CBSE Class 12 Accountancy Notes
Last Updated : 21 Apr, 2025
Accountancy is a practice through which business transactions are recorded, classified, and reported for the proper and successful running of an organization. GeeksforGeeks Class 12 Accountancy Notes have been designed according to the CBSE Syllabus for Class 12. These revision notes consist of detailed Chapterwise important topics and concepts. Here, the learners can get easy access to the Chapterwise notes from the below-mentioned quick links. The notes contain 12 chapters covering every important topic like Accounting for Non-for-Profit Organisation, Partnership, Admission of a Partner, Retirement of a Partner, Issue of Shares, Issue of Debentures, Financial Statements of a Company, Cash Flow Statement, Computerised Accounting of a Company and so on.
PART - A (ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES)
Chapter 1: Accounting for Partnership: Basic Concepts
The concept of partnership is a solution to the problems of the sole proprietorship, such as a single person bearing the risk, investing, and managing the capital alone. The second chapter of Class 12th Accountancy Part-A, Accounting for Partnership:Basic Concepts consists of everything required to know about a partnership firm. It also includes the accounting treatment of different items and capital/current accounts of the partners. Some of the topics included in this chapter are Partnership Deed, Profit and Loss Appropriation Account, Past Adjustments, Guarantee of Minimum Profit to a Partner, and so on.
Chapter 2: Reconstitution of a Partnership Firm: Change in Profit Sharing Ratio
Any change in the agreement of a partnership, ends the partnership but the firm remains in existence. The existing agreement between partners ends and a new agreement comes into force which changes the relationship of partners. Such change is known as Reconstitution of Partnership. The third chapter of Class 12th Accountancy includes the change in partnership and relationship between partners when the partner change their profit sharing ratio. The topics included in this chapter are Methods of Calculating Goodwill, Accounting treatment of different items such as WCR, IFF, Partner's Capital Account, etc.
Chapter 3: Reconstitution of a Partnership Firm: Admission of a Partner
Any change in the agreement of a partnership, ends the partnership but the firm remains in existence. The existing agreement between partners ends and a new agreement comes into force which changes the relationship of partners. Such change is known as Reconstitution of Partnership. The next chapter of Class 12th Accountancy includes the change in partnership and relationship between partners when a new partner joins the partnership. Some of the topics included in the notes of this chapter are Computation of New Profit Sharing Ratio, Hidden Goodwill, Adjustment of Partner's Capital Account, Accounting Treatment of different items like Revaluation of Assets and Liabilities, etc.
Chapter 4: Reconstitution of a Partnership Firm: Retirement or Death of a Partner
Any change in the agreement of a partnership, ends the partnership but the firm remains in existence. The existing agreement between partners ends and a new agreement comes into force which changes the relationship of partners. Such change is known as Reconstitution of Partnership. The next chapter of Class 12th Accountancy includes the change in partnership and relationship between partners when a partner retires or dies. The important topics of this chapter includes Sacrificing and Gaining Ratio of the partners, Settlement Amount due to a Retiring Partner, Calculation of Share of Profit up to the Date of Death, Accounting Treatment of different items in case of Retirement or Death of a Partner, etc.
Chapter 5: Dissolution of Partnership Firm
Discontinuance of economic relationship between the partners of an organisation is known as Dissolution of firm. Chapter 6 notes of Class 12th Accountancy Part-A consists of everything a firm can do for dissolution and at the time of dissolution. Some of the important topics of this chapter are Accounting Treatment of Goodwill, Taking over of Business by a Partner, Memorandum Balance Sheet, Accounting Treatment of different items such as Contingent Assets and Liabilities, Joint Life Policy, etc.
PART - B (FINANCIAL STATEMENT ANALYSIS)
Chapter 1: Accounting for Share Capital
A company is an artificial person created by law, having separate entity with a perpetual succession and a common seal. For its course of business a company requires funds which it can attain through shares, etc. In the seventh chapter of Class 12th Accountancy Part- A notes, we will discuss about Share Capital and its Accounting in detail. The notes of this chapter cover different topics such as Types of Shares, Issue of Shares at Par, Premium, Oversubscription of Shares, etc.
Chapter 2: Issue and Redemption of Debentures
A company can also raise funds through issue of debentures. The last chapter of Part-A Class 12th Accountancy, Issue and Redemption of Debentures consists of everything required to know about debentures, its issue, and redemption. Some of the important topics included in this chapter are Kinds of Debentures, Issue of Debentures, Interest on Debentures, Redemption of Debentures, etc.
