Question

A1 (a) Bank Muscat collect bills for encashment on behalf of its customers. It is a part of its secondary functions. During the year 2019 it received bills for collection amounting to OMR 2,000,000. The balance on bills for collection on 31/12/2018 amounted to OMR 200,000. It returned the dishonoured bills to its customers amounting to OMR 25,000.
Bills collected during the year amounted to OMR 850,000. Record these transactions in the journal and prepare the ledger for the same.
(b) Banks provide the vital resource for an economy to survive and run smoothly. There are various types of banks which cater to the growth of a country namely, housing bank, industrial bank, commercial bank, agricultural bank etc.

   (i) Explain the meaning of commercial bank in your own words. How are the commercial banks useful to Oman’s economy?  ( 2 marks)

(ii) Mr. Ahmed wants to start a business. All his financial transactions will be through bank. His father retired from his office due to old age. His mother is doing some home tuition for school students. Now Ahmed, his father and his mother all three wants to open a bank account. You recommend the type of account to be opened by these three different people and explain their special features. ( 3 marks)

Answer 1

A1, (a) JOURNAL ENTRIES

DATE	PARTICULARS	DEBIT	CREDIT
1/1/2019	customers account	25000
	bank account		25000
31/12/2019	Cash account	850000
	customer's account		850000

(b) i) COMMERCIAL BANKS

Commercial bank is a financial institution which performs the function of accepting deposits from the general public and giving loans for investment with the aim of earning profit. it also has some secondary functions like agency services,general utility servics, transfer of funds and credit creations.

It offers an array of facilities such as internet banking, mobile banking, ATM faciity, credit card facility, NEFT, RTGS and so forth for which it charges a definte sum as a fee for providingtese facilities.

Commercial bank plays a vital role in the developmetof Oman's economy, bank focusingmore on housing,agriculture and fisheries and they also offet potential solutions for lenders facedwithnarrowing margins.

ii) There are different types of accounts are provided by bank. Among them Savings account, fixed account, retiremnt account are suitable for Mr.Ahmed  and his family.

1.SAVINGS ACCOUNT

these are typically the first oficial bank account anybody opens. It is a excellent place to park emergency cash. This account is offered by most banks, credit unions, and other financil institution.we can withdraw money at any time.

Banks paya certain amount as interest for your savings. some savings account offer higher rate of inteest than others.

2. FIXED DEPOSIT ACCOUNT

It refers to an investment scheme tthat banks and non- banking financing companies provide. It offer greater returns on the principle compared to other account. The minimal balance needed to open a fixed deposit is Rs.5000. Some banks provide additional services to FD holders such as loan against FD certificate. its important to note that banks may offer lesser interest rate under uncertain economic condition.

3.   RETIREMENT ACCOUNT

It is a tax addvantaged investing tool that individuals used to earmark funds for retirement savings. it helps to secure retired life financially. it covers several retirement plans and taxpayer are eligible for tax deductions of uptoRs.1.5 lakhs.