Utpl Tnica015 PDF

Accounting
and
Open and Distance Modality
Bank accounting
Guide text
5 credits
The content of this work applies to the following subjects
Cycl Careers
es
Administration in Banking and Finance
Accounting and auditing
The Catholic University of Loja
Administrative area
Preliminarie
s
OPEN AND DISTANCE MODALITY
First
BIMEST
ER
Second
Department of Business Sciences quarter
Accounting and Auditing Section
Solver
Bank accounting Bibliographic

references
Guide text
5 Credits
The content of this work applies to the following subjects

Careers Cycles
■ Administration in Banking and Finance IV
■ Accounting and Auditing VII
Author:
Raul Fernando Acurio del Pino
UTPL-TNICA015
The Catholic University of Loja

Virtual advice:
www.utpl.edu.ec
BANK ACCOUNTING
Guide text
Raúl Fernando Acurio del Pino
PARTICULAR TECHNICAL UNIVERSITY OF LOJA (ce) 4.0, CC BY-NY-SA
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March 7, 2019
2.
Index
Preliminarie
s
First
2. Index 4 BIMESTER
3. Introduction 6
Second
4. Bibliography 9 BIMESTER
4.1. Basic 9
Solver
4.2. Complementary 9
5. General guidelines for the study 11 References

bibliographic
6. Teaching-learning process to achieve competencies 14
FIRST TWO MONTHS Annexes
UNIT 1. THE NATIONAL FINANCIAL SYSTEM 14
1.1. Generalities of the financial system 15
1.2. Integration of the national financial system 29
1.3. Operations of financial entities 36
Self-assessment 1 42
UNIT 2. ACCOUNTING REGIME AND INFORMATION 45
2.1. Bank accounting 45
2.2. Objectives of accounting information 46
2.3. Conceptual framework 46
2.4. Application and scope of the Single Catalog of Accounts 50
UNIT 3. UNIQUE CATALOG OF ACCOUNTS 58
3.1. Structure of the Single Catalog of Accounts 58
3.2. Accounting record of asset accounts 60
Practical activity 1 126

SECOND QUARTER r —
index
UNIT 3. SINGLE CATALOG OF ACCOUNTS (CONTINUED)
129
3.3. Recordsaccounting accounts of the passive Preliminaries
129
TO
3.4. Recordsaccounting accounts of heritage 169
First two
Practical activity 2 months
178
3.5. Recordsaccounting accounts from income
181 Second quarter
3.6. Recordsaccounting accounts of expenses
187
3.7. Contingent accounts Solver
207
3.8. Order accounts TO
Practical activity 3 211 Bibliographic

references
UNIT 4. IFIS FINANCIAL STATEMENTS, APPLICATION AND 214
INTERPRETATION OF INDICATORS Annexes
2. Index 216 4
3. Introduction 6
4.1. Basic 10
4.2. Complementary 10
5. General guidelines for the study 12
1.1. Generalities of the financial system 16
1.2. Integration of the national financial system 30
1.3. Operations of financial entities 37
UNIT 2. ACCOUNTING REGIME AND INFORMATION I 46
2.1. Bank accounting 46
2.2. Objectives of accounting information 47
2.3. Conceptual framework 47
2.4. Application and scope of the Single Catalog of Accounts 51
UNIT 3. UNIQUE CATALOG OF ACCOUNTS 59
3.1. Structure of the Single Catalog of Accounts 59
3.2. Accounting record of asset accounts 61
SECOND QUARTER 130
UNIT 3. SINGLE CATALOG OF ACCOUNTS (CONTINUED) 130
Yo 130
2.1. Accounting records of liability accounts 130
3.4. Accounting records of estate accounts 170
Text-guide: Bank Accounting PRELIMINARIES
3.
Introduction

3.5. Accounting records of income accounts 182
3.6. Accounting records of expense accounts 188
3.7. Contingent accounts 208
3.8. Order accounts 212
UNIT 4. IFIS FINANCIAL STATEMENTS, APPLICATION AND
INTERPRETATION OF INDICATORS 217
4.2. Statement of income 222
4.3. Cash flow statement 224
4.4. Statement of changes in Equity 226
4.5. Technical heritage 229
4.6. Analysis by indices 232
7. Solution 253
8. Bibliographic references 293
7.
Dear students, allow me to express a cordial greeting and my most sincere
congratulations for your decision to improve by participating in this innovative study
system that will allow you to meet your professional goals for the benefit of yourself
and society as a whole.
The subject of Bank Accounting is a subject that is taught in the fourth cycle of the
Administration in Banking and Finance degree and the seventh of the Accounting
and Auditing degree, it is part of the core subjects of the degree, it has a rating of
five (5 ) credits. The contents of this subject have been designed with the aim of
providing the student with the opportunity to know and put into practice the
functions, responsibilities, operations, as well as the regulations for the
development and registration of different banking transactions and other correlative
aspects.
The study of the subject will allow students to have a mastery of the theoretical and
67 OPEN AND DISTANCE MODALITY

practical aspects of the different accounting items and accounts in accordance with
the Single Catalog of Accounts issued by the Superintendency of Banks that make
up the financial statements, as well as to execute the accounting cycle in financial
institutions and present financial statements to different users for making
managerial decisions.
Likewise, students will obtain a high level of theoretical-practical reasoning, which

gives them elements of judgment for the proper interpretation of financial
statements shown by the financial entity in a certain period.
The financial sector is an important manager of the productive development of our

country, generator of sources of work and administrator of both public and private
resources, which is why it requires the contribution of trained professionals who
can generate processes with a high level of innovation that allows are

institutions offer the general public products and services focused on effectively
and efficiently covering their needs.
Students who take the subject will obtain a comprehensive vision of the
competitive environment in which financial institutions develop, since their
operation is based on responsible administration of the resources entrusted to
them by their depositors, which must be placed efficiently in its clients, in order to
ensure the adequate generation of income that guarantees its self-sustainability
and permanence in the market.
In the training program, this subject prepares them for a labor market that requires
the financial accounting professional to be an agent of change through their
knowledge of companies, which will also determine their importance and position
within the organization.
The subject is structured as follows:
In the first two months, the first two units and the beginning of the third unit are
studied. In the first unit, generalities of the financial system, its importance, control
bodies, its members and the operations of financial entities are addressed.
In the second unit, the legal regulations, the accounting regime of financial entities
and the regulatory base of the Superintendency of Banks are studied and at the
beginning of the third unit the topic of the Single Catalog of Accounts and the
accounting of the accounts of the Bank is addressed. asset.
In the second two months, the study of the third unit continues and deals with the
recording of accounting operations of the liabilities, equity, income, expenses,
contingent and memorandum accounts.
Finally, unit four addresses the topic of financial statements and the main indices
with which the management of financial entities is measured.

In the distance study modality, the teaching-learning process is centered on the

student, who is the main protagonist of his humanistic and professional training;
Therefore, I invite you to dedicate your best effort to the study of this subject and
achieve the development of the skills that will allow you to function successfully in
your professional life in the financial areas of companies.
As a teacher of this subject, I will always be attentive to any requirements from

you, gentlemen, students, in addition to sharing your concerns throughout this
academic cycle, which will allow you to achieve your professional aspirations that
will surely be crystallized at the end of the academic year.
Congratulations on your decision to participate in this training process, I wish you

the best of success. Remember that the reward for effort is victory.

4.1. Basic
Acurio, R. (2019). Bank accounting guide text . Loja - Ecuador: Editorial of the
Private Technical University of Loja.
The guide text is an educational material that has been prepared with the
purpose of supporting the student's learning process about banking
accounting, through various activities that guide, motivate, provide feedback
and evaluate the knowledge that the student will acquire over the course of
the course. semester.
4.2. Complementary
National Assembly of Ecuador (2014). Organic Monetary and Financial Code.

Official Registry Supplement No. 332 of September 12, 2014. Quito, Ecuador.
This code establishes the framework of policies, regulations, supervision,

control and accountability that governs the monetary and financial systems,
as well as the securities and insurance regimes, the exercise of their activities
and the relationship with their users.
Superintendency of Banks. (2017). Single Catalog of Accounts and instructions for

financial institutions. Resolution SB-2017-705 of August 30, 2017. Quito,
Ecuador.
It is a technical manual issued by the Superintendency of Banks where the

conceptual framework, principles, description of the accounts and accounting
dynamics are found that allow analyzing, recording and summarizing the
operations of financial institutions, with the objective of obtaining
10 7 OPEN AND DISTANCE MODALITY

reasonable financial statements that allow making sound management

decisions to maximize returns and at the same time minimize risks,
maintaining the confidence of depositors.
http://www.superbancos.gob.ec/
On this website there is access to the Superintendency of Banks of Ecuador,

where you will find information about the history of the Superintendency,
controlled entities, financial and banking regulations, historical and current
balance sheets of financial institutions, financial indices, etc.
http://www.asobanca.org.ec/
In this link there is access to the Association of Private Banks of Ecuador,

where you will find updated information on the most relevant figures of
Banking, legal regulations, publications, analysis, macroeconomic data, etc.

5. General guidelines for the study
In the distance study modality, the student learns autonomously, with the
permanent support of the tutor and an infrastructure that gives strength to the
educational model, thus facilitating the acquisition of knowledge of the subject and
skills, making it possible in the professional future efficient performance in the
workplace.
With a view to taking advantage of these resources, some methodological

guidelines are presented that demand your dedication and discipline for optimal
use of the limited time that a distance student generally has due to their multiple
occupations and work commitments:
▪ The study material available to each student is the guide text in digital format,
which is considered the main learning medium, educationally guides the
learning process step by step and promotes teacher-student interaction for
the development of skills.
▪ To achieve the skills, it is recommended to use certain study techniques such as

comprehensive reading, identifying the main ideas and secondary ideas in
each topic; As this is a guide text in digital format, shade or mark the relevant
aspects of each topic; Likewise, to summarize the contents, choose to create
notes and if you consider it necessary, you can optimize your time through
the reproduction of the text in audio, among other benefits that the digital
format offers.
Other study techniques that will support the learning process are your own notes,
diagrams, synoptic tables, concept maps, among others.
▪ To achieve effective learning, it is necessary to organize your time by establishing

your study calendar considering your priorities.

and time available. To this end, it is recommended to dedicate at least two

hours a day to studying the subject.
▪ During the study and development of the tasks, doubts and concerns will arise. It
is suggested that you make the necessary queries to the teachers of the
subject, through tutoring chats, by telephone at the times established for this
purpose, through permanent messages. through the Virtual Learning
Environment (EVA)
▪ Reinforce your learning with the development of self-assessments, proposed

exercises and recommended activities that appear in the guide text.
▪ The UTPL has several technological resources available to students such as the
platform or Virtual Learning Environment “EVA” that allows an interrelation
between members of the educational community; the virtual library where you
will find publications, magazines, catalogues, electronic books, among others;
videoconferences as a support and permanent updating tool; Open
Educational Resources, related to the subject and that contribute to the
teaching-learning process.
▪ It is recommended to enter the EVA every day to review the academic and
informative announcements posted by teachers. These announcements will
guide you in your training and evaluation each week.
▪ The teaching plan contains the general planning of the subject, which details the
competencies of the subject, the learning results, the contents of each two-
month period, the learning activities, the details of the evaluation of the
subject through the components teaching (CD), learning application and
experimentation practices (CAE) and autonomous learning (CAA) related to
learning resources, dedication time, evaluation instruments and the
qualification of the different synchronous and asynchronous activities.

▪ The teaching plan includes the planning of synchronous (chat and video
collaboration) and asynchronous (forum, wiki) academic activities for each
two-month period and the dates to be considered for their participation and
compliance. It is important to participate and in this way check the progress in
your learning and earn the score that is part of the overall grade for each two-
month period.
▪ Evaluation constitutes a means of verifying the achievement of competencies;

Therefore, it is recommended to participate in accordance with the dates and
times established by the University in the in-person evaluations.
▪ The prior knowledge required to successfully address this subject are: financial
mathematics, general accounting, labor, corporate, tax aspects and, most
importantly, your interest and dedication to study.
▪ It is recommended that you access the different web pages that are in the
bibliography so that you can review the current information on each of the
proposed topics.
▪ It is necessary that you carry out the task in accordance with the hours planned in
the teaching plan. This activity has an important weight in the course grade
and, together with the synchronous and asynchronous activities, will prepare
them for the in-person evaluation.
▪ It is recommended to periodically review the subject evaluation system, which is

included in the teaching plan and in the University regulations.

Text-guide: Bank Accounting FIRST TWO MONTHS
know” Albert Einstein
Dear students, I welcome you to the study of the subject Banking Accounting. In
the first unit we will address various topics such as history, importance, structure,
control bodies, operations, etc. of the National Financial System.
The National Financial System, known by its acronym as SFN, is the set of
financial institutions regulated by the Superintendency of Banks and the
Superintendency of Popular and Solidarity Economy.
The movements of money and credits carried out by natural and/or legal persons
are channeled through the SFN. In this way, the National Financial System
contributes to the development of the country, strengthening productive investment
and responsible consumption.

1.1. Generalities of the financial system
• . Brief history of banking in Ecuador
The topic of the history of banking in Ecuador is a very important topic and will help
you understand the context in which the Ecuadorian financial system has
developed.
“In Ecuador, banking has its origins in the mid-19th century (1859), in the city of
Guayaquil, the first issuing bank, Banco Particular de Luzárraga, was
established. In this year, Mr. Manuel Luzarraga obtained authorization to create the
bank; and in 1861 the first issue of banknotes was carried out” (Romero, 2014, p.
6). The following table details some of the most important milestones of the
national financial system:

Table 1. Banking milestones in Ecuador
Years Milestones
1868 Banco Quito starts.
1871 The Mortgage Bank is created in the city of Guayaquil.

1885 The Anglo Ecuadorian Bank is established in Guayaquil.
1886 The Territorial Bank is founded in the city of Guayaquil.
1894 The Commercial and Agricultural Bank is established. This was one of the
largest banks in the country due to its connection with agriculture and
mainly with cocoa.
1927 Dr. Isidro Ayora, provisional president of Ecuador, decrees the Law
creating the Central Bank of Ecuador and on August 10 of that year it is
officially inaugurated in the city of Quito, with the formation of its first board
of directors.
1999 The financial crisis, better known as the Banking Holiday, froze customer
deposits for a period of 5 days. This led to the closure of 70% of the
country's financial institutions. Economic losses are estimated to have
amounted to $8 billion.
2000 On Sunday, January 9, the then President of the Republic Jamil Mahuad
announced that the country had to enter the dollarization system. This
greatly affected customer deposits and the financial situation of financial
institutions.
2001 onwards The country is recovering from the trauma caused by the bank holiday.
The financial system also accompanies this recovery of the economy with
the increase in the level of deposits and credits granted.
Source: Romero, A. (2014)

Prepared: Acurio, R. (2019)
Financial entities provide services in financial markets. They are responsible for
raising funds from investors: natural and legal persons who have excess liquidity
and placing it in the companies and natural persons who need that liquidity.
Within financial institutions, banks are the largest entities. A bank is defined “as an
entity legally constituted as a public limited company, authorized that acts with
money operations to channel savings and investment, the fundamental
characteristics of banks are that

Only they generate demand deposits in checking accounts, from which the
account owner can use the resources whenever he wishes” (Romero, 2014, p.
7).
Preliminarie
s
What did you think of this definition? Now the importance of financial entities
First
will be analyzed. BIMEST
ER
Second
Importance quarter
Solver
The activity of financial entities is transcendental because they capture the
resources of the surplus agents and place them through credits to the deficit
References
agents. bibliographic
Annexe
Once the importance of financial institutions is understood, their objectives will s
now be stated:
Goals:
According to the author Romero (2014), the objectives of banks are:
▪ “Providing money as credit with the purpose of obtaining economic benefits called
performance or utility that are generated through interest and commissions,
with this the client or debtor having money allows him to activate the
production of goods and services, as well as also investments and other
consumption needs. The economic benefit is obtained by paying a lower rate
for clients' investments and savings accounts compared to that charged to
other clients for the loans granted." (p.11)
▪ Capture money from the public as deposits, this allows them to act as
intermediaries between savings and investment.
Of the previous objectives, one of the main ones is the granting of credits.
Credit is very important because it is what drives the growth of businesses.

Figure 1. Organizational chart of a financial institution

The organizational structure has 5 vice presidents who in turn report to the
Executive Presidency, the Board of Directors and the General Meeting of
Shareholders. Below the Vice Presidencies are the other departments of the
financial institution.
Dear students, based on the regulations of the Superintendency of Banks and my

professional experience in Ecuadorian banking, the main functions of the agencies
found in the organization chart shown in Figure 1 will be described.

▪ General meeting of shareholders: It is an administration and oversight body within

the bank, where key decisions are made for the operation of the company. It
is the responsibility of the General Shareholders' Meeting to deliberate and
agree on the following matters:
• Approval of the annual balance sheets and distribution of the results of the
year.
• Approve the appointment of administrators.
• Appoint external auditors.
• Modification of the statutes of the financial entity.
• Approve the merger or division of the entity and capital increases.
Decide to dissolve the entity
Other matters determined by law or the entity's bylaws.
In accordance with Book I of the Superintendency of Banks on Control

Standards for entities in the public and private financial sectors, title VI,
section I, paragraph I, article 1 “General meetings of shareholders are
ordinary, extraordinary and universal . The ordinary general meetings will
meet at least once a year, within ninety days after the end of the financial
year of the entity, upon prior call. Extraordinary general meetings will meet
when called to exclusively deal with the matters of the call. Universal general
meetings will be established without the need for prior call and will be validly
constituted at any time and in any place, within the national territory, to
discuss any matter, provided that all the paid-in capital of the entity is present.

▪ Board of Directors: It is a body that is responsible for directing and making the
decisions of the bank. In accordance with Book I of the Superintendency of
Banks on Control Standards for entities in the public and private financial
sectors, title XIII, section I, article 3 “The board of directors of financial entities
must develop policies and processes that allow the provisions of the statutes
or regulations to be executed, as well as other provisions that ensure an
effective framework for ownership and management relationships,
transparency and accountability. These policies and processes will be
formalized in a document that will be defined as the “Corporate Governance
Code”, which must contemplate, at least, the following aspects: “
• State the matters on which the general meeting of shareholders must

decide.
Ensure the participation of shareholders in the deliberations of the

matters presented at the general meeting.
Determine how to evaluate and resolve conflicts of interest if they arise.
Define and implement internal control systems.
Determine compensation and remuneration levels for staff.
Develop the policies and processes that determine the structure of an

information and dissemination system on aspects that the general
meeting must know for decision-making.
Application of the transparency policy towards clients regarding

complaints for the services provided.

• Define the policies, processes and accountability mechanisms that allow

evaluating the management of the entity's governing bodies.
• Establish appropriate guidelines to observe compliance with the code of

ethics.
• Determine an appropriate executive succession plan, indicating possible

successors.
▪ Executive President-General Manager: Exercises the legal representation of the

financial entity. The General Manager will be appointed by the Board of
Directors and is responsible in a complementary manner to its obligations and
must report on the performance of the entity in all its areas. The general
manager must ensure compliance with all legal requirements that affect the
business and operations of the entity. Among the main functions we have:
Carry out the acts of administration and ordinary management of the

company.
Represent the entity before the judicial, fiscal, administrative, labor,

municipal authorities, etc.
Attend, with voice, but without vote, the sessions of the Board of
Directors
Attend the sessions of the General Shareholders' Meeting with voice,

but without vote, unless it decides otherwise.
Submit to the Board of Directors for approval: the report and financial
statements, the entity's annual budgets, etc.
Execute the entity's business plan
Prepare and execute the budget approved by the Board of Directors

• Celebrate and sign entity contracts
• Execute the development and investment plans of the institution
• Be accountable for your administration
Audit: It is a department that provides assurance and control services for

banking operations. The internal audit function of a financial institution must
be independent of the audited activities. To accomplish this, it is required that
the function have sufficient authority within the entity, thus allowing auditors to
carry out their tasks objectively. The internal auditor must oversee the audit
function of the financial institution. This official is responsible for ensuring that
the department complies with internal audit standards and the financial
institution's code of ethics.
▪ Legal advice: Responsible for providing legal information to the bank's

departments for the resolution of legal matters. Among the main functions we
have the following:
Defends the interests of the entity
Negotiate and draft contracts
Study and solve legal problems
Issues legal reports on the other areas of the entity.
Adviser on tax matters, tax claims, challenges before judicial authority,

etc.
Adviser on the management of rights in matters of trademarks, patents

and intellectual property

• Intervenes in labor legal processes
• Advisor on business law, etc.

Preliminarie
s
In the organization chart in Figure 1, the different areas of the entity have been
First
established by function, that is: marketing, risk management, commercial, BIMEST
ER
operations and finance. For each of these areas, a Vice Presidency has been
Second
defined, which is the control and authority body in its respective area. The Vice quarter
Presidency is the second highest position after the Executive Presidency and is
Solver
your right hand in the different areas of the financial institution.
References
▪ Market Vice Presidency: It is a department that directs marketing and customer bibliographic
service strategies. Among the functions of this vice presidency we have the
Annexe
following: s
Participate in the preparation and execution of the financial entity's

Strategic Plan.
Study, planning, control and coordination between the departments of

the financial institution in order to satisfy the needs of clients in a
profitable manner.
Define the positioning of the financial entity.
Establish advertising media, public relations, prices of financial products,

promotions, distribution channels (physical offices, electronic media),
etc.

▪ Vice Presidency of Risk Management: It is a department that establishes policies,

regulations and guidelines, which include: prevention, mitigation and
response to financial risks. Among the main functions we have:
• Participate in the preparation and execution of the financial entity's

Strategic Plan.
• Propose policies, procedures and methodologies for risk management,

considering the long-term continuity of the entity and information
security, including responsibilities.
• Create and execute a comprehensive risk management plan, integrating

the business plan and management activities.
• Evaluate the risks, prior to the launch of new financial products together
with the other vice presidencies.
• Control that the entity's policies and guidelines are complied with
• Promote a culture of risk management, etc.
▪ Vice President of Operations: Directs and controls the bank's operations. It is also
responsible for seeking improvements in banking operations. Among the
main functions we have:
• Participate in the preparation of the financial entity's Strategic Plan.
Prepare and provide operational instructions to establish optimal service

to customers.
Support in the development and definition of operations for new

products.

• Propose improvements in the entity's operations.
• Carry out operational support and control tasks in the areas of: Treasury,
credit granting, investments, financial services, transfers, foreign trade,
ATMs, etc.
• Manage and custody securities on behalf of the entity and clients.
• Provide operational support to operations through internet channels,

cellular banking, etc.
▪ Commercial Vice Presidency: Formulates, establishes and executes commercial

activities: Among the main functions we have:
Participate in the preparation of the financial entity's Strategic Plan.
Define sales force objectives
Determine the size of the commercial department and the remuneration

and compensation plan.
Coordinate commercial activities with the market vice presidency.
Plan to attract new clients
Manage the client portfolio (corporate clients, business clients,

individuals).

Vice Presidency of Finance: Formulates and establishes policies, standards

and procedures in financial matters. Among the main functions we have:
• Participate in the preparation and execution of the financial entity's

Strategic Plan.
• Plan, control, organize and direct the entity's economic resources.
• Decide on the investments that the financial institution should make.
• Manage financing sources.
Control the reliability of the financial statements.
• Prepare, control and execute the budget
• Develop the economic evaluation of investment projects
• Control the timely and reliable recording of accounting operations.
• Ensure compliance with tax, municipal, labor, etc. obligations.
• Manage adequate internal control of the entity's assets, etc.
▪ Accounting Department: Within the vice presidency of finance, there is this

department, which is in charge of recording the financial operations of the
entity. Among the main functions of the department we have:
Analyze and record the operations of the entity.
Prepare financial statements.

• Timely deliver accounting reports.
• Reliably and timely determine tax returns.

=== Preliminaries
—
First
semester
• Maintain a cost system and present analysis to evaluate the
=
profitability of financial products. Second semester
• Coordinate accounting and financial controls with other areas of the entity,
etc.
Solver
Ecuadorian financial system

—==
Before defining what the Ecuadorian financial system is, the concept of the
yes
References
bibliographic
financial system will first be analyzed in general.

Annexes
l J
The financial system is made up of several entities that act as financial

intermediaries, which raise resources from the public through a variety of
investment instruments, and then place them in the form of credits or investments
in the public and private sectors.
To better understand this definition, I invite you to analyze the following figure that
explains what the basic financial business is.
Figura 2. Functioning of the financial business Prepared: Acurio, R. (2019)
People or companies that People or companies that

Financial entities
have excess liquidity have a liquidity deficit

As can be seen in Figure 2, in the economy there are natural and legal persons
that have excess liquidity. These people need financial instruments so that they do
not have idle money, but rather have it invested. At the other extreme we have
natural and legal persons who have a liquidity deficit or rather need credit. The
work of the financial entity as shown in Figure 2 fulfills the function of an
intermediary to match the supply and demand of credit and investment. This work
represents a win-win relationship for all parties as long as it is carried out in terms
of healthy competition. People who have excess liquidity can invest their financial
resources, agents who need credit obtain it and the financial institution obtains
economic returns by charging a higher interest rate for credits compared to the rate
paid for deposits.
The national financial system operates effectively and efficiently. Financial

institutions are in charge of intermediation between people who have savings and
people who need credit.

1.2. Integration of the national financial system
The Ecuadorian financial system is made up of the public financial sector, the
private financial sector and the popular and solidarity financial sector. In the
following figure you can see its conformation.
Finance system
Ecuadorian
Monetary and
Financial Policy and
Regulation Board
Superintendency of popular
and solidarity economy
Figura 3. Structure of the Ecuadorian Financial System

Source: Organic Monetary and Financial Code (2014)

A. Regulation and control bodies
Next, each of the control entities of the Ecuadorian financial system will be studied.
According to the Organic Monetary and Financial Code (2014), the entities
responsible for the formulation of policies, regulation, implementation, supervision,
control and financial security are the following:
Monetary and Financial Policy and Regulation Board
In accordance with article 14 of the Organic Monetary and Financial Code (2014), it
is an organization that is part of the executive function, responsible for the
formulation of public policies and the regulation and supervision of monetary,
credit, exchange, financial, insurance. and values.
central bank of Ecuador
According to article 26 of the Organic Monetary and Financial Code (2014) “it is a
legal entity under public law, part of the Executive Function, of indefinite duration,
with administrative and budgetary autonomy, whose organization and functions are
determined in the Constitution of the Republic, this Code, its statute, the
regulations issued by the Monetary and Financial Policy and Regulation Board and
the internal regulations.”
Its purpose according to article 27 of the Organic Monetary and Financial Code
(2014) is “the implementation of the monetary, credit, exchange and financial
policies of the State, through the use of the instruments determined in this Code
and the law.”
Superintendency of Banks
In accordance with article 59 of the Organic Monetary and Financial Code (2014)
“It is a technical body of public law, with legal personality, part

of the Transparency and Social Control Function, with administrative, financial,

budgetary and organizational autonomy, whose organization and functions are
determined in the Constitution of the Republic and the law.
The mission of the Superintendency of Banks in accordance with article 60 of the

Organic Monetary and Financial Code (2014) is to carry out “the surveillance,
audit, intervention, control and supervision of the financial activities carried out by
public and private entities of the national financial system. , with the purpose that
these activities are subject to the legal system and serve the general interest."
Superintendency of Popular and Solidarity Economy
In accordance with article 74 of the Organic Monetary and Financial Code (2014),
this Superintendency, in its organization, operation and control and supervision
functions of the popular and solidarity financial sector, will be governed by the
provisions of the Code and the Organic Law of Popular Economy and Solidarity.
The solidarity financial sector is made up of:
▪ Community sector: Organizations that, through joint work, have as their objective
the production, marketing, distribution and consumption of goods or services.
▪ Associative sector: Associations formed by natural persons with productive or

similar economic activities, created with the purpose of producing, marketing
and consuming goods and services.
▪ Cooperative sector: Cooperatives understood as societies of people who have

come together voluntarily to satisfy their economic, social and cultural needs.
How interesting! In Ecuador there are 4 entities that regulate the financial actions
of entities subject to control. Apart from these organisms there are

other control entities such as: the Internal Revenue Service (SRI), the Ministry of
Labor Relations (MRL), the Ecuadorian Social Security Institute (IESS), the
Financial and Economic Analysis Unit (UAFE).
B. Public financial sector
In the previous section, the control bodies of the Ecuadorian financial system were
analyzed, now we will delve into the study of the controlled financial sectors. The
Ecuadorian financial system is made up of three sectors: the public financial
sector, the private financial sector and the popular and solidarity financial sector.
Each of these sectors has its role in the economy and all contribute to the
development of the financial sector in general and therefore to the country's
economy. Next, these three sectors and the entities that make them up will be
studied in detail.
The public financial sector in accordance with article 161 of the Organic Code
Monetary and Financial (2014) is composed of:
1. Banks; and,
2. Corporations.
Banks
“The bank is defined as an entity legally constituted as a Public Limited Company,

authorized to act with money operations to channel savings and investment, the
fundamental characteristics of banks is that only they generate demand deposits
widely accepted as means payment, that is, in money; On the other hand, the other
financial institutions act as intermediaries” (Romero, 2014, p. 7)
Public banking is one that operates at the service of the general interest.

Corporations
It is a development bank, whose mission is to promote the development of

Preliminarie
productive and strategic sectors, through financial and non-financial services s
that must be aligned with the country's development plans. Example: National
First
Financial Corporation (CFN) BIMEST
ER
Second
c. Private financial sector quarter
Solver
According to the Organic Monetary and Financial Code (2014), the private
financial sector is made up of the following entities:
References
bibliographic
Multiple bank
Annexe
s
It is the financial entity that has authorized operations in two or more credit
segments. The activities of universal banking are broad and are not characterized
by any type of limits. Universal banks are entities that combine the business of
deposits and credits with the trading of securities and shares.
Specialized bank
It is the financial entity that has authorized operations in a credit segment and that
in the other segments its operations do not exceed the thresholds determined by
the Monetary and Financial Policy and Regulation Board.
Financial services:
General warehouses
They are auxiliary credit organizations. The main objective is the storage, control,
handling, conservation of the merchandise that is destined for custody covered by
a certificate of deposit or pledge.

Exchange houses
They are financial institutions dedicated to the purchase and sale of foreign
currencies.
Secondary Mortgage Market Development Corporations
They are financial entities that mobilize resources from the housing sector. They
act as fiduciary in securitization processes of both their own mortgage portfolio and
that of third parties. Securitization is a form of financing that consists of
transforming assets or goods into negotiable securities in the stock market with the
objective of obtaining liquidity under competitive conditions.
Of auxiliary services of the financial system:
Apart from banks and financial services entities, there are other auxiliary entities
that are also part of the private financial system, such as: banking software,
transactional software, transportation of monetary species and securities,
payments, collections, networks and ATMs. , accounting and computing and others
qualified as such by the Superintendency of Banks in the scope of its jurisdiction.
d. Popular and supportive financial sector
According to article 163 of the Organic Monetary and Financial Code (2014), this
sector is composed of:
Cooperatives of saving and credit
In accordance with article 81 of the Organic Law of Popular and Solidarity

Economy, they are organizations formed by natural or legal persons who join
voluntarily for the purpose of carrying out financial intermediation and social
responsibility activities with their partners prior authorization from the
Superintendency.

Central boxes
In accordance with article 102 of the Organic Law of Popular and Solidarity
Preliminarie
Economy, they are entities that are constituted with at least twenty savings and s
credit cooperatives. The minimum capital required for the constitution of a Central
First
Bank will be technically determined by the regulator. Decisions will be made by BIMEST
ER
weighted vote, which will take into account the number of members the
Second
cooperative has, in a range of one to five votes, guaranteeing the right of quarter
minorities. These entities are established to develop financial service networks for
Solver
their members, such as shared windows, fund transfers, remittances, service
payments, etc. References
bibliographic
Associative or solidarity entities, community banks and savings banks

Annexe
s
According to article 104 of the Organic Law of Popular and Solidarity Economy,
they are organizations that are formed by the will of their partners and with
economic contributions that, as savings, serve to grant credits to their members,
within the limits indicated by the Superintendency.
Savings and credit mutualists
Mutual societies are financial entities formed from the union of people whose
objective is to support each other to solve their financial needs. Generally, mutual
companies have invested their resources in the real estate market. Mutual
societies are made up of members just like savings and credit cooperatives.
Auxiliary services of the financial system
Apart from these institutions, there are other auxiliary entities such as: banking,
transactional, transportation of monetary and securities, payments, collections,
networks and ATMs, accounting and computing software.

and others qualified as such by the Superintendency of Popular and Solidarity

Economy in the scope of its jurisdiction.
1.3. Operations of financial entities
From the study of the three sectors that make up the financial system, we can
conclude that several types of financial entities operate in each of them, each of
which has its specific functions and all help financial inclusion through their
operations, such as: active or placement, passive or deposit, contingent and
service for the benefit of the community and the financial institutions themselves.
Next, the operations indicated in the previous paragraph will be analyzed, in

accordance with article 194 of the Organic Monetary and Financial Code (2014).
A. Active operations
Active operations are placement operations that generate economic resources for
the financial entity and are the following:
1. Grant mortgage and pledge loans, with or without issuance of securities, as

well as unsecured loans and any other type of loan authorized by the Board;
2. Grant current account credits, contracted or not;
3. Establish deposits in financial institutions in the country and abroad;
4. Negotiate bills of exchange, drafts, promissory notes, invoices and other

documents that represent payment obligations created by credit sales, as well
as the advance of funds supported by the aforementioned documents;
5. Negotiate documents resulting from foreign trade operations;

6. Negotiate securities and discount foreign documentary bills or make

advances on them;
7. Acquire, preserve and dispose, on its own account or on behalf of third

parties, securities issued by the governing body of public finances and by the
Central Bank of Ecuador;
8. Acquire, keep or dispose of, for one's own account, fixed income securities, in
accordance with the provisions of the Securities Market Law, and other credit
securities established in the Commercial Code and other laws, as well as
securities representing rights over these;
9. Acquire, retain or dispose of forward contracts, call or put options and futures;
They may also carry out other money market operations, in accordance with
the provisions of the regulations.
correspondent;
10. Make investments in the capital of a financial services entity and/or an

auxiliary services entity of the financial system to convert them into its
subsidiaries or affiliates;
11. Make investments in the capital of foreign financial entities, in the

terms of this Code; and,
12. Buy or sell precious minerals.
Within these operations, the most important for generating income for financial
entities are credit operations. These represent the very heart of the financial
business and their granting must be carried out with due technical care both so that
the financial institution is protected and also so that the clients benefit.

B. Passive operations
Passive operations are deposit operations and are the following:
1. Receive demand deposits;
2. Receive time deposits;
3. Receive loans and accept credits from financial entities in the country and
abroad;
4. Act as originator of securitization processes with the support of the mortgage,

pledge or unsecured credit portfolio, whether owned or acquired;
and,
5. Issue long-term obligations and obligations convertible into shares

guaranteed with its assets and equity; These obligations will be governed by
the provisions of the Securities Market Law. (Organic Monetary and Financial
Code, 2014)
If active operations are those that generate income, passive operations are those
that generate expenses for financial entities. These are fundamental for the
financial business because the money that is later lent to clients or invested in
public or private financial instruments comes from deposits.
C. Contingent operations
These operations are temporary in nature and may affect the financial situation of
the entity. Among which we point out the following:
1. Assume obligations on behalf of third parties through acceptances,

endorsements or guarantees of credit titles, the granting of guarantees,
bonds and internal and external letters of credit, or any other document; and,

2. Negotiate financial derivatives on your own account. (Organic Monetary and

Financial Code, 2014)
Contingent operations generate income when commissions are collected, for

example when a guarantee or guarantee is issued, but they can also generate a
disbursement of money when a client of the institution does not fulfill a contract and
the entity that granted it executes the guarantee. In this case, the bank has to pay
the guaranteed entity and then collect the guarantee amount from the client, plus
the relevant surcharges. As we will see in unit 3, the correct accounting of these
operations is very important because, although they do not represent a cash
outflow for the financial institution at the time of issuance, they do represent a risk
in the event that the client does not comply. with their obligations.
D. Of services
In the previous sections, the operations carried out by financial entities have been
described. The main operations are placement operations, for example: the
granting of credits and fundraising operations, for example: the receipt of demand
deposits. In addition to these operations, which are the main ones of financial
entities, there is also another segment of operations, which are services. In many
cases, these are what distinguish a financial entity, since, since the financial
products offered in the market are similar, the way in which the service is provided
is what really makes a differentiator in the activities that are offered. carried out by
these entities.
Among the service activities we have:
1. Perform cash and treasury services;
2. Act as issuer or operator of credit cards, debit cards or payment cards;

3. Carry out collections, payments and transfers of funds, as well as issue

money orders against their own offices or those of national or foreign financial
entities;
4. Receive and keep objects, furniture, securities and documents in deposit for
safekeeping and rent lockers or safe deposit boxes for valuables deposits;
and,
5. Carry out, on one's own behalf or on behalf of third parties, currency

operations, contract repos and issue or negotiate traveler's checks. (Organic
Monetary and Financial Code, 2014)
The operations that entities in the popular and solidarity financial sector can carry
out are:
a. The active, passive, contingent and service operations determined in

paragraph 1 literal to paragraphs 4, 7 and 10; literal b numerals 1, 2, 3 and 4;
literal c numeral 1; and, literal d numerals 1, 3 and 4 of this article;
b. Grant loans to your partners. Mutual companies may grant loans to their
clients;
c. Establish deposits in entities of the national financial system;
d. Act as issuer or operator of debit cards or payment cards. Entities in segment

1 of the popular and solidarity financial sector may issue or operate credit
cards;
e. Issue long-term obligations backed by its assets, equity, mortgage or pledge

credit portfolio, own or acquired, provided that in the latter case they originate
from active credit operations of other financial entities;
f. Make investments in the social capital of the central savings banks; and,

g. Carry out operations with currencies. Entities in the popular and solidarity
financial sector may carry out the operations detailed in this article, according
to the segment to which they belong, under the terms of their authorization.
The definition and actions that comprise the operations determined in this
article will be regulated by the Monetary and Financial Policy and Regulation
Board. Financial entities, for all the operations they carry out, must have the
appropriate credit and service technology. (Organic Monetary and Financial
Code, 2014)
The study of the first unit has been completed. General topics have been covered
such as the history of banking, including the study of the members of the financial
system, the functions of the departments of a financial entity, the operations carried
out by these entities and other generalities of the financial system. All these topics
are vital to understand the context in which the Ecuadorian financial system
operates and will later allow us to apply this theory in practical cases of Bank
Accounting.
To reinforce this knowledge, it is proposed that you carry out the following activity:
Recommended activity
1. Prepare a synoptic table of the operations of the financial system divided into
operations: active, passive, contingent and services.
2. Consult 5 financial entities in your area and ask which of these operations are
the ones that are contracted most frequently and which are the ones that
generate the most income and/or the most expenses for the financial entities?
Once the study of this unit has been completed, it is time to verify your progress,
for which it is proposed to develop the following self-assessment.

to. 1900.
b. 1894.
c. 1927.
3. The Vice Presidency of Finance is responsible for:
a. Direct the commercial activity of the financial institution.

b. Establish policies, regulations and guidelines, which include: prevention,
mitigation and response to financial risks.
c. Formulate and establish financial policies, standards and procedures.
4. Private banks can be:
a. Banks and corporations.

b. Multiple and specialized banks.
c. Private and public banks.