Chapter 3: Financial Statements of a Company
The accounting process ends with the preparation of the financial statement. The information about the financial position of any company is provided with the help of Financial Statements. The first chapter of Class 12th Accountancy Part-B, Financial Statements of a Company includes the two different financial statements of a company; i.e., Balance Sheet and Profit & Loss Account.
Chapter 4: Analysis of Financial Statements
The work of a company does not end with the preparation of its financial statements, it also has to analyse those statements and draw meaningful conclusions from them. The second chapter, Analysis of Financial Statements of Class 12th Accountancy Part-B, consists of all the information required to learn about the analysis of financial statements. The topics included in the notes of this chapter are Methods of Analysis, Process of Analysis, Comparative Statement, Common-size Statement, etc.
- Introduction to Financial Analysis
- Financial Analysis: Objective, Methods, and Process
- Financial Analysis: Need, Types, and Limitations
- Financial Analysis: Uses, Importance, Limitations
- Comparative Statement: Meaning, Importance and Techniques of Presenting Financial Statements
- Comparative Balance Sheet: Objectives, Advantages and Format of Comparative Balance Sheet
- Comparative Income Statement: Objectives, Advantages and Preparation and Format of Comparative Income Statement
- Common Size Income Statement: Objectives, Preparation, Format of Common Size Statement
- Common Size Balance Sheet: Meaning, Objectives and Format of Common Size Balance Sheet
Chapter 5: Accounting Ratios
One of the methods to analyse the financial statements of a company is Ratio Analysis. It defines relationship between various financial factors of a business. Accounting Ratio is the third chapter of Class 12th Accountancy Part-B and consists of different types of accounting ratios. The notes of this chapter give a detailed knowledge about the Different Types of Accounting Ratios, their Formula, and their Significance, with some examples in each for a better understanding of the topic.
- Ratio Analysis- Importance, Advantages and Limitations
- Types of Accounting Ratios
- Liquidity Ratio: Meaning, Types, Formula and Illustrations
- Current Ratio: Meaning, Significance and Examples
- Liquid/Quick Ratio: Meaning, Formula, Significance and Examples
- Solvency Ratio: Meaning, Formula, and Significance
- Debt-Equity Ratio: Meaning, Formula, Significance and Examples
- Total Assets to Debt Ratio: Meaning, Formula and Examples
- Proprietary Ratio: Meaning, Formula, Significance and Examples
- Interest Coverage Ratio | Meaning, Formula, Calculation and Examples
- Activity Ratio: Meaning, Formula and Significance
- Trade Receivables Turnover Ratio: Meaning, Formula, Significance and Illustration
- Trade Payable Turnover Ratio: Meaning, Formula, Significance and Examples
- Working Capital Turnover Ratio: Meaning, Formula, Significance and Examples
- Profitability Ratio or Income Ratio: Meaning, Formula and Significance
- Overall Profitability Ratio: Meaning, Formula, Significance, and Examples
- Gross Profit Ratio: Meaning, Formula, Significance and Examples
- Operating Ratio | Formula and Examples
- Operating Profit Ratio: Meaning, Formula, Significance and Examples
- Net Profit Ratio
- Return on Investment (ROI): Meaning, Formula, Significance and Illustrations
- Ratio Analysis Formula
Chapter 6: Cash Flow Statement
The financial statements of a company do not depict the true cash position of the company. For this, it has to prepare a Cash Flow Statement which is a summary of the different sources and applications of cash during a specific time period and analyses the reasons behind changes in cash balance between the two balance sheet dates. The fourth chapter of Class 12th Accountancy Part-B, Cash Flow Statement consists in detail of every information required to understand the concept with the help of examples. The topics included in the notes of this chapter are Objectives of Cash Flow Statement, Cash Flow from three different Business Activities, Treatment of Special Items, etc.
OR
PART - B (COMPUTERISED ACCOUNTING SYSTEM)
Chapter 1: Overview of Computerised Accounting System
A company’s accounting system is the core of its financial management, as it processes all transactions within the organization. It is a software application that automates financial records and reporting processes to make them faster, more accurate, and easier to manage. The first chapter of Class 12th Accountancy Part-B gives detailed knowledge about the Computerised Accounting System of a Company. The topics included in this chapter are Sourcing of Accounting Software, Features of Computerised Accounting System, Computer and its Components, etc.
Chapter 2: Accounting Application of Electronic Spreadsheet
A company requires spreadsheet applications to add and process its data. The next chapter of Class 12th Accountancy Part-B, Accounting Application of Electronic Spreadsheet consists of information regarding the concept of Electronic Spreadsheet, its Features, Application in Generating Accounting Information, and Data Representation.
