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N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaass
12PAccountancy
aa
aaddaassaa
ww. . P th
– Study Materials
w
w .P.P
w
www w
www
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N Nett
e N Neett
lalai.i. l l i
a .i.
CHAPTER-1 ACCOUNT FROM INCOMPETE RECORDS
a l a
l i
a

et
assaa I VERY SHORT ANSWER QUESTION

aaddas
a aa
s
ad
a a
d s
a aa
s
PP
1. What is meant by incomplete record?
. . . P
. P

.N
w w
w www
www www
When accounting records are not strictly maintained according to double entry system. Them
records are called incomplete records.

lai
2. State the accounts generally maintained by small sized sole trader when double entry

N Neettaccounting system is not followed?

N Neett
• Generally, cash and personal accounts are maintained fully.

l a
l i
a .i. l a i
a .i.
• Real and nominal accounts are not maintained.
l l a
l i
a
sa
assaa a ddaasaa
s
3. What is a statement of affairs?

a ddaassaa
• It is a statement showing the balances of assets and liabilities on a particular date.
a a
ww. P
. P w
w . P
. P
• It is prepared under single entry system to find out capital.
w
www w
www
da

• Capital = Assets -Liabilities

II SHORT ANSWER QUESTION

1. What are the features of incomplete records?

Pa

N Neett N Neett
l a
l i
a .i. Nature

l a
lai .i. l a
l i
a
assaa aa aa
•
•
ddaass ddaas
Accounting principles are not followed properly.s
It is an unscientific way of recordings transactions.

aa aa
w.

ww. P
. P
Type of accounts maintained
w
w . P
. P
•
w
www w
www
Only cash and personal accounts are maintained fully.
ww

• Real and nominal accounts are not maintained properly.

Lack of uniformity

N Neett N Neett
l a
l i
a .i. •
l lai.i. l a
l i
Different organizations record their transactions according to their need and
a a
assaa aa aa
conveniences.

d aass
2. What are the limitations of incomplete records?
d d a
d s
a s
.P. Paa
Lack of proper maintenance of records
. P
. Paa
w w
w w w
w
•
•
www www
It is an unscientific way of maintaining records.
Real and nominal accounts are not maintained.

Difficulty in preparing trial balance

N Neett N N e ett
lalai.i. l a
l i
a .i.
R. MANIKANDAN M COM, M.B.A., BED PH; 9094033454
l a
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a
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N Neett •
N Neett
lalai .i. •
l l i
a .i.
The accounting records are incomplete.
a l a
l i
a
assaa aa aa
Hence, it is difficult to prepare trial balance.

ddaass ddaass
Errors and frauds

. P
. Paa .P.Paa
•
www w
w
Errors and frauds cannot be easily detected from partial records.
w
www www
3. State the difference between double entry system and incomplete records.

Basic Double entry system Incomplete records

N Nett
e Types of accounts
N Neett
All accounts are maintained Only personal and cash

lalai.i. maintained
l a
l i
a .i. l a
l i
a accounts are maintained

et
assaa s aa
s s aa
s
Suitable It is suitable for all types of It is only suitable for sole

aaddaa organization
ad
a a
d a trading and partnership

. P
.P . P
. P firms

.N
w
w
Preparation of trial balance
w ww
It can be prepared easily
w
It is difficult to prepare it

www
Reliability
Recording of transactions www
It is reliable
Both debit and credit
It is not reliable
Both debit and credit
aspects are recorded aspects are not recorded

lai
completely

N Neett N Neett
l a
l i
a .i. l a
l i
a .i. l a
l i
4. State the procedure for calculating profit and loss through statement of affairs.
a
sa
assaa •
addaasaa
s
aaddaassaa
The difference between the closing and opening capital are taken as profit or loss of
a
• ww. P
. P
the business.
w
w . P
. P
w
www w
Due adjustments are to be made for drawings (+) and additional capital (-).
www
da

Statement of profit or loss for the year ended….