5. The active operations are:
a. Credits, investments, financial advice.

Preliminarie
b. Term deposits, savings accounts, credits. s
c. Credits, investments, negotiation of documents, etc.
First
BIMEST
ER
6. Passive operations are:
Second
quarter
a. Issue obligations, receive demand deposits, receive financing from

Solver
other entities, collect demand deposits.
b. Credits, investments, securities trading.
References
c. Term deposits, savings accounts, securities trading. bibliographic
Annexe
Contingent operations are: s
7.
a. Issuance of guarantees, guarantees, undisbursed credits, etc.

b. Time deposits, guarantees, savings accounts, etc.
c. Credits, investments, customs guarantees, bonds, etc.
8. Service operations are:
a. Issuance of guarantees, customs guarantees, granting of lines of credit.

b. Credits, investments, customs guarantees, bonds, etc.
c. Foreign currency operations, financial advice, collections, etc.
9. In what year does the financial crisis, better known as a holiday, occur?
banking.
a. 2000.
b. 1999.
c. 1998.

10. The activity of financial institutions consists of capturing:
a. Resources from the deficit agents and place them through credits to the
surplus agents.
b. Resources from the surplus agents and place them through credits to
the deficit agents.
c. Resources from the surplus agents and place them through credits to
the same agents.
Once self-assessment 1 has been completed, check your answers with those
included in the solution. If you have answered correctly, continue with the next unit,
otherwise return to the contents in which you find difficulties.

UNIT 2. ACCOUNTING REGIME AND INFORMATION

I
“Ignorance of the law does not exempt from
responsibility” General principle of Law.
2.1. Bank accounting
“Bank accounting is a specialized field of general accounting, whose purpose is to

quantify the operations carried out in banks, for which techniques and procedures
framed in generally accepted accounting standards are applied, as well as in the
regulations that regulate the activities of the institutions of the Ecuadorian financial
system.” (Romero, 2014, p. 10)
According to article 218 of the Organic Monetary and Financial Code (2014), the
entities of the national financial system must submit to the policies and regulations
on accounting and financial statements issued by the Monetary and Financial
Policy and Regulation Board, as well as the rules of control that the respective
control bodies dictate on these matters, in a supplementary and non-contradictory
manner.
The Superintendency of Banks, as the regulatory body of financial entities, has

issued Resolution No. SBS-2017-705 which details the objectives of accounting
information, the conceptual framework, accounting principles, the elements of the
financial statements, accounting policies and the Single Catalog of Accounts or
CUC.

2.2. Objectives of accounting information
To advance the topic of Bank Accounting, Resolution No. will be analyzed in depth.
SBS-2017-705 issued by the Superintendency of Banks. At this point, please read
page 6 of this resolution comprehensively.
As can be seen, the three objectives of accounting information found in this

resolution can be summarized in one, which is: to provide useful information for
decision making.
2.3. Conceptual framework
Please read page 7 of Resolution SBS-2017-705.
What did you think of the conceptual framework?
This conceptual framework in turn is based on two fundamental hypotheses, which

are:
“Accrual basis: This means that transactions must be recorded in the financial
statements when they occur, and not necessarily when they are received or paid in
money, for example: a ninety-day credit sale is made. term. The income from that
sale must be recorded when the advantages and risks are transferred to the client
and not when the money from the respective invoice is received.
Going concern: When financial statements are normally prepared, it is presumed

that there is a going concern and that the entity will continue its operating activities.
If there is an intention to liquidate the business, the information will be prepared on
liquidation values” (Puruncajas, 2010, p. 18)
In the case of the accumulation or accrual basis, this hypothesis is very important
especially for financial entities because they manage

resources of the public, so the Superintendency of Banks must know their financial
situation at all times.
In the case of a going concern, this hypothesis is transcendental because to
prepare the financial statements it is assumed that the financial entities will
continue normally with their activity. If this were not the case, the accounting would
have to be prepared on the basis of the liquidation of its assets and liabilities.
These assumptions are the basis on which financial entities must prepare their
financial statements. If these are not met, the financial statements would not be
reliable and therefore management decisions could not be made.
General principles
Once the fundamental assumptions are understood, it is very important before

carrying out the analysis of the operations, to review the principles that govern the
accounting of financial entities.
Please read from page 8 to 10 of Resolution No. SBS-2017-705.
The accounting principles and postulates are action guides that allow the general
objectives of accounting information to be achieved.
financial statements
Once they have a general idea of the objectives of accounting information, the
conceptual framework and general principles, the next point to be studied is the
financial statements, which is why they are required to carry out a comprehensive
reading of pages 10 to 17 of Resolution SBS-2017-705.
As can be seen in this reading, the main financial statements of a financial entity
are:

Statement of financial position. The elements of the statement of financial

position are assets, liabilities and equity. These are defined as follows:
a. “An asset is a resource controlled by the company as a result of past events,

from which the company expects to obtain economic benefits in the future;
b. A liability is a current obligation of the company, arising as a result of past

events, upon expiration of which, and to cancel it, the company expects to
release resources that incorporate economic benefits; and,
c. Net worth is the residual part of the company's assets, once all its liabilities
have been deducted. (International Accounting Standards Board (IASB),
2011, p. 18)
Balance of results. The elements directly related to the outcome measure are
income and expenses.
The elements called income and expenses are defined below:
a. “Income is the increase in economic benefits, produced throughout the

accounting period, in the form of entries or increases in the value of assets,
or as decreases in obligations, which result in increases in net worth, and not
They are related to the contributions of the owners to this heritage; and
b. Expenses are decreases in economic benefits, produced throughout the

accounting period, in the form of outflows or decreases in the value of assets,
or as the emergence of obligations, which result in decreases in net worth,
and are not related with the distributions made to the owners of this estate.”
(International Accounting Standards Board (IASB), 2011, p. 21)

What do you think of the conceptual framework, principles and definition of

financial statements so far?
the financial statements of the entities of the national financial system, as of
December 31 of each year, must be signed by the legal representative and the
general accountant of the entity and will have the opinion of the internal and
external auditors qualified by the superintendencies, as the case may be.
The General Meeting of Shareholders or the body that takes its place, until March
31 of each year, will approve the audited financial statements of the financial
entities, ending on December 31 of the previous year, which will be presented to
the corresponding control body. .
Components of financial statements
A complete set of financial statements expressed in United States dollars includes

the following components:
a. Balance sheet.
b. Statement of income.
c. A statement that presents all changes in the estate;
d. Statement of cash flows; and,
e. Accounting policies and explanatory notes.
Accounting policies
Please read pages 17 to 19 of Resolution No. SBS-2017-705.
Did you find the topic of accounting policies interesting? Financial statements are
not exact, but they must be reasonable. In this case, accounting policies help us a
lot to define the accounting of certain transactions and have uniformity and equity
in the financial statements.

2.4. Application and scope of the Single Catalog of Accounts
Once the components of the financial statements and accounting policies have
been seen, we will delve into the study of the Single Catalog of Accounts (2017),
which is a technical manual issued by the Superintendency of Banks. To begin with
this topic, you need to read comprehensively from page 22 to 28 of Resolution No.
SBS-2017-705
The topic of the CUC or Single Catalog of Accounts (2017) is very interesting
because with the same chart of accounts all financial entities can account for their
operations, which facilitates control for the Superintendency of Banks and for the
financial entities themselves, because these They can be compared with other
entities and with the financial system. The CUC, as will be analyzed later, makes it
possible to carry out financial analyzes more effectively because the financial
statements are comparable from one year to the next, between financial entities
and with the financial system in general.
Processing of accounting records
“The accounting books will record one by one all the transactions carried out by the
entity. Reversals or accounting adjustments that are considered necessary to
incorporate the effects of procedures that have not been carried out, or to correct
the consequences of processes whose application has generated misleading
figures, must be accounted for on the date on which they are known or detected,
without proceed to the accounting reopening of the corresponding balance sheet,
whether daily, monthly or annually.” (Resolution No. SBS-2017-705, 2017, p. 27).
As in general accounting in bank accounting, the following must be prepared: the
journal, the general ledger and the auxiliary books.
Documents supporting accounting records
“The supporting documentation of the operations and especially the accounting

vouchers, will be filed following a logical order and easy to access. Accounting
vouchers and source documentation, which

support the transactions, they will be prepared on pre-numbered and adequately

controlled forms.
Transactions carried out through means of immediate communication must be

registered on the same day they occur, and must be duly supported with the
relevant documentation. Debit or credit notes will be registered on the date of their
issuance.” (Resolution No. SBS-2017-705, 2017, p. 27)
Source documentation is very important for financial entities, because it is the

starting point for the accounting record of financial transactions. For this reason it
must be properly preserved.
Responsibility for accounting records “It is the legal responsibility of the general
accountant to record the operations of the entities, from the preparation of receipts,
documents, records and files of transactions, to the formulation of financial
statements and other reports for their corresponding analysis, interpretation and
accounting consolidation. These tasks will be carried out by a specialized
administrative unit, independent of the operational areas, which will be in charge.
The accountant is responsible for controlling the correct functioning of the unit
under his/her charge, the proper preparation and conservation of accounting
vouchers and the timely presentation of financial statements and accounting
reports. The accountant will carry out his activity subject to the rules of professional
ethics. (Resolution No. SBS-2017-705, 2017, p. 28)
Opportunity to send accounting information
entities of the national financial system will present the financial statements,
including their balance sheets, to the respective control bodies.

consolidated and combined, signed by the legal representative and the general
accountant of the entity, and the additional information that is required, in the
formats and with the periodicity determined by the superintendencies. The internal
auditor will also sign the balance sheets.
Entities in the public and private financial sectors will submit, within the deadlines
defined by the Superintendency of Banks, the regular and extraordinary
information required of them. The lack of timeliness in sending the financial
statements and other documentation requested by the Superintendency of Banks
will be sanctioned in accordance with the provisions of the Organic Monetary and
Financial Code (2014).
Frequency:
▪ “Daily balances. Daily balances will be prepared and delivered to the

Superintendency of Banks, within 12 hours, counting from the date of the
financial statement that is reported, with the exception of daily balances
generated on the last day of the month and the first and second. business
day of the following month, which must be delivered until 12:00 p.m. on the
third business day of the following month
▪ Monthly financial statements. Entities subject to the control of the

Superintendency of Banks must present monthly financial statements, which
must be delivered to the Superintendency of Banks, within a period of three
(3) days, counted from the last business day of the reported month, until
12:00.” (Resolution No. SBS-2017-705, 2017)
entities of the financial system will publish the statements of position, profits and
losses, position of technical equity and indicators of liquidity, solvency, efficiency
and profitability, which must additionally contain the opinion of the external auditor
qualified by the respective superintendency and all the explanatory notes that
complement the information included in its opinion, at least once a year at the
close of each fiscal year as of December 31, or when

The control agencies so provide, in accordance with the standards established for
this purpose.
The publication will be made in a newspaper of the territorial district in which the
entity has coverage and on the website of each financial entity.
Internal control
Article 227 of the Organic Monetary and Financial Code (2014) indicates that all
entities in the national financial system must have internal control systems to
ensure the effectiveness and efficiency of their activities, the reliability of
information and compliance with laws and regulations. applicable regulations.
"In that sense, the correct application of the Single Catalog of Accounts, as a
fundamental part of the internal control system, must be complemented with other
control measures, so that it constitutes an integrated and homogeneous body that
supports the operation and registration of the economic facts presented in the
financial statements and other complementary information.” (Resolution No. SBS-
2017-705, 2017, p. 30)
Audit
Article 228 of the Organic Monetary and Financial Code (2014) indicates that the
entities of the national financial system must have an internal auditor and an
external auditor, registered and qualified in terms of their suitability and experience
by the corresponding Superintendencies.
Internal and external auditors will be administratively, civilly and criminally

responsible for the reports and opinions they issue.
External auditors may provide, in addition to audit services, only personnel

selection services.

Once the study of the accounting regime has been completed, it is time to verify its
progress, for which I invite you to develop the following self-assessment.

Self-assessment index
2
Preliminaries
Dear students, read each of the questions and choose the correct answer:
1. The fundamental assumptions on which the financial information must be kept

according to IFRS are:
a. Double entry and equity.

b. Accounting entity and accrual principle.
c. Accumulation or accrual basis and going concern.
2. The principle of equity refers to:

Annexe
s
a. The registration of economic facts and their information is based on

equality for all sectors.
b. Financial information is based on material and intangible assets that
have economic value.
c. The financial information is based on the economic reality of the
transactions.
3. The principle of essence over form refers to:
a. Financial accounting measurements are primarily based on prices at

which economic resources and obligations are exchanged.
b. The determination of periodic income and financial position depends on
the measurement of financial resources and obligations.
c. Financial information is based on the economic reality of the
transactions.

4. The concept of an asset according to IFRS is
a. These are all properties owned by the entity.

b. It is a resource controlled by the company as a result of past events,
from which the company expects to obtain economic benefits in the
future.
c. It is a current obligation of the company, arising as a result of past
events, upon expiration of which, and to cancel it, the company expects
to release resources that incorporate economic benefits.
5. The periodicity for delivering the balance sheets to the Superintendency of

Banks will be:
a. Monthly.
b. Daily.
c. Annual.
6. The financial statements must be signed by the legal representative:
a. The general accountant and the external auditor.

b. And the general accountant.
c. The general accountant and the internal auditor.
7. The external auditor may provide the following services to the financial
institution: external audit and
a. Personnel selection services.

b. Financial consulting and accounting advice.
c. Tax and accounting advice.

8. The internal and external auditors will be responsible:
a. Administratively, civilly and criminally for the reports and opinions they
issue.
b. Administrative and civil for the reports and opinions they issue.
c. Administratively by the reports and opinions they issue.
9. Transactions carried out through immediate means of communication must be

recorded:
a. The next day it occurs.

b. The same day they occur.
c. On the last day of the month in which it occurs.
10. Accounting adjustments necessary to correct recording errors are

will be counted on the date:
a. Where the error originated, proceeding to reopen the balance sheet.

b. That errors are known or detected.
c. Closing of the balance sheet.
Once you have completed self-assessment 2, check your answers with those

UNIT 3. UNIQUE CATALOG OF ACCOUNTS

Yo
Preliminarie
“My job is not to make it easy for people. My job s
is to make them better…Also take important
First
people within the company to support them and BIMEST
ER
make them even better, so that they get a more Second
quarter
aggressive vision of what the product they work
on could be” Steve Jobs
Solver
Congratulations, gentlemen, students for the effort undertaken during the study of References
bibliographic
the first two units. The learning achieved up to this point is valuable as it will
serve as a basis for studying this unit.
Annexe
s
3.1. Structure of the Single Catalog of Accounts
Name of accounts
“The names of the different accounts correspond to the technical terms of the
financial business, with the type of operation, with their breakdown by maturity or
by type of entity, for the purposes of facilitating the implementation of risk
assessment methodologies, with their classification. within the elements of the
financial statements, in harmony with the provisions of the Organic Monetary and
Financial Code (2014), the Codification of Monetary, Financial, Securities and
Insurance Resolutions and the Codification of the Standards of the
Superintendency of Banks.
The coding of accounts is based on the decimal system as it is considered the

most suitable for processing accounting information through computerized, manual
or mechanical systems. Assignments of digits to account codes are done following
the practice of two numbers per level. “Element codes are excepted.” (Resolution
No. SBS-2017-705, 2017, p. 23)

Account Classification
Below, you can see the levels with which the plan of accounts developed by the
Superintendency of Banks is prepared.
Table 2. Decomposition of account levels in the CUC
Code Description
0 Financial statement element
00 Account Group
00 00 Accounts
00 00 00 Subaccounts
Source: Superintendency of Banks

To identify the elements of the financial statements, the numbering from 1 to 7 has
been used as the first digit. The following explains how the Single Chart of
Accounts is configured:
The first three digits (1, 2 and 3) comprise the asset, liability and equity accounts,
intended to make up the balance sheet; elements 4 and 5 group the income
accounts, summarized in the items of expenses and income. Element 6 integrates
the contingent accounts that group commitments and eventual obligations; and,
element 7, which summarizes the order and control accounts essential for
successful administration.
As you can see, the structure of the CUC is logical, which makes it easier to
account for the daily operations of financial entities.

Table 3. Example of the levels in the Single Catalog of Accounts
Code Description
1 Asset
11 Funds available
1101 Box
110105 Cash

3.2. Accounting record of asset accounts
At this point, the accounting dynamics of the asset accounts will be analyzed, with
the guidance of the Single Catalog of Accounts or “CUC”. The knowledge acquired
in this unit will later be used to prepare and analyze financial statements.
“The assets of financial institutions include: Available funds, interbank operations,

investments, credit portfolio, bank acceptances, accounts receivable, realizable
assets, assets awarded for payment, commercial lease and not used by the
institution, property and equipment and other assets". (Single Catalog of Accounts,
2017)
The accounts that make up this element will always have debit balances with the
exception of the accounts for: provisions, depreciations, discounts and
amortizations, which will be deducted from the corresponding items.
Dear students, the study of asset accounts is aimed at understanding the concept
and why the debtor and creditor movements of the different accounting accounts
are carried out, combined with practical applications and introducing certain
aspects contemplated in the laws, therefore, dedicate your best effort to review the
basic aspects of the accounting items and accounts specified in the Single Catalog
of Accounts.

A. Operations with available funds – group 11
The first group that we are going to study is 11. This group of accounts records the
highly liquid resources available to the entity for its regular operations and whose
use is not restricted.
Please read the description and accounting dynamics of group 11 in the CUC.
Box
This account records the cash available by the entity in its cash registers and/or
vaults, both in local currency and in other currencies.
As the cash account is susceptible to various risks, the physical verification of the
money must be carried out at a specific time and day in the presence of the
custodian or administrator of these resources. The purpose of the tonnage is to
ensure the correct management of monetary resources and maintain accurate
accounting.
Cash register
The cash counting procedure is as follows:
Show up without prior notice, verify by counting and recounting the money,
reconcile with the accounting balance, establish differences if any, and inform the
respective authorities in writing. If there are differences, the accounting record of
the differences found must be made. The result of the count must always appear in
the respective minutes that the participants will sign.
I congratulate you, until now you have only seen the theory, but from now on the
practical part of accounting will be studied, because with it you can later perform
professionally in financial institutions. I encourage you to study each of the
operations that will be analyzed below.

Practical case:
January 15 20XX. During the day, Banco ABC SA records the following data from
Preliminarie
box 1 s
First
BIMESTER
Table 4. Movements of January 15, 20XX of box 1 of Banco ABC SA
Source: Acurio, R. (2019)
Second
Annexes
quarter
Cash balance as of January 14, 20XX $151.000
(+) Income from January 15 $132.400

Solver
(-) Expenditures on January 15 $81.220
= Cash balance as of January 15 ?
References
Balance according to cash count $201.835 bibliographic
Please obtain the cash balance as of January 15 and determine if there is a cash
shortage or surplus and then make the corresponding entry to balance cash 1.
The resolution of this exercise is as follows:
Table 5. Movements of January 15, 20XX of box 1 with the calculation of the
ending cash balance

= Cash balance as of January 15 $202.180
Balance according to cash count $201.835

The accounting entry to regularize box 1 is as follows:
Table 6. Record of the missing box 1 as of January 15, 20XX
General diary
Year 20XX
Date Code Detail Partial Has to To have

01/15/20XX 19
Other assets
1990
Others
199025
Cash shortages
11
Funds available 345
1101
Box
110105
Cash
Missing p/r from box 1 345
Source: Superintendence of Banks
In this case, a cash shortage has been detected. The cashier in charge of this cash
register is responsible for this fact and therefore the financial institution has the
power to deduct this amount from your monthly salary.
Next, the case of a cash surplus will be analyzed:
Table 7. Movements of January 15, 20XX of box 2 of Banco ABC SA


Table 8. Registration of the surplus of box 2 as of January 15, 20XX
General diary
Year
20XX
01/15/20XX 11
1101 Funds available
110105 Box
29 Cash
200
2990 Other passives
299005 Others
Cash surplus
P/r left over from box 2 200
As discussed in the previous transactions, a cash shortage is recorded when there

is less money compared to the accounting balance and a cash surplus is recorded
when there is more money compared to the accounting cash balance.
Deposits for reserve requirements. How did you think of the first practical
accounting case? Next, account 1102 “Deposits for reserve requirements” will be
analyzed. Please take the CUC and read the accounting dynamics, that is, in which
cases this account is debited and in which cases this account is credited.
entities in the public and private financial sectors, without prejudice to the other
reserves provided for by this Code, are obliged to maintain reserve requirements
on the deposits and deposits that they have at their disposal. post. The reserve will
not be remunerated and will be kept in the Central Bank of Ecuador.
In the event that public and private financial entities do not comply with the
required reserve levels, the Superintendency of Banks will order the entity to
immediately contribute the necessary resources to cover the gap.

For entities in the popular and solidarity financial sector, the Monetary and
Financial Policy and Regulation Board will establish the reserve requirements
differentiated by segments for this sector.
The banking reserve is the percentage of resources that financial intermediaries

that receive resources from the public must maintain in the Central Bank.
This account records the deposits that the financial entity maintains in the Central
Bank of Ecuador, in Ban Ecuador and other local banks, when the reporting entity
has its main domicile in a city where the Central Bank does not have offices.
In accordance with Resolution No. 273-2016-F issued by the Monetary and

Financial Policy and Regulation Board, the percentage of banking reserve was set
at 2% for both public and private financial institutions. This percentage will be
calculated on the weekly average of the daily balances of deposits and deposits of
each entity that is required to maintain a reserve in accordance with the provisions
of article 240 of the Organic Monetary and Financial Code (2014).
In resolution 302-2016-F of the same Monetary and Financial Policy and

Regulation Board, another reserve percentage is included, which is 5% but only for
financial entities whose assets exceed 1,000 million dollars. To calculate total
assets, information from the same period to which the deposits correspond will be
considered for calculating the reserve requirement.
Before starting with the practical cases, I invite you to download resolutions No.
273-2016-F and 302-2016-F of the Monetary and Financial Policy and Regulation
Board and carry out a comprehensive reading of each of them. Once this is done,
the following practical cases will be studied where these resolutions will be applied.

Practical case:
January 15 20XX. In the week prior to January 15, 20XX at Banco XYZ SA,
$500,000 in deposits (savings, demand and term) were recorded. With this
information, record the accounting entry corresponding to the bank reserve.
Consider the % of mandatory reserves taking into account that Banco XZZ SA has
assets worth 1.1 billion dollars.
Table 9. Registration of banking reserve in financial entities that have more than
one billion in assets
General diary
Year
20XX
01/15/20XX 11 Funds available

1102 Lace deposits
110205 central bank of Ecuador 25.000
11 Funds available
1101 Box
110105 Cash 25.000

P/r. reserve deposit of 5%
in the ECB.


Practical case:
January 20 XX. In the week prior to January 20, 20XX, Banco Rumiñahui recorded
Preliminarie
$100,000 in deposits (savings, demand and time deposits). With this information, s
record the accounting entry corresponding to the bank reserve. Consider the % First
BIMESTER
mandatory reserve in this case. Banco Rumiñahui has less than $1 billion in
assets. Second
BIMESTER
Table 10. Registration of banking reserve in financial entities that have less than Solver
one billion in assets
References
bibliographic
General diary
Year 20XX
Annexes
1102 Lace deposits
11 Funds available
1101 Box
110105 Cash
P/r. reserve deposit of 2% in the
ECB.
2.000
In summary, the banking reserve is applied as follows: 2% for public or private

financial entities that have less than 1,000 million dollars in assets and 5% is
applied for public or private entities that have more than 1,000 million in assets.
Banks and other financial institutions
Dear students, read the description and accounting dynamics of account 1103 in
your Unique Catalog of Accounts.

This account records balances in checking accounts and other demand deposits,
including overnight deposits made by the entity, in local currency or other
currencies, in banks and other entities both in the country and abroad.
Immediate payment effects
This is getting interesting, isn't it? Please read the description and accounting
dynamics of account 1104 in the CUC.
This account is used specifically in the financial sector because it records the total
value of local checks received by the institution that have been drawn on other
institutions whose collection is made through the clearing house.
Checks must be sent to the next clearinghouse session or no later than the next
business day after receipt.
Local checks must be sent for collection within 24 hours of receipt, properly
reviewed, registered and in intact deposits.
Documents that are rejected when presented for collection should not be
registered in this account, but rather should be returned to the corresponding
clients and removed from the institution's liabilities.
Clearing house
This is a very interesting topic because only banks have this procedure.
In accordance with regulation No. 046-2013 issued by the Central Bank of

Ecuador, the check clearing house system “is the set of instruments, procedures
and standards used for the clearing, settlement and return process of checks that
the institutions

financial institutions present in the clearinghouse, through the exchange of digital

images and check information.”
The operation of the clearing house is justified to streamline and optimize the
check collection system that banks receive from their clients so that they are
cashed. The clearinghouse office operates in the Central Bank, which is directed
by an official from this institution. Each bank will send its main delegate and its
respective alternate. The chamber meets every day of the week except holidays
and Saturdays and Sundays.
Operation and results of the clearing house
How the clearinghouse works in practice will be discussed below. Each delegate of
the financial institutions must establish the result of the clearing house. The result
will depend on the difference between the values of the checks delivered and the
checks received from other institutions.
In the clearinghouse there can be two possible outcomes: for and against:
▪ The result of the chamber is in favor when the total value of the checks delivered
for collection by the bank is greater than the total value of the checks
received from other financial entities. In this case, the Central Bank of
Ecuador will make the respective credit to the institution's account and the
financial entity will record the same value as the debt.
▪ The result of the chamber is against when the total value of the checks delivered
for collection by the bank is less than the total value of the checks received
from other financial entities. In this case, the Central Bank of Ecuador will
make the respective debit in the institution's account and the financial entity
will post a credit to its account for the same value.

The next subtopic is very interesting. In the compensation process, there are two
chambers (Single Catalog of Accounts, 2017):
Two sessions are held daily:
▪ Preliminary: The checks held by each of the financial institutions are exchanged
and charged to other financial entities.
▪ Definitive: The checks received by the banks in the preliminary session, whose
payment has been rejected, are exchanged, in accordance with the causes
that are in the Check Law.
The person responsible for the final chamber will remove the documents that were
processed in the preliminary chamber from the safe. These are:
▪ Returned checks
▪ Certified and cashier's checks
▪ Normal checks
▪ Preliminary chamber report
A balance report will be made on the returned checks for each of the following
concepts:
▪ Closed account
▪ Insufficient funds
▪ Lack of beneficiary
▪ Blocked funds
▪ Check revocation
▪ Check cancellation
▪ Inactive accounts
▪ Form defects
▪ Non-compliant signature

Clearinghouse Accounting
To better understand the mechanics of how the clearinghouse works, the following
practical cases will be analyzed:
Table 11. Preliminary clearinghouse form with result in favor of the financial
institution
Central Bank of Ecuador Preliminary clearing house (Values in dollars)

Date: January 20, 20XX
Bank Name: De Loja

Checks you deliver Checks you receive
Balance
No. Worth No. Worth
Pichincha 90 5.010,00 70 2.923,00 2.087,00

Bolivarian 80 3.500,00 65 8.901,00 (5.401,00)
Guayaquil 101 10.200,00 78 12.345,00 (2.145,00)
Produbanco 78 31.920,00 101 10.478,00 21.442,00
Machala 15 1.890,00 56 2.891,00 (1.001,00)
TOTALS 364 52.520,00 370 37.538,00 14.982,00
Clearinghouse Director private bank

Source: Central Bank of Ecuador
Dear students, in the table above you can view the clearing house form of the
Banco de Loja. This form is issued by the Central Bank of Ecuador, the institution
that operates the compensation process. The data used to fill out this form is
provided by each public or private bank under the supervision of a representative
of the Central Bank. This mechanism supervised by a third party gives confidence
to all financial entities to receive or deliver the necessary resources according to
the results of the spreadsheets.

Once the above is understood, let's now analyze the data presented in the form. In
the detail of the preliminary clearing house in the example, it is seen that Banco de
Loja delivers 364 checks to the other banks for the value of $52,520. In turn, the
same bank receives from the other banks the amount of 370 checks for a value of
$37,538. In this case, the result of the camera is in favor of Banco de Loja for the
value of $14,982 because this bank is delivering checks for a greater value
compared to the total sum of the checks it receives. With these data, the camera
result will be counted:
Table 12. Registration of the preliminary clearing house return result in favor
General diary
Year 20XX
01/20/20XX 2101 Demand deposits

210150 Deposits to be confirmed 37.538
1102 Lace deposits
110205 Ecuador Central Bank 14.982
1104 Immediate payment effects 52.520

P/r the camera
preliminary compensation
Note that in this case the result of the preliminary clearing house is in favor of the
Loja bank, because checks are delivered for a value greater than those received.
As the result is in favor, 14,982 dollars are received, which are credited to the
account of the Banco de Loja in its account at the Central Bank of Ecuador. If the
result had been against, instead of a debit to the account at the Central Bank, there
would have been a credit movement.
Following the same practical case, we proceed to show how the final camera is
liquidated.

After processing the preliminary chamber, the bank establishes and summarizes
the protested checks, to be delivered in the final chamber:
Table 13. Detail of the protested checks to be delivered in the final chamber
Bank No. of che Worth

cheese
Pichincha 2 1.500,00
Produbanco 8 2.345,00
Machala 3 567,00
Total $4.412,00
The checks received from the other banks are as follows:
Table 14. Checks received from other banks due to protest in the final chamber
Bank Account Check Amount Cause

Rotated
Pichicha 67902021 221 103,56 Irregular cancellation
Pichicha 11101010 58 456,00 Insufficient funds
Guayaquil 60101011 1001 1.012,00Insufficient funds

Guayaquil 2100101 1345 103,00 Irregular cancellation
Guayaquil 60103939 1675 545,00 Insufficient funds
Produbanco 20514591 1678 1.003,00Missing beneficiary
Produbanco 20558944 901 678,00 Non-compliant signature
Machala 12901011 657 106,00 Closed account
Machala 17803022 987 110,71 Altered beneficiary
Total $4.117,27
With these data, proceed to account for the final clearinghouse according to the
following form.

Table 15. Final clearinghouse form with result in favor of the financial institution
Central Bank of Ecuador Definitive clearing house (Values in dollars)

Date: January 20, 20XX
Bank Name: De Loja

Balance
No. Worth No. Worth
Pichincha 2 1.500,00 2 559,56 940,44

Bolivarian - - -
Guayaquil - - 3 1.660,00 (1.660,00)
Produbanco 8 2.345,00 2 1.681,00 664,00

Machala 3 567,00 2 216,71 350,29
TOTALS 13 4.412,00 9 4.117,27 294,73

Table 16. Registration of the definitive chamber return result in favor
General diary
Year 20XX

210150 Deposits to be confirmed 4.117,27
1102 Lace deposits
110205 Ecuador Central Bank 294,73
1104 Immediate payment effects 4.412,00

P/r the camera
final compensation

As in the preliminary chamber, the result of the final chamber is in favor of the
financial institution. By reviewing the entry we can see that a debit is made to the
Banco de Loja account at the Central Bank. This indicates that resources have
come in as a result of the clearing of the checks.
With the accounting of the two chambers: preliminary and final, we complete the
chamber accounting process, which is very useful for financial institutions because
the checks delivered and received can be offset with complete confidence between
the parties.
Now another example of a clearinghouse will be analyzed, but this time with the
results against the financial institution. The example below is the same as the
previous one, but the data has been reversed.
Table 17. Preliminary clearinghouse return result against the

financial entity
Central Bank of Ecuador Preliminary clearing house (Values in dollars)

Date: January 21, 20XX Bank
Name: De Loja

Balance
No. Worth No. Worth
Pichincha 70 2.923,00 90 5.010,00 (2.087,00)

Bolivarian 65 8.901,00 80 3.500,00 5.401,00
Guayaquil 78 12.345,00 101 10.200,00 2.145,00
Produbanco 101 10.478,00 78 31.920,00 (21.442,00)
Machala 56 2.891,00 15 1.890,00 1.001,00
TOTALS 370 37.538,00 364 52.520,00 (14.982,00)


The accounting for the final chamber payroll is as follows:
Table 18. Registration of the preliminary return with a negative result

General diary
Year
20XX
01/21/20XX 2101 Demand deposits Deposits to
210150 be confirmed Deposits for 52.520
1102
reserve requirements Central
110205 14.982
Bank of Ecuador
1104 37.538
Effects of immediate collection
P/r the preliminary clearing
house

In the previous example, when the result is in favor of the financial entity, a debit
was recorded in the Central Bank account. On the other hand, when the result of
the chamber is against, a credit is recorded in the account of the Central Bank,
which is a decrease in the account statement of the Loja bank in the latter
institution.
After processing the preliminary chamber, the bank establishes and summarizes
the protested checks, to be delivered in the final chamber:
Table 19. Protested checks to be delivered in final chamber
Bank No. checking Worth

Pichincha 2 559,56
Guayaquil 3 1.660,00
Produbanco 2 1.681,00
Machala 2 216,71
Total $4.117,27
Source: self made
The checks received from the other banks are as follows:

Table 20. Checks received from other banks due to protest in the final chamber
Bank Account Drawn Check Amount Cause

Preliminarie
b. Pichicha 61901021 249 643,00 Irregular cancellation s
b. Pichicha 21201010 179 857,00 Insufficient funds
First
b. Produbanco 2050014231 1012 1.009,00Missing beneficiary BIMEST
ER
b. Produbanco 2050876231 786 1.336,00Non-compliant signature
b. Machala 12101011 654 109,82 Closed account Second
quarter
b. Machala 18703022 987 457,18 Altered beneficiary
Total $4.412,00 Solver
Source: self made
Prepared: Acurio, R. (2019) References
bibliographic
With these data, the definitive clearing house will be accounted for according to the Annexes
following form.
Table 21. Final clearinghouse form resulting against the financial institution
Central Bank of Ecuador Definitive clearing house (Values in dollars)

Date: January 21, 20XX Bank
Name: De Loja

Balance
No. Worth No. Worth
Pichincha 2 559,56 2 1.500,00 (940,44)

Bolivarian - - -
Guayaquil 3 1.660,00 1.660,00

Produbanco 2 1.681,00 2 2.345,00 (664,00)
Machala 2 216,71 2 567,00 (350,29)
TOTALS 9 4.117,27 6 4.412,00 (294,73)


Table 22. Registration of the definitive compensation chamber return result against
As can be seen, in this last entry the accounting of the definitive camera is made.
General diary
Year
20XX
01/21/20XX 2101
210150 Demand deposits 4.412,00
1102
Deposits to be confirmed Deposits
110205 294,73
for reserve requirements Central
1104 4.117,27
Bank of Ecuador Immediate
collection effects
P/r the preliminary clearinghouse

In this case the result is against, since a credit is made to the Loja bank account at
the Central Bank and this obviously reduces the balance in this current account.
B. Interbank Operations – group 12
Dear students, read the description and accounting dynamics of group 12 in the
Single Catalog of Accounts.
Interbank operations are short-term investment instruments. When a bank has a

surplus of cash, it can lend to other banks, thus obtaining a financial return. If the
interest rate on this operation is high, it means that there is no liquidity in the
financial system in general. On the other hand, if the interest rate is low, it means
that the financial system has sufficient liquidity.
These types of transactions must be carried out through contracts, in accordance

with legal regulations, without exceeding the rates established by the Central Bank
of Ecuador. When the bank receives payment for the operation, it will receive

a withholding at source for income tax of 1%, which must be accounted for as an
advance payment of income tax.
This account records interbank funds sold up to a period of 8 days and purchases
with resale agreements up to a period of 30 days to entities of the financial system
when the entity has excess liquidity, as well as the required provisions, according
to the provisions issued by the Superintendency of Banks. (Single Catalog of
Accounts, 2017)
To better understand the accounting dynamics of this account, the following

practical case will be analyzed:
February 18 20XX. Banco del Austro lends Banco Amazonas the amount of
$200,000 for a period of 7 days at a rate of 8.19% per year, a transaction carried
out through the Central Bank of Ecuador.
Now the accounting entry will be made:
Table 23. Record of investment in a sold interbank fund
General diary
Year 20XX
Date Code Detail Has to To have
02/18/20XX 1201
Interbank funds sold
120105
Banks 200.000
1102
Lace deposits
110205 200.000
central bank of Ecuador
P/r. interbank fund sold to
Amazon Bank.


February 25. Banco del Austro collects the interbank fund sold to Banco
Amazonas, for the amount of $200,000, at an annual rate of 8.19%, a transaction
that is carried out through the Central Bank of Ecuador.
The calculation of interest is carried out with the following formula:
Simple interest Capital x Interest rate x Time in days

= 360
IA 2 00,000 x8.19% x 7 ,
Interest =
360
The previous formula, which corresponds to the simple interest formula, will be
used from now on.
Next, the settlement of the interbank fund sold will be entered:
Table 24. Record of the settlement of the interbank fund sold
General diary
Year 20XX
02/25/20XX 1102 Lace deposits

110205 Ecuador Central Bank 200.315,31
1990 Others
199090 Tax advance to rent 3,19
1990901 Advance tax income 1% 3,19
5102 Opera. interbank

510205 Interban funds sold 318,50
1201 Interban funds sold
120105 Banks 200.000,00
P/r. the liquidation of the
interbank fund sold.


