Definition Of Financial Institutions And Banking Accounting Essay

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Financial institutions according to Law No.14/1967 (Suytano et al, 1996, p1) is "all entities through its activities in the financial sector, withdrawing money from and channeled into the community".

Financial Institution (financial institution) according to Minister of Finance Decree No. SK. Kep 792 of 1990 on Financial Institutions (Irmayanto et al, 1998, p1) are all entities in the financial sector kegitannya do the collection and disbursement of funds to the community, especially to finance corporate investment.

Thus, it can be concluded that the financial institution is any entity that kegitannya raise and channel funds to the community.

The definition of banking under Article 1 of Law No.14/1967 on the Principles of Banking (Suyatno et al, 1996, p1) is a "financial institution that provides loans and basic business services in a payments traffic and circulation of money".

Bank according to A. Abdurrachman in the Encyclopedia of Finance and Trade Economics (Irmayanto et al, 1998, p1) is a type of financial institutions that perform a wide range of services, such as loans, currencies listening, monitoring of the currency, acting as a repository of valuable objects, finance business firms and others.

Bank according to Law Decree No.7 of 1992 (Irmayanto et al, 1998, p1) on Banking is a business entity which collects funds from the public in the form of savings and channel them to the public in order to improve the standard of living of the people.

Thus, it can be concluded that the banks are financial institutions that provide payment services in the traffic and circulation of money by collecting funds from the public in the form of deposits and channel funds to the community by providing the credit / loan.


The purpose of Banking

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The purpose of banking is a collector and distributor of public funds and aims to support the implementation of national development in order to improve the distribution of development and the results - the results. Economic growth and national stability. towards improving the living standard of the people. Banks have a strategic position. Namely to support the smooth payment system.

Pelakasanan monetary policy and the achievement of financial system stability. So that the bank needed a sound, transparent and accountable (Djojosoedarjo. 2000).


Theory - Theory of Banking

Understanding Banking

Under the Law - Banking Law No. 10 of 1998 (Kasmir. 2000. Appendix) banking is all that concerns about the bank, covers institutional, business activities, as well as the manner and process in conducting their business activities. Basic functions of banking institutions as stated in the Act - Act No. 7 of 1992 on Banking is a body that performs mobility and channel the funds back to the community in the form of credit by establishing the concept that demands every banker to be - the heart in running the business.

Definition of Bank

According to the Supervisory Board of Bank of Rural Folk (DPBR) in Indonesia bank website, the bank is an entity that collects funds from the public in the form of deposits and deliver to the public in the form of loans and or form - other forms in order to improve the standard of living of the people.

Legal basis is the Law - Law of the Republic of Indonesia Number 7 of 1992 challenged AS amended by the Banking Act - Act No. 10 of 1998. By type bank consists of two types, namely:


A. Commercial Banks

Commercial banks are the banks that carry out business activities or berdasrkan conventional and sharia principles in its activities providing services in payment traffic.

Second. Prekeditan Bank Rakyat (BPR)

BPR is a bank conducting conventional business and or based on sharia principles in their activities do not provide services in a payments traffic.

Legal form of commercial banks and BPR can be a Limited Liability Company. Local companies and cooperatives

Bank

Understanding

According to RI Law number 10 year 1998 (revised Law no. 14 Year 1992) that the Bank is a business entity that collects funds from the public in the form of savings and channel them to the public in order to improve the standard of living of the people.

According Taswan (2006, p4) that the Bank is an institution intended to receive demand deposits, time deposits, and pay on the basis of documents drawn on a specific person or institution, discount securities, loans and invest their funds in securities.

From the definition of the bank, the nature of banking business can be distinguished as follows, namely:

  1. Assets side, the business activities associated with the use or allocation of funds is primarily intended to benefit.

  2. Pasuva hand, the act of withdrawing funds from the public and other third parties with a variety of debt instruments.

  3. Side services, ie activities that berkaiitan of services in the payment mechanism.

Type of Bank

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According Kamsir (2003, p20) the types of the Bank is divided into four kinds, namely:

  1. In terms of its function.

    • Commercial Bank

    • Rural Bank (RB)

  2. In terms of ownership.

    • Bank owned by the government, eg, Bank Rakyat Indonesia (BRI), the State Savings Bank (BTN), and Bank Mandiri.

    • National Private Bank, for example: Bank Bukopin, Bank Lippo.

    • Foreign-owned bank, for example: HSBC, Deutsche Bank.

    • Bank a proprietary blend, for example: PDFCI Bank, Mitsubishi Bank.

  3. In terms of status.

    • Bank Foreign Exchange

    • Non Bank Foreign Exchange

  4. In terms of how to determine the price.

    • Banks are based on conventional principles

    • Bank is based on sharia principles

Bank function

Indonesia is banking functions as a collector, dealer and service activities in the traffic and the payment of money circulation in the community aimed at supporting the implementation of the national builders, in order to improve equity, economic growth and national stability in the direction of improving the welfare of the people. In summary bank functions can be divided into the following:

  1. Grouper funds to perform its functions as a collector of funds the bank has several sources that there are three sources, namely:

    • Funds sourced from its own bank in the form of capital injection time of establishment.