Particulars Rs.
Pa

N Neett (+)
N Neett
Closing capital
Drawings
XXX
XXX

l a
l i
a .i. l a
lai .i. l a
l i
a________

assaa ssaa saa

s XXX

ad
adaa (-) Additional capital
aaddaa XXX
w.

ww. P
. P w
w . P
. P ________

w
www (-) w
Adjusted closing capital
www
Opening capital
XXX
XXX
ww

________
Profit or loss XXX

N Neett N Neett
l a
l i
a .i. •
l lai.i. l a
l i
If adjusted closing capital is more than the opening capital- Profit
a a
assaa aa aa
•

ddaass d a
d s
If adjusted closing capital is lesser than the opening capital- Loss
a s
.P. Paa . P
. Paa
5. Difference between statement of affairs and balance sheet.

w w
w w w
w
www
Basic
Reliable
www
Statement of affairs
It is not reliable
Balance sheet
It is reliable
Accounting system It is prepared from single It is prepared from double
entry system entry system

N Neett N N e ett
lalai.i. l a
l i
a .i.
R. MANIKANDAN M COM, M.B.A., BED PH; 9094033454
l a
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a
assaa s saa ssaa
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N Neett N Neett
lalai .i. Missing items
l a
l i
a .i.
It is very difficult to trace
the missing items
l a
l i
a
Missing items can be traced
very easily

assaa aa
Basis of preparation

aadd ssaa a
It is not fully based on
ledger
aadd assaa It is fully based on ledger

Objective
ww. P
. P w
w .P.P
It is prepared to find out the It is prepared to find out the
w
www
capital
w
www
financial position

6. How is the amount of credit sale ascertained from incomplete records?

• By preparing total debtors accounts credit sale can be prepared

N Nett
e N Neett
lalai.i. DR.
l l i
a .i.
TOTAL DEBTORS ACCOUNT
a l a
l i
a
CR.

et
assaa Particulars
To balance b/d
aaddas
a
XXX
aa
s Rs. Particulars

ad
a a
d s
a aa
s
By cash a/c (received) XXX
Rs.

(opening balance)
. P
.P XXX
. P
. P
By bank a/c (cheques XXX

.N
w w
w www
www www
To sales a/c (credit XXX received)
sales) By discount allowed XXX
To bank a/c (cheque XXX a/c XXX

lai
dishonoured) By sales returns a/c XXX
To bills receivable a/c XXX By bad debts a/c XXX

N eett
(bills dishonoured)
N N Neett By bills receivable a/c XXX

l a
l i
a .i. l a
l i
a .i. (bills received)
l a
l i
a
sa
assaa saa s aa
By balance c/d XXX

ddaa s ddaa s
(closing balance)

. P
. Paa __________________
. P
. Paa __________________

www XXX
w w
w XXX

www www
da

***********ALL THE BEST *********

Pa

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ad
adaassaa
aaddaasaa
s
w.

ww. P
. P w
w . P
. P
w
www w
www
ww

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N N e ett
lalai.i. l a
l i
a .i.
R. MANIKANDAN M COM, M.B.A., BED PH; 9094033454
l a
l i
a
assaa s saa ssaa
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N Neett N Neett
lalai .i. l a
l i
a .i.
CHAPTER-2 ACCOUNTS OF NOT-FOR-PROFIT ORGANIZATIONS
l a
l i
a
assaa ssaa ssaa
I VERY SHORT ANSWERS

aaddaa
1. State the meaning of not-for-profit organization.
aaddaa
ww. P
. P w
w .P.P
• Some organizations are established for the purpose of rendering services to the
w
www
public without any profit motive. w
www
• These organizations are called not for profit organization.
• EX: art, culture, education, sports, etc.
2. What is receipts and payments account?

N Nett
e N Neett
• It is a summary of cash and bank transactions of not-for-profit organization prepared

lalai.i. l a i
a .i.
at the end of each financial year.
l l a
l i
a

et
assaa s aa
s s aa
s
• It is a real account in nature.

aaddaa ad
a a
d a
• It begins with the opening of cash and bank balances.

. P
.
3. What is legacy?
P . P
. P

.N
w w
w www
www www
• A gift made to a not-for-profit organization by a will, is called legacy.
• It is a capital receipt.
4. Write a short note on life membership fees.

lai
• Amount received towards life membership fee from members.

N Neett • It is a capital receipt.