As can be seen in the previous accounting entry, account 199090 “Others”

appears. It records the amounts paid by the entity as an advance payment of
income tax. This advance will then be taken into account as a prior payment in the
financial institution's income tax settlement.
C. Investments – group 13
Dear students, read the pages where the description and accounting dynamics of
group 13 are found.
An investment is a placement of capital with the objective of obtaining a profit in the

future.
For a better understanding of this topic, the following example will be analyzed:
A person has saved the amount of $25,000 dollars. With that money you can buy
an asset, for example a vehicle. However, you decide to invest that money in an
accumulation policy, with the aim of obtaining interest on the capital. The $25,000
for 1 year at a rate of 6% becomes $26,500.
At the end of that year the person will reap the benefit of their investment, so they
can buy the same vehicle and have some money left over. It must be remembered
that at first this person put aside the immediate satisfaction of obtaining the vehicle
in order to put the money into a financial investment.
Companies, like people, tend to make investments at all times. Some are
necessary for its daily functioning, such as the purchase of furniture and fixtures,
buildings, computer equipment, etc.
A financial institution raises money from the public and then has to place that
money by granting loans, but these figures can only sometimes be similar, since
there are many external factors that financial institutions do not control, such as the
demand for credit, the cycle economic of the country, banking regulations, etc.
Financial entities, for several reasons including: caution, profitability, create an
investment portfolio.

In accordance with the Single Catalog of Accounts, investments in securities

acquired by the entity are recorded in this account, with the purpose of maintaining
secondary liquidity reserves.
Purchases and sales of securities, as well as profits or losses, are recorded on the
date of the transaction.
The following example will analyze an investment to negotiate in private sector

entities:
Practical case:
March 5 20XX. Banco de Loja acquires a time deposit from Banco Pichincha for
the value of $500,000 with a term of 91 days, at a rate of 11%. The money is
transferred from the Banco de Loja account at Banco del Pacífico.
First, the accounting entry for the acquisition of the time deposit will be made:
Table 25. Registration of an investment to negotiate in private sector entities
General diary
Year 20XX
03/05/20XX 1301
130115 To negotiate ent. sect. private
500.000
1103 From 91 to 180 days
110310 Banks and other institutions
Bank of Pacific.
P/r. investing in a term deposit. 500.000

The calculation of interest is carried out with the following formula:
Capital x Interest rate x Time in days

Simple interest 360
= Preliminarie
s
Interest = 500,000 x 11% x 91 First

= 13.902,78
360 BIMEST
ER
The accounting entry for the liquidation of the investment is as follows: Second
BIMESTER
Table 26. Record of the settlement of the investment to negotiate in the sector Solver
private
Bibliographic
references
General diary
06/04/20XX 1103 Banks and other institutions
110310 finance Banco del Pacífico 513.763,75
1990 Others
199090 Tax advance on income 139,03
1990901 Tax advance to rent 1%
5103 Interest and discounts To 139,03
510305
negotiate
1301
To negotiate private sec From
130115
91 to 180 days
13.902,78
P/r. the settlement of the time
deposit.
500.000,00
Year
20XX D C D P H T
a o e a a o
t d t r s
e e a t h
i i t a
l a o v
l e
As you can see, both the acquisition entry and the investment liquidation entry
must use the specific accounts indicated in the Single Catalog of Accounts, in this
case as the investment is in Banco Pichincha, the name of the account The
relevant accounting standard is 1301 “For private sector negotiations”. Additionally,
to be more specific, we must choose the account that does not indicate the term, in
this case account 130115 “From 91 to 180 days” The CUC has different detailed


accounts regarding investments.

Due to the term of the operations, this is very important for financial entities
because it allows them to measure their liquidity since it is not the same to have
their resources invested in the short term or in the long term.
Practical case:
Dear students, in this other case, an example of investments for negotiation by the
State or public sector entities will be analyzed:
March 15 20XX. Banco de Loja acquires a zero coupon bond from the Central
Bank of Ecuador (A zero coupon bond means that the interest on the bond is paid
at maturity, along with the principal) for the value of $1,000,000 with a term of 181
days, at a rate of 8%, a transaction that is carried out through a transfer from the
Produbanco account. At the end of the term the bond revalues and is sold for
$1,005,000
First, the entry of the acquisition of the Bank bond will be analyzed
Central Ecuador.
Table 27. Record of investment in zero coupon bond of the Central Bank of the
Ecuador
General diary
Year 20XX
03/15/20XX 1302 To negotiate ent. sec. public
130220 From 181 to 360 days 1.000.000
110310 1.000.000
Produbanco
P/r. investment in a bond from the
Central Bank of Ecuador.


The calculation of interest is carried out with the following

formula:
Simple interest = Capital x Interest rate x Time in days

360 Preliminarie
s
Interest = 1,000,000 x 8% x 181 _ 40.22222 First

360 BIMESTER
The settlement of the investment is as follows: Second

BIMESTER
Table 28. Record of the settlement of the investment in a Central Bank bond Solver
from
Ecuador Bibliographic
references
General diary
Year
20XX
09/12/20XX 1103 Bank and other financial institutions
110310 Produbanco 1.045.222,22
5103 Interest and discounts
510305 To negotiate 40.222,22
5303 financial profits
530305 In sale of assets 5.000,00

1302 To negotiate ent. sec. public
130220 From 181 to 360 days 1.000.000,00
P/r. investment in a bond
Central bank of Ecuador.

In the bond sale transaction, it is sold at a higher value in relation to the face
value. In this case, the profit must be recorded in the “Financial Profits”
account. In the event that the bond is sold for a lower value, the difference in
capital will be recorded in the “Financial losses” account.

D. Credit portfolio – group 14
Now the main activity of financial entities will be analyzed, which is the granting of
credits.
In accordance with the Single Catalog of Accounts, the credit portfolio includes the
capital balances of the credit operations granted by the entity, under the different
modalities, authorized and depending on the specialized line that corresponds to
each of them, includes :
▪ All credit operations granted with own resources or with internal or external
financing sources
▪ Contingent operations paid by the institution due to default of the main debtors
▪ Financial commercial leasing contracts
▪ Overdrafts in checking accounts
▪ Values receivable from credit card holders
The loan portfolio is divided by the destination of these loans. Thus we have that
the portfolio can be (Single Catalog of Accounts, 2017):
▪ Commercial.
▪ Consumption.
▪ Living place.
▪ Microenterprise.
The Credits can be canceled when due or periodically, by

means of amortization installments. Before continuing, read the description and
accounting dynamics of group 14. (Single Catalog of Accounts, 2017)

In accordance with the Regulation of the Central Bank of Ecuador no. 058/2014 in
its article 2, for the calculation of interest and capital payments of credit operations,
the entities of the national financial system must make available to clients the
possibility of choosing the amortization system to be used for the contracting of
credit, including on a mandatory basis at least the following:
▪ French amortization system or equal dividends.

▪ German amortization system or equal capital installments.
Figure 4. Credit amortization systems Source: Villaroel, E. (2013)
French amortization system
“This method considers a fixed installment of capital and interest in all periods, with
amortization being increasing capital and decreasing interest.” (Villaroel, 2013, p.
925).
Now a practical case will be analyzed, where first the credit granting entry will be
prepared, then the amortization table and finally the accounting entries for the
credit payments.

Practical case:
January 30 20XX. The Bank of Loja grants a loan to the company ABC SA for the
value of $75,000, the type of credit is commercial, the term is 180 days and the
interest rate receivable is 14%. Make the corresponding entry. Take into account
that the financial institution has to charge the client the 0.5% annualized Solca tax
according to the fourteenth general provision of the Organic Monetary and
Financial Code (2014) and that the credit is deposited in the company's current
account .
Please record the credit granting entry:
Table 29. Registration of the granting of commercial credit
General diary
Year 20XX
01/30/20XX 1401 Cred com wallet due
140115 From 91 to 180 days 75.000,0
2504 Withholdings
250405 Tax withholdings 187,50
2504051 0.5% Solca 187,50
2101 Demand deposits
210110 Deposits that do not generate in 74.812,50
P/r. the granting of credit.
During the credit granting process, the bank has to present the client with at least
two amortization tables, using the French and German methods. In this case, we
are going to simulate that the credit was granted using the French amortization
method.
To obtain the value of the credit installment we must use the following financial
formula:

Data:
Loan amount: 75.000

Term: 6 months
Interest rate: 14% annually
Amortization: Monthly
Where:
PV = Present value
A = Annuity
i= Interest rate
n= time frame
Next, the equation will be solved with the credit data from the example:
1 - (1 + 14%/12)-6
75,000 = A----------------------- ---—
14%/12
1 - 0,93277169
75,000 = A 0,01166667
75,000 = Ax 5.76242671
75,000 A =
5,76242671
A = 13,015.35
Before moving on to review the accounting of the amortization table, please review
Solca's 0.5% tax calculation. To obtain the value, the following calculation must be
performed: 75,000 x 0.5% = $375. The $375 is the

tax that would be charged if the credit had been granted for one year or more, but
since the credit is for 180 days, we must divide the value of the annual tax by 2,
with which we obtain the tax in this case $187.5 as stated in the preceding seat.
Apart from the tax information, take into account that to account for the credit
portfolio, the accounts in the CUC must be chosen carefully. As you can see in the
entry above, the general ledger account 1401 has been chosen because the credit
is commercial and due and then the account 140115 “From 91 to 180 days” has
been chosen because the credit has a term of 180 days. As was analyzed in group
13 corresponding to investments in the CUC, the portfolio accounts are detailed by
the destination of the credit and by terms, which is very useful to later carry out
liquidity and risk analysis in financial entities.
Table 30. French system amortization table

French Loan Amortization System
Loan value 75.000
Agreed interest rate 14%
Periodicity of the installment in months 12
Periodic rate 1,17%
Amount of monthly installments 6
Quota Capital at the Period

beginning of the Amortization Share
number Payment date interest
period
1 02/28/20XX 75.000,00 12.140,35 875,00 13.015,35
2 03/30/20XX 62.859,65 12.281,99 733,36 13.015,35
3 04/29/20XX 50.577,66 12.425,28 590,07 13.015,35
4 05/29/20XX 38.152,38 12.570,24 445,11 13.015,35
5 06/28/20XX 25.582,14 12.716,89 298,46 13.015,35
6 07/28/20XX 12.865,25 12.865,25 150,10 13.015,35
Totals 75.000,00 3.092,10

Solver
To obtain the capital amortization value and accrued interest in each period we
must use the functions of the Excel program: pagoprin (the capital payment is
References
obtained in each period) and pagoint (the interest payment is obtained in each
bibliographic
period).
The entries corresponding to loan payments are as follows, according to the

amortization table: Second
quarter
Table 31. Posting of the amortization table by the French system
General diary
Year
20XX
Date Code Detail Has to To have Annexes
---------------------1---------------------
02/28/20XX 1603 Interest receivable credit portfolio
160305 Commercial credit portfolio 875,00
5104 Interest and discounts on loan portfolio
P/r. the provision of interest for the month 2

Demand deposits
02/28/20XX 2101
210105 Deposits that do not generate interest 13.015,35
1603 Interest receivable credit portfolio

1401 Commercial credit portfolio due
140115 From 91 to 180 days 12.140,35
P/r. payment of the first installment of the loan 3

03/30/20XX
P/r. the interest provisioned for the month

Date Code Detail Has to To have m Index

E IIIUICC
---------------------4---------------------
210105 Non-interest bearing deposits 13.015,35

1 Preliminaries
160305 Commercial credit portfolio 733,36 AND
1401 Commercial credit portfolio to mature From 91 E bimester
• Second quarter
to 180 days
140115 12.281,99
P/r. payment of the second installment of the loan
---------------------5--------------------- Fix it
04/29/20XX

160305 Commercial credit portfolio 590,07 • References
• bibliographic
Commercial credit portfolio
510405 590,07
g Annexes
P/r. the provision of interest for the month
---------------------6---------------------

140115 From 91 to 180 days 12.425,28
P/r. payment of the third installment of the credit
---------------------7---------------------

---------------------8---------------------

140115 From 91 to 180 days 12.570,24
P/r. payment of the fourth installment of the credit



06/28/20XX ---------------------9---------------------


---------------------10---------------------

140115 From 91 to 180 days 12.716,89 Annexe
s
P/r. payment of the fifth installment of the credit
07/28/20XX ---------------------11---------------------


---------------------12---------------------

140115 From 91 to 180 days 12.865,25
P/r. payment of the sixth installment of the credit
TOTALS 81.184,20 81.184,20
With the preparation of the above entries, the entire accounting cycle of the
loan has been completed with the data from the previous example.

German amortization system
“This method considers a fixed capital fee in each period and interest on the loan
balance, with the capital and interest fee decreasing. The fixed capital installment
is obtained by dividing the loan amount by the term expressed in terms of the
payment period. (Villaroel, 2013, p. 910).
To exemplify the German amortization method we are going to use the same data
from the previous case.
January 30 20XX. The Bank of Loja grants a loan to the company ABC SA for the
value of $75,000, the type of credit is commercial, the term is 180 days and the
interest rate receivable is 14%. Make the corresponding entry. Take into account
that the bank has to charge the client the 0.5% Solca tax and that the credit is
deposited in the company's current account.
The credit granting entry is the same in both methods. What changes is the
amortization table and obviously the payment entries for each of the loan
installments.
In the German method there is no formula like the one that exists in the French
method. To obtain capital amortization, only the capital amount is divided by the
number of installments. Then the interest paid is obtained on the principal balance
payable in each period.
The amortization table for the German method is as follows:

Table 32. German system amortization table
German loan repayment system

Loan value 75.000
Interest rate agreed with the institution 14%
financial
Periodic rate 1,17%
Capital at the
Quota Payment date beginning of the Period
Amortization Share
number
period interest
1 02/28/20XX 75.000,00 12.500,00 875,00 13.375,00

2 03/30/20XX 62.500,00 12.500,00 729,17 13.229,17
3 04/29/20XX 50.000,00 12.500,00 583,33 13.083,33
4 05/29/20XX 37.500,00 12.500,00 437,50 12.937,50
5 06/28/20XX 25.000,00 12.500,00 291,67 12.791,67
6 07/28/20XX 12.500,00 12.500,00 145,83 12.645,83
Totals 75.000,00 3.062,50
The procedure to calculate interest in each period is as follows:
▪ For the first period: The capital balance is $75,000. Interest is calculated on
this balance using the formula that we had seen before regarding simple
interest. The calculation would be as follows: 75,000 x 14% x 30 days divided
by 360. This is equal to $875.
▪ For the second period: The capital balance is 62,500. The interest on the
second installment is calculated on this value. The calculation would be as
follows: (62,500 x 14% x 30) /360 = 729.17.
▪ For the calculation of interest for periods 3 through 6, the calculation is the
same as for periods 1 and 2.

To finish the year, all loan installments will be accounted for:
Table 33. Posting of the amortization table by the German system

Preliminarie
General diary s
Year
20XX
---------------------1---------------------
--------------------2---------------------
Demand deposits Annexe
02/28/20XX 2101 s

140115 From 91 to 180 days 12.500,00
P/r. payment of the first installment of the loan
--------------------3---------------------
03/30/20XX
--------------------4---------------------
Demand deposits
03/30/20XX 2101

140115 From 91 to 180 days 12.500,00
P/r. payment of the second installment of the
loan

Date Code Detail Has to To have m Index
04/29/20XX
---------------------5--------------------- E IIIUICC

1 Preliminaries
AND First
E bimester
• Second
• BIMESTER
---------------------------------------------
210105 Deposits that do not generate interest 13.083,33 B Solve it
• bibliographic
140115 From 91 to 180 days 12.500,00
B Annexes
P/r. payment of the third installment of the credit
---------------------7---------------------

---------------------8---------------------

140115 From 91 to 180 days 12.5000,00
P/r. payment of the fourth installment of the
credit
06/28/20XX ---------------------9---------------------


Date Code Detail Has to To have index '

---------------------10---------------------
1 Preliminaries
Interest receivable loan portfolio Commercial
1603 AND First
160305
loan portfolio
291,67 AND
• Second quarter
From 91 to 180 days
140115 12.500,00
P/r. payment of the fifth installment of the credit
07/28/20XX ---------------------11--------------------- I Fix it

• bibliographic
510405 Commercial credit portfolio 145,83 g Annexes

---------------------12---------------------

140115 From 91 to 180 days 12.500,00
P/r. payment of the sixth installment of the credit

TOTALS 81.125,00 81.125,00
What did you think of this example? Now to make this issue clear, the following practical case will
be analyzed where a comparison will be made between the two credit amortization systems.
January 02 20XX. Banco Rumiñahui grants a loan to the company Atrifecsa SA for the value of
$200,000, the type of credit is commercial, the term is 360 days and the interest rate receivable is
14% per year.

It is requested:
▪ Create the two amortization tables using the French and German methods and
determine which amortization method is best for the company from the point
of view of the interest paid? And by what amortization method does the
financial institution recover the borrowed capital faster?
First, the amortization table will be prepared using the French method:
1 - (1+i)-n
VP = A---------- -----—
Yo
Where:
PV = Present value
A = Annuity
i= Interest rate
n= time frame
Next, the equation will be cleared with the credit data:
1 - (1 + 14%/12)-12
200.000 = 4---------- ------------- ---------
14%/12
1 - 0,87006302
200,000 = A 0,01166667
200,000 = Ax 11.1374552
200.000
A= 11,1374552
A = 17,957.42

To construct the amortization table that follows below, you must use the Excel
program and its functions: pagoprin (with this function the capital installment is
obtained in each period) and pagoint (with this function the interest amount is
obtained in each period). period).
Table 34. Amortization table for the French system

Loan value 200.000
Periodic rate 1,17%
Capital at the
Quota number beginning of the Amortization Period Share

period interest
1 200.000,00 15.624,09 2.333,33 17.957,42

2 184.375,91 15.806,37 2.151,05 17.957,42
3 168.569,54 15.990,78 1.966,64 17.957,42
4 152.578,76 16.177,34 1.780,09 17.957,42
5 136.401,42 16.366,07 1.591,35 17.957,42
6 120.035,35 16.557,01 1.400,41 17.957,42
7 103.478,34 16.750,18 1.207,25 17.957,42
8 86.728,16 16.945,59 1.011,83 17.957,42
9 69.782,57 17.143,29 814,13 17.957,42
10 52.639,27 17.343,30 614,12 17.957,42
11 35.295,97 17.545,64 411,79 17.957,42
12 17.750,34 17.750,34 207,09 17.957,42
Total 200.000,00 15.489,08

Now the amortization table will be made by the German system
To obtain the capital installment for this credit amortization system, the $200,000 must be divided

into 12 monthly installments. The result of this

division is $16,666.67. Interest will be calculated on capital balances using the

simple interest formula. The procedure is the next:
▪ For the first period: The capital balance is $200,000. Interest is calculated on
this balance. The calculation is as follows: 200,000 x 14% x 30 days divided
by 360. This is equal to $2,333.33.
▪ For the second period: The capital balance is 183,333.33. The interest on the
second installment is calculated on this value. The calculation would be as
follows: (183,333.33 x 14% x 30) /360 = $2,138.89.
▪ In the following periods this calculation is repeated until the twelfth installment
is calculated.
Once these calculations have been made, the amortization table can be put
together:

Table 35. Amortization table according to the German

system
German Loan Repayment System

Preliminarie
Loan value 200.000 s
First
Periodicity of the installment in months 12 BIMESTER
Periodic rate 1,17%
Second
BIMESTER
Capital at the
Quota
beginning of the Amortization Period Share Solver
number
period interest
References
1 200.000,00 16.666,67 2.333,33 19.000,00 bibliographic
2 183.333,33 16.666,67 2.138,89 18.805,56
3 166.666,67 16.666,67 1.944,44 18.611,11 Annexes
4 150.000,00 16.666,67 1.750,00 18.416,67
5 133.333,33 16.666,67 1.555,56 18.222,22
6 116.666,67 16.666,67 1.361,11 18.027,78
7 100.000,00 16.666,67 1.166,67 17.833,33
8 83.333,33 16.666,67 972,22 17.638,89
9 66.666,67 16.666,67 777,78 17.444,44
10 50.000,00 16.666,67 583,33 17.250,00
11 33.333,33 16.666,67 388,89 17.055,56
12 16.666,67 16.666,67 194,44 16.861,11
Total 200.000,00 15.166,67
With the construction of these two amortization tables, the questions of the
practical case will be answered:
To answer the first question, which amortization method is best for the company
from the point of view of interest paid? The following table will be analyzed:

Table 36. Comparison of interest paid in amortization systems: French and

German
French method
Quota number Interests method Difference
interests
German
1 2.333,33 2.333,33 0,00

2 2.138,89 2.151,05 -12,16
3 1.944,44 1.966,64 -22,20
4 1.750,00 1.780,09 -30,09
5 1.555,56 1.591,35 -35,79
6 1.361,11 1.400,41 -39,30
7 1.166,67 1.207,25 -40,58
8 972,22 1.011,83 -39,61
9 777,78 814,13 -36,35
10 583,33 614,12 -30,79
11 388,89 411,79 -22,90
12 194,44 207,09 -12,64
Total 15.166,67 15.489,08 -322,42

As can be seen in the amortization table, the German system pays less interest,
therefore, this system is the most convenient for the company.
To answer the second question, by what amortization method does the financial
institution recover the borrowed capital faster? The following table will be analyzed
in which capital payments are compared:

Table 37. Comparison between capital payments between the German and
French amortization system
German method Method capital Preliminarie

Quota number Difference s
capital payments payments do french
First
1 16.666,67 15.624,09 1.042,58 BIMESTER
2 16.666,67 15.806,37 860,30

Second
3 16.666,67 15.990,78 675,89 BIMESTER
4 16.666,67 16.177,34 489,33 —
5 16.666,67 16.366,07 300,59 Solver
6 16.666,67 16.557,01 109,66 ==

References
7 16.666,67 16.750,18 -83,51 bibliographic
8 16.666,67 16.945,59 -278,93

9 16.666,67 17.143,29 -476,63 Annexe
10 16.666,67 17.343,30 -676,63 s
11 16.666,67 17.545,64 -878,97

12 16.666,67 17.750,34 -1.083,67
Total 200.000,00 200.000,00 0,00
As can be seen in the table above, the bank recovers the loan capital more quickly
through the German amortization system.
Occasional overdrafts
Within the same group 14 “Credit portfolio” are occasional overdrafts. These are
contracted over the phone, speaking with the account officer. The term cannot be
longer than 30 days, it is an immediate loan that the financial institution grants to
the client.
The accounting method for this type of transaction is similar to the granting of a
credit operation, with a single payment at the end.
This topic will now be studied by analyzing the following practical case:

April 1 20XX. Mr. Raúl Carrasco, owner of checking account 02050014591, has a
balance in his account of $1,200. This man needs to write a check for 5,000, so he
calls the account officer to ask for an overdraft of 4,000. On April 11, Mr. Castro
covers the overdraft and pays 15% annual interest and a 4% banking commission.
The entry of the overdraft and the payment of the check is as follows:
Table 38. Registration of a bank overdraft
The interest on the overdraft and the commission must be calculated with the
General diary
Year
20XX
04/1/20XX 1402 Consumer credit portfolio
140205 From 1 to 30 days 4.000
210110 Monetary deposits 1.000
1101 Box
110105 Cash 5.000
P/r. cancellation of the check with the
bank overdraft.

following formulas:
Interest= 16.67
4,000 x 4% x 10
Commission Capital x Interest rate x Time in days
Overdraft interest 360
interest =
= 360
Overdraft interest 4,000 x 4% x 10

360
=
Interest = 6.67
105 7

Next, the settlement of the overdraft will be recorded. It is assumed that the client
has previously made the deposit of $4,000 through a cash deposit.
Table 39. Record of settlement of a bank overdraft
AND. Accounts receivable – group 16
General diary
Year
20XX
04/11/20XX 2101 Deposit at sight

210110 Monetary deposits 4.023,34
1402 Consumer credit portfolio
140205 From 1 to 30 days 4.000,00

5104 Interest and portfolio differences Annexe
s
510410 Consumer credit portfolio 16,67
52 Commissions earned
5201 Credit portfolio 6,67
For the cancellation of the overdraft
and the payment of interest

Records immediate collection values from the normal course of business (Single
Catalog of Accounts, 2017)
Mainly comprises:
▪ Interest and commissions receivable

▪ Income receivable from commercial trusts
▪ Payments on behalf of clients
▪ Advances for human development programs
▪ Advances for acquisition of shares
▪ Miscellaneous accounts receivable

Interest receivable accounts include interest accrued from interbank operations,

investments and loans granted. Additionally, commissions receivable that originate
from the different operations carried out by the entity, other than credit operations,
are included.
The following is a very important piece of information. If the financial institution

does not collect the interest and commissions for the period of 3 years, these
accounts receivable will be written off or, in other words, they will be sent to losses.
The following practical case will study how the financial institution calculates the
interest on a loan and how the interest accrued and collected is accounted for.
September 12 20XX. A consumer loan is granted to an individual of $25,000 at

14% for one year. Interest payment is semiannual. The credit is amortized by the
French method and will be collected by debiting the savings account.
The amortization table is as follows:

Table 40. Amortization table for the French system
Loan value 25.000

Number of payments per year 2
Loan Start Date 09/12/20XX
Periodic rate 7,00%
Loan years: 1
Loan semesters: 2
Capital at the Period
Quota Date Amortization Share
number beginning of the interest
pay
period
1 03/11/20XX 25.000,00 12.077,29 1.750,00 13.827,29
2 09/07/20XX 12.922,71 12.922,71 904,59 13.827,29
Total 25.000,00 2.654,59
The loan fee of $13,827.29 is calculated as follows:
1 - (1 + 14%/2)-2
25,000 = A—-----------------——
14%/2
1 - 0,8734
25,000 =A-----------------
0,07
25,000 =Ax 1.80801817
25,000 A =--------
1,80801817
A = 13,827.29
The calculation of interest at each end of the month and on the two payment dates
are as follows:

Table 41. Calculation of interest accrued per month
Cut dates Days passed Accrued interest

09/12/20XX
09/30/20XX 18,00 175,00

10/31/20XX 31,00 301,39
11/30/20XX 30,00 291,67
12/31/20XX 31,00 301,39
01/31/20XX 31,00 301,39
02/28/20XX 28,00 272,22
03/11/20XX 11,00 106,94
03/31/20XX 20,00 100,51
04/30/20XX 30,00 150,76
05/31/20XX 31,00 155,79
06/30/20XX 30,00 150,76
07/31/20XX 31,00 155,79
08/31/20XX 31,00 155,79
09/07/20XX 7,00 35,18
Totals 360,00 2.654,59
Now the daily book resulting from this credit operation will be prepared.

Table 42. Accounting for interest accrued from the first dividend of the loan
General diary
Preliminarie
s
Year First
20XX BIMESTER
---------------------1--------------------- Second
BIMESTER
09/30/20XX 1603 Interest receivable from credit portfolio
175,00 Solver
References
P/r. the interest accrued bibliographic
175,00
---------------------2---------------------
10/31/20XX 1603 Annexes
Interest receivable from credit portfolio
301,39
P/r. the interest accrued
301,39
---------------------3---------------------
291,67
291,67
---------------------4---------------------
301,39
301,39
---------------------5---------------------

301,39
301,39


---------------------6---------------------

Interest and discounts on loan portfolio 272,22
5104
272,22
---------------------7---------------------
03/11/20XX Demand deposits

2101
Savings deposits 13.827,29
210135
1603
Consumer credit portfolio
160310 1.643,06
Interest and discounts on loan portfolio
5104
1402 Portfolio of consumer loans to mature From
140220 181 to 360 days 12.077,29

TOTALS 15.470,35 15.470,35

Table 43. Ledger of interest receivable and interest accrued
Interest receivable Interests and rights

Credit portfolio Consumer credit portfolio
Has to To have Has to To have
175,00 1.643,06 175,00
301,39 301,39
291,67 291,67
301,39 301,39
301,39 301,39
272,22 272,22
1.643,06 1.643,06 106,94
0,00 1.750,00


By majorizing these operations, it can be verified that the calculations were well
carried out, since the interest was provisioned until the last full month and the
interest earned adds up to what the amortization table says.
Next, the second part of the credit will be analyzed until its cancellation.
Table 44. Accounting for interest accrued from the second dividend of the loan
General diary
Year 20XX
Date Code Detail Must Have
---------------------1---------------------
100,51
100,51
---------------------2---------------------
150,76
150,76
---------------------3---------------------
155,79
155,79
---------------------4---------------------
150,76
150,76


---------------------5---------------------

5104
155,79
---------------------6---------------------
08/31/20XX Interest receivable from credit portfolio

1603
5104
155,79
---------------------7---------------------
09/07/20XX 2101
Demand deposits
210135 13.827,29
Savings deposits
1603
160310
Consumer credit portfolio 869,41
5104
Interest and discounts on loan portfolio
510410
Consumer credit portfolio 35,18
1402
Portfolio of consumer loans due
140220
From 181 to 360 days 12.922,71
TOTALS 14.696,71 14.696,71


Table 45. Account Ledger: Interest Receivable and Interest Earned
Interest receivable Interest and interest on

Wallet c and credits consumer credit
Has to To have Has to To have
100,51 869,41 100,51
150,76 150,76
155,79 155,79
150,76 150,76
155,79 155,79
155,79 155,79
869,41 869,41 35,18
0,00 904,59
With the preparation of the journal and the general ledger, the accounting cycle for
interest receivable ends.
F. Realizable assets, awarded for payment, commercial lease and not used
by the institution - group 17
It groups together the accounts that record the assets acquired to be used for the
sale or construction of housing programs, those received by the entity in payment of
obligations, those destined for commercial leasing operations, those recovered at the
end of the commercial leasing contract for not take advantage of the purchase option
or those recovered due to the early expiration of the commercial lease contract and
the assets leased under the modality of an operating lease contract.
Before analyzing the practical case, please read the pages where group 17 is found
in the Single Catalog of Accounts.
February 28 20XX. The Bank of Loja receives an office in a judicial sale. The value
of the auction was $50,185 and was used to pay off an unpaid consumer loan of Mr.
Santiago Salazar. The client's original credit was $45,000 and

Unpaid interest to date amounts to $3,555. The difference in favor of the client is
credited to their checking account.
Table 46. Registration of assets awarded for payment of a credit

General diary
G. Properties and equipment – group 18
Year
20XX
01/28/20XX 1702 Assets awarded for payment

170210 Buildings and other premises 50.185
14 Credit portfolio
1422 Overdue consumer portfolio 45.000
1603 Interest receivable

160310 Consumer portfolio 3.555

210110 Deposits that do not generate income 1.630
P/r. an office awarded in a judicial
auction for the fulfillment of a loan from
Mr. Santiago Salazar.

Next, group 18, which refers to property and equipment, will be analyzed. As seen
above, the most important asset of financial entities is the credit portfolio, but apart
from this asset, the entity needs to have other assets such as: buildings, computer
equipment, furniture and fixtures, equipment, etc. to serve their clients.
Before analyzing the practical case, please read the pages where group 18 is found
in the Single Catalog of Accounts.
January 20 20XX. Banco XYZ purchases a car from Automotores ABC for use by
operations management for $35,000.00 + 12% VAT and is paid by check no. 2110
from the Produbanco account. For the accounting record, consider 10%

VAT withholding because it is a transaction between special taxpayers and 1% of

the income tax.
The accounting record of this transaction is as follows:
Table 47. Vehicle purchase registration

General diary
In the previous accounting entry, the Value Added Tax is recorded as an expense
Year
20XX Date Code Detail Partial Has to To have
01/20/20XX 1807 Transport units 35.000
4504 Taxes, contributions
450405 Tax taxes 4.200
4504051 VAT charged to the expense 4.200
2504 Withholdings 770
250405 Tax withholdings 350
2504052 1% tax withholding on income 420

2504053 10% VAT source ret
1103 Bank and other financial institutions

110310 Produbanco 38.430
P/r. the purchase of a vehicle for
operations management.

and not as an asset because the majority of the income of financial institutions is not
taxed with this tax, which is why the financial institution does not have the right to
take the credit. VAT tax.
Practical case:
February 27 20XX. Bank XYZ purchases an office to install a new agency for the
value of $200,000. The land is valued at 105,000 and the construction at $95,000.
The bank issues check no. 1922 from the account he maintains at Banco Rumiñahui.
This transaction is exempt from VAT and does not

income tax withholding is applicable. Dear students, proceed with the accounting of
this transaction:
Table 48. Registration of the purchase of an office to install a banking agency

Preliminarie
s
General diary First

BIMESTER
Year Second
BIMESTER
20XX
02/27/20XX 1801 Land 105.000 Solver
1802 Buildings 95.000
1103 Bank and other financial institutions Bibliographic

110310 200.000 references
Rumiñahui Bank
P/r. purchase of an office for the
Annexes
installation of a Bank agency.

H. Other assets – group 19
In group 19, the following accounts are registered (Single Catalog of Accounts,
2017):
I. Investments in shares
J. Investments in shares
K. Advance payments
L. Deferred expenses
M. Materials, merchandise and supplies
N. Internal transfers between offices, branches, agencies of the
entities.
O. Deposit and mortgage insurance fund
Next, several practical cases will be analyzed to better understand the accounting
dynamics of this group.

Investments in stocks and shares
In accordance with the Single Catalog of Accounts (2017), this account includes the
investments made by the entity in capital securities, with the purpose of obtaining
returns and complementary support services to the main management of the entity.
Practical case:
April 20 20XX. As a result of its investment strategy, Bank XYZ buys 1,000 shares
of the National Brewery at $90 each. The purchase is made by transfer from the
Banco Rumiñahui account.
Before solving the practical case, the concept of ordinary shares will be analyzed:
“They are those that confer all the fundamental rights that, according to the law, are
recognized to shareholders, such as the right to receive profits, the right to vote in
proportion to the paid value of the shares, preference in the increase of capital,
challenge ” (Espejo and López, 2018, p. 307).
Table 49. Registration of the purchase of shares of a company

General diary
Year 20XX
04/20/20XX 1901 Investments in shares and part
190115 in companies 90.000
1103
Bank and other institutions finance
110310
Banco Rumiñahui 90.000
P/r. the purchase of 1,000 shares of
the National Brewery at $90 dollars
each.


When the value of the share changes, the positive difference will have to be posted
to the “Other operating income” account, code 5501, and if the difference is
negative, the difference will be posted to the “Other operating losses” account, code
4601.
To finish with the previous practical case, it is assumed that at the end of the month
of May the price of each share changes to $91.50 each. Next, the corresponding
accounting entry will be made:
Table 50. Record of adjustment of the value of shares to market value

General diary
Year
20XX
05/31/20XX 1901
Investments in shares and part
190115 1.500
in companies
55
5501 Other operating income Earnings on shares 1.500
and part P/r. adjustment of the value of the
share to the market value.

Deferred assets
To carry out their activities, companies require expenses that must be paid, however,
the service will be received in the future.
Deferred assets are classified into two groups:
▪ Expenses and advance payments and

▪ Deferred expenses

Expenses and advance payments
“This item originates when certain services that will be received within the
Preliminarie
following twelve months are paid in advance: for example: insurance, leases, s
commissions, advances to suppliers and any other type of payment made in First
BIMESTER
advance and that has not been accrued at the time. closing of the financial year”
(Espejo and López, 2018, p. 178) Second
BIMESTER
Examples:
Solver
▪ Prepaid interest References

bibliographic
▪ Prepaid insurance policies
▪ Leases paid in advance.
Annexes
▪ Commissions paid in advance.
Next, the following practical case will be analyzed:
April 1 20XX. Banco XYZ SA cancels by check no. 1034 from your account at
Banco del Pacífico to the ABC company, five months' rent of a commercial
premises at a rate of $1,000 each month plus 12% VAT. The bank withholds 8%
income tax and withholds 70% VAT.
The accounting record is as

follows:

Table 51. Registration of rent paid in advance

index
General diary
Date Code Detail Has to To have First two
Year
04/1/20XX 1904 months
20XX
190490
5.000
1904901 Second quarter
Expenses and advance payments Others
4504
Rents paid in advance Taxes,
450405
4504051 contributions Solver
Tax taxes 600 )
2504
2504901 VAT charged to the expense Tax
Bibliographic
2504902 withholdings 8% withholding at source references
1103 70% VAT
110310 400 Annexes
Bank and other financial institutions
420
Banco del Pacífico
P/r. payment to ABC company, advance
4.780
rent for 5 months.
Preliminarie
s
The next point is very important. At the end of each month, the value accrued for the use of the
leased premises must be recorded. The accounting entry is as follows:
Table 52. Record of rent accrued for the first month

General diary
Year 20XX
04/30/20XX 4503
Various services
450330 1.000
1904 Leases
190490 Expenses and advance payments
1.000
1904901 Others
Rents paid in advance P/r. the accrued
value of the first month of rent.
Prepared: Acurio, R.
(2019)
125 7/ OPEN AND DISTANCE MODALITY

Deferred charges
Now we will analyze the issue of deferred charges. Deferred charges are
Preliminarie
expenses incurred by the company for services that will benefit it in future periods. s
First
Examples: BIMESTER
Second
▪ Establishment expenses andorganization BIMESTER
▪ Installation costs
Solver
▪ Studies
▪ Computer programs References
bibliographic
▪ Adaptation expenses
▪ Goodwill
Annexes
▪ Others
Below, some practical cases on deferred charges will be analyzed:
Constitution and organization expenses
November 15 20XX. Banco “ABC” SA, records the payment of legal fees necessary for the
constitution of the entity, the amount of $20,000 plus 12% VAT. The company retains the law firm
“SOA Cía. Ltd.” 2% income tax and 70% VAT and pay the difference with cashier's checks.

Table 53. Record of establishment expenses of Banco ABC SA
General diary
Year
20XX
11/15/20XX 1905 Deferred expenses
Constitution and organization
190505 20.000
expenses
450405 Tax taxes 2.400
2504 Withholdings
250405 Tax withholdings 2.080

2504052 2% tax withholding. rent. 400
2504053 70% withholding on VAT tax. 1.680
2301 Management checks. 20.320
P/r. cancellation of incorporation
expenses

Now another practical case will be analyzed:
The bank often rents commercial premises or buildings to increase its commercial network. It is
logical that these premises, since they are not designed for a financial institution to operate, have
to make adjustments, improvements, adaptations, incurring expenses that will be amortized within
the period established in the lease contract. These types of expenses give rise to an asset that is
called in the CUC as “Adaptation expenses”
Practical case:
June 1 20XX. Banco ABC SA leases a commercial premises for 5 years to begin its operation.
The bank makes improvements and adjustments for the value of $6,000 plus VAT, which were
paid by check from the account at Banco de Loja. The supplier that made the adjustments is the

company Diseño SA from which 2% of income tax and 70% of VAT were withheld.
The corresponding seat is the following:
Table 54. Record of improvements and adaptations in a commercial premises for

use by the financial institution
General diary
Year 20XX

190525 Adaptation expenses 6.000
450405 Tax taxes 720
4504051 VAT charged to the expense 720
2504 Withholdings

2504053 70% ret in the fte. of VAT. 504
Bank and other financial
1103
institutions
110310 Bank of Loja 6.096
P/r. payment for improvements to
the leased premises.
To amortize the expenses incurred in improving the leased premises, the 5-year duration of the
contract is considered. To obtain the amortization value we are going to use the following formula:
Expenditure value
Amortization of adaptation expenses = '---------------No. of years
6,000 Amortization of adaptation expenses =

5 years
Amortization annual adaptation expenses = 1,200
1.200
Amortization monthly adaptation expenses =
Amortization monthly adaptation expenses =100

Table 55. Record of monthly amortization for adaptation and improvement

expenses
General diary
Year
20XX
06/30/20XX 4506 Amortization
450630 Adaptation expenses 100
1905
Deferred expenses
190525
Adaptation expenses 100
P/r. the monthly amortization of
adaptation expenses in leased
premises

Gentlemen, students have concluded with the study of all groups of asset accounts. Now they
have a vision of the main assets that a financial entity has. As you can see, the composition of
these assets is very different compared to commercial or industrial companies because these
entities are dedicated to financial intermediation and not to the marketing or production of goods.