- Concept of Electronic Spreadsheet
- Features offered by Electronic Spreadsheet
- Application in generating accounting information: Bank Reconciliation Statement, Asset Accounting, Loan Repayment of Loan Schedule, and Ratio Analysis
- Data Representation: Graphs, Charts, and Diagrams
Chapter 3: Using Computerised Accounting System
The last chapter of Class 12th Accountancy Part-B, Using Computerised Accounting System includes topics like Installation of CAS, Data: Entry, Validation, and Verification, Adjusting Entries, and Need and Security Features of the Computerised Accounting System.
- Steps in the installation of CAS, codification and Hierarchy of account heads, creation of accounts
- Data: Entry, Validation and Verification
- Adjusting Entries, Preparation of Balance Sheet, Profit and Loss Account with Opening and Closing Entries
- Need and Security features of the system
CBSE Previous Year Papers (2020)
Accounting for Non-for-Profit Organization (Not in Current CBSE Syllabus for 2024-2025)
Non-for-Profit Organisation is an organisation that works with the motive to render services to society and not profit-making. The below links describes the accounting treatment of different items in this organisation, its financial statements and other aspects. Some of the topics included are Balance Sheet in NPO, Introduction to NPO, Income and Expenditure Account of NPO, etc.
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CBSE Class 12 Accountancy Notes Accountancy is a practice through which business transactions are recorded, classified, and reported for the proper and successful running of an organization. GeeksforGeeks Class 12 Accountancy Notes have been designed according to the CBSE Syllabus for Class 12. These revision notes consist of deta
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PART-A
Chapter 1: Accounting for Partnership: Basic Concepts
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Accounting Treatment of Partner's Loan, Rent Paid to a Partner, Commission Payable to a Partner, Manager's Commission on Net ProfitPartner's Loan:Partner's Loan is created to Partner's Loan Account and not to Partner's Capital A/c. A Loan advanced by any partner is a charge against profit and not an appropriation of profit. According to the Indian Partnership Act,1932, Partner's Loan is repaid in priority to capital at the time
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Capital Accounts of the Partner: Fixed Capital MethodThe Partner's Capital Account is an account that records all the transactions between the Partnership firm and the partners to evaluate the partners' share in the firm (Partners' investment) at the end of the accounting period. The partners' capital account is adequately maintained to ensure transpa
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Capital Accounts of the Partner: Fluctuating Capital MethodThe Partner's Capital Account is an account that records all the transactions between the Partnership firm and the partners. The Capital Account is prepared to determine the partners' share in the firm at the end of the accounting period. Every item of the partner's concern, right from their initial
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Difference between Fixed Capital Account and Fluctuating Capital AccountThe Partner's Capital Account is an account that records all the transactions between the Partnership firm and the partners. The Capital Account is prepared to determine the partners' share in the firm at the end of the accounting period. Every item of the partner's concern, right from their initial
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Past Adjustments in Partnership Accounting | Cases & ExamplesIn a Partnership, the profit is divided among partners according to the conditions mentioned in the partnership deed. For example, according to the conditions of the Partner's Salary, Interest on Capital, etc. Even though there are conditions, sometimes partners forget to fulfil them or make some er
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Guarantee of Minimum Profit to a Partner: Journal Entries & ExampleGuarantee of Minimum Profit to a Partner means that a partner has been assured to receive a minimum amount of profit (Guaranteed Amount). This further means that if in any year, the actual share of the profit of the guaranteed partner is less than the Guaranteed Amount, then the deficiency shall be
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Chapter 2: Reconstitution of a Partnership Firm: Change in Profit Sharing Ratio
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Goodwill: Meaning, Factors Affecting Goodwill and Need for ValuationWhat is Goodwill?Goodwill is an intangible asset that represents the market value of a business firm. In simple words, Goodwill is a monetary value of a reputation of a business firm in the market, earned by the owner through his/ her hard work and best quality service. Goodwill of the firm enables
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Valuation of Goodwill: Meaning, Methods, Formulas & ExamplesA firm's Goodwill is the reputation earned by the firm through rendering quality services to its customers. A satisfied customer will come back to the firm again and again thereby, helping the firm to build up a solid customer base that yields more profit in the future. Thus, Goodwill is the market
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Super Profit Method of Calculating GoodwillGoodwill is the intangible asset of the business. An enterprise earns more profit than the normal profit because of Goodwill. Goodwill can be defined as the reputation of the business earned through hard work, honesty, quality, and customer satisfactory services. It helps to earn profits in the futu
