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Major item is Interest received on loans and advances.Then comesDiscount and CommissionInterest earned on InvestmentsEarning from foreign exchange dealingsService charges collected.Agency business -For doing govt business -Turn over commission from RBI(mostly public sector banks.Rent Realised.This is for General InformationAccording to Sec 29 of the Banking Regulation Act ,1949 banks have to prepare balance sheet and profit and loss account in the prescribed form ,Schedule III is Balance sheet and Form B gives Income Classification as follows:-Interest and DiscountCommission ,Exchange and brokerageSubsidies and Donations ReceivedIncome from Non Banking Assets and profit from sale or dealing with such assetsOther Receipts (specify )

3 billion dollars.That’s the factual answer.This is a fascinating question. But not for the reasons which most people might think.You simply cannot estimate the total worth of all current unused Amazon gift cards. Because that involves a lot of very specific information that rests in the bowels of Amazon’s accounting ledgers, financial models and operations departments.So how do I know the answer?Because you don’t have to estimate this.Amazon reports this information publicly in every major financial filing (at least four times a year).I found the answer within one minute of reading this question using a simple “word search” in their annual report on the Securities and Exchange Commission (SEC) site.Here’s their annual report for 2017.DocumentNo, you don’t need to read the whole thing.Hold down CTRL +F and search for the term “gift card” in the document. It’s a massive one but the word appears only about a half dozen times.Here’s the key relevant part which will give you your answer on page 48.“Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to unredeemed gift cards, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses. As of December 31, 2016 and 2017, our liabilities for unredeemed gift cards was $2.4 billion and $3.0 billion.”If you want to get even more specific, the very latest figure would be found in their latest SEC filing (3rd quarter of 2018) and that is $1.7 billion.You might notice how that number has come down considerably from $3 billion since the end of 2017. That’s almost certainly because a disproportionate number of gift cards get sold during the final quarter of the year (Thanksgiving and especially Christmas). So expect that number to increase sharply when they report their annual results for this year. It will probably be somewhere between $3.5–4 billion, given Y/Y revenue increases.All of that now is the answer to the wording of this question and to be frank, it is somewhat mundane.Why then did I mention this question as being fascinating?Because such products as gift cards are a tricky matter for retail firms in terms of estimating and reporting profitability.See, unlike all other products, with gift cards the expense is not incurred by the business when they take the cash price from the customer. Not unless the customer uses the card right away to buy what they want (which would defeat the whole purpose of a gift card). But the retailer is on the hook for providing the services or products at some point in the future when the customer redeems the card.Gift cards are essentially speaking, interest free loans from customers to the business.The tough part is now two foldEstimating “breakage”(i.e. how many customers will never use that card). Breakage is the opposite of overage. Gyms do that all the time. The level of breakage in the fitness club business is especially high because many if not most gym members will not use the service. Not so much with gift cards because most of them will get used especially when you are a retailer like Amazon which sells so many things that an Amazon gift card is almost like cash.How to estimate when the services will have to be provided.This is critical because of the time value of money. Things are made much simpler if there is a short duration to use it. Because you then simply close the books out on that date and have effectively been gifted (no pun intended) that money by the customer for nothing.It is critical to keep in mind here that businesses typically cannot report the money collected by gift card sales as revenue if the card is not redeemed and still viable. Because the principle of accounting is that you generally recognize revenue only when you have delivered the service (and hence incurred the expense). Both need to match. Do not confuse revenue with cash. So when you buy that Groupon which expires in two years, Groupon cannot claim that as revenue unless until when you use that coupon or else two years from now when it expires. It’s cash in the coffers but revenue is not merely money, it is a statement about business operations.That amount stays on the balance sheet as a liability (effectively an IOU note) until then. And is balanced out on the asset side with the cash you paid.But now things get really tricky because apparently Amazon gift cards have no expiration date.Now in their annual report above for 2017 Amazon mentions the following, which will give you some insight about how they estimate breakage“We reduce the liability for a gift card when redeemed by a customer. If a gift card is not redeemed, we recognize revenue when it expires or when the likelihood of its redemption becomes remote, generally two years from the date of issuance.”Now $3 billion is a relatively small amount for Amazon’s revenue. But interestingly enough that’s exactly how much their annual profit was in 2017 (of course the two “$3 billion”s have no relation and the unused gift cards have no part in even the revenue, let alone $3 billion net profit.Amazon (and Wall Street bankers and analysts) will then have to see that of that total $3 billion, what tranches were sold in which prior months. The older the unused card, they might start drawing it down in terms not of reporting standards but such things as valuation.These are some really interesting matters which people think of as dry and technical but are critical when you want to understand the financial guts of a business.They are interesting not in a merely academic sense like splitting hairs on some esoteric technicality simply out of some fetish for detail. No, because they have key consequences in the real world in terms of stock prices and assessment of the value of a company.Apparently, the F.A.S.B. (Financial Accounting Standards Board) which sets generally used accounting principles (GAAP) in America changed the rules sometime earlier this year to give companies more leeway to report some parts earlier and not have to wait till the last day of the last year when the card expires. This would be some critical implications for the likes of Walmart and Amazon. But that’s a different topic for another time.I am also curious why they report unused gift cards as “Accrued Expenses” and not “Unearned Revenue” (both would be liabilities). To be fair, I am a man of finance and it is something that accountants may know better.Men like me only need to know how to read and speak the language of money, but they’re the ones who actually write it.