= Cash balance as of January 3 ?
Practical activity 1
Preliminarie
s
Up to this point, the study of the Asset accounts has been concluded. In order to First
BIMEST
check what you have learned, I encourage you to develop the following practical ER
activity that will help you quantify your progress. Second

quarter
Please record the following transactions in the journal: Solver
January 3 20XX. Banco ABC SA, during the day records the following data from References
bibliographic
box 2
Annexe
s
Table 56. Movements of cash 2 of Banco ABC SA on January 3, 20XX

Obtain the cash balance as of January 3 and determine if there is a cash shortage or surplus and
make the corresponding entry to balance cash 2.
January 9 20XX. In the week of January 9 at Banco XYZ SA, $750,000 in deposits (savings,
demand and time deposits) were recorded. With this information, record the accounting entry
corresponding to the bank reserve. Consider the % of mandatory reserves taking into account that
Banco XYZ SA has the value of 500 million dollars in assets.
January 15 20XX. Banco “XYZ” SA carries out the clearinghouse process. This bank delivers 61
checks to the other banks for the amount of $91,220 and receives 50 checks for the value of
$89,120.

February 18 20XX. Banco Amazonas lends Banco del Austro the amount of
$150,000 for a period of 9 days at a rate of 8%, a transaction that is carried out
through the Central Bank of Ecuador
February 21 20XX. Produbanco recovers a time deposit from Banco Pichincha for
the value of $450,000 with a term of 61 days, at a rate of 10%, a transaction that is
credited to the current account of Banco del Pacífico.
March 25 20XX. The Bank of Loja sells 10 days before maturity due to liquidity
needs, a zero coupon bond from the Central Bank of Ecuador for the value of
$795,000. The original value of the bond was 800,000, the interest rate is 7.5% and
it had a 91-day term. This transaction is carried out through the ECB. (A zero
coupon bond means that the interest on the bond is paid at maturity, along with the
principal).
March 28 20XX. The Bank of Loja grants a loan to the company Atrifecsa SA for the value of
$105,000, the type of credit is commercial, the term is 360 days and the interest rate receivable is
12%. The credit is deposited into the company's current account. Dividend payments are made
monthly. Make the entry for granting the credit. Additionally, prepare the amortization tables for the
French and German systems and answer the following questions:
1. Which system is best for the client and which system is best for the financial institution?
2. By which system does the bank recover the investment most quickly?
April 12 20XX. Mr. Raúl Ortega, owner of checking account 0205078591, has a balance in his
account of $1,500. This man needs to write a check for 7,000, so he calls the account officer to
ask for an overdraft of 6,000.
April 30 20XX. Mr. Raúl Ortega pays the overdraft on the 30th and pays the 16% interest and 4%
bank commission.

May 15 20XX. Banco Pichincha purchases a car from Automotores del Sur for use
by operations management for the value of $32,000.00 + 12% VAT and is paid by
check no. 191 management. For the accounting record, consider the 10% VAT
withholding as it is a transaction between special taxpayers and 1% on income tax.
May 25 20XX Banco ABC SA cancels by cashier's check no. 294 to the ZXY
company, six months' rent of a commercial premises at a rate of $1,000 each
month plus 12% VAT. The bank withholds 8% income tax and withholds 70% VAT.
June 13 20XX. Banco “ABC” SA, records the amount of $15,000 plus 12% VAT as
legal fees and expenses for establishing the Bank. The company retains the law
firm “Castro Cía. Ltd.” 2% income tax and 70% VAT and pay the difference with
cashier's checks.
June 28 20XX. Bank XYZ purchases an office to install a new agency for the value of $305,000.
The value of the land is $100,000 and the building is the difference. The Bank issues check no.
777 from Banco Pichincha. This transaction is exempt from VAT and income tax withholding is not
applicable.
Once practical activity 1 has been completed, check your answers with those included in the
solution. If you have answered correctly, continue with the next unit, otherwise return to the
contents in which you find difficulties.

Text-guide: Bank Accounting SECOND QUARTER
SECOND QUARTER
UNIT 3. SINGLE CATALOG OF ACCOUNTS (CONTINUED)

Yo
“Intelligence consists not only in knowledge, but
also in the skill of applying knowledge in practice”
Aristotle
2.1. Accounting records of liability accounts
Liabilities in the case of a financial institution originate from (Single Catalog of

Accounts, 2017): ▪ Collection of resources from the public
▪ Loans received from other public or private financial institutions
▪ Raising resources through the issuance of securities such as, for example:
debentures, commercial paper, etc.
▪ Obligations with the SRI, IESS, etc.
▪ Obligations to employees
▪ Accounts payable to suppliers
▪ Debts to partners, etc.
A. Obligations to the public – group 21
Please take your Unique Catalog of Accounts (2017) in group 21 and read the
description and accounting dynamics.
Obligations with the public are divided into:
▪ Demand deposits
▪ Repo operations

▪ Term deposits
▪ Guarantee deposits
▪ Restricted deposits
Demand deposits
Demand deposits are those kept by the public in the financial institution that are
payable within a period of less than 30 days and are (Single Catalog of Accounts,
2017):
▪ Checking account: The deposit in a checking account is one made in a bank, in

the name of one or more natural or legal persons, which allows the account
holders to write checks against the funds deposited in it and make partial
contributions. in said account. The bank has the obligation to cash checks, in
accordance with their form of issuance, upon presentation thereof, unless the
account does not have sufficient funds.
▪ Savings account: It is a deposit made in a financial institution for an indefinite

period. The deposited funds can be increased with partial contributions and
can be partially withdrawn by the client without prior notice. Usually, they are
associated with a debit card, through which you can make withdrawals
through ATMs or consume goods or services with a direct charge to the
funds in said account.
Theory is always more understandable if it is combined with practice, which is why

the following practical case will be analyzed:

January 30 20XX . Mr. Marco Pineda opens a checking account at Banco

Rumiñahui, by depositing cash for $10,000.
Table 57. Registration of opening a checking account
General diary
Year 20XX

01/30/20XX 1101
Box
110105 10.000
Cash
2101
Demand deposits
210110
Deposits that do not generate int.
P/r. opening a checking account. 10.000
Payment of a check:
February 15 20XX. Mr. Marco Pineda, after opening his checking account, writes
his first check. The amount drawn is $1,500.
Table 58. Record payment of a check
General diary
Year 20XX
210110 Deposits that do not generate int. 1.500
1101 Box
110105 Cash
P/r. the issuance of check no. 001. 1.500

Practical case:
February 28 20XX. Ms. Sonia Córdova deposits into her checking account no.
650011221 in Banco XYZ through a cash deposit of $5,000 and two checks, one
from Banco de Guayaquil for $1,000 and another from Produbanco for $1,500. The
total deposit is $7,500
To make the practical case a little more complex, it will be assumed that, in the
clearing house session, it is reported that the Banco de Guayaquil check presents
a disagreement due to the signature of the check, so it is returned to the account
owner with a debit of $5 dollars for the financial institution's commission. The
Produbanco check is in compliance and is credited to the current account. The
accounting entries resulting from these transactions are as follows:
Table 59. Registration of a mixed deposit: check and cash
General diary
Year 20XX
01/28/20XX 11
1101 Funds available
110105 Box
1104 Cash
5.000
2101 Immediate payment effects
2.500
210150 Deposits that do not generate int.
Deposits to be confirmed 5.000
P/r. the deposit in the checking account. 2.500
Next, we will analyze what happens when the Produbanco check is confirmed at
the clearing house:

Table 60. Recording confirmation of funds from a check
General diary
Year 20XX
01/28/20XX 1102 Lace deposits



210110 Deposits that do not generate int P/r. the 1.500
cashing of the Produbanco check in the
current account.

To finish this topic, the deposited check that did not have funds will be accounted
for:
Table 61. Record of the return of a check deposited due to non-conformity of

signature
General diary
Year 20XX

210110 Deposits that do not generate int. 5
54 Service revenues
5490 Other services 5
P/r. the return of the check from the
bank of Guayaquil due to non-
conformity of signature and the
collection of the respective
commission.

Checkbook delivery:
Now the process of delivering a checkbook will be studied. This is a service that
banks offer when opening checking accounts. Obviously this service has a cost
that must be paid by the current account holder.
Practical case:
May 2 20XX. The Bank of Loja, delivers to Mr. Patricio Ortega a checkbook of 200
checks numbered from 001 to 200 for the value of $60 (Value of the checkbook of
$35). This value is debited from your checking account no. 650010103.
The cost of the service is $60 in total. VAT is included in this value. To get the
subtotal without VAT, we need to divide 60 by 1.12, which gives us 53.57 and the
VAT value would be 6.43.
Now the corresponding accounting entry will be made.
Table 62. Record of checkbook issuance
General diary
Year 20XX

210110 Monetary deposits 60,00
1906 Materials, merchandise and ins
190615 Supply 35,00
2504 Tax withholdings
2504051 VAT on sales 6,43

56 Other income
5601 Profit on sale of goods 18,57
P/r. the delivery of a checkbook of
200 units.

When a client requests a checkbook, the financial institution requests its

preparation from its supplier and keeps it within its inventory of checkbooks in the
supply accounting account. Once the checkbook is given to the customer, it is
downloaded from the inventory and the accounting account. The bank's internal
audit area carries out surprise checks to verify the existence of clients' checkbooks
periodically.
Check revocation:
The person who has a checking account has the option of revoking a check, which
means voiding the payment, to safeguard their interests for various reasons: loss,
theft, deterioration, bad business, etc.
In accordance with article 27 of the Check Law, the drawer may revoke a check by
informing the drawee in writing to refrain from paying it, indicating the reason for
such revocation, without this causing the drawer's liability to disappear.
At the request of the bearer or holder who has lost the check, the drawer is
obliged, as a temporary protection measure, to suspend the payment order in
writing.
The revocation of the check will not take effect when there is not sufficient
provision of funds and, in this case, the bank will be obliged to protest the check.
The drawee must retain the amount of the revoked check until a judge decides
what is appropriate, or until the drawer annuls the revocation, or until the expiration
of the limitation period indicated in paragraph 1 of article 50, or until it is declared
the check becomes void due to theft, deterioration, loss or destruction, in
accordance with the regulations issued by the Superintendent of Banks.

Practical case:
March 15 20XX. Mr. Jairo Guachagmira requests that “ABC” Bank proceed to
Preliminarie
revoke check no. 151 from his checking account for $5,000 transferred to Mr. s
Pedro Pérez. The Bank charges $5.00 for commission and $10.00 for publication, First
BIMESTER
values that are debited from the same checking account.
Second
BIMESTER
The accounting entry is as follows:
Solver
Table 63. Registration of check revocation
References
bibliographic
General diary
Year Annexes
20XX
15/03/ 2101 Demand deposits

20XX 210110 Monetary deposits 5.015
2590 Various accounts payable

259015 Checks drawn and not cashed 5.000
259090 Other accounts payable 10
54 Service revenues
5404 5
Management and collections
P/r. revocation of check no. 151.
Dear students, when one or more checks have been revoked, the financial
institution is obliged to publish the loss of these in national newspapers. To avoid
requesting a revocation of a check, checkbooks must be kept in custody to prevent
their loss and the generation of expenses for people and/or companies.
Lifting of check revocation:
To complete the accounting cycle, the lifting of the revocation will be analyzed.
On June 13, 20XX, after the 90 days stipulated in the

law, the Bank must refund the amount previously debited. The accounting entry is
as follows:
Table 64. Registration of the lifting of check revocation
General diary
Year
20XX Date Code Detail Has to To have
01/13/20XX 2590
Various accounts payable
259015 5.000
Checks drawn and not cashed
2101
Demand deposits
210110
Monetary deposits
P/r. the lifting of revocation.
5.000
Certified check
How have you found the subject so far? Next, the case of the certified check will be
analyzed, for which some articles from Chapter V of the Check Law will be studied:
Article 36.- The check that contains the word “certified”, written, dated and signed
by the drawee, obliges him to pay the check upon presentation and releases the
drawer from the responsibility of paying it.
Article 37.- The certification will only have value when it is issued as a check to
order; Otherwise, it will be considered unwritten.
Article 38.- The certified check cannot be revoked.
The bank that has certified a check must render it void at the request of the drawer,
provided that the drawer returns the check.

In the event of theft, deterioration, loss or destruction, it may be declared void at

the request of the drawer or beneficiary, in accordance with the regulations issued
by the Superintendent of Banks.
Article 39.- Once the period mentioned in section 1 of article 50 has expired or the
check has been declared void, in accordance with the previous article, the drawee
will deliver the funds to the appropriate party.
Article 40.- In cases where the law requires the presentation of “accepted”, “seen”
or “confirmed” checks, certified checks will be used instead.
To better understand this topic, the following practical case will be analyzed:
July 1 20XX Mr. Julio Castro certifies check no. 2221, for the value of $4,000 from
your checking account no. 6500010145. The Bank charges $2.00 for the
certification of the check.
Table 65. Check certification registration
General diary
Year 20XX

210110 Monetary deposits 4.002
210130 Certified checks 4.000
5490 Other services
549010 2
Priced with maximum cost
P/r. the certification of check no. 2221.

Deposit of certified check into current account
When the certified check is not used, to recover those funds the account holder
must deposit this check in the same account. The entry would be the following,
taking the same data from the previous example.
Table 66. Certified check deposit
General diary
Year
20XX
02/07/20XX 2101
210130 4.000
Demand deposits Certified checks
2101
210110 Demand deposits Monetary deposits 4.000
P/r. the deposit of the certified check.

Savings accounts
Dear students, I congratulate you, you have concluded the study of transactions in
checking accounts, as you have seen, several transactions can be carried out with
these accounts. Next, we will delve into the study of savings accounts, which are a
very important group because many people and/or companies use these financial
instruments in order to save their financial resources.
Savings accounts are demand deposits, like checking accounts. The financial
institution gives the person who opens a savings account a booklet where the
financial institution records the movements of deposits and withdrawals. In recent
times, some financial institutions no longer issue physical savings books since the
client can see the account movements through the use of the Internet on the
websites of the financial institutions.

Savings accounts generally maintain more stable monetary balances compared to

checking accounts, because checking accounts generally have a higher level of
transactionality, that is, greater movement of check issuance, transfers and
deposits. Another difference with checking accounts is that savings accounts
cannot write checks and they earn interest on the average account balance.
Before carrying out the practical case, please read the page corresponding to the
description and accounting dynamics of account 210135 in the Single Catalog of
Accounts (2017).
March 30 20XX. Dr. Santiago Acurio opens savings book no. 6300302901 at
Banco de Loja, by depositing cash for $10,000
Table 67. Opening a savings account
General diary
Year 20XX
03/30/20XX 1101 Box
110105 Cash 10.000
210135 10.000
Savings deposits
P/r. opening the savings account no.
6300302901

Withdrawal from a savings account
Now we will analyze the example of a withdrawal from a savings account.
February 28 20XX. Dr. Wilson Velastegui withdraws the amount of $5,000 from his
savings account. The record of the transaction in the journal is as follows:

Table 68. Record of cash withdrawal from a savings account
General diary
Year 20XX

02/28/20XX 2101
Demand deposits
210135 5.000
Savings deposits
1101 Box
110105 Cash
P/r. withdrawal from savings account.
5.000
Deposit in a savings account.
The practical case of a savings account deposit is as follows:
February 28 20XX. Mr. Manuel del Pino deposits in his savings account no.
650011221 at Bank “XYZ”, in cash $5,000 and a check from Banco de Guayaquil
for $6,000.
Table 69. Registration of a mixed deposit: check and cash in a savings account
General diary
Year 20XX
02/28/20XX 1101 Box
110105 Cash 5.000
210135 Savings deposits 5.000
P/r. a deposit into savings account no.
650011221.


Example of crediting interest in a savings account.
To close the accounting cycle of savings accounts, the interest crediting operation
will be analyzed.
April 30 20XX. The Atty. Jaime Acurio has maintained an average balance of
$15,000 in his savings book no. 5600201802 at the Banco de Loja. The Bank pays
3.5% annually on the average of the money held in the account. Make the bank's
accounting entry. (Calculate interest based on a 360-day year)
Before making the accounting entry we have to calculate the interest paid by the
financial institution on the average balance in the savings account:
, , Capital x Interest rate x Time in days

Simple interest =
360
Interest = 15,000 X 3.5/o X 30 43.75
360
Table 70. Recording of accrued interest and crediting to savings accounts

General diary
Year 20XX
04/30/20XX
--------------1--------------
4101 Compulsory interests with the public
410115 Savings deposits 43,75
2501 Interest payable
250105 Demand deposits 43,75
P/r. the interest accrued for the month of April
--------------2--------------
Interest payable
04/30/20XX 2501
P/r. crediting interest to the savings account.
(2019)

In the first entry we have the accounting of the accrued interest and in the second
entry we have the crediting of the savings account.
The following information is very important. In the case of the payment of interest in
a savings account, the withholding of 2% on financial returns is not applicable, in
accordance with article 109 of the Regulations to the Internal Tax Regime Law.
Term deposits
Before starting the study of term deposits, their concept will be analyzed:
“They are investments made in financial institutions of the financial sector payable
upon maturity for a period of no less than 30 days, with an interest rate freely
agreed upon between the parties.” (Espejo and López, 2018, p. 109)
Before continuing with the topic of term deposits, it is important to analyze the
differences that exist between them versus checking and savings accounts:
▪ Time deposits have a maturity date. The money can only be withdrawn on that
expiration date.
▪ If the person wants to withdraw their money before the expiration date, they must
pay a penalty or advance commission. The amount of the penalty may not be
greater than the value of the interest accrued on the investment. Some
financial institutions have pre-cancellable accumulation policies on specific
dates. This means that the client can cancel their investment on certain dates
agreed in advance.
▪ Term deposits provide the client with greater profitability than savings deposits,
for a simple reason because the term deposit is

tied to a fixed-term deposit, that is, the bank knows in advance that it can count on
this money and therefore can lend it for the same term at a higher interest
rate.
▪ In term deposits, movements such as debit notes for payroll payments, transfers,
tax payments, etc. are not allowed. (Single Catalog of Accounts, 2017)
Renewal:
Dear students, below, some practical aspects of term deposits will be analyzed.
When clients have contracted a term deposit or an accumulation policy, they have
to pay attention to its expiration date to make a decision: renew the certificate or
withdraw the money with interest. Generally, financial institutions offer clients
automatic renewal, that is, when the expiration day arrives, the entity does not call
the client to consult the renewal, but rather, if the client does not express his desire
to cancel the accumulation policy, the It is automatically renewed. In the other
case, the financial institution agrees with the client not to automatically renew the
policy. In this case, if the person does not express his or her willingness to renew
by telephone or by attending the financial institution, the institution deposits the
value of the policy. policy in the savings or checking account plus the interest
earned.
Interests
A central issue in term deposits is the issue of interest, because at the end of the
day they are the monetary remuneration for making the investment.
Consider the following aspects about interests:
▪ Interest is the price that the financial institution pays you for the money placed in
the time deposit.

The interest offered for a term deposit depends on the financial market at that
time and the financial needs of financial institutions for funds.
Interest can be paid periodically, for example, it can be paid monthly.
Interest can also be paid at the expiration of the transaction.
Interest on fixed-term deposits is subject to withholding at source of income

tax of 2% on financial returns, with the exception of deposits older than 365
days, which are exempt from this tax.
Table 71. Advantages and disadvantages of time deposits for the client
Advantages Disadvantages
If you lose the availability of liquidity for the
Security (You do not lose the capital and time in which the policy is agreed upon.
you also get a fixed interest). Financial
institutions have deposit insurance of up to
$32,000 per client.
Flexibility to choose terms (The client can
choose different types of terms at their There are other financial products, such as
convenience, for example: 30, 45, 60, 90, stocks, corporate bonds, commercial paper,
180, 360 days or more). government bonds, etc., that have a higher
profitability, but also a higher risk.
Fixed profitability (The client knows in
advance how much he will earn with the
policy)
Source: Deposit Insurance Corporation (COSEDE) Prepared: Acurio, R. (2019)
Before carrying out the practical part, please review the Single Catalog of Accounts
(2017) on the page where the description and accounting dynamics of account
2103 are located.

Practical case:
February 28 20XX. Ms. Yolanda del Pino makes an investment of $50,000.00

within 91 days in Banco Pichincha. The interest paid by the Bank is 6.5% per year.
The seat is as follows:
Table 72. Registration of a term deposit
General diary
Now the case of cancellation of an investment will be studied:
Year
20XX
02/28/20XX 1101
Box
110105 50.0000
Cash
2103
Term deposits
210315
From 91 to 180 days
P/r. the opening of Ms. Del Pino's investment. 50.000
February 28 20XX. Dr. Fabián Orellana withdraws his fixed-term deposit in full in
the amount of $15,000. The deposit was kept for 181 days at 6.5% annual interest.
Both interest and principal are paid in cash. Make the corresponding entry.
(Withhold the tax corresponding to financial returns).
The interest calculation is as follows:

360
Interest = 15,000 r 6.5% A: 181

360
Interest = 490.21
146 7

Table 73. Registration of the settlement of a time deposit
General diary
Year
20XX
02/28/20XX 2103 Term deposits

210320 From 181 to 360 days 15.000,00

250115 Term deposits 490,21
2504051 2% financial returns 9,80

1101 Box
110105 Cash 15.480,41
P/r. the cancellation of Dr. Fabián
Orellana's investment.

To reinforce knowledge, another practical case will be studied below:
March 15 20XX. The ING. Geovany Carrillo withdraws his fixed-term deposit in
full in the amount of $25,000. The deposit was kept for 366 days at 6.5% annual
interest. Both interest and principal are paid in cash. Make the corresponding
entry. (Withhold the tax corresponding to financial returns).
Simple interest =
360
Interest = 1,652.08
25,000 x 6.5% x 366

Interest
360
=

Table 74. Record of the settlement of a term deposit for more than one year
General diary
Year
20XX
210325 More than 361 days 25.000,00
250115
Term deposits 1.652,08
1101
Box
110105
Cash
P/r. the cancellation of the
investment of the Eng. Cheek
26.652,08
The previous transaction is not subject to the withholding of 2% of financial returns,

because the investment is made for 366 days. (article 109 of the Internal Tax
Regime Law). This case has an important tax incentive because the 2% income
tax or $33.04 dollars is not withheld.
B. Interbank Operations – group 22
As can be seen, significant coverage has been given to group 21, because this is
the main counterparty of the financial entity's business (credit granting). If the
financial institution does not raise resources from the public, it would not be able to
grant loans either.
This group of beads is a mirror of group 12. The difference is that the financial
institution that receives the money registers a liability, that is, a debt with the
creditor financial institution. “This account records the funds obtained by the
institution from the entities that make up the national financial system, to address
temporary liquidity problems with terms of no more than 30 days. These types of
operations are also called interbank purchased funds.” (Single Catalog of
Accounts, 2017)

Before continuing, read the accounting dynamics of group 22 in the CUC.
After doing a comprehensive reading, analyze the following practical case.
February 18 20XX. Banco Amazonas borrows from Banco del Austro the amount
of $200,000 for a period of 15 days at a rate of 12%, a transaction that is carried
out through the Central Bank.
Table 75. Registration of a purchased interbank fund
General diary
Year
20XX
18/02/ 1102 Lace deposits
20XX 110205 central bank of Ecuador 200.000
2201 Purchased Interbank Funds
220105 200.000
Banks
P/r. interbank loan credited to the
Central Bank account.

Now the accounting entry when the interbank loan is settled will be analyzed.
March 5. The Amazonas bank pays the credit to the Austro bank for the amount of
$200,000 within a period of 15 days at a rate of 12%, a transaction that is carried
out through the Central Bank of Ecuador
Let's first calculate the interest:

360
Simple interest
=
Interest = 200,000% 12% x 15
360
Interest = 1,000

Table 76. Registration of the settlement of a purchased interbank fund
General diary
Year
20XX
03/05/20XX 2201 Comp Interbank Funds
220105 Banks 200.000
4102 Interbank operations
410205 Comp interbank funds 1.000
2504051 1% ret at source x pay 10

1102 Lace deposits
P/r. cancellation of the credit with
the respective interest.

C. Immediate obligations – group 23
Next, the accounting dynamics of group 23 will be studied, for which they are
required to read this topic in the Single Catalog of Accounts (2017).
This group records those immediate settlement obligations that arise from the
entity's own operations, as well as from values received to pay third parties.
Immediate obligations originate from (Single Catalog of Accounts, 2017):
▪ Cashier's checks
▪ Money orders, transfers and collections payable (Example: transfers received on

behalf of third parties)
▪ Collections for the public sector (Examples: telephone service, electricity, drinking
water, municipal patent, IESS payroll, electronic payment receipts for taxes
administered by the SRI, etc.)

▪ Securities in circulation and coupons payable (Nominal value of the bonds,

obligations and other securities issued by the entity that must be paid since
they were drawn or their term has expired).
Issuance of cashier's checks
First, the concept of cashier's checks will be analyzed.
A cashier's check is a financial certificate that can be used in place of cash, credit,
regular checks or other means of payment. It works similar to a normal check,
although with some differences. Cashier's checks are issued by a financial
institution, generally by a bank, and the money is withdrawn from the client's
account on the date of issue and not on the date of collection, and the issuer of the
money is the financial institution, therefore that the cashier's check represents a
guarantee. It is also nominative and can be collected only by the beneficiary of the
check. (Single Catalog of Accounts, 2017)
Physical and formal characteristics:
Next, some formal characteristics of cashier's checks will be analyzed:
▪ Each bank has its own design, but they all have a similar structure.
▪ They must bear the name and address of the financial institution
▪ They have security to ensure their veracity such as: watermarks or magnetic
stripes.
▪ They must include the signature or facsimile signature of the responsible worker
of the issuing bank.
▪ Although it is not mandatory, the check is identified as a “Cashier's Check” or

certified check.

A banking entity is the one that issues this type of checks to carry out financial
operations for third parties.
Payment:
▪ Cashing a cashier's check is no different than cashing a regular check.
▪ The beneficiary can endorse the check and deposit it in his account
▪ The payee can also cash the check at the cashier.
▪ Generally, up to 90 or 120 days should be charged, depending on the

regulations of the financial institution.
Before analyzing the practical part, please read the accounting dynamics of
account 2301 in the CUC.
Practical case:
March 15 20XX. Mr. Bladimir Segovia goes to Produbanco to obtain a cashier's

check for $50,000.00 to buy a commercial premises. The cashier's check is
debited from your savings account and the banking institution charges you the
amount of $10, an amount that is also debited from the same account.

Table 77. Record of issuance of a cashier's check

General diary
Year
20XX Preliminarie
Date Code Detail Has to To have s
03/15/20XX 2101 Monetary deposits
First
210135 Savings deposits 50.010 BIMEST
23 Immediate obligations ER
2301 Management checks 50.000 Second

quarter
5490 Other services
549005 Priced with maximum cost 10 Solver

P/r the issuance of a cashier's check.
Source: Superintendency of Banks References
bibliographic
Annexes
Collections for the Public Sector
Practical case:
April 30 20XX. Bank XYZ collects the consumption payment for the telephones of
the Municipality of Guayaquil for the company CNT. The amount collected is
$15,155 and is debited from the Municipality's current account, including the
commission of $55 dollars.
Table 78. Record collection of consumption basic services

General diary
Year 20XX

210110 Deposits that do not generate int 15.210
23 Immediate obligations
2303 Collections for the SP 15.155
5490 Other services
549005 Priced with maximum cost 55

P/r consumption collection
CNT company phone

(2019)

May 3 20XX. Bank
Table 79. Telephone consumption collection transfer
As you can see in the transaction to collect telephone consumption from the
Municipality of Guayaquil, the financial entity acts as an intermediary between the
General diary
Year
20XX
05/03/20XX 23
2303 Immediate obligations Collections for 15.155
1103 the SP Banks and other institutions
110310 15.155
end Banco del Pacífico
P/r transfer of telephone consumption
collection to the CNT company.

state company CNT and the client. This type of collection services are not only
carried out in the case of telephone consumption, but also for a wide range of
services such as: property tax payments, contributions to the IESS, drinking water
service, payment of taxes to the SRI, tax payment to the SENAE, etc. Financial
entities charge small values in these transactions, but they represent important
values at the end of the day because the volume of operations is large, since many
people and/or companies now make their payments for services by debiting their
accounts.
D. Acceptances in circulation – group 24
Bank acceptances may originate from transactions involving the import and export
of goods or the purchase and sale of goods in the country. Import or export letters
of credit in which the institution assumes responsibility for payment once they have
been fulfilled will be considered bank acceptances.

the requirements, the documents (bills of exchange) accepted by the entity at the
request of the client, to make payment to a beneficiary, for purchases and sales of
goods in the country. The financial institution receives a commission for issuing the
bank acceptance.
Practical case:
June 15 20XX. The company Frankimport Cía. Ltda. requests the Banco de Loja
to issue a bank acceptance with a maturity of 90 days in favor of the company
MSA Colombia for an import of personal protective equipment. The value of the
transaction is $48,000 and is debited from the savings account of the requesting
company. Banco de Loja charges a commission of $1,200 for issuing the bank
acceptance.
Table 80. Registration of the issuance of a bank acceptance
General diary
Year 20XX

210135 Savings deposits 49.200
24 Acceptances in circulation
2401 Within the deadline 48.000
5202 Debtors by acceptance 1.200
P/r. the issuance of the acceptance of
the banker's acceptance.
These types of transactions are very frequent in foreign trade issues. In the specific
case of the previous example, the importer is confident that once the stipulated
conditions are met, the merchandise will arrive and the foreign supplier is certain
that they will make the corresponding payment for the invoice issued.

AND. Accounts payable – group 25
Next, accounts payable will be analyzed. This group records the amounts
Preliminarie
incurred pending payment for: s
First
▪ Interest payable BIMEST
ER
▪ Commissions payable
Second
▪ Employer obligations quarter
▪ VAT and Income Tax withholdings

Solver
▪ Contributions, taxes and fines
▪ Suppliers References
bibliographic
▪ Portfolio purchase obligations
▪ Credit guarantees surrogates pending recovery
Annexe
▪ Accounts payable to sharp establishments s
▪ Provisions for contingent operations

▪ Various accounts payable (Single Catalog of Accounts, 2017)
At this point, the description and accounting dynamics of the main accounts of
group 25 will be reviewed, for which please read the corresponding pages in the
CUC.
Interest payable
The operation of these accounts is similar to account group 16. We are going to
see the same practical case of group 16, but this time the financial institution is
going to be the debtor.
September 12 20XX. Bank XYZ obtains a loan of $25,000 from Bank ABC. This
loan is granted for one year with two semi-annual dividends, at a rate of 14% per
year. The loan details and amortization table are shown below. Dividends are paid
upon maturity through a transfer from the Banco Pichincha account.
The interest accrued would be the following:

Table 81. Accrued interest payable
Accrued
Cut dates Days passed
interest
09/12/20XX
09/30/20XX 18,00 175,00

10/31/20XX 31,00 301,39
11/30/20XX 30,00 291,67
12/31/20XX 31,00 301,39
01/31/20XX 31,00 301,39
02/28/20XX 28,00 272,22
03/11/20XX 11,00 106,94
03/31/20XX 20,00 100,51
04/30/20XX 30,00 150,76
05/31/20XX 31,00 155,79
06/30/20XX 30,00 150,76
07/31/20XX 31,00 155,79
08/31/20XX 31,00 155,79
09/07/20XX 7,00 35,18
Totals 360,00 2.654,59
In order to observe the accounting dynamics of the accounts involved in the

provision of interest payable and the payment of dividends, the journal of Bank
XYZ is attached.

Table 82. Accounting for interest caused by a loan
General diary
Preliminarie
Year s
20XX
Date Code Detail Has to To have First
BIMESTER
4103
09/30/20XX
---------------------1---------------------- Second
BIMESTER
410305 Interest on financial obligations
Obligations with financial institutions in the
175,00 Solver
2501 country.

References
Financial obligations bibliographic
175,00
Annexes
4103
10/31/20XX ---------------------2----------------------
Interest on financial obligations
410305
301,39
country.
2501
Interest payable
250135
Financial obligations
301,39
4103
11/30/20XX ---------------------3----------------------
410305
291,67
country.
2501
Interest payable
250135
291,67
4103
12/31/20XX
---------------------4----------------------
301,39
2501 country.
Interest payable
250135
301,39

4103
01/31/20XX ---------------------5----------------------
301,39
2501 country.

301,39
4103
02/28/20XX ---------------------6----------------------
410305
272,22
country.
2501
Interest payable
250135
272,22
---------------------7---------------------
03/11/20XX
2602 Obligations with financial institutions in the
country.
260220 From 181 to 360 days.
2501 12.077,29
Interest payable
250135 Financial obligations
4103 1.643,06
410305 country.
Bank and other financial institutions 106,94
1103 Banco del Pichincha
110310 P/r. payment of the first installment of the
loan
13.827,29
TOTALS 15.470,35 15.470,35
Source: self made

So that you can see how the account payable is settled by interest, below, the
largest of: interest payable and interest accrued will be reviewed.
Preliminarie
Table 83. Account ledger: interest payable and interest caused by obligations with s
financial institutions First
BIMESTER
In this case, the interest accrued and accrued during the first dividend has been
Second
quarter
Interest payable Interest accrued
Inst financial obligations Obligations with financial
institutions
Has to To have Has to To have Solver
1.643,06 175,00 175,00

301,39 301,39 References
291,67 291,67 bibliographic
301,39 301,39
301,39 301,39 Annexe
272,22 272,22 s
1.643,06 1.643,06 106,94
0,00 1.750,00
accounted for since the second dividend has the same accounting dynamics, only
the values change.
Employer obligations
One of the main accounts of group 25 is the employer obligations account,

because since the financial entity is a financial services company, one of the main
accounts payable is the salaries and other benefits of the employees. The account
records the obligations of the financial entity with its employees for remuneration,
social benefits, contributions to the IESS, reserve fund, profit sharing that will be
provisioned monthly, originating from their employment relationships.
Next, the following practical case will be studied.

January 31 20XX. The salary of Banco ABC staff is paid by transfer from the
Produbanco account, according to information in the payment role:
Preliminarie
Table 84. ABC Bank Payments Role s
ABC Bank
Payroll
Surnames and Reserve Thirteenth Fourteenth Total to Contribution

Surnames Deductions
No.
names funds monthly monthly pay for IESS
and Bonus Apor te Liquid
No. Salary payment Associate Comisa trunk
payment
1 names
TO tions
66,6 loan we go
ind 66,7 31,3 749,0 salary
97,2
tion riato
bres to
IESS 50,0 the IESS
2 b 50,0 31,3 529,0 72,9
Annexe
31 TOc 800,0 45,0 75,645,0 120,0 31,320,0 501,9 65,6
584,4 s
42 bd 600,0 40,0 56,740,0 31,320,0 525,9125,5 58,3
397,8
53 AND
c 540,0 100,0 100,0
51,0 31,320,0 693,8 88,3 145,8
380,7
64 dF 480,0 100,0 100,0
45,4 31,320,0 1.112,2 145,8
414,6
5 TOTALS
AND 1.000,0 401,5 200,0 401,7
113,4 350,0 187,520,0 4.111,8
254,0 585,6
462,6
6 F 1.000,0 200,0 113,4 20,0 185,6 881,0
TOTALS 4.420,0 400,0 455,5 470,0 120,0 653,4 3.121,1

Note: The format of the payment role depends on the needs of each entity

In the payment role in the example, it is assumed that all employees have been
in office for more than a year and have not requested accumulation of reserve
funds in the IESS, and therefore they are paid this social benefit monthly and it is
Preliminarie
also assumed that all of them receive the tenths on a monthly basis. The s
payment role is paid to each official by bank transfer. First

BIMESTER
Table 85. Accounting for the payment role of ABC bank Second
BIMESTER
General diary
Solver
Year
20XX
Date Code Detail Has to To have To have Bibliographic
references
01/31/20XX 4501 Personal expenses
450105 Salaries 4.420,00 Annexes
450120 Contributions to the IESS 585,63
450135 Reserve fund 401,51
450190 Others 989,17
45019001 Bonuses 400,00
45019002 Thirteenth salary 401,67
45019003 Fourteenth salary 187,50
2503 Employer obligations
250315 Contributions to the IESS 1.511,12
25031501 IESS individual contribution x pay 455,49

25031502 Loans to the IESS to be paid 470,00
25031503 Employer IESS contribution payable 585,63
259090 Other accounts payable 773,40

25909001 Payable Employees Association 120,00
25909002 Commission payable 653,40

financial
110310 Produbanco 4.111,78
P/r. payment roll for the month of
January
TOTALS 6.396,30 6.396,30

As can be seen in the payments role, expense accounts such as salaries, reserve
funds, bonuses, tenths, etc., are recorded as debit. The accounts that are in the
deduction columns of the payment role such as: contributions to the IESS, loans to
the IESS, various accounts payable, etc., are recorded as credit because they are
liability accounts.
F. Financial obligations – group 26
What did you think of the issue of accounts payable? Now group 26 will be
analyzed. “This group of accounts records the value of the obligations contracted
by the entity by obtaining resources from banks and other entities in the country or
abroad and with other public or private entities, under the modality of direct credits
and the use of lines of credit". (Single Catalog of Accounts, 2017)
Before moving on to the example, please read the pages corresponding to group 26 in the Single
Catalog of Accounts (2017).
What did you think of this reading? Now the following practical case will be analyzed:
September 15 20XX. Bank XYZ obtains a loan from Standard Chartered Bank located in New
York, for the value of $5,000,000, to be used in foreign trade operations between Ecuadorian and
United States companies. This loan is granted for one year, at a rate of 10% per year. Interest
and principal are paid at the end of the term. The payment is credited to the Banco del Pacífico
account.

