TIME DESCRIPTION OF ECONOMIC REFORMS

Despite capital and liabilities serving as the primary sources of assets in commercial banks, the current accounting methodology fails to provide a clear, comprehensive, and precise reflection of their formation, classification, and settlement. The existing Chart of Accounts and related regulatory guidelines do not sufficiently capture the nuances of short-term versus long-term liabilities or the detailed recording of interest expenses, leading to an incomplete picture of a bank’s financial health. This deficiency hampers the ability of both internal management and external stakeholders to accurately assess the bank’s resource utilization, liquidity, and solvency. Consequently, there is a critical need to develop an improved accounting framework that aligns more closely with the economic substance of banking transactions and meets the evolving requirements of regulatory oversight and decision-making. The purpose of the article is to critically examine the current accounting methodology for capital and liabilities in commercial banks, identifying its deficiencies in accurately capturing and reporting financial operations. It aims to propose methodological improvements and revisions to the Chart of Accounts to enhance transparency, precision, and regulatory compliance in bank financial reporting. The object of the study is the accounting methodology used in commercial banks for recording, classifying, and reporting capital and liabilities, including the regulatory framework and the structure of the Chart of Accounts that underpins these practices. The study’s methodological basis is grounded in established accounting principles and regulatory frameworks (including the Civil Code, Law on Banks, and Central Bank guidelines), while its information base comprises financial statements, normative documents, and empirical data from commercial banks. The main hypothesis of the study is that the current accounting methodology for capital and liabilities in commercial banks inadequately reflects their true financial positions, and that targeted improvements in classification and reporting can significantly enhance transparency and decision-making. Presentation of the material. The main material of the article presents a thorough analysis of the accounting methodology for capital and liabilities in commercial banks, focusing on the classification, recording, and reporting of these financial elements based on existing regulatory frameworks in Azerbaijan. It highlights the role of capital and liabilities in the formation of a bank's assets, with particular emphasis on the equity capital structure, the use of share issuance, and the management of long-term and short-term liabilities. Additionally, the study identifies deficiencies in the current system, including inadequate accounting for term and on-demand accounts and generalized reporting of interest expenses, and proposes recommendations for improving the Chart of Accounts and accounting practices to ensure the accurate representation of the financial health of commercial banks. The originality of the article lies in its critical assessment of the existing accounting methodology for capital and liabilities in commercial banks, highlighting deficiencies that impact financial transparency and decision-making. The practical significance of the study is its proposed improvements to the Chart of Accounts and accounting practices, which can lead to enhanced reporting accuracy, regulatory compliance, and more informed decision-making both internally for bank management and externally for stakeholders. Conclusions. The study concludes that the current accounting methodology for capital and liabilities in commercial banks does not adequately reflect the complexities of financial transactions, leading to deficiencies in transparency and reporting accuracy. It demonstrates that refining the Chart of Accounts and updating classification practices-especially regarding short-term versus long-term liabilities and interest expenses-are essential to improve decision-making and regulatory oversight. These methodological enhancements are expected to support more precise financial analysis and contribute to greater stability and confidence in the banking sector

capital structure, liabilities management, equity capital, charter capital, chart of accounts, com-mercial banking.

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