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Item 1: Deposits, fixed or at call held in your books

  • Bank deposits:
    • Time deposits
    • Fixed deposits, with fixed interest rate
    • Deposit at call with daily basis interest
  • Accounted as bank balance under current assets, unless deposit matures after 1 year (accounted as pledged bank deposit if pledged, with proper disclosure).

Item 2: Saving accounts held in your books

  • Cash in savings accounts, with interest of compound daily basis
  • Accounted as bank balance under current assets, with accrued interest income.

 Item 3: Current account balances held in your books

  • Cash in current accounts, with interest, also cover cash to be drawn by cheque
  • Accounted as bank balance under current assets. If overdrawn, accounted as current liabilities with accrued interest.

Item 4: Loan amount debit balance (excluding loans in connection with Inward cargos) in your books

  • Loan amounts with drawn under bank facilities, usually with fixed terms and periodic repayments or maturity date with whole repayments, and with interest calculated at specific margin over/under prime/quoted rate
  • Care accrued interest expenses
  • Accounted as bank loan, with current / non-current classification based on repayment terms.
  • Care financial statements' disclosure for interest rate, security given and repayment terms.

Item 5: Accounts closed during the year to confirmation date

  • No effect on balance sheet figures
  • Check to board minutes regarding board approval to close the accounts.
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4 Answers

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Item 6: Advances to manufacturers

  • Short-term per-shipment financing for manufacturers who do not have sufficient fund to complete an order
  • Function: to enable procurement of raw materials
  • Advance on total value of contract, accounted as bank loans under current liabilities.

Packing credits accounts

  • Short-term pre-shipment financing, advance by time goods have been produced and packed for shipment
  • Based on a percentage of L/C value, recover by proceeds from export bills
  • Account as bank loans under current liabilities 

Export loans

  • Short term post-shipment financing, usually with presence of invoices and shipping documents for banks
  • Account as bank loans under current liabilities

Item 7: Acceptances outstanding

7.1 Bills receivable by you (banker):

  • Bills held by bank for goods imported
  • Once bank releases documents held which will then pass title to importers, importers can obtain goods
  • Importers usually negotiate terms with bank
  • No interest within agreed term
  • Accounted as bills payable under current liabilities

7.2 Trust receipt (T/R);

  • Bank has a pledge on merchandise imported as a continuing security
  • Importers agree to hold documents and goods in trust for sela
  • Usually ear-marked together with other forms of advance, e.g.
    • import L/C insurance (when bank lost control of goods)
    • import loan
    • shipping guarantee
    • export bills negotiation under discrepancies
  • Accounted as trust receipt loans under current liabilities

7.3 Bills held by you (banker) for collection:

  • Bills held by bank for goods imported, but does not involve L/C
  • Bank acts as a middleman in collecting bills for importer
  • Bank charge commission
  • Account as trade creditors / account payable under current liabilities

Item 8: Partial payments held by you

  • Occur when bank handles both outwards & inwards bills for same customers
  • To reduce handling charges, importer ask bank to offset export bills receipts against import bills payments
  • Account by set off bills payable under current liabilities

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Item 9: irrevocable L/C outstanding

  • Be non-utilized letter of credit line available to importers
  • Generally for importer no disclosure requirement for importer
  • If line has been partially taken up, there will be a liability as bills payable in importers' book

Item 10: Bills receivable

10.1 Bills purchased by you (banker)

  • Exporters received settlement before bank receives fund from importers' bank
  • Discounted with recourse
  • Account as factoring loan under current liabilities in books of exporter if it is with recourse

10.2 Bills held by you (banker) for collection:

  • Bills held by bank for goods exported, but does not involve L/C
  • Bank acts as a middleman in collecting bills for exporter
  • Bank will charge a commission
  • Account as trade debtors under current assets 

Item 11: Marginal deposit

  • If importers do not have a L/C facility with bank, bank may require a deposit from importers for settlement of all or part of bills; or
  • Importers have a facility but purchase amount is in excess of facility granted
  • Account as deposit under current assets.

Item 12: Loans granted for inward cargos

  • Once goods are arrived, if importers don't have sufficient fund to honor the bills, bank may advance a loan to importers to settle bills and release documents
  • Bank does not obtain title to goods
  • Account as bank loans under current liabilities.
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Item 13: Guarantees

13.1 Shipping Guarantees

  • Written indemnity by bank to shipping company
  • Allow importers to take possession of goods before bill of lading (B/L) is received
  • Redeem upon receipt of original B/L
  • Usually ear-mark against TR line
  • Contingent liability, but may be too remote for separate disclosure
  • If goods are received and liabilities booked, there is no contingent liability.

13.2 Letter of guarantee (L/G)

  • Undertaking from exporters to bank
  • Bank negotiates against on discrepant documents under L/C
  • Usually ear-mark against TR line
  • Consider contingent liability

13.3 Other guarantees

  • Banker issue guarantees to third parties for the company
  • Examples:in lieu of rental deposit to landlard
  • No implication on financial statements

13.4 Received by you (banker) on our behalf

  • Third parties issue guarantees addressed to banker for the company
  • Examples: director's personal guarantee to banker for mortgage / loan
  • no implication on financial statements except disclosure requirements.

Item 14: Foreign Exchange contract outstanding

  • For future purchase contract and sale of foreign exchange contract
  • Closing date value of foreign contract using closing rate, or rate fixed under the contract
  • Accounting treatment refer to HKAS 39 and disclosure referring to HKFRS 7

Item 15: Other direct or contingent liabilities

  • some legal issues with bank directly
  • Account as liability or contingent liability

Item 16: securities and other documents of title held by you (banker)

16.1 Against facilities granted

  • Obtain bank facility letter
  • Consider disclosure requirement / check with relevant board minutes

16.2 For safe custody

  • items under bank's safe custody, like share certificates
  • Provide evidence for existence and ownership of assets
  • No disclosure unless are pledged

(Source: Year 2009 CPD seminar)

answered by (8k points)
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Method to get both office account and client account from one bank by one single bank confirmation request and pay bank charge one time only (client account for regulated company that can hold clients' money):

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