Table 86. Registration of a loan from a foreign financial institution
General diary
Year 20XX

09/15/20XX 1103 Banks and other financial institutions
110310 Banco del Pacífico 5.000.000
2603 Obligations with inst finan ext
260320 From 181 to 360 days 5.000.000
P/r. the loan from Standard Chartered
Bank with a one-year term and 10%
annual interest.

Now the accounting record of the loan payment will be analyzed, but first the interest calculation
must be carried out.

Simple interest =
360
5000,000 x 10% x 360
Interest
360
=
Interest = 500,000
Table 87. Record of cancellation of foreign loan payment
General diary
Year 20XX
09/10/20XX 2603 Obligations with inst finan ext
260320 From 181 to 360 days 5.000.000
2501
Interest payable
250135
Financial obligations 500.000
1103
110310
Bank of Pacific
P/r. repayment of loan from Standard
Chartered Bank
5.500.000
(2019)

g. Securities in circulation – group 27
This group records the nominal value of securities not convertible into shares,
Preliminarie
issued and placed in circulation by entities legally authorized to issue them. s
First
Practical case BIMEST
ER
Second
January 15 20XX. Bank The Bank pays a 1% placement commission to the quarter
Picaval company. The money collected is credited to the Banco Pichincha

Solver
account.
References
bibliographic
Annexe
s
Table 88. Registration of obligations issued in the securities market
General diary
Year 20XX
110310 Banco Pichincha 19.800.000
42
Commissions caused
4201
Financial obligations 200.000
2702
Obligations
270205
Issued by private financial institutions
P/r. the issuance of obligations in the
securities market.
20.000.000

H. Obligations convertible into shares and future group capitalization

contributions - 28
This group records the values of debentures convertible into shares and
contributions for future capitalization.
Practical case
March 15 20XX. Banco ABC issues bonds convertible into shares for the value of
$10,000,000 with a one-year term at 6.5% annual interest. The Bank pays a 1%
placement commission to the Capital company. The money collected is credited to
the Banco Rumiñahui account.
Table 89. Registration of issuance of debentures convertible into shares
General diary
Year 20XX
03/15/20XX 1103
110310 9.900.000
Banco Rumiñahui
42
4201 Commissions caused Financial
100.000
2801 obligations Obligations conv in shares
280105 Obligations conv in shares P/r. the

issuance of obligations in the securities
market.
10.000.000

March 15 20X1. Banco ABC pays the obligations issued a year ago for an amount
of $5,500,000 by transfer from the Banco Rumiñahui account and for the rest it
exchanges the obligations for securities representing the entity's capital. (bank
Preliminarie
shares) s
Table 90. Record of payment of obligations and exchange of others for paid capital
General diary
Year
20X1
03/15/20X1 2801
280105 10.000.000
Obligations in shares Obligations in
2501
shares Interest payable
250145
Obligations 650.000 Annexe
31 s
Social capital 4.500.000
3101
Paid-in capital
1103
110310 Banks and other financial institutions 6.150.000
Rumiñahui Bank
P/r. the payment of a part of the
obligations and the exchange of another
part for shares of the Bank.

I. Other liabilities – group 29
Dear students, continue with the same spirit and dedication to the study of the topic
of liabilities. “Group 29 records internal operations between the different agencies
and branches, income received in advance, payments received in advance,
administration funds, employee reserve fund, subsidies received by public financial
institutions and other various liabilities that cannot be classified in other groups.
(Single Catalog of Accounts, 2017)

Commissions received in advance
The “commissions received in advance” account represents the amounts received

by the financial entity for the delivery of a service that it will provide in the future
(Single Catalog of Accounts, 2017).
▪ It is credited for the amounts collected in advance for commissions.
▪ It is debited for the value accrued periodically and the return of the values
received in advance when providing the service that gave rise to the
commission.
Next, the following example will be analyzed:
May 2 20XX. The financial entity issues invoice 001-001-00004548 for the concept
of commissions for collection management to company XYZ (normal taxpayer), for
5 months, at a rate of $5,000 per month plus VAT. The check is deposited in the
account of Banco del Pacífico. Company XYZ withholds 2% income tax from the
financial institution.
Table 91. Record of income received in advance

General diary
Year 20XX
110310 Bank of Pacific 27.500
199090 Income tax advance
1990902 Income tax advance 2% 500
29 Other passives
2901 Income received x in advance 25.000
2505 Contributions, taxes
2505901 VAT on sales. 3.000
P/r. the invoice delivered by the collection
service to company XYZ.

May 31 20XX. The accrued value of the commission for the first month is recorded.
Table 92. Record of the accrued value of commissions for the first month
General diary
Year
20XX
May 31 29 Other passives
2901 Income received x in advance 5.000
54 Service revenues
5404 5.000
P/r. the accrued value of the
commissions for the first month.

This registration is made at the end of each month, so that the income account
received in advance at the end of 5 months ends with a zero balance and the
benefit of the commissions is reflected in account 5404 “Management and
collections”.
3.4. Accounting records of estate accounts
I congratulate you for reaching this point and I encourage you that now that the
study of the liability accounts has been completed, let's analyze the equity
accounts.
“The conceptual framework of IFRS defines equity as the residual part of the
entity's assets, once all its liabilities have been deducted. Equity denotes the
interest of the owner or of the partners or shareholders in the company, with
respect to their capital contributions, plus the accumulation of reserves, surplus
and undistributed profits” (Zapata, 2017, p. 300)
A. Share capital – group 31
Now without further delay, we will analyze using an example how the capital of a

bank is formed.

October 20 20XX. The promoter shareholders of Bank “ABC SA” subscribe the
initial capital for the value of $8,000,000. The entry that must be made is the
following:
Preliminarie
s
Table 93. Record of subscribed and unpaid shares First
General diary BIMESTER
Year Second
20XX quarter
10/20/20XX 1690
169030 Miscellaneous accounts receivable For 8.000.000 Solver
2801
sale of goods and shares Obligations
280105 8.000.000 References
conv in shares Obligations conv in bibliographic
shares P/r. shares subscribed and not
paid.
Annexe
Source: Superintendency of Banks s
Now the transaction where a part of the capital is credited will be studied.
October 31 20XX. The promoter shareholders of Bank “ABC SA” pay the amount
of $4,000,000 of the subscribed capital and deposit it in the capital integration
account opened at Banco Pichincha.
Table 94. Registration of the paid value of the shares

General diary
Year 20XX
10/31/20XX 1103 Banks and other institutions end
110310 Banks and inst. finan Banco Pichincha
1103101
locations 4.000.000
1690
Miscellaneous accounts receivable
169030 4.000.000
For sale of goods and shares
P/r. the value paid for the shares that
correspond to 50% of the subscribed
capital.
(2019)

Before proceeding to make the next accounting entry, it must be taken into account
that when a part of the capital is paid, a second entry must immediately be made
regularizing the adjustment for the paid capital.
October 31 20XX. After the shareholders of Bank “ABC SA” have paid the amount
of $4,000,000, the adjustment entry must be made for the capital paid in the same
amount.
Table 95. Registration of adjustment to paid capital

To complete the accounting cycle for this transaction, the adjustment of paid-in
General diary
Year
20XX
10/31/20XX 2801
280105 Obligations converted into shares
4.000.000
31 Obligations converted into shares
Social capital
3101
Paid-in capital
P/r. adjustment for 50% of the paid capital. 4.000.000
capital must be recorded in memorandum accounts for control purposes.

October 31 20XX. After registering the capital adjustment, the registration entry of
the origin of the paid capital must be made.
Table 96. Registration of the origin of paid capital
General diary
Year
20XX
10/31/20XX 73
7308 Creditors, on the other hand, Origin 4.000.000
7408
of capital Origin of capital
740805
Shareholder cash contributions P/r.
4.000.000
the origin of paid-in capital of
financial institutions, based on the
nationality of the shareholder.

Once the constitution of the bank is approved, the money that is deposited in the
capital integration account has to be transferred to the vaults of the financial
institution itself to begin operations. This transaction is not within the equity
accounts, but will be analyzed to conclude the study of the accounting cycle until
the start of operations.
December 30 20XX. Once the resolution to establish Banco “ABC” SA has been
registered, Banco Pichincha delivers the deposit that was used to integrate capital
in the amount of $4,000,000. This money was in Pichincha for a period of 60 days
at a rate of 4%. (Calculate interest based on 360 days). The income tax
withholding at source is 1%. Make the entry to transfer the money plus interest to
the bank vault.

Table 97. Record of the withdrawal of money to the bank vault for the beginning
of
operations
Preliminarie
General diary s
Year 20XX First

Date Code Detail Partial Has to To have BIMESTER
12/30/20XX 1101
Second
110105 Cash Box 4.026.400 quarter
1990 Others
199090 Tax advance to rent 266,67 Solver
1990901 Tax advance to income 1%
1103 Banks and financial institutions Bibliographic
110310 Bank and local financial references
266,67
1103101 institutions Banco Pichincha
5101 Interest on deposits Deposits in
510110
banks
P/r. the transfer of the money
4.000.000
plus interest to the Bank's vault.
26.666,67
With this last entry, the entire pre-operational cycle of the bank has been
concluded, that is, all operations have been studied from the subscription of the
shares, the registration of paid capital, the adjustment of capital, the accounting in
memorandum accounts on origin. of capital and finally the entry of the transfer of
the money from the integration of the capital to the bank vault for the beginning of
operations. As you may notice, this entire procedure for opening operations
requires time and the proper authorizations from the Superintendency of Banks.
Once this control body grants authorization to financial entities, they can begin to
carry out the operations that were analyzed in detail in the first unit.

B. Premium or discount on share deals – group 32
This group records the amounts paid above or below the nominal value of the
repurchased own shares. It will also record the discount corresponding to the State
Bonds received by the CFN National Financial Corporation as a capital
contribution. (Single Catalog of Accounts, 2017)
The repurchase of shares of the same entity may at any given time be a good
option when the financial institution has excess liquidity and stock market
conditions are favorable.
Practical case:
May 2 20XX. Bank XYZ repurchased 1,000,000 of its own shares in the stock
market at 0.90 per share. The par value of each share is $1.00.
The resources for the purchase are transferred from the Banco de Loja account.
Table 98. Registration of the acquisition of own shares
General diary
Year 20XX
02/05/20XX 31 Capital
3102 Treasury shares 1.000.000
32 Placement premium or discount

3201 Premium on share placement 100.000
1103 Banks and other financial institutions
110310 Bank of Loja 900.000
P/r. the repurchase of shares.
Account 3102 is a valuation account, which records the treasury shares acquired
by the financial institution. It is presented negatively in the assets. A premium is
recorded in the placement of shares because Bank XYZ bought the shares at a
cheaper price in relation to the nominal value.

C. Reservations – group 33
This group 33, according to the Single Catalog of Accounts (2017), records the
values that, by decision of the General Assembly of Shareholders or Partners in
accordance with its statutes or by legal provision, have appropriated the liquid
operating profits for the purpose to increase assets, constitute reserves of a special
or optional nature or for specific purposes.
Legal Reserve
Financial entities are organizations that need to build solid assets in order to have
greater support when granting credit. One of the ways to consolidate assets is to
establish reserves, one of which is the legal reserve. Please take the CUC and
read the accounting dynamics of this account.
Now the following practical case will be analyzed:
December 31 20XX. The legal reserve is registered for $66,300
Table 99. Legal reserve registration
General diary
Year 20XX
12/31/20XX 36 Results
3601 Profits or Surpluses 66.300
33 Bookings
3301 Legal 66.300
P/r. the legal reserve during the
financial year.

D. Other equity contributions – group 34
According to the Single Catalog of Accounts (2017), group 34 records the non-
refundable contributions received by banks and financial institutions from the State
and donations received by entities of the financial system. Without further ado, let's
analyze a practical case.
October 12 20XX. The State Bank receives the donation of a vehicle, valued at
$35,000. This donation was made by a private company.
Table 100. Vehicle donation registration
General diary
Year 20XX
12/10/20XX 18 Properties and equipment
1807 Transport units 35.000
34 Other equity contributions
3402 35.000
Donations
P/r. the donation of a vehicle received
by the financial institution.

E. Surplus due to valuations – group 35
We are already finishing the topic of the estate accounts. Group 35 records the
counterpart of the valuation or adjustment to market prices of the net book value of
the real estate held in accounts 1801 “land” 1802 “buildings” in accordance with the
provisions issued by the Superintendency of Banks. (Single Catalog of Accounts,
2017).

Practical case:
December 30 20XX. Banco de Loja has land that has a book value of $1,000,000.
The bank carried out an expert report to carry out an appraisal of this. The
appraisal was delivered on December 30 and the result of this is that the land has
been revalued by 200,000, meaning that the land is currently worth $1,200,000.
Table 101. Land valuation record
General diary
Year
20XX
12/30/20XX 1801 Land 200.000
35 Valuation surplus
3501 Property Valuation 200.000
P/r. the revaluation of the land
according to the expert opinion.


With the study of this topic, the study of the liability and equity accounts has been
concluded. In order to check what you have learned, I encourage you to develop
the following practical activity that will help you establish your progress.
Please proceed with posting the following transactions in the journal.
July 7 20XX. Ms. Yolanda del Pino deposits into her savings account no.
102020201 in Banco ZZZ through a cash deposit of $4,500 and two checks, one
from Banco Pichincha for $1,250 and another from Banco Amazonas for $1,800.
The total deposit is $7,550
July 12 20XX. Banco del Loja delivers to Mr. Jairo Castro a checkbook of 100
checks numbered from 101 to 200 for the value of $50 (Value of the checkbook
$25). This value is debited from your checking account no. 650010103.
August 2 20XX. Mr. Santiago Acurio requests that Bank “XYZ” proceed to revoke
check no. 232 from his checking account for $3,550 wired to Mr. Pedro Araque.
The bank charges $3.50 per commission and $6.00 per publication, values that are
debited from the same checking account.
August 15 20XX. Mr. Bladimir Acurio certifies check no. 153, for the value of
$2,550 from your checking account no. 3152038104. The bank charges $2.50 for
the certification of the check.
September 30 20XX. Mr. Jorge Acuña has maintained an average balance of

$12,501 in his savings book no. 62342534 at the Bank of Loja. The Bank pays
2.5% annually on the average of the money held in the account. (Calculate interest
based on a 360-day year)

September 24 20XX. Mr. Raúl Carvallo withdraws his fixed-term deposit in full for
the amount of $55,501. The deposit was kept for 91 days at 5.5% annual interest.
Both interest and principal are paid in cash. (Withhold the tax corresponding to
financial returns).
October 6 20XX. Banco Rumiñahui pays the credit to Banco Capital for the
amount of $351,000 within a period of 10 days at a rate of 8%, a transaction that is
carried out through the Central Bank of Ecuador.
October 22 20XX. The financial institution charges in advance, by check, 6 months

for handling and collection fees to company XYZ, at a rate of $1,000 per month
plus the VAT generated. The check is deposited in the account of Banco del
Pacífico. ABC company withholds 2% income tax from the banking entity.
October 31 20XX. The promoter shareholders of Banco Capital SA subscribe the

initial capital for the value of $10,000,000.
November 8 20XX. The promoter shareholders of Banco Capital SA pay the

amount of $5,000,000 of the subscribed capital and deposit it in the capital
integration account opened at Banco Pichincha.
November 16 20XX. After the shareholders of Banco Capital SA have paid the
amount of $5,000,000, the adjustment entry must be made for the capital paid in
the same amount.
November 16 20XX. After recording the capital adjustment, make the entry to
record the origin of the paid-in capital.
December 15 20XX. Once the resolution to establish Banco Capital has been
registered, Banco Pichincha delivers the deposit that was used to integrate capital
for the amount of $5,000,000. This money was in Pichincha for a period of 45 days
at a rate of 4%. (Calculate interest based on 360 days).

The income tax withholding at source is 1%. Make the entry to transfer the money
Once practical activity 2 has been completed, check your answers with those
included in the solution. If you have answered correctly, continue with the following
topics, otherwise return to the contents in which you find difficulties.

3.5. Accounting records of income accounts
Much progress has been made in the study of the subject. Next, the analysis of
the Income accounts will continue.
According to the Single Catalog of Accounts (2017), the income of financial

entities can be:
▪ Income financial
▪ Income operational
▪ Income non-operational
Income must be recorded based on the realization principle, that is, without
considering whether or not the money was received. Example: Interest on credits
must be accounted for when they accrue regardless of whether they have been
collected or not.
At the end of the year all income accounts must be closed with a credit to the
“Profit or Loss for the year” account, as appropriate.
A. Interest and discounts earned – group 51
The main income accounts will now be analyzed. This group of accounts records
the income generated by:
▪ Deposits
▪ Interbank funds sold
▪ Repo operations
▪ Investments
▪ Credit portfolio
▪ Discounts earned, etc
Before continuing with the matter, please read the Single Catalog of Accounts
(2017) on the page where group 51 is located.

As has been seen so far, the majority of the income that a financial institution has
comes from portfolio interests and investments. The accounting for these incomes
was analyzed when group 16 was studied.
B. Commissions earned – group 52
Now we will study the other important group of income, which is commissions.
Please do a comprehensive reading of this group of accounts in the CUC.
This group of accounts records the amounts charged for commissions for:
▪ Credit portfolio
▪ Debtors by acceptance
▪ Guarantees ▪ Bonds
▪ Credit letters
▪ Others
An important fact is that this group also includes commissions earned on

purchases by credit card owners and on payment of bills to affiliated
establishments, on purchases with deferred payment, etc.
Practical case: Issuance of a guarantee
Before developing the example, it will be defined what a bank guarantee is:
A bank guarantee is a guarantee operation by which the bank undertakes to

respond to the fulfillment of a client's obligation to a third party (beneficiary), in the
event that the client does not do so.
Now the practical case will be analyzed:

March 30 20XX. Bank “ABC” issues a guarantee to company XYZ, for the value
of $200,000. The bank charges a commission of 2.5% annually and the term is 6
months.
Interest = 2,500 Second
Preliminarie
BIMESTER
s
200,000 x 2.5% x 180
Simple interest First
Solver
360
= BIMEST
ER
The accounting record is as follows:
Table 102. Registration of the issuance of a bank guarantee Bibliographic

references
General diary
Year 20XX
03/30/20XX 1101 Box
110105 Cash 2.500
63 Creditors against
6301 Endorsements 200.000
64 Creditors
P/r. the issuance of the guarantee for
180 days
term, with the commission of 2.5%
annual
C. Financial profits – group 53
Please read group 53 in the Single Catalog of Accounts (2017) and then review
the following practical case.
July 30 20XX. Banco de Machala maintains a current account at Banco

Santander in Spain of 1,000,000 euros. The price at the beginning of the month
was

of $1.20 for each euro. At the end of the month the price of the euro is $1.22 for
each euro. Make the corresponding entry.
Table 103. Record of financial profits due to exchange rate variation

D. Income from services – group 54
General diary
Year
20XX
110315 Banco Santander 20.000
53
financial profits
5301
Gain in exchange 20.000
P/r. the exchange gain of 0.02 for the
deposit in euros of 1,000,000 in Banco
Santander

Next, the service income accounts will be analyzed. Read group 54 in the CUC.
The income from services of a financial institution can be the following:
▪ Trust services
▪ Special services
▪ Affiliations and renewals
▪ Management and collections
▪ Other services
An example of accounting for services for management and collections is found in

the point. 3.3.1.

E. Other operating income – group 55
Financial entities may have other types of operational income such as:
▪ Profits on stocks and shares

▪ Profit on sale of realizable and recovered assets
▪ Dividends for contribution certificates
▪ Agreements
▪ Income for subsidies made
▪ Income for subsidies recovered
▪ Others
This group of accounts records the profits generated by the modification of the
proportional equity value of the shares and participations held by the institution,
the profits generated by the updating of investments in shares and participations
in foreign currency that occur as a result of the variation in their price and the
profit generated from the sale of realizable and recovered assets. An example of
accounting for profits in shares and participations can be found in point 3.2.8.
F. Other income – group 56
To finish with the income accounts, we have group 56 corresponding to “others”,

the same as those obtained by the financial institution, different from those of the
normal line of business (Single Catalog of Accounts, 2017)
Before continuing, please read the Single Catalog of Accounts (2017) of group 56.
The other income is:
▪ Utility for sale of estate

▪ Utility for sale of actions and shares
▪ Leases

▪ Recoveries of financial assets

▪ Others
Preliminarie
As you can see, financial institutions have various types of income. In the case of s
the profit on the sale of goods, this income can be materialized when the entity
First
sells some property, mainly from the group 17 realizable goods awarded for BIMEST
ER
payment. As was analyzed when this group of accounts was studied, all the
Second
assets that have been received from clients for payment of their debts are quarter
recorded here.
Solver
In the case of the profit on the sale of shares and participations, this income can References
bibliographic
be realized when shares or participations are sold at a higher value compared to
the acquisition price of the share or participation.
Annexe
s
The financial entity may also have income from rentals of assets that it is not
using in its operations, such as properties that are in group 17 or other investment
properties. In addition, you may have income from recovering credit portfolios that
have already been written off but that are recovered after adequate collection
management or through legal means.
G. Profit and loss – group 59
This group of accounts records the balances of the debit and credit income
accounts for the closing of the financial year, in order to determine the profit or
loss for the year. This group of accounts are used at the end of the year, as in
general accounting, to close income and expense accounts with the objective of
determining the profit or loss for the year.

3.6. Accounting records of expense accounts
Next, the expense accounts will be analyzed. “Expenses are the decreases in
economic benefits, produced throughout the accounting period, in the form of
outflows or decreases in the value of assets, or due to the generation or increase
of liabilities that result in decreases in equity. and are not related to distributions
made to the owners of this estate” (International Accounting Standards Board
(IASB), 2011, p. 21)
The expense account, according to the Single Catalog of Accounts (2017),

records:
▪ The interest accrued

▪ The commissions caused
▪ financial losses
▪ The provisions
▪ Operating costs
▪ Other operating losses
▪ Other expenses and losses
▪ income tax and
▪ Employee participation
TO. Interest accrued – group 41
The first expense account is the interest incurred. This group records the value of
the accrued interest incurred by the entity for the use of resources received from
the public.
A financial entity may have the following types of interest:
▪ Obligations to the public

▪ Interbank operations
▪ Financial obligations
▪ Securities in circulation and obligations convertible into shares
▪ Other interests

Please read the pages corresponding to interests accrued in the CUC.

After this, the following practical case will be studied:
January 20 20XX. Bank “XYZ” receives a loan from Produbanco for the value of
100,000 at a rate of 10% per year and for 90 days. In this case we are going to
determine what interest accrues that the financial institution must record.
First, we must calculate the total interest of the operation:

360
=
100,000 x 10% x 90
Interest 360
=
Interest =
2,500
When we know the total interest, we must obtain the daily interest.
:: 2.500
Daily interest =
Daily interest = 27.78
Now that the daily interest has been calculated, the days of interest must be
calculated.
accrued interest:
Table 104. Calculation of days of interest payable
Dates Days accrued

01/20/20XX Credit granting date
01/31/20XX 11
02/28/20XX 28
03/30/20XX 30
04/20/20XX 21
Total 90

Table 105. Registration of interest caused by financial obligations
General diary
Year 20XX

01/31/20XX
--------------1---------------
4103 Financial obligations Ob. financial
410310
with ent of the country. Interest 305,56
2501
payable Financial obligations P/r. the
250135
interest accrued
305,56
The interest incurred is obtained by multiplying the days by the daily interest.
In the first case, the interest amount is calculated as follows:
11 days x 27.78 = 305.56
In the following months the calculations are the same

Table 106. Registration of interest caused by financial obligations
General diary
Year
20XX
02/28/20XX
--------------2---------------
4103 Financial obligations Ob. financial
410310
2501
250135
interest accrued
777,78
03/30/20XX
--------------3---------------
4103
Financial obligations Ob. financial
410310
2501
250135
interest accrued
833,33
04/20/20XX
--------------4 ---------------
4103
Financial obligations Ob. financial
410310
2501
250135
interest accrued
583,33
Payment of the credit is made by transfer from Banco de Loja. The accounting
record is as follows:

Table 107. Registration of credit cancellation
General diary
Year
20XX
04/20/20XX 2501 Interest payable

250135 Financial obligations 2.500
2602 Inst financial obligations of the 100.000
country
110310 102.500
Bank of Loja
P/r. credit payment
B. Commissions caused – group 42
Before studying the concept of commissions incurred, it is important to understand

that after accounting for interest incurred, this item represents an important cost for
financial entities, so negotiation of rates for services must be properly negotiated,
generally by commerce departments. foreign, legal, finance, etc., in order to have
these financial expenses well controlled.
“This group of accounts record the values for obtaining resources, lines of credit,
use of services, and contingent operations carried out by financial entities.” (Single
Catalog of Accounts, 2017)
Please read the description and accounting dynamics of group 42 in the CUC.
Practical case:
June 20 20XX. Bank “XYZ” has detected a portfolio amount of $500,000 that is
difficult to recover. The financial institution has hired the law firm SOA Asociados
Cía. Ltda. (normal taxpayer) so that

assist judicially in the collection of this portfolio. The law firm has agreed on its
fees as follows: 15% of the portfolio amount and estimates to recover the credits
within a period of 6 months. The bank pays SOA the first month's invoice for the
value of $12,500 plus VAT, using its account at Banco Pichincha (2% income tax
and 70% VAT are withheld) Preliminarie
s
Table 108. Registration of the invoice for collection commissions
C. Financial losses – group 43
General diary
Year
20XX
06/20/20XX 42 Commissions caused
4203 Collections 12.500
Annexe
4504 Taxes, contributions s
450405 Tax taxes
2504051 2% tax withholding. to rent 250

2504052 70% VAT withholding 1.050

110310 Pichincha Bank 12.700
P/r. the invoice from SOA Asociados for
the portfolio collection contract.

It records the losses arising from the updating of liabilities in foreign currency, the
operating losses generated by the intermediation process carried out by the entity
through the exchange desk, the losses from valuation at market value of
investments for negotiation and available. for sale and the difference between the
acquisition value and the sale value of the credit and investment portfolio.

July 30 20XX. Banco de Loja maintains a 2-year term obligation in Banco

Santander of Spain for the value of 1,000,000 euros. The price at the beginning of
the month was $1.20 for each euro. At the end of the month the price of the euro is
Preliminarie
$1.22 for each euro. Make the corresponding entry. s
Table 109. Record of financial losses due to exchange rate variation
General diary
Year
20XX
07/30/20XX 43 Financial losses
4301 Loss in exchange 20.000
2603
Obligations with inst finan ext Of more
260325
than 360 days 20.000 Annexe
P/r. the exchange loss of 0.02 for the s
obligation in euros of 1,000,000 in

Banco Santander

D. Provisions – group 44
As previously stated, financial statements are the product of real facts, estimates
and accounting policies. In the case of provisions, these are financial estimates.
The main activity of financial entities is intermediation. These institutions use the
funds from the deposits to make credit placements and investments mainly, but the
financial institution does not have complete assurance that these credits and
investments will return to the institution 100%, because there is always a risk of
non-payment. .
Ecuadorian legislation provides regulations to make these provisions. This means

that when credit is granted, the regulations have to tell us when it should be
provisioned.

A provision is ultimately the creation of a fund in the balance sheet to cover

potential losses, for example in granting credit. Once the provision has been
established, it will appear in portfolio or group 14 as an asset with a negative sign
called: “Provisions for bad debts”. In group 13 of investments, however, an asset
with a negative sign called “Provision for investments” will appear. (Single Catalog
of Accounts, 2017)
Please before continuing with this topic read Annex 1, where you will find an
excerpt from the legislation on standards for the classification of risk assets. In this
document you will be able to see what the criteria are for making loan portfolio
provisions. I recommend reading it before continuing with the examples that follow.
In addition to reading Annex 1, also read the accounting dynamics of group 44 in
the CUC.
Practical case:
July 31 20XX. Banco de Loja has granted 12 commercial loans for a total value of
$400,000. All these loans are up to date with their payments, that is, they do not
present any delinquencies.
The accounting entry will be made in accordance with the regulations found in
Annex 1.
The first thing to analyze is the risk category of the credits.

As these are loans that do not have any days of delinquency, they are in category
A-1. For this category the expected loss range is 1%.
The calculation of the provision would be as follows:
Amount of credits = 400,000 x 1% provision = 4,000
The accounting entry is as follows:

Table 110. Commercial credit portfolio provision record

General diary
Year 20XX

07/31/20XX 44 Provisions
4402 Credit portfolio 4.000
1499 Provision for bad loans
149905 4.000
P/r. the portfolio provision for the month
of July.
Next, another practical case of provisions will be analyzed:
June 30 20XX. Banco de Loja has granted consumer loans for the value of
$5,290,000.00. Their portfolio rating is attached in the following table. The portfolio
rating has been obtained according to the days of delinquency of the portfolio. For
the purposes of the example we will consider that this portfolio classification is the
first time it has been carried out.
Table 111. Credit operations and provisions of Banco de Loja as of June 30, 20XX
Credit amount Provision Amount of
Credit operations Qualification
consumption percentage provision Zion
511 2.555.000 A-1 1% 25.550

235 1.175.000 A-2 2% 23.500
145 725.000 A-3 3% 21.750
125 625.000 B-1 6% 37.500
18 90.000 B-2 10% 9.000
9 45.000 C-1 20% 9.000
7 35.000 C-2 40% 14.000
5 25.000 d 60% 15.000
3 15.000 AND 100% 15.000
1.058 5.290.000 3,22% 170.300
(2019)

As of July 31, 20XX, the new portfolio classification based on days in arrears is as
follows:
Table 112. Credit operations and provisions of Banco de Loja as of July 31, 20XX
Credit amount Provision Amount of

consumption percentage provision Zion
459 2.295.000 A-1 1% 22.950

260 1.300.000 A-2 2% 26.000
160 800.000 A-3 3% 24.000
130 650.000 B-1 6% 39.000
20 100.000 B-2 10% 10.000
10 50.000 C-1 20% 10.000
9 45.000 C-2 40% 18.000
6 30.000 d 60% 18.000
4 20.000 AND 100% 20.000
1.058 5.290.000 3,55% 187.950
Based on this information, the accounting entries will be made: the first provision
for the consumer portfolio and then the second entry for the adjustment of the
credit portfolio due to the change in credit rating.
Table 113. Record of the provision of consumer credit portfolio

General diary
Year 20XX
1499
Provision for bad loans
149910 170.300
P/r. of the provision of the consumer
credit portfolio as of June
(2019)

Take into account the following. To make the second entry, the difference between
the provision for the month of June and the provision for the month of July will be
accounted for, because at the end of the day the accumulated provision must
remain, which in this case is $187,950 in account 149910 “Provision for bad debts
consumer credit portfolio”.
The entry of the provision as of July 31, 20XX would be as follows:
Table 114. Record of the provision of consumer credit portfolio for the month of
July 20XX
General diary
Year
20XX
1499
Provision for bad loans
149910 17.650
P/r. of the provision of the consumer
credit portfolio for the month of July.

Did you find this topic interesting? The issue of provisions is a central issue in the
financial intermediation business because it reflects the risk of having granted
credits and the reserves that must be established to mitigate these risks.
E. Operating expenses – group 45
Dear students, I congratulate you because you have concluded the study of the
expense accounts that are specifically managed by financial entities and that
originate from the financial intermediation business. Now we are going to delve into
group 45, where operating expenses will be studied, which are common in every
company and whose accounting treatment has already been done.

studied in other subjects, but I still want to ask you to pay close attention to the
application using the CUC
The expenses included in this group according to the Single Catalog of Accounts
(2017) are:
▪ Personal expenses
▪ Fee
▪ Various services
▪ Taxes, contributions and fines
▪ Depreciations
▪ Amortization
▪ Other expenses
Before continuing the study of the respective subaccounts, read the pages in the
CUC, where group 45 is located.
Personal expenses
This account records the expenses incurred for remuneration, overtime, bonuses,
etc., in accordance with current legal provisions. An example of accounting for the
role of payments is found in the study of liability accounts.
Fee
In this subaccount, the values received by the members of the board of directors
are recorded, through the presentation of the respective invoice, since they do not
have a dependency relationship with the financial entity. Before analyzing a
practical case, gentlemen students, read the description and accounting dynamics
of this account.
June 30 20XX. “ABC” Bank pays the amount of $5,000 dollars to Mr. Juan Pérez,
member of the bank's board of directors. Mr. Pérez presents his invoice no. 2123

and the bank withholds 10% of income tax and 100% of VAT. The Bank issues the
respective check for the account at Banco del Pacífico.
Table 115. Registration of fees
General diary
Year 20XX
06/30/20XX 45 Operating costs

450210 Fee 5.000
450405 Tax taxes


2504052 10% withholding impto. rent 500
2504053 100% VAT withholding 600

110310 4.500
Bank of Pacific
P/r. the payment of invoice # 2123 for
board member fees.
Various services
Miscellaneous services are expenses incurred by the financial institution for the
use of services such as:
▪ Mobilization
▪ Guardianship
▪ Advertising and propaganda
▪ Basic services
▪ Insurance
▪ Leases
▪ Other services.

These other services are expenses that must be incurred so that financial entities
can function properly. An example is presented below:
March 20 20XX. “ABC” Bank pays the electric light service in cash for the value of
$1,200, by debiting the Rumiñahui Bank account.
Table 116. Registration of payment of basic services by bank debit
General diary
Year
20XX
03/20/20XX 4503 Various services
450320 Basic services 1.200
4503201
Electric light 1.200
1103
Bank and other financial
110310 1.200
institutions
Rumiñahui Bank
P/r. payment of the entity's
electricity through bank debit


March 21 20XX. “ABC” Bank cancels Mr. Agustín Velastegui, invoice no. 2345
corresponding to the lease of the “Alameda” agency for the value of $2,000 plus
VAT. The financial institution withholds 8% income tax and 100% VAT and the
difference is issued by a check from Banco de Guayaquil.
Table 117. Record of rent payment of a banking agency
General diary
Year
20XXDate Code Detail Partial Has to To have
03/21/20XX 4503 Various services
450330 Leases 2.000
450405 Tax taxes

2504052 8% withholding at source 160
Banks and other financial
1103
institutions
110310 1.840
Bank of Guayaquil P/r. the
payment of invoice 2345 for
rent of the “Alameda” premises.

Taxes and contributions
Continuing with the topic of expenses, this subaccount records the payments and
provision of expenses corresponding to taxes and contributions to the State with
the exception of income tax, which has a specific account. Please analyze the
accounting dynamics of this subgroup of accounts in the CUC.

Other expenses
Other expenses record all other operating expenses that are not included in the
expenses seen up to this point. Between them we have:
▪ Miscellaneous supplies
▪ Donations
▪ Maintenance and repairs
▪ Discounts on storage services
▪ Others
Practical case:
March 30 20XX. According to invoice no. 1035, office supplies are purchased for
the offices located in Quito, from the company ATRIFECSA for the value of
$15,000, which become part of the inventory, plus 12% of the VAT, withholding tax
is made at the source. 1% income, and 30% VAT. The total after subtracting
withholdings is paid by check from Produbanco.
Table 118. Registration of the purchase of office supplies

General diary
Year 20XX
03/30/20XX 1906 Materials, merchandise, supplies
190615 Supply 15.000
450405 Tax taxes

2504051 1% tax withholding. rent 150

110310 Produbanco 16.110
P/r. the purchase of office supplies for
Quito agencies.
(2019)

For control purposes and to respect the accrual principle that is in the International
Financial Reporting Standards, not all of the $15,000 can be sent to the expense,
so it must be accounted for in the “Supply” account.
Preliminarie
s
To record the expense of office supplies we will assume that they have been used First
BIMESTER
in the following way:
Second
BIMESTER
April $2,000
May $4,500
Solver
June $3,567
References
bibliographic
Annexes

Table 119. Recording the use of office supplies
General diary
Preliminarie
Year 20XX s
Date Code Detail Must Have
First
04/30/20XX -------------------1 ------------------- BIMEST
ER
Other expenses
4507 Miscellaneous supplies Second
450705 quarter
Materials, merchandise 2.000 2.000
1906
Supply
190615 Solver
P/r. the use of office supplies during
the month of April
References
05/31/20XX -------------------2 ------------------- bibliographic
Other expenses
4507 Annexe
Miscellaneous supplies
450705 s
Materials, merchandise and ins 4.500 4.500
1906
Supply
190615
the month of May
06/30/20XX -------------------3 -------------------
Other expenses
4507
Miscellaneous supplies
450705
Materials, merchandise and ins 3.567 3.567
1906
Supply
190615
the month of June
Congratulations! With this group of accounts the topic of operating expenses has
been concluded.
F. Other operational losses – group 46
Financial institutions are exposed to several risks. In the case of operational

losses, these can be determined by the change in the valuation of a share or
participation that the entity owns. If this action

or participation decreases in value because its price on the stock market drops or,
in the case of companies that are not listed on the stock market, it has suffered
losses. The financial institution will have to record this accounting loss in its books.
The entity is also subject to exchange rate losses, for example: if it owns shares or
participations that are quoted in a foreign currency other than the United States
dollar, for example: in Euros, it will also be exposed to losses due to the exchange
rate. variation in the exchange rate, even if the shares or participations have not
changed in value.
Finally, losses can be recorded when assets owned by the entity are sold at a
lower value. For example, if the financial institution needs liquidity and has assets
awarded for payment belonging to group 17, it can obtain liquidity immediately, but
resigning itself to having a loss due to the urgency of the transaction.
Having made this comment about this group, let's now analyze the following
practical case.
Practical case:
April 22 20XX. Banco de Loja sells an office as a result of a judicial auction for
$45,000. The asset is registered for the value of $50,000 in group 17. The buyer
transfers the value of the sale to the Banco del Pacífico account.

Table 120. Registration of the sale at a loss of an office awarded for payment of a
loan
General diary
Year
20XX
04/22/20XX 1103 institutions
110310 Bank of Pacific. 45.000
46 Other operating losses
4602 Loss on sale of goods 5.000
1702 Assets awarded for payment
170210 50.000
Buildings and other premises P/r.
the sale of a recovered office

G. Other expenses and losses – group 47
Group of accounts 47 “constitute losses obtained due to circumstances unrelated

to the line of business or due to special circumstances that, being specific to the
activity, have influenced the assets of the financial entity.” Before continuing,
please read the Single Catalog of Accounts (2017) on the page where group 47 is
located.
The other expenses and losses are as follows:
▪ Loss on sale of goods

▪ Loss on sale of shares and participations
▪ Interest and commissions accrued in previous years
▪ Others.
H. Taxes and employee participation – group 48
Income tax and participation payment to employees are recorded in this account,
which will be provisioned monthly.

