding both total 200. If a recognised loan loss reduces asset value by 5 without changing liabilities, assets become 195 and equity falls to 25. The accounting identity still balances.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
After the stated loss, what is the bank’s equity?
Show the answer and reasoning
25 units.
Initial assets are 200 and liabilities are 170, leaving equity of 30. Recognising the loss reduces assets to 195 while deposits remain 170. Equity must therefore equal 195 minus 170, or 25. The loss does not automatically reduce the contractual amount the bank owes its depositors.
Two traps to watch for.
- Calling customer deposits bank assets rather than liabilities.
- Assuming an accounting loss automatically reduces deposit obligations.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Write the balance-sheet identity from memory.
Classify deposits, loans, cash and equity.
Trace a loss through both accounting sides.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- www.ncert.nic.in https://www.ncert.nic.in/textbook/pdf/leec103.pdf
- www.rbi.org.in https://www.rbi.org.in/scripts/DataDefinition.aspx
For RBI preparation, check the current official notice before relying on changing dates, rules or examination requirements.