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Capitalisation Method of Calculating GoodwillIn a common language, Goodwill means a 'reputation' or a 'good name'. Therefore, a Partnership firm's Goodwill is the reputation earned by the firm through rendering quality services to its customers. A satisfied customer will return to the firm, again and again, helping the firm build up a solid cu
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Accounting Treatment of Accumulated Profits and Reserves: Change in Profit Sharing RatioWhen the firm is reconstituted all the accumulated profit, reserves and losses are transferred to Partner's Capital Accounts (if capitals are fluctuating) or Current Accounts (if capitals are fixed) in their old profit-sharing ratio. This is done because the reserves or accumulated profits/losses be
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Accounting Treatment of Revaluation of Assets and Liabilities: Change in Profit Sharing RatioThe value of Assets and Liabilities undergoes a change with the passage of time due to many reasons, like regular wear and tear, appreciation in the value of assets, bankruptcy of any debtor, and so on. In the Partnership firm, whenever there is a change in the profit-sharing ratio among the partner
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Accounting Treatment of Partner's Capital Account in case of change in Profit Sharing Ratio (Fluctuating Capital)Capital is the amount contributed by the partners in the firm. Partner’s capital shows equity in a partnership owned by specific partners. It records the initial and subsequent contribution made by each partner and also the withdrawal made by the partner. Partner’s Capital Account shows the ownershi
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Adjustment in Existing Partner's Capital Account in case of Change in Profit Sharing RatioChange in profit-sharing Ratio or reconstitution of firm results in adjustment of capital accounts of the partners. The capital of the new firm is adjusted with respect to the new profit-sharing of the partners in the firm. When there is a change in the profit-sharing ratio or reconstitution of the
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Chapter 3: Reconstitution of a Partnership Firm: Admission of a Partner
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Computation of Sacrificing Ratio in case of Admission of a PartnerSacrificing Ratio is the ratio in which the old partners sacrifice their share of profit and loss in the firm for the new partner admitted. During the time of admission of new partners, there is a change in the profit sharing ratio. There is a change in the profit sharing ratio because the new partn
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Accounting Treatment of Goodwill in case of Admission of a PartnerWhat is Goodwill?Goodwill is an intangible asset that is either self-generated or purchased. It is the value of benefits that a business has because of the factors that help in increasing its profitability, say its location, favourable contracts, access to supplies and customer loyalty, etc. Goodwil
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Hidden Goodwill: Admission of a PartnerGoodwill is an intangible asset that is either self-generated or purchased. It is the value of benefits that a business has because of the factors that help in increasing its profitability say its location, favourable contracts, access to supplies and customer loyalty, etc. Goodwill is the reputatio
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Accounting Treatment of Revaluation of Assets and Liabilities in case of Admission of a PartnerThe value of Assets and Liabilities undergoes a change with the passage of time due to many reasons, like regular wear and tear, appreciation in the value of assets, bankruptcy of any debtor, and so on. In a Partnership firm, when a new partner is admitted into the business, it becomes necessary to
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Accounting Treatment of Accumulated Profits and Reserves in case of Admission of a PartnerWhen a new partner is admitted in a partnership firm, all the accumulated profit, reserves, and losses are transferred to Partner’s Capital Accounts (if capital is fluctuating) or Current Accounts (if capital is fixed) in their old profit-sharing ratio. This is done because the reserves or accumulat
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Accounting Treatment of Workmen Compensation Reserve: Admission of a PartnerWorkmen Compensation Reserve is the reserve created out of profits to meet the needs of employees or workers. An amount is kept aside in the reserve in name of workers to meet the unforeseen situation. A claim can or cannot be made against this reserve. Accounting treatment differs for situations ag
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Accounting Treatment of Investment Fluctuation Fund in case of Admission of a PartnerAn investment Fluctuation Fund is a reserve created out of profit to meet the change in the market value of the investment. Â An amount is kept aside in the reserve in name of fluctuation to meet the change in the value of the investment. The difference between the book value and the market value of