3.7. Contingent accounts
One difference between general accounting and bank accounting is the recording
of contingent accounts.
In accounting matters, we speak of contingency when it refers to uncertain

situations that may occur in the future.
Financial entities are in the group of institutions with greater regulation by the
State. This is why they must account for all their operations, including contingent
operations.
Practical case: Issuance of a bond
Before developing the example, the concept of bail will be defined.
A surety in simple words is a guarantee contract signed between a financial

institution and the debtor. This document guarantees that, if the debtor cannot pay
its obligations, the bank will be responsible for paying the beneficiary of the
guarantee.
July 31 20XX. Bank “ABC” issues a bond to company XYZ, for the value of
$1,000,000. The bank charges a commission of 1.5% annually and the term is 270
days. Payment of the bail commission is made in cash.
Simple interest = 1,000,000 x 1.5% x 270

360
Simple interest = 11,250

Table 121. Registration of the issuance of a bond

index
General diary
Preliminaries
Year 20XX
First two
07/31/20XX 1101 Box months
110105 Cash 11.250
63 Creditors against Second
quarter
6302 Bonds and guarantees 1.000.000
64
Creditors
6402 Fix it
Bonds and guarantees 1.000.000
640215
Bonds with fine inst guarantee
52 Bibliographic
11.250
5204 Commissions earned references
Bail bonds
P/r. the issuance of a bond for a 270- Annexes
day term, with a 1.5% annual
commission

After 270 days, on April 27, 20XX, the bond expires. This means that company
XYZ fulfilled its contract without incident and the bond document returned to the
bank. The accounting entry is as follows:
Table 122. Registration of the extinction of a bond
General diary
Year 20XX
04/27/20XX 64 Creditors
6402 Bonds and guarantees 1.000.000
640215 Bonds with instant guarantee
63
Creditors against 1.000.000
6302
Bonds and guarantees
P/r. the extinction of the bond and
return of the document to the bank.

Next, another example of contingent accounts will be analyzed:
Approved credits not disbursed
January 15 20XX. The Bank of Loja grants a line of credit to the company Gallinoti
SA for the value of $1,200,000. The bank charges a commission of 1% annually
and the term is 360 days. The fee for the line of credit is collected in cash.
....................... 1,200,000 xx 360

Simple interest = ~ 360
Commission interest = 12,000
Table 123. Registration of the granting of a line of credit to a private company
General diary
Year 20XX
01/15/20XX 1101 Box
110105 Cash 12.000
6304 Approved credits not dissem 1.200.000
64 Creditors
6404 Approved credits not dissem

640405 Commercial credit portfolio 1.200.000
5290 Others
52901 Credit commissions not disbursed 12.000
P/r. granting a line of credit for one
year, with a commission of 1% per
year
(2019)

ABC Company has used the following amounts of the approved line of credit.
January 31 $200,000
April 14 $150,000
May 25 $400,000
Next, the use of the line of credit will be recorded on the dates on which the
disbursements occurred.
Table 124. Record of the use of the credit line
General diary
Year 20XX
01/31/20XX
-------------------1 --------------------
64
Creditors
6404
Approved credits not dissem
640405 200.000
63
Creditors against
6304
P/r. the use of a line of credit for $200,000 200.000
04/14/20XX
-------------------2 --------------------
64
Creditors
6404
640405 150.000
63
Creditors against
6304
05/25/20XX
-------------------3 --------------------
64
Creditors
6404
640405 400.000
63
Creditors against
6304

As you can see in the previous entries, the registration in the contingent accounts
allows us to update the risks faced by the financial institution. Although it is true
that these operations do not affect the relationship between assets, liabilities and
Preliminarie
equity preliminarily, there may be several cases in which there are risks, for s
example, in the case of the issuance of the bond, if the company does not comply First
BIMESTER
with its contract. , the financial entity will have to disburse the money to the
counterparty, affecting its financial situation until the entity charges the client said Second
BIMESTER
amount plus the expenses incurred.
Solver
With these examples we have concluded the study of contingent accounts and in
the next point we will address the analysis of memorandum accounts. References
bibliographic
3.8. Order accounts Annexes
The memorandum accounts are the last accounts to be studied, these are used to record
movements of values, when these do not affect or modify the financial statements of the entity, but
are necessary to record its contingent rights or responsibilities and/or establish reminders in the
accounting. In financial entities, it is very important to have the movements of these accounts
updated since they face several financial risks that must be mitigated through adequate and timely
information.
These accounts are presented at the bottom of the balance sheet, that is, at the bottom,
immediately following the presentation of all asset, liability and equity accounts.
Practical case:
January 30 20XX. Banco de Loja contracts a line of credit with Banco Popular de Chile for the
value of $500,000 at a rate of 8.5%, which will have a duration of 12 months from the date of its
subscription. This operation is carried out as a measure to avoid a possible lack of liquidity.
(2019)

Table 125. Record of the approval of the line of credit agreement with the
Popular Bank of Chile
General diary
Year 20XX

01/30/20XX 71
7104 Debtor memorandum accounts 500.000
7204 Unused lines of credit Unused lines
500.000
of credit P/r. the approval of the credit
line agreement with Banco Popular
de Chile.

February 15 20XX. Banco de Loja uses 50% of the credit line granted by Banco
Popular de Chile. The money is received in the current account of Banco Pichincha.
Table 126. Record of the first disbursement of the line of credit

General diary
Year 20XX
02/15/20XX
--------------1---------------
110310 Pichincha Bank 250.000
2603 Obligations with inst finan ext

260325 From 181 to 360 days 250.000
P/r. the obligation contracted with

Banco Popular de Chile. ------2
Unused lines of credit
02/15/20XX 7204
71 Debtor memorandum accounts 250.000
7104 Unused lines of credit 250.000
P/r. the approval of the credit line
agreement with Banco Popular de
Chile.

Once you have completed the study of the topics proposed in this unit, it is time to
verify your progress, for which I invite you to develop the following practical activity.
(2019)

Preliminarie
s
Dear students, for the following practical activity, record the following transactions First
BIMEST
in the journal: ER
Second
quarter
February 18 20XX. Bank “XYZ” issues a customs guarantee for import taxes to
the company Gallinoti SA., for the value of $50,000. The bank charges a Solver
commission of 2.3% annually and the term is 3 months.
References
bibliographic
March 12 20XX. Banco Capital receives a loan from Banco Rumiñahui for the
value of 80,000 at a rate of 12% per year and for 90 days. Determine what Annexe
s
interest accrues must be recorded by the entity that receives the credit.
April 20 20XX. Banco Capital has microcredits granted for the value of
$2,544,000.00. The portfolio rating is as shown in the following table:
Table 127. Credit operations and provisions of Banco Capital as of April 20, 20XX
Amount of micro- % of provision Amount of

credits Zion provision Zion
3500 2.100.000 A-1 1% 21.000

401 240.600 A-2 2% 4.812
160 96.000 A-3 3% 2.880
130 78.000 B-1 6% 4.680
2 12.000 B-2 10% 1.200
0
1 6.000 C-1 20% 1.200
0
9 5.400 C-2 40% 2.160
6 3.600 d 60% 2.160
4 2.400 AND 100% 2.400
4.240 2.544.000 1,67% 42.492

The portfolio rating has been obtained according to the days of delinquency of the
portfolio. For the purposes of the example we will consider that this portfolio
classification is the first time it has been carried out.
May 15 20XX. Banco Rumiñahui pays the amount of $7,500 dollars to Mr. Juan
Carrillo, member of the bank's board of directors. Mr. Carrillo presents his invoice
no. 183 and the bank withholds 10% of income tax and 100% of VAT. The bank
draws the respective check from the Banco del Pichincha account.
June 30 20XX According to invoice no. 3035, office supplies are purchased for the
offices located in Quito, from the company Frankimport for the value of $25,000,
which become part of the inventory, plus b12% of the VAT, withholding tax is made
at the source. 1% income, and 30% VAT. The total after subtracting withholdings is
paid by cashier's check.
July 25 20XX. Produbanco grants a line of credit to the company Atrifecsa, for the
value of $1,000,000. The bank charges a commission of 1.5% annually and the
term is 180 days. Payment of the line of credit commission is paid by debit to the
current account.
August 12 20XX. The company Atrifecsa uses $250,000 of its approved line of
credit.
Once the practical activity has been completed, check your answers with those
(2019)

UNIT 4. IFIS FINANCIAL STATEMENTS,

APPLICATION AND INTERPRETATION OF
INDICATORS
“Never invest in a business you can't understand”

Warren Buffett
As we begin with this last unit, allow me to express my congratulations for the effort
put in, your dedication and perseverance. I encourage you to continue in the same
way until you finish studying this subject.
“Financial statements are reports presented by the company's administration, they

reasonably reflect the figures of the financial situation, economic results, fund flows
and the evolution of assets, in a given period and serve different users as a basis
for make decisions for the benefit of the entity” (Espejo and López, 2018, p. 399)
Goals
Both the company's administration, suppliers of money and goods, the treasury
and the general public are interested in knowing the financial strengths and
weaknesses of the entity taken as a whole or regarding a section of the business in
particular.
Financial statements serve to:
▪ “Make investment and credit decisions.
▪ Evaluate the management, solvency, liquidity of the company and the ability to
generate funds.
▪ Know the origin and characteristics of your resources to estimate the financial
capacity for growth, financing and investment.

▪ Make a judgment on the financial results of the administration, in terms of

profitability, solvency, generation of funds and capacity for business
development” (Espejo and López, 2018, p. 399)
Limitations of financial information
As stated above, the financial statements are not accurate. Next, we will analyze
what these limitations are:
▪ “The financial statements must be reasonable, they are not exact nor are the
figures shown definitive, even with the application of IFRS, because the
operations are recorded based on personal judgments and estimates that
allow choosing different alternatives for treatment and quantification. of
operations.
▪ The currency does not retain its purchasing power and over time it can lose its
meaning in permanent transactions and in economies with an inflationary or
devaluation influence.
▪ The financial statements do not represent absolute values; Therefore, the

information it provides is not an exact measure of your situation or your
productivity, but it does provide clear ideas about the situation if the numbers
are reasonable.
▪ The definitive profit or loss is not known until the moment of the sale or liquidation
of the entity” (Zapata, 2011, p. 60)
Qualitative characteristics to determine the usefulness of the information in

the financial statements
Financial statements are not just numbers or figures, but they have to be prepared
under certain qualitative characteristics to ensure that they are reliable.

▪ “Comprehensibility: It is applied so that the financial statements are understood

through accounting accounts; Furthermore, it is necessary that these
accounts be grouped according to the nature of the items. Example: banks,
accounts receivable, inventories, plant and equipment, among others.
▪ Relevance: The information provided must allow users to detect the most
important data on the basis of which decisions will be made.
▪ Materiality: Materiality depends on the volume of business created by the

company. Material accounts must be shown separately in the financial
statements. This means that its value is representative in relation to assets,
liabilities, expenses, etc.
▪ Essence over form: The transactions in the financial statements must be real
and must not only meet legal requirements, which is the minimum they must
meet” (Puruncajas, 2010, p. 19)
4.1. Statement of financial position
Definition:
“The statement of financial position is the report that presents in a detailed,

complete and reasonable manner the amounts of the assets, liabilities and equity
items as of a given date, based on international standards that allow the
understandability, reliability and comparability of the information. financial. It
constitutes a fundamental tool for decision-making by investors, lenders and
owners; On the other hand, the statement of financial position reflects the financial
management carried out by the company's administrators” (Espejo and López,
2018, p. 401)

Utility
▪ The balance sheet allows us to know the situation of the entity in all the items
Preliminarie
that can be measured monetarily at a given time, that is, it allows us to know s
how much money is in the available funds, credit portfolio, obligations with First
BIMESTER
the public, accounts. receivables, accounts payable, property and
equipment, etc. Second
BIMESTER
▪ Thanks to this document, shareholders and/or directors can access vital

Solver
information about their business, such as the availability of money and other
assets and the status of their debts (liabilities), with which the solvency of the References
bibliographic
entity can be measured. financial. If there are more liabilities than assets, the
entity would be falling into insolvency, that is, it would not be able to meet its
Annexes
commitments in the future.
Below is a balance sheet model of an entity.

financial:

Table 128. Balance Sheet of Banco ABC SA
ABC Bank SA
Preliminarie
Balance sheet s
As of December 31, 20XX First

BIMESTER
Code Account name Values
ASSETS Second
BIMESTER
11 Funds available 501.570,00
12 Interbank operations 1.200.000,00
Solver
13 Investments 11.000.789,00
1399 (Provision for investments) (567.900,00) References
bibliographic
14 Credit portfolio 15.000.466,00
1499 (Provision for bad debts (1.567.900,00)
Annexes
15 Debtors for acceptances 501.000,00
16 Accounts receivable 2.000.456,00
17 Realizable assets, awarded for payment, commercial lease 1.398.000,00
and not used by the institution
18 Properties and equipment 13.580.000,00

19 Other assets 680.000,00
Total assets 43.726.481,00
PASSIVES
21 Obligations to the public 14.489.749,00

23 Immediate obligations 567.000,00
24 Acceptances in circulation 234.500,00
25 Accounts payable 2.567.000,00
26 Financial obligations 569.000,00
27, 28, 29 Other passives 1.500.567,00
Total liabilities 19.927.816,00
HERITAGE
31 Social capital 16.503.644,00

32 Premium or discount on share placement 1.245.678,00
33, 34 and
35 Reserves, other equity accounts 5.460.000,00
3603 Usefulness of exercise 589.343,00
Total assets 23.798.665,00
Total liabilities + equity 43.726.481,00
(2019)

4.2. Statement of income
“The income statement is a financial report that presents in an orderly and

classified manner the income from the business activities; the costs and
expenses generated by said activities in a given period and the profit or loss for
the year” (Espejo and López, 2018, p. 402)
Utility:
▪ The income statement measures the quality of the management of the financial
entity, as well as the control of expenses and income, which at the end of
the day can make an entity win or lose; As such, this report is one of the
appropriate catalysts to evaluate the manager's successes or failures.
▪ Through this financial statement, the economic result of the financial entity for
the activities carried out during a period is measured in monetary terms; In
turn, this result will modify the composition of the assets, increasing or
decreasing it. The financial institution will always want the assets to grow
year after year because this will allow them to continue giving loans.
Below you can see an example of the income statement of a financial institution.

Table 129. Balance of results of Banco ABC SA

ABC Bank SA
Statement of income
From December 1 to 31, 20XX
Code Account name Values
Financial income 2.687.581,00

51 Interest and discounts earned 2.250.070,00
52 Commissions earned 225.007,00
53 financial profits 112.504,00
54 Service revenues 100.000,00
Financial expenses 810.711,00
41 Interest accrued 724.487,00
42 Commissions caused 36.224,00
43 Financial losses 50.000,00

= Financial gross margin 1.876.870,00
Operating income 56.000,00
55 Other operating income 56.000,00
Operational expenses 720.000,00
45 Operating costs 675.000,00
46 Other operating losses 45.000,00
= Operating margin before provisions 1.212.870,00
Provisions, depreciation and amortization 617.405,00

44 Provisions 150.005,00
4505 Depreciations 407.400,00
4506 Amortization 60.000,00
Net operating margin 595.465,00

Non-operating income and expenses 340.000,00
56 Other income 340.000,00
47 Other expenses and losses
= 935.465,00
Profits before taxes and employee participation
48 Taxes and employee participation 346.122,00

= Result available to shareholders 589.343,00

4.3. Cash flow statement
So far we have seen the two basic financial statements, but apart from these there
are two additional statements, one of which is the cash flow statement.
“The Cash Flow Statement (EFE) is an explanation of the variation in cash and
cash equivalents during a given year, presented in an expressly defined format”
(Rovayo, 2010, p. 47)
Objectives and usefulness of the EFE
This financial statement is very useful for the administration of a financial entity for
the following reasons:
▪ “ Clearly present what the cash sources have been during the
exercise and what they have been used for: where “Cash” was obtained and
where said “Cash” is.
▪ Assess the company's ability to generate cash.
▪ By analyzing past cash flows we can predict future cash flows.

cash in the future and, therefore, anticipate any liquidity problem that could
occur.
▪ Through the EFE we will understand the investment and financing policies that a
company has followed in the past and their possible impact in the future.
▪ Another important advantage of the information collected in the state is its

objectivity and comparability, since it eliminates the effects of using different
accounting treatments for the same transactions, facilitating comparison
between different companies.” (Rovayo, 2010, p. 47)

To finish this topic, an example of this financial statement is shown below.
Table 130. Cash Flow Statement of Banco XYZ SA

XYZ Bank SA
Cash flow statement
From December 1 to 31, 20XX
Values in thousands of
Account name
$
Cash flows from operating activities
Interest and discounts received 204.894,00
Commissions received 1.000,00
Interest paid (24.893,00)
Commissions paid (17.673,00)
Annexe
Operating payments, taxes already used (166.800,00) s
Financial profits, net (7.887,00)

Other operating income, net 55.054,00
Other non-operating income, net (629,00)
Net cash provided by operating activities, before changes in 43.066,00
operating assets and liabilities
Changes in operational assets and liabilities

Decrease in interbank operations (18.008,00)
(89.432,00)
Increase in negotiable and available-for-sale investments
(278.892,00)
Increase in credit portfolio and commercial lease contracts
Increased obligations to the public 308.987,00

Reduction of immediate obligations (5.324,00)
Net cash from operating activities: (39.603,00)
Cash flows from investing activities
391,00
Decrease in investments held to maturity and restricted availability
Property acquisition, net of sales (40.075,00)

Acquisition of deferred expenses (10.228,00)
Acquisition of foreclosed and leaseable assets, net of withdrawals (425,00)
Increase in shares and participations, net of withdrawals (700,00)
Increase in liquidity fund (other assets) (6.335,00)
Net cash used in investing activities (57.372,00)

Account name Values in thousands of

$
Cash flows from financing activities
93.583,00
Increase in credits in favor of banks and other financial institutions
Dividends paid (3.471,00)

Others (63,00)
Net cash provided by financing activities 90.049,00
Funds available
Net increase during the year (6.926,00)
Balance at the beginning of the year 671.877,00
BALANCE AT THE END OF THE YEAR 664.951,00

This financial statement results from the combination of the balance sheet and the
income statement and, as stated previously, explains how the cash flows have
been generated from: operation, investment and financing. This financial statement
explains what the amount of money was at the beginning of the period, how much
was generated during the year and how much money exists at the end of the
period.
4.4. Statement of changes in Equity
The last financial statement is the statement of changes in equity.
“The Statement of changes in net worth represents the evolution of a company's

net worth during the financial year, identifying the origin of the changes produced,
in such a way that it allows reconciling the initial net worth with the final net worth”
(Espejo and López, 2018, p. 405).
Utility
Like the other financial statements, this statement is very useful because:

▪ Presents the equity variations not included in results

It provides the variation of all the entity's equity accounts, with which you can
know if the equity is strengthening or decreasing.
This information is useful for all those users who want to know the company's
financial information. It is especially attractive for the entity's shareholders,
since they will be able to know the evolution of the company's wealth and its
shares.
You can analyze expanding your assets through capital increases if required.
It helps to consolidate several items into a single account, as a prior to the

capitalization of these credits. (Zapata, 2017, p. 392).
Below is an example of the statement of changes in equity.

Table 131. Statements of changes in the equity of Banco ZXY SA
XYZ Bank SA
Preliminarie
Statement of changes in Equity s
As of December 31, 20XX
First
Expressed in thousands of US dollars BIMESTER
Premium on Second
Paid-in Legal Retained BIMESTER
share Surplus by Total
capital reserve earnings
placement value tions
Balances at the 237.000 503 24.569 8.700 21.000 291.772 Solver
beginning of the year

Bibliographic
Net profit 26.299 26.299 references
Appropriation for legal 2.630 (2.630)
reserve Annexes
Increase in capital 22.321 (22.321)

Distribution of (2.471) (2.471)
dividends
(109) (109)
Stock Investment
Valuation
287 287
Valuation of financial
instruments
2.369 2.369
Property Valuation
Others (63) (63)

Balances at the end 259.321 503 27.199 11.247 19.814 318.084
of the year
Explanatory notes:
With the entry into force of the International Financial Reporting Standards, the
obligation to present the respective explanatory notes has been added.

Zapata (2017) states that when making explanatory notes, the following must be
taken into account:
a. The income statement and the financial position statement are the ones that
most require communicating relevant facts, not only because of the number
of accounts that are included in them, but also because of the scope and
coverage of said reports.
b. When selecting accounts to disclose, a variable that must be taken into

account is the relative materiality that it expresses.
c. Objectively identify the accounts that have rotated the most over time.
d. Preferably, the accounts that have greater representativeness or scope will

be subject to disclosure, since precisely those involved in the economic-financial situation
will be attentive to the information that is exposed and how they are involved or how its
effects relate to others of the same type. .
e. Use charts, tables, graphs and text, the written language must be simple and clear. We
must avoid redundant and using very technical words.
f. The notes or details of an item must be taken from the accounting records, therefore, it must
be verifiable and contrastable.
4.5. Technical heritage
Dear students, in this unit the four mandatory balance sheets have been analyzed in accordance
with IFRS, including the notes to the financial statements. These four balance sheets are
common for all companies, including financial entities, but to finish the study of the financial
statements, a report that is only prepared by financial institutions will also be analyzed and it is
vital to have it like the other 4 balance sheets, because us

It allows us to know about the solvency of each entity, which is important to know
because the entities manage public resources.
According to the glossary of financial terms of the Superintendency of Banks that

appears on its website, “In Ecuador, the law that governs the financial system
regulates that the technical assets are constituted by the sum of paid capital,
reserves, the total of the profits of the current year, profits of previous years,
contributions to future capitalizations, convertible obligations, less the deficiency of
provisions, amortizations, and required depreciations, losses and other items that
the financial institution has not recognized as losses and that the Superintendency
of Banks classify them as such.”
In accordance with Art. 190 of the Organic Monetary and Financial Code (2014),
entities in the national financial system must maintain equity sufficiency to support
the entity's current and future operations, to cover losses not protected by the
provisions of risk assets and to shore up adequate macroeconomic performance.
Entities in the national public and private financial sectors, individually, and financial groups, on
the basis of consolidated and/or combined financial statements, are required to maintain at all
times a relationship between their technical assets and the weighted sum for risk of its assets and
contingents not less than 9%.
The entities of the popular and solidarity financial sector of segment 1, individually, and the
popular and solidarity groups, on the basis of the consolidated and/or combined financial
statements, must maintain at all times the relationship between their technical assets and the
sum risk-weighted of its assets and contingents not less than 9%. The Board will regulate the
percentages of technical assets applicable to the rest of the segments of the popular and
solidarity financial sector.
The total technical assets of financial entities must cover at least the sum of the capital
requirements for credit risk, market risk,

operational risk and others incurred in the execution of financial activities in accordance with the
regulations issued by the Board. index
The relationship between the technical assets and the total and contingent assets
Preliminarie
of the entities of the public, private and popular and solidarity financial sectors of s
segment 1 may not be less than 4%. First two

months
Table 132. Technical assets of Banco ACB SA Second

quarter
ACB Bank SA
Technical heritage
As of December 31, 20XX
Value in thousands
of Percentage
US$
278.13 Annexe
Primary technical heritage 4 s
Secondary technical heritage 34.670
Deductions (2.000)
Total technical assets constituted 310.804
Total and contingent assets 4.113.987
Required 164.559 4,00%

Established 310.804 7,55%
Surplus 146.245
2.879.791
Risk-weighted assets and contingents
Required 259.181 9,00%

Established 310.804 10,79%
Surplus 51.623

In the previous example, a technical equity of 10.79% is recorded versus the 9%

required as a minimum by law, that is, the financial entity has an excess of
technical equity, which gives it greater solvency.
Important:
Dear students, to expand your knowledge, it is important that you enter the
following link and can directly view the most relevant figures of the banking
entities on the website of the Association of Private Banks of the
Ecuador. http://www.asobanca.org.ec/
4.6. Analysis by indices
Just as the doctor orders a series of analyzes to evaluate the health status of his
patient, financial analysts use ratios to evaluate the financial and economic
situation of an entity.
“Indices are nothing more than the result of comparing one account with another. Mathematically
it is the quotient between two figures. These figures are the balances of the accounts that we
want to analyze with each other. Such accounts may be from the balance sheet, from the results,
or from both.” (Rovayo, 2010, p. 71)
Important:
Dear students, to expand your knowledge, it is important that you access the following links
and be able to directly view the most relevant financial indices of banking
entities.http://www.asobanca.org.ec http://www. sbs.gob.ec
Usually the indices are grouped into different analysis categories.

For your better understanding we will use the classification prepared by the Superintendency of
Banks:

Asset structure and quality
The first indices that we are going to study are those that analyze the structure and
quality of the assets. Financial entities must at all times take care of the quality of
their assets since their deterioration can occur more quickly than companies that
are dedicated to activities other than finance, for example, they must take care that
their productive assets (portfolio, investments ) are greater than the liabilities with
cost (current accounts, savings accounts and term deposits) or that their credit
portfolio delinquency remains below acceptable levels. Once these clarifications
have been made, now let's move on to analyze its concept.
The indicators in this group help us evaluate the efficiency of the company's
operations. In other words, they reflect the efficiency in the formation of assets and
liabilities, the credit risk position and the possibility of coverage for unrecoverable
credits. (Robayo, 2010, p. 71).

Within these indices the following have been chosen:
Table 133. Structure and asset quality indices
Index Formula according to the CUC Concept

Productive (1103 + 12 + 13 + 1401 + 1402 + 1403 Measures the efficiency in the
assets/liabilities with + 1404 + 1405 + 1406 + 1409 + 1410 placement of captured resources.
cost + 1411 +1412 + 1413 + 1414 + The higher the better the ratio
1417 + 1418 + 1419 + 1420 + 1421

+ 1422 + 15 + (1701 -170120) +
1901 + 190205 + 190210 + 190215 +
190220 + 190240 + 190250 +190280
+ 190286 + 1903) / (2101 - 210110
- 210130 - 210150 + 2102 - 210210
Annexe
+2103 - 210330 + 2104 + 2105 + 22-
s
2203 + 26 + 27 -2790 + 280105 +
2903 + 2904)
Portfolio delinquency Measures the proportion of the
=Overdue portfolio/total (1425 + 1426 + 1427 + 1428 + 1429 portfolio that is overdue
portfolio + 1430 + 1433 + 1434 + 1435 + 1436
+1437 + 1438 + 1441 + 1442 +1443
+ 1444 + 1445 + 1446 + 1449 + 1450
+1451 + 1452 + 1453 + 1454 + 1457
+ 1458 + 1459 + 1460 + 1461 + 1462
+1465 + 1466 + 1467 + 1468 + 1469
+ 1470) / (14 - 1499)
Coverage of 1499 / (1425 + 1426 + 1427 + 1428 + It measures the level of protection
portfolio: 1429 + 1430 + 1433 + 1434 + 1435 that the entity assumes against the
Portfolio/portfolio +1436 + 1437 + 1438 + 1441 + 1442 + risk of non-performing loans. The
provisions 1443 + 1444 + 1445 + 1446 + 1449 higher the ratio, the better.
defeated +1450 + 1451 + 1452 + 1453 + 1454 +
1457 + 1458 + 1459 + 1460 + 1461
+1462 + 1465 + 1466 + 1467 + 1468
+ 1469 + 1470) * (-1)

Solvency
The entities of the national financial system must comply at all times with the
financial and operational requirements established by the Organic Monetary
Financial Code and those established by the Monetary and Financial Policy and
Regulation Board, in accordance with the activities they carry out.
The indicators of this group help us determine the level at which the financial entity
is indebted and also reflect the patrimonial sufficiency with which the entities carry
out financial intermediation. (Robayo, 2010, p. 81)
Table 134. Solvency Ratios
Formula according to the

Index Concept
CUC
Total, passive / total 2/1
active It measures the level to which assets
have been financed by third-party
resources. The lower the ratio, the better.
(17 + 18 + 1901) / ((3 - 34)
It measures the level of contribution of
equity resources allocated to the
Immobilized
acquisition of fixed assets and goods
assets/equity
received in dation. The ratio greater than
100% implies the use of third-party
resources. The lower the ratio, the better.
((11 - 1103) + 140190 + 1402
+ 1404 + 1405 + 1407 Measures the level of contribution of
Non-productive + 1499 + 16 + 17 + 18 + (19 equity for the acquisition of unproductive
assets/equity - 1902)) / ((3 - 34) assets. A ratio greater than 100% implies
the use of third-party resources. The
lower the better the ratio.


Liquidity Indicators
The entities of the national financial system must maintain sufficient levels of
Preliminarie
high-quality liquid assets free of encumbrance or restriction, which can be s
transformed into cash in a certain period of time without significant loss of value, First
BIMESTER
in relation to their obligations and contingents, weighted. as determined by the
Monetary and Financial Policy and Regulation Board and will be measured using, Second
BIMESTER
at least, the following prudential parameters:
Solver
i. Immediate Liquidity
ii. Structural Liquidity References
bibliographic
iii. Liquidity Reserves
iv. Domestic liquidity, and
Annexes
v. Liquidity gaps
It allows the acquisitions to be related to the placements. The index established in title VII, subtitle
VI, chapter II of the codification of resolutions of the Superintendency of Banks is included.
Liquidity ratios must be monitored daily since liquidity positions are changing due to the behavior
of companies and people who keep their money in demand deposits. Financial institutions must
maintain adequate liquidity ratios to face possible runs on deposits. Let us not forget that trust in a
financial institution is given, among other things, because they can return the public's money at
any time. If financial managers do not have sufficient money reserves to meet customer requests,
trust can be undermined to the point of putting the financial institution at risk.

Table 135. Liquidity Ratios

Index Concept
CUC
Available funds/deposits 11 / (2101 + 2102 + 210305 It measures the level of availability that
up to 90 days + 210310) the entity has to meet the payment of
liabilities of greater demand. The higher
the ratio, the better.
(11 + (12 - 22) + 130105 + It measures the level of liquid resources
Extended liquidity:
130112 + 130115 + 130130 + that the entity has to meet the payment
Calculation provided in
130150 + 130151 + 130210 of required liabilities. The higher the
title VII, subtitle VI,
+(1350 – 2350) + 139010) / ratio, the better.
chapter II of the
(21 +(23 – 2350)
codification of resolutions
+ 24 + 25 + 27 + 2801 +
of the Superintendence of
2803)
Banks and Banking
Board.

Profitability indicators
“These indices, as their name indicates, serve to evaluate the profitability of the
company” (Robayo, 2010, p. 77). They allow us to measure the degree of return
on shareholders' investment and the results obtained by the operational
management of the financial intermediation business.

Table 136. Profitability indices

Index Concept
CUC
(5 - 4) / (3 – 34) average
ROE = Year result / Measures the level of return generated
average equity by equity. The higher the better the ratio.
ROA = Result for the (5 - 4) / 1 average Measures the level of return generated
year / total average by the asset. The higher the better the
assets ratio.
Operating result for the (51 – 41 + 52 + 54 – 42 + It measures the level of profit or loss
year / average total 53 - 43 – 44 – 45 + 55 -46) / generated by the entity's operational
assets 1 average management in relation to the asset. The
higher the better the ratio.
Note: Both ROE and ROA are acronyms in English.
▪ ROE represents the acronym (return on equity), which means return on equity.
▪ On the other hand, ROA means (return on assets) or return on assets.
Administrative efficiency indicators
Dear students, it is not enough for financial institutions to be profitable, they also have to be
efficient. This efficiency is measured in relation to the assets and/or liabilities managed by
managers. We must compare these indicators with the indicators of other financial entities and with
the average of the financial system with the objective of achieving better than average indexes and
then seek to be at the forefront of financial entities due to efficiency in the management of
operations.

Table 137. Administrative efficiency indices

Index Concept
CUC Preliminarie
s
Operating 45/1 average
expenses/average total It represents the operational burden First
BIMEST
assets implicit in the financing of assets. The ER
lower the better the ratio. Second
quarter
Operational expenses / It represents the implicit operational load
total average resources 45 / (21 + 22 + 2308 + 2311 + of the deposits. The lower the better the
raised Solver
2350 + 2360 + 2370 +24 + 25 ratio.
+ 27 + 2801 + 2803 + 2804 +
References
2807 + 2990) average bibliographic
Personnel 4501/1 average It represents the personnel cost implicit
expenses / average in the management of assets. The lower Annexe
total assets the better the ratio. s

Once the main financial indices have been studied, they will be calculated using real data. The
data that has been used is found in Annex 2. In this annex, there are the balance sheets of results
and financial situation of a large private bank and of the total system of private banks in Ecuador
as of December 31, 2016. (Superintendency of Banks, 2016) In order to obtain useful conclusions,
the financial indices of the private bank will be compared against those of the banking system in
general.

Table 138. Structure and asset quality indices
STRUCTURE AND ASSET QUALITY INDICES

Bank Bank
System
1 Productive assets 2.987.433,39 114,81% 27.742.956,36 122,20%

Liabilities with cost 2.602.130,47 22.703.458,32
2 Past due portfolio 69.295,10 3,30% 691.428,01 3,39%

Total portfolio 2.097.330,78 20.375.060,60
3 Portfolio provisions 84.390,66 121,78% 1.366.475,69 197,63%

Past due portfolio 69.295,10 691.428,01

Interpretation of the first index: The bank has a ratio of productive assets to liabilities with cost
of 114.81% versus 122.20% for the banking system.
This means that the bank is less efficient in allocating the resources raised in relation to the
industry average. The bank has to improve this index. One way to improve it would be to increase
productive assets (credit portfolio and investments) and/or reduce liabilities with cost (sight
deposits).
Interpretation of the second index: The bank has a delinquency rate of 3.30% versus 3.39% for
the banking system. This means that the bank is in a better position than the system average in
terms of portfolio management.
Interpretation of the third ratio: The bank has a portfolio coverage ratio of 121.78% versus
197.63% for the banking system. This means that the bank has covered the risk of portfolio
default, but it should have coverage at least equal to that of the banking system. To do this, the
bank should increase portfolio provisions until it obtains the same index as the system.

In summary, it can be concluded that the bank has a good quality of its assets, but
in two of the indices it is less efficient compared to the banking system. The bank
should improve these two ratios at least at the level of the banking system.
Preliminarie
s
Table 139. Solvency ratios
First
BIMESTER
SOLVENCY RATES
Interpretation of the first ratio: The bank has a liabilities-to-assets ratio of 89.19% Second
BIMESTER
versus 90.10% for the banking system. This means that the bank has less debt
Bank Bank
Solver
System
References
1 Total liabilities 3.485.713,35 89,19% 32.075.281,61 90,10% bibliographic
Total assets 3.908.326,48 35.599.114,74
Annexe
2 Immobilized assets 148.455,82 35,13% 1.004.223,22 28,51% s
422.613,12 3.522.234,60
Patrimony - Other patrimonial
contributions
2 Non-productive assets 1.659.402,59 392,65%14.405.485,01 408,99%

Patrimony - Other patrimonial 422.613,12 3.522.234,60
contributions
than the system, which puts it in a better position.
Interpretation of the second ratio: The bank has a ratio of immobilized assets to equity of
35.13% versus 28.51% for the banking system. This means that the bank has a greater proportion
of its equity resources allocated to the acquisition of fixed assets and goods received in payment,
which is negative for the bank. To improve this situation, the financial institution could increase its
assets and/or sell its fixed assets or goods in lieu of payment that are not productive.

Interpretation of the third ratio: The bank has a ratio of non-performing assets to
equity of 392.65% versus 408.99% for the banking system. This means that the
bank has fewer unproductive assets in relation to equity than the system, which is
positive.
In summary, it can be concluded that the bank has greater solvency than the
banking system, but it should improve the ratio of fixed assets to equity and at least
have the same result as the banking system.
Table 140. Liquidity ratios
LIQUIDITY RATES
Bank System
banking
1 Funds available 1.022.889,03 38,98% 8.217.271,71 33,89%

Deposits up to 90 days 2.624.184,23 24.243.566,47
2 Expanded liquidity 1.034.220,85 33,38% 8.288.995,22 27,61%

Deposits 3.098.269,82 30.018.240,93

Interpretation of the first ratio: The bank has a ratio of available funds to deposits up to 90 days
of 38.98% versus 33.89% for the banking system. This means that the bank has a higher level of
liquidity to meet the payment of more demandable liabilities, which is a point in the bank's favor.
Interpretation of the second index: The bank has an expanded liquidity index of 33.38% versus
27.61% for the banking system. This means that the bank has a better level of liquid resources to
meet the payment of required liabilities, which is positive.
In summary, the bank has greater liquidity than the banking system, that is, it has more resources
available to face withdrawals of demand deposits and other liabilities.

Table 141. Profitability indices

PROFITABILITY INDICES
Bank Bank
System
1 Result of the excersice 26.516,30 6,27% 221.937,90 6,30%

Patrimony - Other patrimonial 422.613,12 3.522.234,60
contributions
2 Result of the excersice 26.516,30 0,68% 221.937,90 0,62%

Total assets 3.908.326,48 35.599.114,74
3 Operative result 38.507,22 0,99% 174.603,11 0,49%

Total assets 3.908.326,48 35.599.114,74
Interpretation of the first index: The bank has an ROE of 6.27% versus the
6.30% of the banking system. This means that the bank has a lower return on
equity than the average for the banking system. The difference in profitability is barely 0.03%, but it
is a warning sign for the bank to improve its profitability to higher levels than the banking system.
Interpretation of the second index: The bank has a ROA of 0.68% versus 0.62% for the banking
system. This means that the bank has a better profitability on total assets which is a positive point.
Interpretation of the third index: The bank has an operating result on total assets of 0.99%
versus 0.49% for the banking system. This means that the bank has a better operating profitability
than the banking system, which is positive.
In summary, it is observed that the profitability indices are low in relation to banks in other
countries, for example, in Peru for the same period in 2016 the banking system has an ROE of
18.41% and an ROA of 2. 03% (Source: Superintendence of Banking, Insurance and AFP of Peru
http://www.sbs.gob.pe ).
In the case of the bank in the example, although the profitability ratios are low, two of the three
ratios are better than those of the banking system, which shows that the bank is more profitable.

Table 142. Administrative efficiency indices
ADMINISTRATIVE EFFICIENCY INDICES

Bank Bank
System
1_ Operational expenses 202.604,93 5,18% 1.695.425,69 4,76%

Total assets 3.908.326,48 _ 35.599.114,74
_
2 Operational expenses 202.604,93 6,57% 1.695.425,69
Total resources captured 3.085.158,47 _ 30.015.398,15
5,65%
3 Personal expenses 67.620,07 1,73% 558.021,88 1,57%
Total assets 3.908.326,48 _ 35.599.114,74
Interpretation of the first index: The bank has an expenditure index

operational over total assets of 5.18% versus 4.76% of the banking system. This means that the
bank has a higher operational load than the system. The bank has to improve this ratio by
analyzing and subsequently reducing operational expenses that are not necessary.
Interpretation of the second index: The bank has an index of operational expenses over total
resources raised of 6.57% versus 5.65% for the banking system. This means that the bank has a
higher operational burden in relation to the resources raised. As analyzed in the interpretation of
the previous index, the bank has to improve this indicator by reducing unnecessary expenses.
Interpretation of the third index: The bank has a personnel expense ratio over total assets of
1.73% versus 1.57% for the banking system. This means that the bank has a higher personnel
cost than the banking system. The bank has to improve staff efficiency with the aim of achieving an
index at least at the level of the banking system.