The following might sound familiar. Think about it & pl take a stand against the hypocrisy.Warning: It's a forward, but definitely worth a read.Question: how do you convert Rs.50 lakh into Rs.1,600 crore? You won’t get an answer from any of the learned professors at Harvard Business School. But you will if you hire a clever Indian chartered accountant.Here’s how it goes. You run a political party. You accept “donations” from the public. Your audited balance sheets show that, between 2004-05 and 2010-11, you received Rs. 2,008 crore in donations – officially. As a political party you are exempt from all taxes – income-tax, service tax, capital gains tax.So you have a fairly healthy corpus of reserves which you are supposed to use – as per Election Commission (EC) guidelines – strictly for “political” purposes.So what do you do? Why, you go right ahead and give an unsecured loan of Rs. 90 crore from your political party’s healthy fund reserves, built through public donations, to a defunct newspaper publishing company.This company, by sheer coincidence, has a debt of Rs. 90 crore. The loan from your party extinguishes that debt and makes the defunct newspaper publishing company debt-free and employee-free.But does the defunct newspaper publishing company have any value? Well, it owns, among other assets, a large building in the heart of Delhi on land specifically granted to newspaper publishing companies to publish newspapers. The estimated value of the building? Rs.1,600 crore.So, here we have a defunct newspaper publishing company which does not publish anything, much less a newspaper, with zero debt, zero employees, near-zero sundry expenses – and a building worth Rs. 1,600 crore.Now what? Your clever Indian chartered accountant, not all those learned professors at Harvard Business School, provides the answer: float a new non-profit company to buy up the defunct company’s shares for a token Rs. 50 lakh.Kosher? Absolutely.Laws broken? Perhaps.But it will take a decade or more to prove they were – if they were – and public memory is conveniently short.But, your spokesmen say, the political party made “no commercial gain” from the Rs. 90-crore loan transaction. Exactly. The political party in fact made a commercial loss of Rs. 90 crore (the unsecured loan). The commercial gain was made by the new non-profit company which now owns a building valued at Rs. 1,600 crore, having paid just Rs. 50 lakh to buy 100% shareholding in the defunct newspaper publishing company.Interestingly, 76% of the shares of this new asset-rich but non-profit company belong to two senior leaders of the party. Since the defunct newspaper publishing company was owned by dozens of now-deceased shareholders of the grand old party, should not the shares of the new non-profit company belong to the party as a cooperative rather than to a few individuals? Ah, but this is no ordinary political party. It’s a family enterprise.What next? No newspaper is being published from the building. All staff have left. The building is empty. The clever Indian chartered account regards this as a criminal waste of real estate.Rent it out, he says, and you do. The income after all can always be set off against expenditure designated under the head “charitable purposes” so that your balance sheet shows no profit. That takes care of the letter, if not the spirit, of the law.Is renting space in your building illegal? It may not be if your new company has as one of its objectives in its Articles of Association the business of renting real estate. And if it doesn’t, it can always be appended later by your clever chartered accountant.If, on the other hand, you now restart the paper, under media and political duress, all floors of the building will be needed for operations. Hundreds of retrenched staff will have to be re-hired. The current income from rent will vanish. Expenditure will spiral. Daily newspapers can lose as much as Rs. 100 crore a year. Another Rs. 90 crore debt write-off may be required in the near future. So restarting a newspaper under duress is a poor option, your chartered accountant tells you.But what would the Harvard Business School professor, having heard both sides of the story, recommend you do?Simple. Reverse the entire transaction, he’d say. Return the Rs. 90-crore unsecured loan to your political party. Restore ownership of the Rs. 1,600-crore building to the original defunct newspaper publishing company by transfering back to it the 100% shareholding your new non-profit company bought from it for Rs. 50 lakh.If you do that, this episode will become required reading as a Harvard Business School case study titled: “How to place public interest above private interest”.And if you don’t? You might well lose the next general election and have to restart the newspaper after all.