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Accounting Treatment of Partner's Capital Account: Admission of a Partner (Fixed Capital)Capital is the amount contributed by the partners in the firm. Partner's capital shows equity in a partnership that is owned by specific partners. It records the initial and subsequent contribution made by each partner and also the withdrawal made by the partner. Partner's Capital Account shows the
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Accounting Treatment of Partner's Capital Account: Admission of a Partner (Fluctuating Capital)Capital is the amount contributed by the partners in the firm. Partner's capital shows equity in partnership that is owned by specific partners. It records the initial and subsequent contribution made by each partner and also the withdrawal made by the partner. Partner's Capital Account shows the ow
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Preparation of Revaluation Account, Capital Account and Balance SheetIllustration 1:Amit and Sumit were partners sharing profit equally. A new partner, Ravi is admitted from 1st April 2022 for a  \frac{1}{5}th of the share in the profit. Following is the Balance Sheet of Amit and Sumit as on 31st March 2022: Additional Information:Ravi brought ₹40,000 as his Capital
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Adjustment of Partner's Capital Account: Admission of a PartnerWhenever a new partner is admitted, he/she brings an amount as capital either in proportion to his share of profit or the capital of old partners is adjusted to make them proportionate to their share of profits respectively. Such adjustment of capital can be done in either of the following ways:Case
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Chapter 4: Reconstitution of a Partnership Firm: Retirement or Death of a Partner
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Computation of New Profit Sharing Ratio: Retirement of a PartnerWhenever a partner retires from a firm, his/her share of profit is acquired either by all the remaining partners or some/ one of them. This leads to a change in Profit-Sharing Ratio among the continuing partners, and therefore, a New Profit-Sharing Ratio for each remaining partner is determined. A N
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Calculation of Gaining Ratio: Retirement of a PartnerWhat is Gaining Ratio?When a partner retires from a firm, his share of the profit is acquired by the continuing partners in a certain ratio, and a new profit-sharing ratio is determined. A Gaining Ratio is a ratio in which the remaining partners take over the share of the retiring partner. The purpo
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Difference between Sacrificing Ratio and Gaining RatioAfter the admission of a new partner or retirement or death of old partners in a partnership business, the new profit sharing ratio is calculated for all the remaining partners of the business. The new profit sharing ratio brings a change in the ratio in which partners were previously distributing t
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Accounting Treatment of Goodwill in case of Retirement of a PartnerWhat is Goodwill?Goodwill is an intangible asset that is either self-generated or purchased. It is the value of benefits that a business has because of the factors that help in increasing its profitability, say its location, favourable contracts, access to supplies and customer loyalty, etc. Goodwil
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Hidden Goodwill in case of Retirement of a PartnerGoodwill is an intangible asset that is either self-generated or purchased. It is the value of benefits that a business has because of the factors that help in increasing its profitability say its location, favourable contracts, access to supplies and customer loyalty, etc. Goodwill is the reputatio
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Accounting Treatment of Revaluation of Assets and Liabilities in case of Retirement of a PartnerThe value of Assets and Liabilities undergoes a change with the passage of time due to many reasons, like regular wear and tear, appreciation in the value of assets, bankruptcy of any debtor, and so on. In the Partnership firm, whenever a partner retires, it becomes necessary to revalue the assets a
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Accounting Treatment of Accumulated Profits and Reserves in case of Retirement of a PartnerWhen the firm is reconstituted all the accumulated profit, reserves and losses are transferred to Partner's Capital Accounts (if capital is fluctuating) or Current Accounts (if capital is fixed) in their old profit-sharing ratio. This is done because the reserves or accumulated profits/losses belong
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Accounting Treatment of Workmen Compensation Reserve in case of Retirement of a PartnerWhat is Workmen Compensation Reserve?Workmen Compensation Reserve is the reserve created out of profits to meet the needs of employees or workers. An amount is kept aside in the reserve in name of workers to meet the unforeseen situation. A claim can or cannot be made against this reserve. Accountin
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Accounting Treatment of Investment Fluctuation Fund in case of Retirement of a PartnerA reserve that is created out of profit to meet the change in the market value of the investment is termed an Investment Fluctuation Fund. Simply put, an amount is kept aside in the reserve in name of fluctuation to meet the changes in the value of the investment. The difference between the book val