    • Funds derived from the public collected through the banking business such as business demand deposits, time deposits and Tabanas,

    • Funds sourced from financial institutions from lending funds obtained in the form Call Money Credit and liquidity (funds can be withdrawn at any time by the borrowing bank).

  2. Dealer or lender Bank in its activities not only keep the proceeds, but to re-channel their utilization in the form of bank credit to the people who need fresh money to the effort. Certainly in the implementation of this function will get the bank expected a revenue source for the imposition of interest or in the form of credit. Lending would pose a risk, therefore it is the gift to be really careful and meet the requirements. Credit is given in the form:

    • nvestment Credit

    • Working Capital Loan

    • Trade Credit

    • Credit Consumptive

    • Earning Credit

  3. Suppliers of Funds. Funds collected by the bank channeled to the public in the form of loans, purchases of securities, investments, property ownership remains.

  4. Provide services

    • Receiving deposits such as tax payments, telephone payments, payment of water and electricity.

    • Serve payments such as salary / pension / honorarium, payment of dividends, coupon payments.

    • Transfer (Remittance) is an inter-bank money transfers services, both among the same bank or different banks.

      Suppliers of Funds. Funds collected by the bank channeled to the public in the form of credit pemberikan, purchase securities, equity, fixed-price owners.

    • Receiving deposits such as tax payments, telephone payments, payment of water and electricity.

    • Serve payments such as salary / pension / honorarium, payment of dividends, coupon payments.

    • Transfer (Remittance) is an inter-bank money transfers services, both among the same bank or different banks.

    • collection (Collection) is an inter-bank services billing slips that come from out of town.

    • Clearing (Clearing) is a service withdrawal slips (check or demand deposit) that originate in one city.

    • Safe Deposit Box is a document storage services, the form of securities or valuables.

    • Bank Card is a service issue credit cards that can be used in a variety of transactions and cash withdrawals at ATMs (Automatic Teller Machine).

    • Bank Notes (FX) is the buying and selling activities of foreign currencies.

    • Letter of Credit (L / C).

      But if the above functions are classified again the bank function can be divided into two, namely:

    • Main function, including: fund raising, financing, increased benefits from public funds, and underwriting risk.

    • Additional functions include: providing money transfer facilities, the use of checks, and bank guarantees.

Capital Bank

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Definition of bank capital under the Policy Package May 29, 1993, quoted from Dahlan Slamet (2001, P104) then there is a distinction between capital for a bank that was founded and headquartered in Indonesia and the capital for a branch office located in foreign countries.

Capital for the bank, founded and headquartered in Indonesia consists of: Core Capital and Supplementary Capital.

Core Capital. The core model components can be:

a. Capital paid up

Capital which has been effectively paid by the owner. For banks that formed the cooperative law, paid-in capital consists of principal savings, mandatory savings and capital investment as stipulated in Law no. 25 of 1992 neighbor Cooperatives.

b. paid-in capital

Ie the excess of capital contributions received by the bank as a result of the stock price exceeds its face value.

c. Capital contribution

Capital that is recovered from the donations of shares, including the difference between the carrying value of the sale price if the shares are sold. The capital comes from outside donations received by the bank in the form of cooperative law also included in the definition of capital contributions.

d. General Reserves

Reserve that is formed from the elimination of retained earnings or net profit after tax, and approved by general meeting of shareholders or meeting of members in accordance with the provisions of the establishment or the articles of association of each bank.

e. Backup destination

Ie the profit after tax is set aside for specific purposes and has been approved by the general meeting of shareholders or meeting of members.

f. retained earnings

Namely the balance of net profit after tax is set aside for specific purposes and has been approved by the general meeting of shareholders or meeting of members.

g. profit last year

That is all net profit years ago after tax, and has not been established for use by the general meeting of shareholders or meeting of members. In this case the bank had a balance of the year-ago loss, all losses are a deduction from core capital.

h. Income year

Namely profit obtained in the current accounting year after deducting the estimated tax bill. The amount of profit that the current accounting year is calculated as a core capital by 50%. In this case if the current year the bank suffered a loss, the entire loss is a deduction from core capital.

Amount of core capital is as stated in the letters a through h above, reduced by:

A. Existing goodwill in the books of banks.

2. Shortage of allowance for asset which should be the product of the amount established in accordance with the provisions of Bank Indonesia.

Establishment of Bank objectives

The main purpose of the establishment of banks in Indonesia as:

Agent of Development . As the maintenance of monetary stability in Indonesia.

financial intermediary . As an intermediary collection and channeling of funds is reflected through product dihasilkananya services, among others:

  • Receive money transfer services, both at home and abroad.

  • Carry your valuables security services through Safe Deposit Box.

  • Gathering and through checking, savings and time deposits.

  • Channelling funds through the provision of credit.

  • Guarantor emissions for companies that will sell their shares.

  • Hold a payment transaction with the foreign trade sector.