N Neett
l a
l i
a .i. l l i
a .i.
• It is non-recurring in nature.
a l a
l i
a
sa
assaa aa aa
5. Give four examples for capital receipts of not-for-profit organization.

ddaass
• Sale of fixed assets
ddaass
• Legacy
. P
. Paa . P
. Paa
ww
• Life membership fees
w w w
w
www www
da

• Endowment fund
6. Give four examples for revenue receipts of not-for-profit organization.
• Interest on fixed deposit
Pa

• Sale of old news papers

N Neett • Interest on investment

N Neett
l a
l i
a .i. • Subscription
l a
lai .i. l a
l i
a
assaa II SHORT ANSWERS
ad
adaassaa
aaddaasaa
s
w.

ww. P
. P
1. What is income and expenditure account?
w
w . P
. P
w
www
• It is nominal account. w
www
• It is prepared to find out surplus and deficit relating to a particular year.
ww

• It is just like preparing profit and loss account.

• Only revenue and income and expenditure items are recorded.

N Neett N Neett
• Depreciation and outstanding expenses are also recorded.

l a
l i
a .i. l a
lai.i. l a
l i
a
2. State the difference between receipts and payments account and income and expenditure

assaa saa
s s aa
s
account.
Basic
aaddaa d
Receipts and payment
aa a
d a Income and expenditure

w
w .P. P account
w
w. P
. P account

w
www
Nature of account
Basis of accounting w
www
It is real account
It is based on cash system
It is nominal account
It is based on accrual system
Opening and closing It commences opening There is no opening and
balance balance and end with closing balance
closing balance

N Neett N N e ett
lalai.i. l a
l i
a .i.
R MANIKANDAN M COM, M.B.A.,BED.,PH; 9094033454
l a
l i
a
assaa s saa ssaa
SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM , CH-89

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N Neett N Neett
lalai .i. Nature of items
l a
l i
a .i.
It contains actual receipts
and payments
l a
l i
It contains only revenue
a
expenses and incomes

assaa Purposes

aaddaassaa aas
It is prepared to know the

aa
cash receipt and cashdd saa It is prepared to know the
surplus and deficit

ww. P
. P payment
w
w .P.P
w
www w
www
3. How annual subscription is dealt with in the final accounts of not-for-profit organization?
The annual subscription is dealt with in the final accounts of following as:
• Treatment in income and expenditure account

N Nett
e • Treatment in balance sheet
N Neett
lalai.i. DR.
l a
l i
a .i.
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED….
l a
l i
a CR.

et
assaa Expenditure Rs.
aaddas
a aa
s Income
ad
a a
d s
a
Rs. aa
s Rs.

. P
.P . P
By subscription
. P XXX

.N
w w
w Less:
www
www www
subscription for
the previous year
XXX
______________
XXX

lai
Less:

N Neett N Neett
subscription for XXX

l a
l i
a .i. l a
l i
a .i.the subsequent
l a
l i
a
sa
assaa aa aa
year ______________

ddaass a
XXX
dd ass
. P
. Paa Add:
outstanding
. P
. PaaXXX
www w w
w
www www
da

subscription for
the current year ______________
XXX
Add: received
Pa

N Neett N eett
in advance during XXX
the previous year ______________
N
XXX

l a
l i
a .i. l a
lai .i. for the current
l a
l i
a
assaa ssaa saa
s
year

ad
adaa aaddaa
w.

ww. P
. P w
w .
BALANCE SHEET AS ON…..P
. P
Liabilities w
www Rs. w
www Assets Rs.
ww

Subscription received Outstanding

in advance for the XXX subscription for the:

N Neett
subsequent year

N Neett Current year

Previous year
XXX
XXX

l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aad aasaa
s
ad
a a
d s
a aa
s
4. How the following items are dealt with in the final accounts of not-for- profit
d
organization?

w
w .P. P
SALE OF SPORTS MATERIALS
w
w. P
. P
w
www w
www
• Consumable items such as sports material, stationary, medicines, etc. consumed
during the year.
• Consumption= opening stock + purchases – closing stock.

N Neett N N e ett
lalai.i. l a
l i
a .i.
R MANIKANDAN M COM, M.B.A.,BED.,PH; 9094033454
l a
l i
a
assaa s saa ssaa
SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM , CH-89

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N Neett N Neett
lalai .i. LIFE MEMBERSHIP FEES
l a
l i
a .i. l a
l i
a
assaa s aa s aa
•
•
ddaa s ddaa s
Amount received towards life membership fee from members.