In summary, on the issue of administrative efficiency, the banking system has

better administrative efficiency indices in relation to the bank because it has lower
indices.

Self-assessment index
3
Preliminaries
Dear students, as was done in previous units, it is time to verify the progress of
your studies on financial statements, therefore I invite you to develop the following
self-assessment:
1. Financial statements are reports resulting from the accounting of real events:
a. About financial transactions.

b. Of the application of International Financial Reporting Standards and
the entity's accounting policies.
c. And estimates according to International Financial Reporting Standards.
Annexe
s
2. The financial statements must serve to:
a. Make investment decisions, evaluate management performance, know

the results of the company, know the financial capacity for growth and
control operations.
b. For control purposes and delivery of these to the Superintendence of
Banks.
c. To file them in the manager's office.
3. Financial statements:
a. They must be exact and their figures are final.

b. They must be reasonable, that is, they provide clear ideas about the
entity's financial situation.
c. They represent absolute values, therefore the information is not an
exact measure of the financial situation.

4. The materiality characteristic in the financial statements refers to:
a. That the value of each item that is representative in relation to assets,

liabilities, expenses, etc., must be presented separately in the financial
statements.
b. It is applied so that the financial statements are understood through
accounting accounts.
c. The transactions in the financial statements must be real and must not
only comply with legal requirements.
5. The Balance Sheet is:
a. A basic accounting report that helps us measure the profit or loss of an

entity in a given period.
b. As a snapshot of the entity's financial situation at a given time.
c. An explanation of the change in the entity's cash in a given period.
6. The objectives of the Cash Flow Statement are:
a. Present the origins of cash and applications of cash, assess the

company's ability to generate cash, forecast cash flows for the future.
b. It measures the quality of the entity's management and its results in
financial terms.
c. It allows you to diagnose the financial situation of the company.
7. The balance sheets that most require notes to communicate the details of the
information and other relevant facts are:
a. The balance sheet and cash flow statement.

b. The income statement and the financial position statement.
c. The balance of changes in equity and the income statement.

The Bank must maintain a relationship between its technical assets and the risk-
8. weighted sum of its assets and contingents at a minimum of:
a. 9%.
b. 10%.
c. 9,5%.
The technical assets constituted in accordance with current legal regulations

9. may not be less than ___ of the total assets:
a. 4%.
b. 3%.
c. 3,5%.
10. The essence characteristic about the express form:
a. The information it provides must allow users to detect the most

important data on the basis of which decisions will be made.
b. The transactions in the financial statements must be real and must not
only comply with legal requirements.
c. The financial statements are understood through accounting accounts
that must be grouped according to their nature.
11. What code and its corresponding item have been omitted from this section of
the income statement?
Table 143. Financial income that a financial entity has

Code Account name
FINANCIAL INCOME

? ?
54 Service revenues
(2019)

12. What item has been omitted from the following income statement formula?
Table 144. Financial gross margin
Code Account name

FINANCIAL INCOME
? ?
= GROSS FINANCIAL MARGIN

13. What item has been omitted in the following Income Statement formula?
Table 145. Margin of a financial institution
Account name
FINANCIAL GROSS MARGIN
(+) OPERATIONAL INCOME
(-) OPERATIONAL EXPENSES

14. What code and its corresponding item have been omitted in the following
income statement formula?
Table 146. Formula for profit before taxes and shares
Code Account name

NET OPERATING MARGIN
56 Other income
? ?
= PROFIT BEFORE TAXES AND PARTICIPATIONS.

15. Are they included in the financial expenses?
a. Interest and discounts earned, commissions incurred and financial

Preliminarie
losses. s
b. Operating expenses, provisions, financial losses.
First
c. Financial losses, commissions caused, interest caused. BIMEST
ER
Second
16. The flows into which the cash flow statement is decomposed are: quarter
Solver
a. Operation, investment and financing.
b. Financial income, financial expenses, financing. References
bibliographic
c. Interest and discounts received, property acquisition, dividends
paid.
Annexe
17. The following account is not included within the net operating margin: s
a. “4505” Depreciations.
b. “56” Other income.
c. “46” Other operating losses.
18. Account “1499” provision for bad debts is presented in the balance sheet as
follows:
a. Asset with a negative sign after group 14 Credit portfolio.

b. Passive.
c. Asset with a negative sign after group 13 Investments.
19. The account “premium or discount on placement of shares, within the

balance sheet, is presented within the group of:
a. Asset.
b. Heritage.
c. Passive.

20. The “debtors for acceptances” account, within the balance sheet, is
presented within the group of:
a. Asset.
b. Heritage.
c. Passive.
21. The groups of financial indices that are used in financial institutions according
to the Superintendency of Banks are:
a. Solvency, structure and quality of assets, profitability, administrative

efficiency and liquidity.
b. Solvency, asset quality, profitability and efficiency.
c. Asset quality, solvency, debt and profitability.
22. Choose two financial profitability ratios:
a. Total liabilities/total assets and non-productive assets/equity.

b. ROE and ROA.
c. Operating result/average assets and Personnel expenses/average total
assets.
23. Choose two indicators of administrative efficiency:
a. Operational expenses/total average assets and Personnel

expenses/total average assets
b. ROE and Personnel expenses/average total assets
c. Available funds/deposits up to 90 days and productive assets/liabilities
with cost.

24. The financial index “Productive assets/liabilities with cost” measures:
a. Efficiency in the placement of captured resources.

b. The level to which the assets have been financed by third party
resources.
c. The level of availability that the entity has to meet the payment of more
demandable liabilities.
25. The financial index “ROA” measures the level:
a. Return generated by equity.

b. Return generated by the asset.
c. In which the assets have been financed by third party resources.
How did you do in this last self-assessment?
Remember that you can check your answers in the solution found at the end of the
guide text and if you have failed in any aspect please re-read the topics in which
you have difficulties.
Congratulations! The study of the educational component of banking accounting

has been concluded. I thank you very much for your dedication and study during
these two two months. I hope that the knowledge acquired in this subject will allow
you to continue advancing in your student career and that in a short time you will
complete your studies with complete success and perform in the best way in your
professional life.

m Guide text: Banking Accounting SOLUTIONARY
7. Solution
Self-assessment 1
No. Answer Feedback

1. TO
The correct answer is A, because 1927 is the year in which the
Law creating the Central Bank of Ecuador was decreed.
2. b The correct answer is B, because 1894 is the year in which the

Commercial and Agricultural Bank was founded.
3. c The correct answer is C, because the Vice Presidency of
Finance is responsible for formulating and establishing policies,
standards and procedures in financial matters. Annexe
4. b The correct answer is B, because private banks can be s
multiple and specialized.

5. c The correct answer is C, because the active operations are:
credits, investments, negotiation of documents, etc.
6. TO
The correct answer is A, because passive operations are:
issuing obligations, receiving demand deposits, receiving
financing from other entities, collecting demand deposits.
7. TO
The correct answer is A, because contingent operations are:
issuance of guarantees, guarantees, undisbursed credits, etc.
8. c
The correct answer is C, because service operations are:
currency operations, financial advice, collections, etc.
9. b
The correct answer is B, because 1999 is the year in which the
financial crisis, better known as the bank holiday, occurred.
10. b
The correct answer is B, because the activity of financial
institutions consists of capturing resources from surplus agents
and placing them through credits to deficit agents.

Self-assessment 2
No. Answer Feedback

1. c
The correct answer is C, because the fundamental
assumptions on which financial information must be kept
according to IFRS are: accrual basis and going concern.
2. TO The correct answer is A, because the principle of equity refers
to the fact that the recording of economic facts and their
information are based on equality for all sectors.
3. c
The correct answer is C, because the principle of essence over
form refers to the fact that financial transactions must have
economic reality and not only must their legal form be correct.
4. b The correct answer is B, because the asset according to IFRS
is a resource controlled by the company as a result of past
events, from which the company expects to obtain economic
benefits in the future.
5. b
The correct answer is B, because the periodicity of delivery of
the balance sheets to the Superintendency of Banks is daily.
6. c The correct answer is C, because the financial statements

must be signed by the legal representative, the general
accountant and the internal auditor.
7. TO
The correct answer is A, because the external auditor will be
able to provide external audit and personnel selection services
8. TO The correct answer is A, because internal and external auditors
will be administratively, civilly and criminally responsible for the
reports and opinions they issue.
9. b The correct answer is B, because transactions carried out
through immediate means of communication must be recorded
on the same day they occur.
10. b The correct answer is B, because the accounting adjustments
necessary to correct recording errors will be accounted for on
the date they are known or detected.

As studied in the topic of the cash account, the cash balance as of January 3 must
first be obtained by performing the respective mathematical operations. Once said
balance has been obtained, that is, $40,290, this value must be compared with the
cash balance, that is, $40,190, and determine whether a cash shortage or surplus
should be recorded. In this case, because the value of the tonnage is less than the
accounting balance, a cash shortage must be recorded.
Table 147. Cash movements of January 3, 20XX

Table 148. Record of cash shortage

General diary
Year 20XX
01/03/20XX 19
Other assets
1990
Others
199025
Cash shortages
11
Funds available 100
1101
Box
110105
Cash
P/r missing from box no. 2 100

January 9 20XX.
In the case of this exercise, the $750,000 weekly deposits must be multiplied by
Preliminarie
the 2% reserve requirement since the transaction tells us that the Bank has assets s
worth 500 million dollars. If the entity had assets of more than 1,000 million dollars,
the reserve percentage would be 5%.
Table 149. Bank reserve reserve registration

General diary
Year
20XXDate Code Detail Partial Has to To have
Annexe
1102 Reserve deposits Central Bank s
110205 of Ecuador 15.000
11 Funds available
1101 Box
110105 Cash
P/r. reserve deposit
2% in the ECB.
15.000

January 15 20XX .
In this case, a result must be recorded in favor of Bank XYZ since it is delivering a
Preliminarie
larger amount of checks in the clearing process. s
First
Table 150. Registration of the clearing house form result in favor of the financial BIMESTER
institution Second
BIMESTER
General diary
Date Code Detail Partial Has to To have References
Year bibliographic
20XX
Annexes
1102 Lace deposits
110205 2.100
1104 Central Bank of Ecuador Effects
91.220
of immediate collection P/r the
preliminary clearing house
Solver

February 18 20XX.
Since Banco Amazonas lends to Banco del Austro, a sold interbank fund must be
Preliminarie
accounted for. s
First
Table 151. Registration of a sold interbank fund BIMESTER
Second
Year 20XX
Solver
02/18/20XX 1201 Interbank funds sold
Bibliographic
120105 Banks references
150.000
1102 Reserve deposits Central Bank of
110205 150.000
Ecuador Annexes
P/r. interbank fund sold to Amazonas
bank.


Text-guide: Bank Accounting SOLUTIONARY
February 21 20XX.
In this case, you must begin by calculating the interest earned, using the simple
interest formula.

Simple interest 360
=
Interest = -------------%- - -= 7.625
360
After obtaining the value of the interest earned, we make the corresponding entry
using the accounting account “For private sector trading.” Furthermore, since the
investment is 61 days, it must be posted to the respective account in accordance
with the term of the transaction.
Table 152. Registration of the settlement of a time deposit
General diary
Year 20XX
02/21/20XX 1103 institutions
110310 Bank of Pacific 457.548,75
1990 Others
199090 Tax advance on income 76,25
1990901 Tax advance to income 1% 76,25
510305 To negotiate 7.625,00
1301 To negotiate private sec
130110 From 31 to 90 days P/r. the 450.000,00
settlement of the time
deposit.


March 25 20XX
To resolve this transaction, the interest corresponding to the 81 days of the

investment must be calculated. The original 91 days should not be considered
because the investment is sold 10 days before maturity.
The calculation of interest is carried out with the following

formula:
Simple interest
= 360
800,000 x 7.5 %
Interest I••UU
360
=
Table Registration of investment in a bond of the Central Bank of

153. Ecuador
General diary
Year 20XX
03/25/20XX 1102
110205 Lace deposits
808.500,00
43 central bank of Ecuador
4303 Financial losses
5.000,00
5103 For sale of productive assets Interest
510305 and discounts To negotiate
1302 To negotiate ent. Sec. Public From 91
130215
to 180 days
P/r. investment in a bond 13.500,00
Central bank of Ecuador.
800.000,00
We must be careful in choosing the account that contains the investment term, that is, the account
“130215”

March 28 20XX.
First, the Solca tax must be calculated. This tax is in full because the credit is equal
to one year. If the credit was less than one year, it would be calculated on an
annualized basis.
Table 154. Commercial credit portfolio registration due

General diary
Year 20XX

03/28/20XX 1401 Cred com wallet due
140120 From 181 to 360 days 105.000
2504 Withholdings
2504051 0.5% Solca 525
210110 Deposits that do not generate in 104.475
P/r. the granting of credit.

French system annuity calculation

1 - (1 + 12%/12)-12
105,000 = A--------------------------- - ----- -
12%/12
1 - 0,88744923)
105,000 = A ------------- 0,01
105,000 = Ax 11.2550775
105.000
A= 11,2550775
A = 9,329.12

After calculating the annuity, the amortization table must be calculated using the
Excel program. It is recommended to search in this program how the formulas:
pagoint, pagoprin and pago should be applied and then build the tables shown
Preliminarie
below. s
First
BIMESTER
Table 155. French system amortization table
Second
BIMESTER
Loan value 105.000
Solver
Periodicity of the installment in months 12 References
bibliographic
Periodic rate 1,00%
Annexes
Capital at the Period
Quota
Amortization Share
period
1 105.000,00 8.279,12 1.050,00 9.329,12
2 96.720,88 8.361,91 967,21 9.329,12
3 88.358,96 8.445,53 883,59 9.329,12
4 79.913,43 8.529,99 799,13 9.329,12
5 71.383,44 8.615,29 713,83 9.329,12
6 62.768,15 8.701,44 627,68 9.329,12
7 54.066,71 8.788,46 540,67 9.329,12
8 45.278,26 8.876,34 452,78 9.329,12
9 36.401,92 8.965,10 364,02 9.329,12
10 27.436,81 9.054,75 274,37 9.329,12
11 18.382,06 9.145,30 183,82 9.329,12
12 9.236,76 9.236,76 92,37 9.329,12
Total 105.000,00 6.949,47

Table 156. German system amortization table

r
1
index
x-----------------------,
German Loan Repayment System
Preliminaries
Loan value 105.000
TO
First two
months
Periodic rate 1,00%
Second quarter
Quota Capital at the Period
Amortization Share
Solver
period TO
1 105.000,00 8.750,00 1.050,00 9.800,00
2 96.250,00 8.750,00 962,50 9.712,50 References
bibliographic
3 87.500,00 8.750,00 875,00 9.625,00
4 78.750,00 8.750,00 787,50 9.537,50
Annexes
5 70.000,00 8.750,00 700,00 9.450,00
6 61.250,00 8.750,00 612,50 9.362,50
7 52.500,00 8.750,00 525,00 9.275,00
8 43.750,00 8.750,00 437,50 9.187,50
9 35.000,00 8.750,00 350,00 9.100,00
10 26.250,00 8.750,00 262,50 9.012,50
11 17.500,00 8.750,00 175,00 8.925,00
12 8.750,00 8.750,00 87,50 8.837,50
Total 105.000,00 6.825,00
The system that best suits the client is the German method because it pays less interest ($124.47
less interest). The system that most favors the bank is the French method because it charges more
interest ($124.47 more interest).
The amortization system by which the bank recovers its capital more quickly is the German
system, because the capital installments are greater at the beginning of the loan.

April 12 20XX.
In this transaction, the overdraft of $6,000 must be posted to the corresponding

Preliminarie
portfolio account, according to the following accounting record. s
First
Table 157. Registration of a bank overdraft BIMESTER
Second
Year 20XX
Solver
04/12/20XX 1402 Consumer credit portfolio References
bibliographic
140205 From 1 to 30 days 6.000
210110 Monetary deposits 1.000 Annexes
1101 Box
110105 Cash 5.000
P/r. cancellation of the check with the
bank overdraft.


April 30 20XX.
Calculating the interest on the overdraft and the commission, the following
calculations must be made:

Overdraft interest
360
=
6,000 x 16% 18
Overdraft interest
360
=
Interest =
48.00
6,000 x 4% x 18
Commission 360
interest =
Interest = 12.00
Table 158. Overdraft Cancellation Record
General diary
Year 20XX
04/30/20XX 2101 Deposit at sight
210110 Monetary deposits that do not 6.060,00
140205 From 1 to 30 days 6.000,00

5104 Interest and portfolio differences
5201 Credit portfolio 16,00
For the cancellation of the overdraft
and the payment of interest


May 15 20XX.
To resolve this transaction, the accounting account to register vehicles must be

Preliminarie
searched in the Single Catalog of Accounts. The correct account is “Transportation s
Units”. For the issue of taxes, the “Tax Withholdings” account must be used with its First
BIMESTER
respective auxiliary accounts. In the case of VAT, this is charged to the expense
directly since financial institutions have most of their operations with 0% VAT. Second
BIMESTER
Table 159. Vehicle purchase registration

Solver
References
bibliographic
General diary
Year 20XX Annexes
05/15/20XX 1807 Transport units 32.000
450405 Tax taxes
2504 Withholdings
2504052 1% tax withholding on income 384

2504053 10% VAT source ret 320
2301 35.136
Cashier's Checks P/r. the
purchase of a vehicle for
operations management.


May 25 20XX.
To resolve this transaction we must look in the CUC for the account corresponding
to expenses and advance payments.
Table 160. Advance rental payment record
General diary
Year 20XX
05/25/20XX 1904 Expenses and advance payments

190490 Others 6.000
1904901 Rent paid in advance

450405 Tax taxes
2504901 8% withholding at source 480

2504902 70% VAT 504
2301 Management checks 5.736
P/r. payment to ABC company, advance
rent for 6 months.


June 13 20XX.
To resolve this transaction, you must search the CUC for the corresponding
Preliminarie
account. In this case it is the “Constitution and organization expenses” account. s
Table 161. Registration of incorporation expenses
General diary
Year 20XX

Constitution and organization
190505 15.000
expenses
450405 Tax taxes
4504051 VAT charged to the expense 1.800 Annexe
s
2504 Withholdings
250405 Tax withholdings 1.560

2504053 70% withholding on VAT tax. 1.260
2301 Management checks. 15.240
P/r. cancellation of
incorporation expenses


June 28 20XX.
In this transaction, care must be taken to separately account for the land and the
office as shown in the following accounting record.
Table 162. Registration of the purchase of an office for the installation of a banking
agency
General diary
Year 20XX

06/28/20XX 1801 100.000
1802 Land 205.000
1103 Buildings
110310 Banks and other institutions 305.000
finance Banco Pichincha
P/r. purchase of an office for the
installation of a Bank agency.


July 7 20XX.
In this first transaction we must take into account that not all the deposit is in cash.
The checks must be posted to the accounts for immediate collection and deposits
to be confirmed because they have not been cashed.
Table 163. Registration of a mixed deposit in a current account
General diary
Year 20XX

1101 Box
110105 Cash 4.500

210110 Deposits that do not generate int. 4.500
210150 Deposits to be confirmed P/r. the 3.050
deposit in the current account.


July 12 20XX.
In this transaction, it must be taken into account that the $50 dollars include VAT,
Preliminarie
so this value must be divided by 1.12. The value of the checkbook is $25 and the s
difference is the profit from issuing the checkbook. First
BIMESTER
Table 164. Checkbook delivery record Second

BIMESTER
General diary
Solver

210110 Monetary deposits 50,00
1906 Materials, merchandise and ins
190615 Supply 25,00
2504051 VAT on sales 5,36
56 Other income
5601 Profit on sale of goods 19,64
P/r. the delivery of a checkbook of
100 units.
Year 20XX
References
bibliographic
Annexe
s


August 2 20XX.
In this transaction, it must be taken into account that the financial institution
charges the amounts for publication and for the revocation of the check.
Table 165. Check revocation record
General diary
Year 20XX

259015 Checks drawn and not cashed 3.550,00 Annexe
s
259090 Other accounts payable 6,00
54 Service revenues
5404 3,50
P/r. revocation of check no. 232.

August 15 20XX.
As you can see, the certified check changes from the monetary deposit account
that does not generate interest to the certified checking account. This value will
remain in this account until the beneficiary comes to cash the certified check.
Table 166. Registration of a certified check
General diary
Year 20XX
Aug 15 2101 Demand deposits

210130 Certified checks 2.550,00

5490 Other services
549010 Priced with maximum cost 2,50

P/r. the certification of check no.
153

September 30 20XX.
To solve this question, you must first calculate the interest.

Simple interest 360
=
Interest = 12,501 x 2.5/ u x30 26.04

360
Once the interest has been calculated, the accounting records must be made. The
first record corresponds to the accounting of accrued interest.
The second entry corresponds to the accreditation of the interests.
Table 167. Record of accrued interest and credit to credit account

savings
General diary
Year 20XX
09/30/20XX
--------------1--------------
4101 Compulsory interests with the public
P/r. the interest accrued for the month
--------------2--------------
Interest payable
09/30/20XX 2501
2101 Monetary deposits
P/r. crediting interest to the savings
account.


September 24 20XX.
First, the interest accrued on the investment must be calculated, as follows:

360
Interest = 55,501 x 5.5% x 91

360
Interest= 771.62
Table 168. Registration of cancellation of a term deposit
General diary
Year 20XX
210315 From 91 to 180 days 55.501,00
4101 Compulsory interest with the
410130 audience 771,62
2504 Term deposits
1101 2% financial returns
Box
110105
15,43
Cash
P/r. the cancellation of Mr. Raúl
56.257,19
Carvallo's investment.
It must be taken into account that the corresponding income tax withholding must
be made.

October 6 20XX.
As in the previous transactions, interest must be calculated

accrued:

= 360
351,000 x 8% x 10
Interest 360
=
Interest =
780
Table 169. Record of cancellation of the purchased interbank fund
General diary
Year
20XX
6/10/20XX 2201 Comp Interbank Funds
220105 Banks 351.000
410205 Comp Interbank Funds 780
2504 Tax withholdings 7,80

2504051 1% ret at source x pay 7,80
1102 Lace deposits
110205 central bank of Ecuador 351.780,2
P/r. cancellation of the credit with
the respective interest.
In the entry above, we must consider the withholding of 1% income tax between
financial entities.

October 22 20XX.
In this transaction, it must be taken into account that the $6,000 must be recorded in
Preliminarie
the income received in advance account since said income has not yet accrued. s
First
BIMESTER
Table 170. Record of collection commissions Second
BIMESTER
General diary
Solver
Year 20XX
Date Code Detail Has to To have Bibliographic
references
110310 Bank of Pacific 6.600 Annexes
199090 Tax advance to rent
1990902 Imposed advance. to income 2% 120
29 Other passives
2901 Income received x advance 6.000
2505 Contributions, taxes
2505901 VAT on sales. 720
To record the invoice issued for
management and collection services to
Cia ABC.

October 31 20XX.
When it comes to the subscription of capital, the shareholders have not yet
disbursed money, so the value of the subscription will be recorded in the account
receivable from the sale of goods and shares.
Table 171. Record of subscribed and unpaid shares
General diary
Year 20XX

10/31/20XX 1690
169030 Miscellaneous accounts receivable For 10.000.000
2801 sale of goods and shares Obligations
280105 10.000.000
conv in shares Obligations conv in
shares P/r. shares subscribed and not
paid.


November 8 20XX.
In this transaction, the shareholders pay a part of the subscribed capital, for which
a capital integration account is opened in another bank and the account receivable
that was generated with the capital subscription is reduced.
Table 172. Registration of 50% of the value paid for the subscribed shares
General diary
Year 20XX

8/11/20XX 1103 Banks and other institutions end
110310 Banks and inst. finan Banco
1103101
Pichincha locations 5.000.000
1690
Miscellaneous accounts receivable
169030 5.000.000
For sale of goods and shares P/r.
the value paid for the shares that
correspond to 50% of the subscribed
capital.


November 16 20XX.
After the previous registration, the registration must be carried out for the
adjustment of the share capital
Table 173. Registration of the adjustment of 50% of the paid capital

General diary
Year 20XX
11/16/20XX 2801
280105 Obligations in shares Obligations in 5.000.000
31 shares Share capital
3101 5.000.000
Paid-in capital
P/r. adjustment for 50% of the paid
capital.

November 16 20XX.
Finally, the origin of the capital is recorded in memorandum accounts.
Table 174. Registration of the origin of paid capital

General diary
Year 20XX
11/16/20XX 73
7308 Creditors, on the contrary Origin of 5.000.000
7408
capital Origin of capital
740805
Shareholder cash contributions P/r.
5.000.000
the origin of paid-in capital of
financial institutions, based on the
nationality of the shareholder.


December 15 20XX.
Before transferring the money to the Bank's vault, the interest earned must be
calculated.
Interest = 50,000 x 2.3% x 90

360
Interest = 25,000
Table 175. Record of money deposited in the capital integration account to the
bank vault
General diary
Year 20XX
12/15/20XX 1101 Box
110105 Cash 5.024.750
1990 Others
199090 Tax advance to rent 250
1990901 Tax advance on income 1% 250
1103 Banks and financial institutions
Bank and local financial
110310
institutions
1103101 Pichincha Bank 5.000.000
5101 Interest on deposits
510110 Deposits in banks 25.000
P/r. the transfer of the money


with the commission of 2.3% per year
General diary
Year 20XX
02/18/20XX 1101 Box
110105 Cash 287,50
6302 Bonds and guarantees 50.000,00
64 Creditors
6402 Bonds and guarantees

640205 Customs guarantees 50.000,00
5204 Bonds and guarantees 287,50
P/r. the issuance of a customs
guarantee within 90 days, with a
commission of 2.3% per year

As you can see, the customs guarantee is recorded in contingent accounts

because there has not been any disbursement of money alone

represents a risk for the financial institution. In the event that the terms of the
guarantee are not met, the Bank has to pay the value to customs and
subsequently charge the client.
March 12 20XX.
To solve this operation, you must calculate the interest for the entire transaction
and then obtain the daily interest to multiply it by the respective days.
, , 80,000 x 12% x 90
Interest =
360
Interest = 2,400
When we know the total interest, we must obtain the daily interest.
Daily interest = É--

90
Daily interest = 26.6667
Now that the daily interest has been calculated, the accrued interest will be
calculated:
Table 177. Calculation of interest earned
Interest earned Days per daily

Dates Days accrued
interest
03/12/20XX Credit granting date

03/31/20XX 19 506,67
04/30/20XX 30 800,00
05/31/20XX 31 826,67
06/10/20XX 10 266,67
Total 90 2.400,00

Once the interest amount has been calculated, the entries must be made as
shown below.
Preliminarie
Table 178. Registration of interest caused by financial obligations s
First
BIMESTER
General diary
Year Second
20XX BIMESTER
03/31/20XX
-------------------1 -----------------------
Solver
410310 Ob. financial with ent of the country.
506,67 Bibliographic
2501 Interest payable references
Annexes
506,67
04/30/20XX
-------------------1 -----------------------
800,00
800,00
05/31/20XX
-------------------1 -----------------------
826,67
826,67
06/10/20XX -------------------1 -----------------------
266,67
266,67

April 20 20XX.
According to table 126, portfolio provisions for the microenterprise must be

Preliminarie
accounted for. s
First
BIMESTER
Table 179. Record of portfolio provision as of April 20, 20XX
Second
BIMESTER
General diary
Year 20XX
Solver
04/20/20XX 44
Provisions Bibliographic
4402 references
42.492,00
1499 Credit portfolio
149920 Provision for bad loans 42.492,00
Annexes
Microenterprise credit portfolio P/r.
the portfolio provision as of April 20


May 15 20XX.
In the following record the fees of a member of the Bank's board of directors are
Preliminarie
recorded. This official issues an invoice from which the respective taxes must be s
withheld. First
BIMESTER
Table 180. Record of expense for fees to directors Second

BIMESTER
General diary
Solver
Year 20XX
Date Code Detail Has to To have Bibliographic
references
05/15/20XX 45 Operating costs
4502 Fee 7.500
Annexes
450405 Tax taxes

1103 Banks and financial institutions

110310 6.750
Pichincha Bank
P/r. the payment of invoice # 183
for board member fees.


June 30 20XX.
Purchased supplies cannot be posted to expense, but must be posted to inventory.

Preliminarie
The specific account is called “Supply”. s
First
Table 181. Record of purchase of supplies BIMESTER
Second
Year 20XX
Solver
06/30/20XX 1906 Materials, merchandise and Bibliographic
references
190615 Supply 25.000
450405 Tax taxes
4504051 VAT charged to the expense 3.000 Annexes

2103 Management checks 26.850
P/r. the purchase of office supplies
for Quito agencies.


July 25 20XX.
First, the accrued interest must be accounted for.
1,000,000 x 1.5% x 180

Commission interest =
360
Commission interest = 7,500
Table 182. Record of the granting of a 180-day line of credit
General diary
Year 20XX

210110 Non-international monetary deposits 7.500
6304 Approved credits not dissem 1.000.000
64 Creditors
6404 Approved credits not dissem

640405 Commercial credit portfolio 1.000.000
5290 Others
52901 Credit commissions not disbursed 7.500
P/r. the granting of a line of credit
for 180 days, with a commission of
1.5% per year

As it is a line of credit, the line of credit is recorded in contingent accounts.

August 12 20XX.
Once a portion of the line of credit has been disbursed, the reverse entry is made
to the issuance of the line of credit.
Table 183. Record of the use of the credit line
General diary
Year 20XX

08/12/20XX 64
6404 Creditors
640405
Approved credits not disbursed
63
Commercial credit portfolio Creditors 250.000 250.000
6304
against
Approved credits not dissem P/r. the
use of a line of credit for $250,000


r
1
Self-assessment 3
index
No. Answer Feedback
1. b The correct answer is B, because the financial statements
Preliminaries
They are reports resulting from the accounting of real events, TO
of the application of IFRS and the accounting policies of the

First
entity. BIMESTER
2. TO The correct answer is A, because the financial statements
They should be used to make investment decisions, evaluate Second quarter
managerial management, knowing the results of the company,

know the financial capacity for growth and control operations. Solver
TO
3. b The correct answer is B, because the financial statements References

They must be reasonable, that is, they provide clear ideas bibliographic
on the financial situation of the entity.
Annexes
4. TO The correct answer is A, because the characteristic of
Materiality in the financial statements means that the value of each
item that is representative in relation to the assets, liabilities,
expenses, etc., must be presented separately in the financial
statements.
5. b
The correct answer is B, because the balance sheet is like a
photograph of the entity's financial situation at a given time.
6. TO
The correct answer is A, because the objectives of the Cash Flow
Statement are: to present the origins of cash and applications of
cash, to assess the company's ability to generate cash, to forecast
cash flows for the future.
7. b The correct answer is B, because the balance sheets that most

require notes to communicate the details of the information and
other relevant facts are: the income statement and the financial
position statement.
8. TO
The correct answer is A, because the bank must maintain a
relationship between its technical equity and the risk-weighted sum
of its assets and contingents of at least 9%.
9. TO The correct answer is A, because the technical assets constituted
in accordance with current legal regulations cannot be less than
4% of the total assets.

r
1
Self-assessment 3
index
No. Answer Feedback
10. b The correct answer is B, because the characteristic of
Preliminaries
essence about the express way that the transactions of the TO
financial statements must be real and must not only

First
meet legal requirements BIMESTER
11. The correct answer is code 53 “Financial profits”
because it is the group that is missing to complete all the Second quarter
income that a financial institution has.

12. The correct answer is “Financial expenses”, because the Solver
subtraction between financial income minus financial expenses TO
is equal to the gross financial margin. References

bibliographic
13. The correct answer is “Operational margin before
provisions”, because the financial gross margin plus income
Annexes
operational expenses minus operational expenses equals
operating margin before provisions.
14. The correct answer is code 47 “Other expenses and losses”
because the net operating margin plus other income minus other
expenses and losses is equal to the profit before taxes and
contributions.
15. b
The correct answer is B, because the financial expenses are:
financial losses, commissions incurred and interest incurred.
16. TO The correct answer is A, because the flows into which the cash
flow statement is decomposed are: operation, investment and
financing.
17. b The correct answer is B, because account 56 “Other income” is not
included in the net operating margin.
18. TO
The correct answer is A, because account 1499 provision for bad
debts is presented on the balance sheet as an asset with a
negative sign after group 14
19. b
The correct answer is B, because the premium or discount account
in share placement is presented in equity.
20. TO The correct answer is A, because the debtor account for
acceptances is presented in Assets

Self-assessment 3
No. Answer Feedback

21. TO
The correct answer is A, because the groups of financial ratios
used in financial institutions are: solvency, structure and quality
of assets, profitability, administrative efficiency and liquidity.
22. b The correct answer is B, because two profitability indices are
ROE and ROA
23. TO The correct answer is A, because two administrative efficiency
indices are: operational expenses/total average assets and
personnel expenses/total average assets.
24. TO The correct answer is A, because the financial index
“Productive assets/liabilities with cost” measures the efficiency
in the placement of captured resources.
25. b The correct answer is B, because the ROA index measures the
level of return generated by the Asset.

Text-guide: Bank Accounting BIBLIOGRAPHIC REFERENCES
8. Bibliographic references
National Assembly (2014). Organic Monetary and Financial Code. Official Registry
Supplement No. 332 of September 12, 2014. Quito, Ecuador.
Mirror, L. and López G. (2018). General Accounting. Approach with International

Financial Reporting Standards (IFRS). Loja - Ecuador: Editorial of the Private
Technical University of Loja.
Puruncajas, M. (2010). International Financial Reporting Standards.

Guayaquil - Ecuador: Editorial Intelecto SA
Robayo, G. (2010). Finance for managers. Guayaquil - Ecuador: IDE Business

School Editorial
Romero, A. (2014). Bank accounting. New York - United States of America:

Dreams Magnet LLC Publishing.
Superintendency of Banks. (2017). Single Catalog of Accounts and instructions for

financial institutions. Resolution No. SB-2017-705 of August 30, 2017. Quito,
Ecuador:
Villaroel, E. (2013). Financial mathematics. Cochapamba – Bolivia: Jinantinssl

Editorial.
Zapata, P. (2011). General Accounting 7th Edition. Bogotá - Colombia: McGraw

Hill Publishing.
Zapata, P. (2017). General accounting 8 edition. Bogotá - Colombia: Editorial

Alfaomega Colombiana SA

Text-guide: Bank Accounting ANNEXES
9.
Annexes
Appendix 1
Resolution No. 209-2016-F of February 12, 2016, which was amended by the
following Resolutions: No. 245-2016-F of May 5, 2016; No. 293-2016-F of
October 28, 2016, No. 354-2017-F of April 17, 2017 and No. 358-2017-F of April
28, 2017.
THE BOARD OF MONETARY AND FINANCIAL POLICY AND REGULATION
Book I.- General Standards for the Institutions of the Financial System
Title IX.- Assets and credit limits
Chapter II.- Qualification of risk assets and constitution of provisions by institutions

controlled by the Superintendency of Banks and Insurance
Section II.- Elements of the rating of risk assets and their classification
Article 5.- The elements that must be taken into account to classify risk assets in
the different categories and indicate the ranges of provision requirements are
detailed below: 1. PORTFOLIO OF CREDITS AND CONTINGENTS
For the purposes of classifying the portfolio of entities in the public and private
financial sectors, loans will be divided into ten segments: priority commercial,
ordinary commercial, productive, priority consumption, ordinary consumption, real
estate, public interest housing, microcredit , educational and public investment.

The classification of each debtor's obligations will be according to the type of

credit and the corresponding risk. The quantification of said risk represents the
expected value of the losses in relation to each debtor and will reflect the
Preliminarie
appropriate level of provisions... s
First
1.1 PRIORITY, ORDINARY COMMERCIAL CREDITS AND PRODUCTIVE BIMEST
ER
CREDIT
Second
quarter
It is granted to natural persons required to keep accounting or legal entities, for a

Solver
period of more than one year, intended to finance productive projects whose
amount, at least ninety percent (90%), is destined for the acquisition of property. References
bibliographic
capital, land, construction of infrastructure and purchase of industrial property
rights. Exceptions are the acquisition of franchises, brands, royalty payments,
Annexe
licenses and the purchase of fossil fuel vehicles... s
1.1.1 METHODOLOGY TO APPLY CREDIT RATING

COMMERCIAL:
In the evaluation of the subjects of priority and ordinary commercial credits and
productive credit, the following factors must be considered, without exception, for
the qualification of the credit portfolio and contingents, taking into account that the
evaluation of the payment capacity and financial situation of the debtor It is the
main factor for the effect….
1.1.1.1 Payment capacity and financial situation of the debtor.
The objective of the evaluation is to identify the stability and predictability of the
primary source (ability to pay) of credit repayment through the evaluation of the
projected cash flow and the key financial ratios of the debtor and/or co-debtors,
taking into account It takes into account the characteristics of productive activity
and credit, in accordance with updated, documented, quality and timely financial
information.

1.1.1.1.1 Minimum quantitative factors to evaluate:
▪ Projected cash flow;

▪ Cash flow statement;
▪ Liquidity;
▪ Leverage;
▪ Profitability and efficiency;
Financial indicators must be defined based on thresholds, constructed with

descriptive statistics of central tendency, dispersion or position, such as the mean,
median, standard deviation, mode or percentiles, which allow differentiating the
maximum and minimum limits between which it is contained. an indicator in a
certain risk category; The estimation of said parameters must be inferred through
statistical distributions that present the indicators of the industry to which the
evaluated credit subject belongs. Entities that do not develop these methodologies
must adhere to the thresholds defined by the Superintendency of Banks and
Insurance, the table of thresholds of financial indicators for each risk category will
be sent to the financial system through circular......
1.1.1.1.2 Minimum qualitative factors to evaluate:
The objective of the evaluation is to identify management's ability to keep the

business financially and economically viable over time, with appropriate controls
and adequate support from shareholders:
▪ Administration competence
▪ Organizational structure
▪ Size and dependence on the economic group, if applicable; and,
▪ Composition of the shareholding structure….