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Accounting Treatment of Partner's Capital Account in case of Retirement of a Partner (Fixed Capital)A distinct account that records all the transactions between the Partnership firm and the partners to figure out the share of each partner in the firm at the end of the accounting period is known as the Partner's Capital Account. Every transaction right from the initial capital investment to their e
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Accounting Treatment of Partner's Capital Account in case of Retirement of a Partner (Fluctuating Capital)A Partner's Capital Account is a separate account that records all the transactions between the Partnership firm and the Partners in order to determine the share of each partner in the firm at the end of the accounting period. All the capital investments made by the partners are credited, and drawin
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Settlement of Amount due to a Retiring Partner when Full Amount is PaidWhen a partner retires from the firm, the firm is reconstituted. The firm continues its business with a change in the profit-sharing ratio. The account of the retiring partner is settled by either paying immediately the amount due to him/her or transferring the due amount to his/her loan account. If
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Settlement of Amount due to a Retiring Partner: Amount Paid in InstalmentSometimes the retiring partner may agree to receive the settlement amount in instalments instead of taking the full amount at once. The principal amount is then paid in an agreed number of instalments, and the settlement amount in such cases is transferred to the Retiring Partners' Loan Account. The
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Settlement of Amount due to a Retiring Partner: Transferred to Loan AccountA Retiring Partner is entitled to receive an amount of his share in the partnership firm after making all the adjustments related to goodwill, profit/losses, reserves, and accumulated profits, salary, commission, interests, and drawings. Such an amount can be paid to the retiring partner immediately
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Adjustment of Capital Account in case of Retirement of a PartnerWhenever a partner retires, the capital of the remaining partners is changed. As a result of this, some partners may have to bring in desired additional capital to fill in the deficit of their capital and some may have to withdraw the excess capital to match the requirement. The partners in the case
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Reconstitution of a Partnership Firm in case of Death of a PartnerOn the death of a partner, the partnership comes to end. The death of a partner does not mean the firm comes to an end as the partnership firm is a separate entity from the partners. After the death of a partner, the firm continues its operation, and the remaining partner acquires a share of the dec
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Calculation of Share of Profit up to the Date of Death of a PartnerA deceased partner's legal executors are entitled to receive a share of the profit until the death date of the deceased partner. Such profits are calculated from the date of the last Balance Sheet of the firm till the date of the death of the partner. As per the Indian Partnership Act 1932, the acco
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Adjustment of Interest on Deceased Partner's Capital, Deceased Partner's Share in Goodwill and Accumulated Profits and ReservesSimilar to the case of retirement, the Executor of the deceased partner is entitled to receive the interest on capital up to the date of the death of a partner. The executor is also entitled to get a share of Goodwill and Accumulated profits and reserves.1. Adjustment of Interest on Deceased Partner
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Accounting Treatment of Revaluation of Assets and Liabilities in case of Death of a PartnerWhat is Revaluation of Assets and Liabilities?The value of Assets and Liabilities undergoes a change with the passage of time due to many reasons, like regular wear and tear, appreciation in the value of assets, bankruptcy of any debtor, and so on. In the Partnership firm, whenever a partner retires
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Accounting Treatment of Accumulated Profits and Reserves in case of Death of a PartnerWhen the firm is reconstituted all the accumulated profit, reserves and losses are transferred to Partner's Capital Accounts (if capital is fluctuating) or Current Accounts (if capital is fixed) in their old profit-sharing ratio. This is done because the reserves or accumulated profits/losses belong
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Accounting Treatment of Workmen Compensation Reserve in case of Death of a PartnerWhat is Workmen Compensation Reserve?Workmen Compensation Reserve is the reserve created out of profits to meet the needs of employees or workers. An amount is kept aside in the reserve in name of workers to meet the unforeseen situation. A claim can or cannot be made against this reserve. Accountin
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Accounting Treatment of Investment Fluctuation Fund in case of Death of a PartnerWhat is Investment Fluctuation Fund?A reserve that is created out of profit to meet the change in the market value of the investment is termed an Investment Fluctuation Fund. Simply put, an amount is kept aside in the reserve in name of fluctuation to meet the changes in the value of the investment.