•
. P
. Pa
It is a capital receipt.
a
It is non-recurring in nature.
.P.Paa
www w w
w
www
TOURNAMENT FUND

•
www
If there are any specific funds such as tournament fund, prize fund, etc. it is shown on
liabilities side of balance sheet.

N Nett
e • It is a revenue receipt.
N Neett
lalai.i. •
l l i
a .i.
It is recurring in nature.
a l a
l i
a

et
assaa aaddas
a aa
s
*************ALL THE BEST ************
ad
a a
d s
a aa
s
. P
.P . P
. P

.N
w w
w www
www www

l a
l i
a N
.i. Neett
lai l a
l i
a N
.i. Neett
l a
l i
a
sa
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
da
Pa

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ad
adaassaa
aaddaasaa
s
w.

ww. P
. P w
w . P
. P
w
www w
www
ww

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N N e ett
lalai.i. l a
l i
a .i.
R MANIKANDAN M COM, M.B.A.,BED.,PH; 9094033454
l a
l i
a
assaa s saa ssaa
SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM , CH-89

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N Neett N Neett
lalai .i. l a
l i
a .i.
CHAPTER-3 ACCOUNTS OF PARTNERSHIP FIRM FUNDAMENTALS
l a
l i
a
assaa ssaa ssaa
I VERY SHORT ANSWERS

a
1. Define partnership.
addaa aaddaa
ww. P
. P w
w .P.P
• The relation between persons who have agreed to share the profits of a business
w
www w
www
carried on by all or any of them acting for all.
-Indian Partnership Act,1932
2. What is meant by fixed capital method?
• The capital of the partners is not altered and remains generally fixed.

N Nett
e N Neett
• Two accounts are maintained for each partner

lalai.i. l a
l i
a .i.
(a)Capital account
l a
l i
a

et
assaa s aa
s s aa
s
(b)Current account

aaddaa
3. Why is profit and loss appropriation account prepared?
ad
a a
d a
. P
.P . P
. P
• It is prepared for the purpose of adjusting the transaction relating to the amount

.N
w w
w www
www www
due to and amount due from partners.
4. What is a partnership deed?
• It is a document in writing that contains the terms of the agreement among the

lai
partners.

N Neett N N ett
• It is also called articles of partnership.
e
l a
l i
a .i. l l i
a .i.
5. Why is profit and loss appropriation account prepared?
a l a
l i
a
• It is prepared for the purpose of adjusting the transaction relating to the amount
sa
assaa aasaa
s
due to and amount due from partners.
aadd aaddaassaa
6. What is the journal entry to be passed for providing interest on capital to a partner?

w . P
. P
• For providing interest on capital
w w
w . P
. P
w
www w
www
da

Date Particulars L.F. Debit Credit

Interest on capital a/c Dr. XXX
To partner capital / current a/c XXX
Pa

N Neett (Interest on capital provided)

N eett
• For closing interest on capital account
N
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa s aa saa
Date Particulars L.F. Debit Credit

ddaa s
Profit and loss appropriation a/c Dr.
ddaa s XXX
aa aa
w.

ww. P
. P
To interest on capital a/c
(Interest on capital closed)
w
w . P
. P XXX

w
www w
www
ww

II SHORT ANSWERS

1. State the features of partnership.

N Neett N Neett
• It is an association of two or more person.

l a
l i
a .i. l a
lai.i.
• Minimum 2 and maximum number of members 50 limited.
l a
l i
a
assaa a dd asaa
s
• They agreement may be oral or written.
a ad a
d s
a aa
s
• It’s carried on by all or any of them acting for all.
a a
w
w .P. P w
w. P
. P
2. State the difference between fixed capital method and fluctuating capital method.
w
www
Basic
w
www
Fixed capital method Fluctuating method
Number of accounts Two accounts are maintained Only pone account capital
(a)Capital account account is maintained.