1.1.1.2 Payment experience
The objective of this aspect is to evaluate the debtor's payment performance,

willingness to pay and his character or attitude towards his debts, evaluated
through his payment history in the financial system institution itself (delinquency,
payment behavior and identification of the payment methods for the transactions
paid and/or canceled)….
Additionally, it will consider the other sources of commercial information available

to it, regarding the debtor's credit experience.
Minimum factors to evaluate. - Payment history of all credit operations in the

institution itself.
1.1.1.3 Economic environment risk
The objective of this aspect is to establish and evaluate the main factors
exogenous to the debtor that could impact its financial capacity to comply with its
obligations, which will be analyzed through an evaluation of the market, industry
and economic sector inherent to the debtor's business. , which may be determined
by a notation that identifies the risk of the sector, established by the entity itself
through specialized sources of information, duly approved by the board of
directors.
The joint analysis of the factors indicated in sections 1.1.1.1, 1.1.1.2 and 1.1.1.3
will allow the classification of all the obligations that a debtor of a financial entity
has, in the risk categories detailed below...

1.1.2.1 NORMAL RISK CREDITS
1.1.2.1.1. CATEGORY A-1
The cash flow statement presents income from the business, sufficient to cover
operating activities, capital amortization and debt interest, and part of the
investment activities, the latter can be complemented with long-term debt, which
above considering the cyclicality of the business, duly verified by the institution of
the financial system. The projected cash flow presents sufficient income to cover
all business obligations, which must be supported by solid historical data and
supporting documentation, as well as its estimates will be the result of statistical
and/or empirical methodologies.
The company's management has extensive experience in managing the company,

with the ability to operate the business efficiently and profitably, promptly
complying with the delivery of detailed information... Additionally, it has
demonstrated an immediate response capacity to face problems. changes in the
market and the development of its competition; the organizational structure is
aligned with the business objectives; manages optimal levels of good corporate
governance within a framework of adequate and efficient policies, standards,
procedures and internal controls; and, the shareholders support the management
of the company…….
In the last year, the credit subject has not presented delays in the payment of its
obligations, both in the financial system and with other creditors.
There is no delinquency whatsoever, with zero days in arrears as of the date of

qualification.
Expected loss range: 1%

1.1.2.1.2. CATEGORY A-2
The credits evaluated in this category have the characteristics of the “A1”
Preliminarie
category, except for the following conditions: s
First
▪ In the administration, weaknesses are observed in financial management BIMEST
ER
and planning, which slightly affect the administration of the cash cycle, even
Second
when they are immediately overcome. quarter
Solver
▪ In the last year, there has been at least a delay of up to fifteen (15) days in
the payment of obligations, both in the financial system and in other
References
creditors. bibliographic
Annexe
▪ Delinquency of one (1) to fifteen (15) days as of the qualification date. s
Expected loss range: 2%
1.1.2.1.3. CATEGORY A-2
The credits evaluated in this category have the characteristics of the “A2” category,
except for the following conditions:
▪ The income from the business is sufficient to cover operating activities and
interest on the debt; Investment activities are covered with long-term
financing, considering the cyclicality of the business.
▪ In addition to the weaknesses in financial planning, it is noted that

management and strategic planning present some unmet goals.
▪ In the last year, there has been at least a delay of sixteen (16) to thirty (30)
days in the payment of obligations, both in the financial system and in other
creditors.

▪ Delinquency of sixteen (16) to thirty (30) days as of the qualification date.
Expected loss range: 3% to 5%

Preliminarie
s
1.1.2.2. CREDITS WITH POTENTIAL RISK
First
BIMEST
ER
1.1.2.2.1. CATEGORY B-1
Second
quarter
The cash flow statement presents income from the business, sufficient to cover
operating activities, however, these income are not enough to cover the entire Solver
debt, considering the cyclicality of the business. The projected cash flow presents
References
income that covers all business obligations, and is supported by historical data bibliographic
estimated based on statistical and/or empirical methodologies; however, some

Annexe
projection assumptions present inconsistencies. s
Business management is not achieving the expected results in strategic and

financial planning. Additionally, there is a less rapid response capacity than
category “A” debtors to face changes in the market and competition.
The industry evaluation presents financial indicators that reflect stable behavior.
There are government policies (economic and legal) that affect the development of
the sector. In the products generated by this, it is observed that production and
sales present a stable trend.
In the last year, the credit subject has presented at least a delay of thirty-one (31)
to sixty (60) days in the payment of its obligations, both in the financial system and
with other creditors.
Delinquency of thirty-one (31) to sixty (60) days as of the qualification date.

1.1.2.2.2. CATEGORY B-2
The credits evaluated in this category have the characteristics of the “B1” category,
▪ The organizational structure is not consistent with the business objectives.
▪ In the last year, there has been at least a delay of sixty-one

▪ 61) up to ninety (90) days in the payment of obligations, both in the
financial system and in other creditors.
▪ Delinquency of sixty-one (61) to ninety (90) days as of the qualification date.
1.1.2.3. POOR CREDITS
1.1.2.3.1. CATEGORY C-1
The cash flow statement presents income from the business that is only enough to
cover operating activities, considering the cyclicality of the business. Cash flow has
been projected with insufficient historical data.
The debtor presents competition problems in the administration of the company,

the organizational structure makes its management difficult, and the composition
and support of the shareholders presents difficulties. The viability of the debtor's
business is in doubt, unless changes in administration and management occur,
production capacity and the generation of profits for the company are
strengthened.
The industry assessment reflects declining trends in its key financial indicators,
profit margins and competitiveness. The

industry faces severe disruptions due to technological, regulatory and/or

macroeconomic changes. In the products generated by this, it is observed that
production and sales show a decreasing trend.
In the last year, the credit subject has been late at least ninety-one (91) to one
hundred twenty (120) days in the payment of its obligations, both in the financial
system and with other creditors.
Delinquency of ninety-one (91) to one hundred twenty (120) days as of the

qualification date.
Expected loss range: 20% to 39%.
1.1.2.3.2. CATEGORY C-2
The credits evaluated in this category have the characteristics of the “C1” category,
• In the last year, there has been at least a delay of one hundred twenty-
one (121) to one hundred eighty (180) days in the payment of
obligations, both in the financial system and in other creditors.
• Delinquency of one hundred twenty-one (121) to one hundred eighty

(180) days as of the qualification date.
Expected loss range from 40% to 59%
1.1.2.4. DOUBTABLE CREDITS - CATEGORY D
The cash flow statement presents income from the business that is not enough to
cover operating activities, considering the cyclicality of the business. If there is
projected cash flow, it is insufficient and does not have supporting documentation.

The performance of the company's management is poor. The viability of the

company as a going concern is doubtful or the business has already ceased
operations, or is in the process of bankruptcy.
The industry assessment shares the same characteristics as the previous

category, and includes additional confirmations that the industry's weaknesses
have been of a time-invariant nature.
Credits for whose recovery legal actions have been taken will be considered
doubtful collection, without taking into account their time of delinquency. Credits
whose debtors have sued the creditor entity will also be included in this category, if
the collection of said credit depends on the result of the respective judicial action.
In the last year, the credit subject has been late for at least one hundred and
eighty-one (181) to three hundred and sixty (360) days in the payment of its
obligations, both in the financial system and with other creditors.
Delinquency of one hundred eighty-one (181) to three hundred sixty (360) days as
of the qualification date.
1.1.2.5. LOSSES – CATEGORY E
Credits that are considered uncollectible or with a recovery value so low in

proportion to what is owed that their maintenance as an asset under the agreed
terms is not justified should be placed in this category, either because the clients
have been declared bankrupt or insolvency, bankruptcy, liquidation, or suffer a
noticeable and presumably irreversible deterioration in their solvency and whose
guarantee or remaining assets are of little or no value in relation to the amount
owed.

Transactions granted in favor of companies whose capacity to generate resources

depends on others with which they have an economic relationship, ownership,
administration or other condition, which in turn are very weakened in their financial
position, generally as a consequence of its own indebtedness or operational
inability, thus existing a high uncertainty about its permanence as a going concern.
Delinquency greater than three hundred and sixty (360) days
Expected loss: 100%
1.1.3. QUALIFICATION COVERAGE FOR PRIORITY AND ORDINARY

PRODUCTIVE AND COMMERCIAL CREDIT. - The qualification must cover one
hundred percent of these credits.
The institutions of the financial system have the power to qualify debtors of
commercial credits whose amount does not exceed forty thousand dollars of the
United States of America (US$40,000.00), with the internal monitoring models
provided for in section 1.1.4. “Methodologies and/or internal commercial credit
rating systems”, of this chapter, or solely for delinquencies, based on the ranges
described in the following table:
Table 184. Business Credit Ratings by Days of Delinquency
CATEGORIES DAYS OF DEFAULT
A-1 0
A-2 1 – 15
A-3 16 – 30
B–1 31 – 60
B–2 61 – 90
C-1 91 – 120
C-2 121-180
d 181-360
AND +360
Source: Monetary and Financial Policy and Regulation Board.
(2019)

1.1.4. METHODOLOGIES AND/OR INTERNAL SYSTEMS FOR RATING

PRODUCTIVE CREDIT AND PRIORITY AND ORDINARY COMMERCIAL
CREDITS.
In the credit evaluation of existing debtors and potential clients, as a prerequisite

for the approval, implementation and disbursement of commercial credits, the
institutions of the financial system may use methodologies or internal systems such
as those provided for in section 7.1 of the article. 7, of chapter II “On credit risk
management”, of title X “On risk management and administration”, of this book;
depending on the profile of the clients, nature, size and complexity of the
operations of the controlled institution and its business strategy. These
methodologies or internal systems must be known and approved by the board of
directors or body that acts in their place and evaluated by the Superintendency of
Banks.
To have effective monitoring and control of credit risk, the institutions of the
financial system may use their own methodologies and/or internal systems in the
qualification of their priority and ordinary commercial credits and productive credit,
as provided in section 7.2 of article 7, of the aforementioned chapter II “Credit risk
management”.
To estimate the risk category assignment for each credit subject, the institutions of
the financial system may develop an internal rating system based on quantitative
and qualitative methods, which allow them to determine the coefficients for the
different factors to be considered, for each type. of client, group or homogeneous
segment of clients and industry, which must be known and approved by the board
of directors or body that acts in its place, and approved by the Superintendency of
Banks prior to their validity.
Ordinary commercial loans must maintain, at least, a real guarantee equivalent to

150% of the amount of the debt.

1.2 ORDINARY AND PRIORITY CONSUMPTION CREDITS
ORDINARY CONSUMPTION CREDIT
It is granted to natural persons, intended for the acquisition or marketing of light

fossil fuel vehicles.
PRIORITY CONSUMER CREDIT
It is granted to natural persons, intended for the purchase of goods, services or

expenses not related to a productive or commercial activity and other purchases
and expenses not included in the ordinary consumption segment, including jewelry
collateral credits.
They are generally amortized based on a system of periodic installments.
All operations carried out through the credit card system will be considered priority
consumer credits.
They are generally amortized based on a system of periodic installments.
In the process of administering ordinary and priority consumer credit, special

importance must be given to the policy that the financial institution applies for the
selection of credit subjects, to the determination of the debtor's payment capacity
and to the stability of the source. of its resources, coming from salaries, fees,
remittances, average income or other sources of profitable income, adequately
verified by the lending public and private financial sector entity.

1.2.1. COVERAGE OF THE RATING OF ORDINARY AND PRIORITY

CONSUMPTION CREDITS
Preliminarie
The rating will cover the entire portfolio of ordinary and priority consumer loans s
granted by the financial entity, according to the aforementioned criteria and based First
BIMESTER
on the following parameters: ….
Second
BIMESTER
Table 185. Consumer credit ratings by days of delinquency.
Solver
A-1 0
References
A-2 1–8 bibliographic
A-3 9 – 15
Annexe
B–1 16 – 30 s
B–2 31 – 45
C-1 46 – 70
C-2 71 – 90
d 91 – 120
AND + 120
1.3 PUBLIC INTEREST HOUSING LOANS AND CREDIT
REAL ESTATE
PUBLIC INTEREST HOUSING CREDIT
These are those granted with a mortgage guarantee to natural persons for the
acquisition or construction of a single, first-use home, granted with the purpose of
transferring the portfolio generated to a securitization trust with the participation of
the Central Bank of Ecuador or the public financial system, whose commercial
value is less than or equal to seventy thousand dollars of the United States of
America (US$70,000.00) and whose value per square meter is less than or equal
to eight hundred ninety dollars of the United States of America (US$890.00)

REAL ESTATE CREDIT
It is granted with a mortgage guarantee to natural persons for the construction,

repair, remodeling and improvement of their own properties, for the acquisition of
land intended for the construction of their own home; and, for the acquisition of
finished housing for the use of the debtor and his family not categorized in the
public interest housing credit segment.
In the credit administration process for public interest housing and real estate,
special importance must be given to the policy that the financial institution applies
for the selection of credit subjects, to the determination of the debtor's payment
capacity and to the stability of the source of its resources, coming from salaries,
wages, fees, remittances, average income or other sources of profitable income,
adequately verified by the lender public and private financial sector entity...
1.3.1. COVERAGE OF THE RATING OF PUBLIC INTEREST AND REAL

ESTATE HOUSING CREDITS.
It will cover the entire portfolio of loans for public housing and real estate that the
entity maintains, based on the aforementioned criteria and based on the following
parameters:
Table 186. Home credit scores by days of delinquency.

A-1 0
A-2 1 – 30
A-3 31 – 60
B–1 61 – 120
B–2 121 – 180
C-1 181 – 210
C-2 211 – 270
d 271 – 450
AND + 450
(2019)
1.4 MICROCREDITS
It is granted to a natural or legal person with a level of annual sales less than or
equal to one hundred thousand dollars of the United States of America
(US$100,000.00), or to a group of borrowers with a joint guarantee, intended to
finance production activities. and/or small-scale marketing, whose main source of
payment constitutes the product of sales or income generated by said activities,
adequately verified by the entity of the public or private financial system.
1.4.1. COVERAGE OF THE RATING OF MICROCREDITS
The qualification will cover all microcredit operations granted by the financial entity,
according to the aforementioned criteria and based on the following parameters:
Table 187. Microcredit ratings by days of delinquency.

A-1 0
A-2 1–8
A-3 9 – 15
B–1 16 – 30
B–2 31 – 45
C-1 46 – 70
C-2 71 – 90
d 91 – 120
AND + 120
1.5 EDUCATIVE CREDIT
It includes credit operations granted to natural persons for their professional or

technical education and training and to legal persons for the

training and training operation must be duly accredited by the competent bodies.
Educational credit operations are characterized by being structured according to

the financing needs of the subjects, which mainly derive from the adequate
identification of the payment cycle in which the recipients will be able to meet their
obligations. To this end, these types of products contain amortization tables with
payment periods that begin their execution after the completion of the debtor's
studies, grace periods for both interest and capital; or, the application of a different
methodology for the evaluation of payment capacity….
Educational credits will be permanently qualified based on the late payment of the
agreed installments….
1.5.1. EDUCATIONAL CREDIT QUALIFICATION COVERAGE
The rating will cover all educational credit operations granted by the entity in the
public and private financial sectors, according to the aforementioned criteria and
based on the following parameters:
Table 188. Educational credit ratings by days of delinquency

A-1 0
A-2 1 – 15
A-3 16 – 30
B–1 31 – 60
B–2 61 – 90
C-1 91 – 120
C-2 121 – 180
d 181 – 360
AND + 360

1.6 PUBLIC INVESTMENT CREDIT
It is intended to finance programs, projects, works and services aimed at the

provision of public services, the provision of which is the responsibility of the State,
either directly or through companies; and, which are paid from the budgetary
resources or income of the debtor trustworthy in favor of the lending public
financial entity. This segment includes operations granted to decentralized
autonomous governments and other public sector entities.
In the case of companies and/or projects, their administrative and financial

management, as well as their stability and future projections, will be evaluated,
applying the criteria provided in sections 1.1.1 “Methodology to be applied for the
qualification of priority and ordinary commercial credits and productive credit” ;
and, 1.1.2. “Risk classification of productive credit and priority and ordinary
commercial credits”, of this standard.

Appendi
x2
STATE OF SITUATION PAGE 1
PRIVATE BANKING SYSTEM
31/12/2016
(in thousands of dollars)
TOTAL PRIVATE
CODE ACCOUNT BIG BENCH
BANKS
ASSET
11 FUNDS AVAILABLE 1.022.889, 8.217.271,7
110 Box 03 145.400,2 1 1.368.260,3
1 110 Lace deposits 1 502.518,7 2 4.290.833,2
2 110 Banks and other financial institutions 0 329.747,7 2 2.096.167,0
3 110 Immediate payment effects 5 45.222,3 7 269.803,8
4 110 Remittances in transit 7 0 192.207,3
-
5 0 9.950,0
12 INTERBANK OPERATIONS -
120 Interbank funds sold 0
- 10.000,00
1 129 (Provision for interbank and repo operations) - - 50,00
9 566.071,7 5.635.114,7
13 INVESTMENTS
130 At fair value with changes in the income statement 7 2
8.254,71 16.987,48
1 130 At fair value with changes in the State income statement 252.708,3 330.855,0
2 130 Available for sale by private sector entities 2 91.607,9 4 1.428.959,3
3 130 Available for sale by the State or public sector entities 6 13.684,4 4 1.985.354,8
4 130 Held to maturity by private sector entities 5 2
- 33.491,10
5 130 Held until maturity by the State 221.023,9 1.724.790,7
6 130 Restricted availability 4 4 221.949,7
-
7 139 (Provision for investments) - -9
9 2.012.940, 19.008.584,
14 CREDITS PORTFOLIO
140 Priority commercial credit portfolio to mature 12 994.680,9 91 8.826.090,7
1 140 Priority consumer loan portfolio to mature 3 745.925,9 2 5.514.067,3
2 140 Real estate loan portfolio due 2 171.540,6 9 1.873.478,3
3 140 Portfolio of credits for microenterprises to mature 7 54.954,0 2 1.321.136,0
4 140 Portfolio of productive credit to mature 4 1 703.264,2
8.066,63
5 140 Ordinary commercial credit portfolio due 14.082,5 5 157.451,6
6 140 Portfolio of ordinary consumer loans due 2 10.798,2 3 310.120,4
7 140 Public interest housing loan portfolio to mature 0 9
- 22.695,06
8 140 Refinanced priority commercial loan portfolio due to mature 201.736,4
3.482,94
9 141 Refinanced priority consumer loan portfolio due to mature 5
9.634,48 54.492,89
0 141 Refinanced real estate loan portfolio due to mature 6.644,0
-
1 141 Refinanced microenterprise loan portfolio due to mature 8
193,88 16.534,96
2 141 Refinanced productive credit portfolio due to mature 7.401,0
-
3 141 Refinanced ordinary commercial credit portfolio due to mature 1
- 16,31
4 141 Refinanced ordinary consumer loan portfolio due to mature - 248,74
5 141 Restructured priority commercial loan portfolio due to mature 726,08 85.354,06
7 141 Restructured priority consumer loan portfolio due to mature 8.584,27 70.623,43
8 141 Restructured real estate loan portfolio due to mature - 18.393,09
9 142 Credit portfolio for restructured microenterprises to mature - 49.467,76
0 142 Restructured productive credit portfolio to mature 1.180,8
-
1 142 Restructured ordinary commercial credit portfolio due to 0
- 28,16
2 142 mature 4.508,2
Restructured ordinary consumer loan portfolio due to mature -
3 7


PRIVATE BANKING SYSTEM 12/31/2016
TOTAL PRIVATE Preliminaries

BANKS
142 Non-interest-bearing priority commercial credit portfolio 2.638,08 49.109,81
5 142 Non-interest-bearing priority consumer credit portfolio 7.853,38 211.411,06 First
6 142 Non-interest-bearing real estate loan portfolio 2.713,28 41.264,08 BIMESTER
7 142 Non-interest-bearing credit portfolio for microenterprises 1.826,11 54.231,48
8 142 Non-interest-bearing productive credit portfolio - 373,60
9 143 Non-interest-bearing ordinary commercial credit portfolio - 73,34
Second
0 143 Portfolio of ordinary consumer loans that do not accrue 71,03 8.388,61
BIMESTER
1 143 interest
Refinanced priority commercial credit portfolio 670,81 4.846,48
3 143 Refinanced priority consumer loan portfolio 922,42 16.516,26
4 143 Refinanced non-interest-bearing real estate loan portfolio - 137,33 Solver
5 143 Credit portfolio for refinanced microenterprises 142,83 1.481,53
6 143 Refinanced productive credit portfolio that does not accrue - 210,69
7 143 interest
Refinanced ordinary consumer credit portfolio - 12,73 References
9 144 Restructured senior commercial credit portfolio 226,91 7.063,43 bibliographic
1 144 Restructured priority consumer loan portfolio 2.909,84 24.798,41
2 144 Restructured non-interest-bearing real estate loan portfolio - 1.399,98
3 144 Credit portfolio for restructured microenterprises - 6.934,16
4 144 Restructured non-interest bearing productive credit - 79,15 Annexes
5 portfolio
144 Restructured ordinary consumer credit portfolio - 546,76
7 144 Overdue priority commercial credit portfolio 4.780,64 42.991,02
9 145 Overdue priority consumer credit portfolio 42.758,67 157.294,99
0 145 Overdue real estate loan portfolio 593,75 15.205,39
1 145 Overdue credit portfolio for microenterprise 891,13 33.522,42
2 145 Overdue productive credit portfolio - 9,08
3 145 Overdue ordinary commercial credit portfolio - 14,51
4 145 Overdue ordinary consumer credit portfolio 12,98 484,72
5 145 Overdue refinanced priority commercial credit portfolio 57,47 2.988,06
7 145 Overdue refinanced priority consumer loan portfolio 88,98 4.950,21
8 145 Overdue refinanced real estate loan portfolio - 3,01
9 146 Overdue credit portfolio for refinanced microenterprises 17,02 262,02
0 146 Overdue refinanced productive credit portfolio - 4,65
1 146 Overdue refinanced ordinary consumer loan portfolio - 0,37
3 146 Restructured overdue priority commercial credit portfolio 34,39 9.261,46
5 146 Restructured overdue priority consumer loan portfolio 169,37 3.432,79
6 146 Restructured overdue real estate loan portfolio 0,00 509,52
7 146 Overdue loan portfolio for restructured microenterprises - 1.037,42
8 146 Overdue restructured productive credit portfolio - 10,67
9 147 Restructured overdue ordinary consumer loan portfolio - 21,93
1 147 Expiring educational loan portfolio 5.064,70 409.144,19
3 147 Non-interest bearing educational credit portfolio 164,98 19.663,74
9 148 Overdue educational loan portfolio 51,41 435,66
5 149 (Provisions for bad debts) - 84.390,66 - 1.366.475,69
9 1 DEBTORS FOR ACCEPTANCES - 16.202,13
5 150 Within the deadline - 16.202,13
1 1 ACCOUNTS RECEIVABLE 32.364,74 461.746,40
6 160 Interest receivable from interbank operations - 2,67
1 160 Interest on investments 1.552,48 24.378,09
2 160 Interest receivable from credit portfolio 17.636,57 214.001,89
3 160 Other interest receivable - 58,57
4 160 Commissions receivable 110,94 2.544,02
5 160 Income receivable from commercial trusts - 317,03
6 161 Advance payment for acquisition of shares - 16.812,63
1 161 Overdue investments - 2.092,78
2 161 Payments on behalf of clients 5.249,73 27.800,59
4 161 Restructured interest receivable - 10.792,33
5 161 Accounts receivable for housing portfolio sold to the trust - 59.130,95
9 169 Miscellaneous accounts receivable 13.408,59 171.826,30
0 169 (Provision for accounts receivable) - 5.593,58 - 68.011,44
9


PRIVATE BANKING SYSTEM 12/31/2016
TOTAL PRIVATE
BANKS
1 REALIZABLE ASSETS, AWARDED FOR PAYMENT, 2.154,24 55.268,21
7 LEASING
170 Assets awarded for payment 5.050,60 69.987,21
2 170 Property to be rented - 96,78
3 170 Recovered goods 36,04 386,66
4 170 Leased property - 3.540,56
5 170 Assets not used by the institution - 29.537,00
6 179 (Provision for realizable assets, awarded for payment and - 2.932,40 - 48.280,00
9 1 recovered)
PROPERTIES AND EQUIPMENT 141.958,17 653.100,02
8 180 Land 19.851,26 121.744,06
1 180 Buildings 115.072,26 774.541,06
2 180 Construction and renovations in progress 2.143,89 6.390,64
3 180 Furniture, fixtures and office equipment 39.505,30 142.444,54
5 180 Computing team 73.864,46 265.516,09
6 180 Transport units 371,28 10.078,35
7 189 Others 1.854,26 21.286,40
0 189 (Accumulated depreciation) - 110.704,54 - 688.901,11
9 1 OTHER ASSETS 129.948,42 1.541.876,63
9 190 Investments in stocks and shares 4.343,41 295.854,99
1 190 Fiduciary rights 75.518,38 909.723,34
2 190 Expenses and advance payments 17.383,33 156.478,43
4 190 Deferred expenses 29.455,38 132.052,06
5 190 Materials, merchandise and supplies 1.233,43 6.066,24
6 190 Internal transfers - 424,23
8 199 Others 2.181,50 92.367,98
0 199 (Provision for other irrecoverable assets) - 167,01 - 51.090,64
9 1TOTAL ASSETS 3.908.326,48 35.599.114,74
4BILLS 393.068,39 3.265.959,05
+1+4 TOTAL ASSETS AND EXPENSES 4.301.394,86 38.865.073,79

- -
PASSIVES
2 OBLIGATIONS TO THE PUBLIC 2.960.159,57 28.682.512,76
1 210 Demand deposits 2.036.507,03 19.165.576,84
1 210 Term deposits 825.367,41 8.309.433,06
3 210 Guarantee deposits - 1.032,82
4 210 Restricted deposits 98.285,13 1.206.470,04
5 2 INTERBANK OPERATIONS - 10.000,00
2 220 Purchased interbank funds - 10.000,00
1 22010 Banks - 10.000,00
5 2 IMMEDIATE OBLIGATIONS 13.427,55 145.327,40
3 230 Management checks 635,61 20.013,34
1 230 Money transfers, transfers and collections payable 12.788,84 66.482,95
2 230 Collections for the public sector 3,09 58.815,18
3 230 Securities in circulation and coupons payable - 15,92
4 2 ACCEPTANCES IN CIRCULATION - 16.202,13
4 240 Within the deadline - 16.202,13
1 2 ACCOUNTS PAYABLE 97.966,49 937.221,45
5 250 Interest payable 16.636,63 182.089,70
1 250 Commissions payable - 3.514,03
2 250 Employer obligations 15.566,35 178.031,01
3 250 Withholdings 24.405,01 181.793,83
4 250 Contributions, taxes and fines 2.488,84 43.986,83
5 250 Suppliers 68,51 13.016,70
6 250 Portfolio purchase obligations - 2.840,58
7 251 Accounts payable to affiliated establishments 17.006,98 100.119,24
0 251 Provisions for bank acceptances and contingent operations 1.315,60 62.273,26
1 259 Various accounts payable 20.478,57 169.556,28
0


12/31/2016
CODE ACCOUNT BIG BENCH TOTAL PRIVATE BANKS

26 FINANCIAL OBLIGATIONS 386.674,72 1.865.681,77
2601 Overdrafts - 2.695,00
2602 Obligations with financial institutions in the country - 9.816,40
2603 Obligations with foreign financial institutions 276.519,00 1.182.226,42
2605 Obligations with entities of the financial group abroad - 4.485,00
2606 Obligations with public sector financial entities 155,72 171.795,70
2607 Obligations with multilateral organizations 110.000,00 445.812,64
2690 Other obligations - 48.850,61
27 VALUES IN CIRCULATION 4,02 14.302,16
2702 Obligations - 14.320,58
2703 Other securities 4,02 4,02
2790 Premium or discount on placement of securities in circulation - - 22,45
28 OBLIGATIONS CONVERTIBLE INTO SHARES 26.712,19 222.761,68
2801 Bonds convertible into shares 6.712,19 34.175,03
2802 Contributions for future capitalization - 86,66
2803 Subordinated term debt 20.000,00 188.500,00
29 OTHER PASSIVES 768,82 181.272,26
2901 Income received in advance 452,62 48.722,05
2903 Funds under administration
2904 Employee reserve fund - 65,59
2905 Deposit and Mortgage Insurance Fund
2906 Income from valuation of realizable goods delivered
2911 Subsidies from the national government
2990 Others 316,20 132.484,62
2 TOTAL LIABILITIES 3.485.713,35 32.075.281,61
HERITAGE
31 SOCIAL CAPITAL 341.450,00 2.567.139,41
3101 Paid-in capital 341.450,00 2.567.139,41
3103 Member contributions
32 PREMIUM OR DISCOUNT IN PLACEMENT OF SHARES - 1.104,77
3201 Premium on placement of shares and contribution certificates - 1.104,77
33 BOOKINGS 48.382,13 547.380,66
3301 Legal 47.137,22 415.088,71
3302 General
3303 Specials 18,11 88.070,19
3305 Revaluation of assets 1.226,81 44.190,48
3306 Irredistributable legal reserve
3310 Due to non-operational results - 31,28
34 OTHER EQUITY CONTRIBUTIONS - 1.598,52
3401 Other equity contributions
3402 Donations - 1.595,35
3490 Others - 3,17
35 SURPLUS DUE TO VALUATIONS 6.264,69 187.118,69
3501 Surplus from valuation of property, equipment and others 6.461,16 158.384,97
3502 Surplus from valuation of investments in shares - 20.480,23
3504 Valuation of investments in financial instruments - 196,47 8.253,50
36 RESULTS 26.516,30 219.491,07
3601 Accumulated profits or surpluses 0,00 21.749,95
3602 (Accumulated losses) - - 24.196,78
3603 Profit or surplus for the year 26.516,30 225.422,47
3604 (Loss of exercise) - - 3.484,57
3 TOTAL ASSETS 422.613,12 3.523.833,12
+2+3 TOTAL LIABILITIES AND EQUITY 3.908.326,48 35.599.114,74

- - 0,01
5 INCOME 419.584,69 3.487.896,95
+2+3+5 TOTAL LIABILITIES, EQUITY AND INCOME 4.327.911,17 39.087.011,69
Figure 5. Balance sheet of a large bank and of the total number of private banks
in the
Ecuador as of
12/31/2016of Banks.
Source: Superintendence

PROFIT AND LOSS PAGE 1

FROM JANUARY 1, 2016 TO DECEMBER 31, 2016
Preliminaries
TOTAL PRIVATE
BANKS
First
BIMESTER
5 TOTAL INCOME 419.584,69 3.487.896,95
51 INTEREST AND DISCOUNTS EARNED 237.789,34 2.323.319,35 Second

5101 Deposits 655,90 11.994,89 BIMESTER
5102 Interbank operations - 88,52
5103 Interest and discounts on investments in securities 8.319,00 115.116,83
5104 Interest and discounts on loan portfolio 228.814,44 2.189.980,10
5190 Other interests and discounts - 6.139,01 Solver
41 INTEREST CAUSED 76.274,12 750.479,79
4101 Obligations to the public 63.499,21 636.593,91
4102 Interbank operations - 20,87 References
4103 Financial obligations 12.087,54 109.441,72 bibliographic
4104 Securities in circulation and obligations 542,51 3.854,34
4105 Other interests 144,86 568,95
MAR_NE_INT NET INTEREST MARGIN 161.515,22 1.572.839,57
Annexes
52 COMMISSIONS EARNED 40.753,85 244.695,90
5201 Credit portfolio 1.988,10 1.994,75
5202 Debtors by acceptance - 325,57
5203 Endorsements - 9.660,00
5204 Bail bonds 4.347,89 31.606,79
5205 Credit letters 3.214,17 15.885,33
5290 Others 31.203,69 185.223,46
54 SERVICE REVENUES 116.225,83 518.646,45
5404 Management and collections 6.149,01 6.724,64
5490 Other services 110.076,82 511.921,81
42 COMMISSIONS CAUSED 17.607,59 75.891,32
4201 Financial obligations - 4.197,97
4202 Contingent operations - 504,02
4203 Collections - 5.209,69
4205 Trust services - 165,55
4290 Several 17.607,59 65.814,08
53 FINANCIAL PROFITS 12.756,57 82.343,48
5301 Gain in exchange 3.040,16 12.983,87
5302 In investment valuation 6.922,07 32.782,23
5303 For sale of productive assets 2.546,72 18.207,09
5304 Income from commercial trust 5,89 17.155,27
5305 Financial leasing 241,73 1.215,02
5390 Others
43 FINANCIAL LOSSES 8.044,85 42.479,32
4301 Loss in exchange 511,27 2.170,45
4302 In investment valuation 6.251,23 12.295,27
4303 For sale of productive assets 834,20 11.109,42
4304 Losses due to commercial trust 161,48 860,87
4305 Investment premium in securities - 33,41
4306 Premiums on purchased portfolio 286,67 16.009,90
4390 Others
MAR_BR_END FINANCIAL GROSS MARGIN 305.599,03 2.300.154,76

PROFIT AND LOSS PAGE 2

FROM JANUARY 1, 2016 TO DECEMBER 31, 2016
44 PROVISIONS 64.777,65 469.168,82

4401 Investments - 25.951,97
4402 Credit portfolio 60.882,21 391.937,28
4403 Accounts receivable 1.329,99 26.089,78
4404 Realizable assets, awarded for payment 2.565,46 11.073,28
4405 Other assets - 9.568,64
4406 Contingent operations - 4.427,87
4407 Interbank and repo operations - 120,00
MAR_NE_E NET FINANCIAL MARGIN 240.821,38 1.830.985,94
ND
45 OPERATING COSTS 202.604,93 1.695.425,69

4501 Personal expenses 67.620,07 558.021,88
4502 Fee 2.039,29 83.935,13
4503 Various services 51.510,46 461.797,83
4504 Taxes, contributions and fines 33.981,24 293.265,39
4505 Depreciations 11.648,05 80.883,78
4506 Amortization 21.482,51 58.117,13
4507 Other expenses 14.323,32 159.404,54
SEA_INTER INTERMEDIATION MARGIN 38.216,45 135.560,25
M
55 OTHER OPERATIONAL INCOME 501,25 96.716,15

5501 Profits on stocks and shares 452,12 49.037,93
5590 Others 49,14 47.678,22
46 OTHER OPERATIONAL LOSSES 210,48 57.673,29
4601 Loss on stocks and shares 166,14 44.845,26
4602 Loss on sale of realizable and recovered assets 33,14 92,69
4690 Others 11,20 12.735,34
MAR_OPER OPERATIONAL MARGIN 38.507,22 174.603,11
A
56 OTHER INCOME 11.557,84 222.175,62

5601 Profit on sale of goods 449,43 7.883,08
5602 Profit on sale of shares and participations - 7,68
5603 Leases 2,40 3.001,85
5604 Recoveries of financial assets 10.692,84 140.002,50
5690 Others 413,17 71.280,50
47 OTHER EXPENSES AND LOSSES 3.179,25 38.904,66
4701 Loss on sale of goods 111,14 1.221,41
4702 Loss on sale of shares and participations - -
4703 Accrued interest and commissions 1.896,47 13.022,82
4790 Others 1.171,64 24.660,42
GAN_PER_ PROFIT OR (LOSS) BEFORE TAXES 46.885,81 357.874,07
A_IM
48 TAXES AND EMPLOYEE PARTICIPATION 20.369,51 135.936,17
GAIN_PER_ PROFIT OR (LOSS) FOR THE YEAR 26.516,30 221.937,90

AXE
Figure 6. Income statement of a large bank and of the total number of

banks
private of Ecuador from 01/01/2016 to 12/31/2016
Source: Superintendence of Banks.

ISBN: 978-99H2-25-H57-3

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Accounting

Accounting and auditing

The Catholic University of Loja

Bank accounting Bibliographic

The content of this work applies to the following subjects

■ Administration in Banking and Finance IV

■ Accounting and Auditing VII

The Catholic University of Loja

PARTICULAR TECHNICAL UNIVERSITY OF LOJA (ce) 4.0, CC BY-NY-SA

Layout and digital design: EDILOJA Cía. Ltd.

5. General guidelines for the study 11 References

FIRST TWO MONTHS Annexes

UNIT 1. THE NATIONAL FINANCIAL SYSTEM 14

1.1. Generalities of the financial system 15

1.2. Integration of the national financial system 29

1.3. Operations of financial entities 36

UNIT 2. ACCOUNTING REGIME AND INFORMATION 45

2.1. Bank accounting 45

2.2. Objectives of accounting information 46

2.3. Conceptual framework 46

2.4. Application and scope of the Single Catalog of Accounts 50

UNIT 3. UNIQUE CATALOG OF ACCOUNTS 58

3.1. Structure of the Single Catalog of Accounts 58

3.2. Accounting record of asset accounts 60

Practical activity 1 126

Practical activity 3 211 Bibliographic

Practical activity 2 179

67 OPEN AND DISTANCE MODALITY

Likewise, students will obtain a high level of theoretical-practical reasoning, which

The financial sector is an important manager of the productive development of our

77 OPEN AND DISTANCE MODALITY

The subject is structured as follows:

87 OPEN AND DISTANCE MODALITY

In the distance study modality, the teaching-learning process is centered on the

As a teacher of this subject, I will always be attentive to any requirements from

Congratulations on your decision to participate in this training process, I wish you

97 OPEN AND DISTANCE MODALITY

National Assembly of Ecuador (2014). Organic Monetary and Financial Code.

This code establishes the framework of policies, regulations, supervision,

Superintendency of Banks. (2017). Single Catalog of Accounts and instructions for

It is a technical manual issued by the Superintendency of Banks where the

10 7 OPEN AND DISTANCE MODALITY

reasonable financial statements that allow making sound management

On this website there is access to the Superintendency of Banks of Ecuador,

In this link there is access to the Association of Private Banks of Ecuador,

11 7 OPEN AND DISTANCE MODALITY

5. General guidelines for the study

With a view to taking advantage of these resources, some methodological

▪ To achieve the skills, it is recommended to use certain study techniques such as

▪ To achieve effective learning, it is necessary to organize your time by establishing

12 7 OPEN AND DISTANCE MODALITY

and time available. To this end, it is recommended to dedicate at least two

▪ Reinforce your learning with the development of self-assessments, proposed

127 OPEN AND DISTANCE MODALITY

▪ Evaluation constitutes a means of verifying the achievement of competencies;

▪ It is recommended to periodically review the subject evaluation system, which is

137 OPEN AND DISTANCE MODALITY

know” Albert Einstein

15 7 OPEN AND DISTANCE MODALITY