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Accounting Treatment of Partner's Capital Account in case of Death of a Partner (Fixed Capital)Capital is the amount contributed by the partners in the firm. Partner's capital shows equity in a partnership that is owned by specific partners. It records the initial and subsequent contribution made by each partner and also the withdrawal made by the partner. Partner's Capital Account shows the
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Accounting Treatment of Partner's Capital Account in case of Death of a Partner (Fluctuating Capital)Capital is the amount contributed by the partners in the firm. Partner's capital shows equity in a partnership that is owned by specific partners. It records the initial and subsequent contribution made by each partner and also the withdrawal made by the partner. Partner's Capital Account shows the
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Accounting Treatment of Amount Due to Deceased PartnerAfter making all the adjustments related to the partners, the balance due to the deceased partner is transferred to his/her executor's account. This amount is paid to the executor in either of the following ways:1. Lump-sum in a single instalment:Under this method of payment, the full amount due to
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Accounting Treatment of Joint Life Policy in case of Death of a PartnerWhat is Joint Life Policy?Joint Life Policy like any other life policy gives coverage against the death of the policyholder, however, under Joint Life Policy the coverage is of a minimum of two persons and the pay-out is on a first-death basis. In the Partnership firm, the partners may hold the Join
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Accounting Treatment of Individual Life Policy in case of Death of a PartnerThe firm may insure the life of the partners individually instead of taking a Joint Life Insurance. When the premium of the Individual Life Policy is charged against the Profit and Loss Account of the firm, then the Insured Amount is treated as the gain for the partners. So, the Representative of th
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Chapter 5: Dissolution of Partnership Firm
Difference between Dissolution of Firm and Dissolution of PartnershipA Partnership is an association of two or more people to conduct business. A Partnership is a relation between persons who agreed to share the profits of a business carried on by all or any of them acting for all. Partners are someone who is associated with another in a common activity or interest,
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Difference between Firm's Debt and Private DebtDebt is a liability that necessitates one party, the debtor, to pay another party, the lender, money or other consented value. Debt is a delayed payout, or set of payments, as opposed to an instant rebate. It is an important concept in the context of business finance and accounting. The separate ent
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Difference between Realisation account and Revaluation accountWhat is Realisation Account?At the time of dissolution of the Partnership firm, Assets are realised, outside liabilities are paid, loan by partner is repaid and the balance, if any, is distributed among the partners. Realisation account is prepared to close the books of accounts by realising assets
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Accounting treatment of Accumulated Profits, Reserves, and Losses in case of Dissolution of FirmAccumulated profit refers to a part of the firm's net profit that is preserved by the firm for future growth. It is also known as retained earnings or undistributed income. Accumulated profits and reserves show the financial position of the company in the long run in terms of earning, saving, and in
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Dissolution of Firm: Partner's Capital AccountWhat is Dissolution of a Firm?Dissolution of the firm is the discontinuation of the business and closure of all the books of accounts of the firm. Dissolution of the partnership means a change in the profit-sharing ratio of the existing partners in the firm and the business or the firm continues its
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Dissolution of Partnership Firm: Meaning and ExampleWhat is Dissolution of a Partnership Firm?Dissolution of the firm means dissolution of the partnership among the partners of the firm. The business is closed, and an end comes to the business relationship among partners on the dissolution of the firm. The firm is dissolved either by a court order or
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Accounting Treatment of Goodwill in case of Dissolution of FirmGoodwill is nothing but a monetary value of a reputation of a business firm in the market, earned by the firm by serving its customers. In a Partnership firm, Goodwill is treated like an asset; every partner has a right over the firm's goodwill up to his/her share in the business.In case of the Diss
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Accounting Treatment of Joint Life Policy in case of Dissolution of a FirmWhat is Joint Life Policy?Joint Life Policy is a life policy that gives coverage against the death of the policyholder, under which the coverage is of a minimum of two persons and the pay-out is on a first-death basis. Since the Partnership firm is a business run by at least two people, the partners
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Accounting Treatment of Contingent Assets and Contingent Liabilities in case of Dissolution of a firmContingent Assets: A Contingent Asset is an economic gain that may come into existence in near future as a result of some past action. The existence of such assets is completely uncertain and beyond the control of the entity. Example: Any property of a firm under some legal suit, and warranty receiv
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Part-B
Chapter 1: Accounting for Share Capital
Company and its TypesA company is one of the most important and prominent forms of business organization. It can be described as a voluntary association of individuals, having a common purpose, who agree to pool their funds and unite to achieve the said goals. It can be called an artificial person created under the juri
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Shares : Meaning, Nature and TypesWhat are Shares?When the total capital of the company is divided into units of small denominations, it is known as shares. For example, if the total capital of the company is ₹ 5,00,000, divided into 10,000 units of ₹50 each, each unit of ₹50 will be called a share (of ₹ 10 each). Thus, in the above
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Difference between Preference Shares and Equity SharesLife-blood of any business is finance. Sufficient finance for the company helps to grow and expand the company. The financial needs of any business are concerned with the acquisition and utilisation of funds. It is done through planning, acquiring, utilising, managing, and controlling funds in conne
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Share Capital: Meaning, Kinds, and Presentation of Share Capital in Company's Balance SheetWhat are Shares?When the total capital of the company is divided into units of small denominations, it is known as shares. For example, if the total capital of the company is ₹ 5,00,000, divided into 10,000 units of ₹50 each, each unit of ₹50 will be called a share (of ₹ 10 each). Thus, in the above
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Difference between Capital Reserve and Reserve CapitalCapital Reserve and Reserve Capital are most often confused same. However, the former is a reserve created out of the Capital Profits of a firm; whereas, the latter is a part of the increased nominal capital or uncalled share capital of an organisation which shall not be called up, except in the eve
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Accounting for Share Capital: Issues of Shares for CashA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Issue of Shares At Par: Accounting EntriesA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Issue of Shares at Premium: Accounting EntriesA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Issue of Share for Consideration other than Cash: Accounting for Share CapitalA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Issue of Shares: Accounting Entries on Full Subscription with Share ApplicationA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Calls in Arrear: Accounting Entries with Examples on Issue of SharesCalls in Arrear refer to the amount of money that a shareholder has not yet paid to a company on shares they have agreed to purchase. In the context of a company issuing shares, the payment for these shares is often requested in installments, known as "calls." If a shareholder does not pay an instal
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Calls in Advance: Accounting Entries with Examples on Issue of SharesCalls in Advance is the amount of future calls which is received by the company in advance. Calls in Advance is just opposite to Calls in Arrear. It is a situation when the shareholders of a company pay the amount not yet called upon their shares. Section 50 of the Companies Act, 2013 says that the
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Oversubscription of Shares: Accounting TreatmentA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Oversubscription of Shares: Pro-rata AllotmentA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Oversubscription of Shares: Pro-rata Allotment with Calls in ArrearA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Forfeiture of Shares : Accounting Entries on Issue of SharesWhat is Forfeiture of Shares?Cancellation of shares of a shareholder who fails to pay the amount due on allotment or on any call within the specific time period is known as Forfeiture of Shares. A company or its directors can forfeit the shares only if its Articles of Association allow for the same.
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Accounting Entries on Re-issue of Forfeited SharesA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Disclosure of Share Capital in the Balance Sheet: Accounting Entries on Issue of SharesA unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
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Chapter 2: Issue and Redemption of Debentures
Issue of Debentures: Meaning, Characteristics, Purpose of Issuing Debentures and ExampleA debenture can be described as a debt instrument issued by a company to the public in order to raise funds for medium or long-term usage. It is just like a bank loan, with debt obligation and liability for interest payment, but instead of borrowing from a bank, these are issued and traded in the ca
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Types of DebenturesWhat is Debenture?A debenture can be described as a debt instrument issued by a company to the public in order to raise funds for medium or long-term usage. It is just like a bank loan, with debt obligation and liability for interest payment, but instead of borrowing from a bank, these are issued an
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Difference between Shares and DebenturesIssuing of Shares and Debentures are two of the most prominent source of finance for any business. By issuing shares and debentures, any public company can generate finance from the market. Finance required by the business to establish and run its operations is known as Business Finance. No business
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Issue of Debentures: Accounting Treatment of Issue of Debenture and Presentation of debentures in balance sheet (with format)What is a Debenture?A written instrument or document which is issued by the company acknowledging the borrowings is known as Debenture. In this document, the terms of repayment of principal and payment of interest at a specific rate are stated. According to Section 2(30) of the Companies Act, 2013,"
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Issue of Debenture at Par and PremiumWhat is a Debenture?A written instrument or document which is issued by the company acknowledging the borrowings is known as Debenture. In this document, the terms of repayment of principal and payment of interest at a specific rate are stated. According to Section 2(30) of the Companies Act, 2013,"
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Issue of Debentures for Consideration other than CashIssue of Debentures for consideration other than cash means that the company has not received amount (in cash or by cheque) against the debentures issued. Debentures may be issued for consideration other than cash in the following situations:To promoters of the company for rendering services for inc
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Issue of Debenture as Collateral SecurityWhat is Issue of Debentures as Collateral Security?A company may have to issue debentures as a subsidiary or secondary security in addition to the principal security when it takes a loan from a bank or from other party, this is known as Issue of Debentures as Collateral Security. Collateral security
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Interest on DebenturesA debenture can be described as a debt instrument issued by a company to the public in order to raise funds for medium or long-term usage. It is just like a bank loan, with debt obligation and liability for interest payment, but instead of borrowing from a bank, these are issued and traded in the ca
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Redemption of DebenturesWhat is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
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Redemption of Debentures: Meaning, Sources and Rules regarding RedemptionWhat is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
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Redemption of Debentures in case of Lump-SumWhat is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
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Redemption of Debentures in case of InstallmentWhat is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
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Redemption of Debentures in case of Purchase of Own DebenturesWhat is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
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