N Neett N N e ett
lalai.i. l a
l i
a .i.
R MANIKANDAN MCOM., M.B.A., BED., PH;9094033454
l a
l i
a
assaa s saa ssaa
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N Neett N Neett
lalai .i. Change in capital
l a
l i
a .i.(b)Current account
The amount of capital not
l a
l i
a
The amount of capital changes

assaa aa
Closing balanceddaassaa
a
It always shows the credit
adda
changes from period to period.
assaa from period to period.
It always shows the debit or

ww. P
. P balance.
w
w .P.P credit balance.
w
www
Adjustments
w
www
All adjustments done in current
account.
All adjustments done in capital
account.

3. State any six contents of a partnership deed.

N Nett
e N N ett
• Name of the firm and nature and place of business
e
lalai.i. l a
l i
a .i.
• Date of commencement and duration of business
• Names and addresses of all partners
l a
l i
a

et
assaa as
a aa
s
• Capital contributed by each partner
aadd
• Profit sharing ratio ad
a a
d s
a aa
s
. P
.P . P
. P

.N
w w
w www
• Amounts of drawings allowed to each partner

www www
4. Write a brief note on the applications of the provisions of the Indian partnership act, 1932
in the absence of partnership deed.

lai
Remuneration to partners:

N Neett N Neett
• No salary or remuneration is allowed to any partner. [Sec 13(a)]

l a
l i
a .i. l a
l i
a .i. l a
l i
a
sa
assaa aa aa
Profit sharing ratio:

• ddaass ddaass
. . Paa . P
. Paa
Profits and losses are to be shared equally. [Sec 13(b)]
P
ww
Interest on capital
w w w
w
www www
da

• No interest is allowed on capital. [Sec 13]

Interest on loans advanced by partners to the firm:

Pa

N Neett •
eett
Interest on loans is to be allowed at the rate of 6%. [Sec 13(d)]
N N
l a
l i
a .i. Interest on drawings:
l a
lai .i. l a
l i
a
assaa •
ddaassaa
ddaasaa
s
No interest is charged on the drawings of the partners.
aa aa
w.

ww. P
. P w
w . P
. P
w
www w
www
****************ALL THE BEST ****************
ww

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N N e ett
lalai.i. l a
l i
a .i.
R MANIKANDAN MCOM., M.B.A., BED., PH;9094033454
l a
l i
a
assaa s saa ssaa
SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM CH-89

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N Neett N Neett
lalai .i. l a
l i
a .i.
CHAPTER-4 GOODWILL IN PARTNERSHIP ACCOUNT
l a
l i
a
assaa ssaa ssaa
I VERY SHORT ANSWERS

a
1. What is goodwill?
addaa aaddaa
ww. P
. P w
w .P.P
• It is the good name or reputation of the business.
w
www
• It is an intangible asset.
• It has no physical existence.
w
www
• It is shown under fixed assets in the balance sheet.
2. What is acquired goodwill?

N Nett
e N Neett
• Goodwill acquired by making payment in cash or kind is called acquired goodwill.

lalai.i. l a
l i
a .i. l a
l i
a
• The excess of purchase consideration over the value of net assets acquired is treated

et
assaa s aa
s s aa
s
as acquired goodwill.

aaddaa
• It is also called purchased goodwill.
ad
a a
d a
. P
.P
3. What is super profit?
. P
. P

.N
w w
w www
www www
• It is the excess of average profit over the normal profit of the business.
• Super profit = Average profit – Normal profit
4. What is normal rate of return?

lai
• It is the rate at which profit is earned by similar business entities in the industry

N Neett under normal circumstances.

N Neett
l a
l i
a .i. l a
l i
a .i. l a
l i
5. State any two circumstances under which goodwill of a partnership firm is valued.
a
sa
assaa aa aa
• Change in profit sharing ratio

ddaass
• Admission of a partner
ddaass
P aa
• Retirement or death of a partner
. . P . P
. Paa
ww
• Dissolution of partnership firm
w w w
w
www www
da

II SHORT ANSWERS

1. State any six factors determining goodwill.

Pa

• Profitability of the firm

N Neett N eett
• Favorable location of the business enterprises
N
l a
l i
a .i. l a
lai .i.
• Good quality of goods or service offered
l a
l i
a
assaa ad
ad assaa
• Efficiency of management
a aaddaasaa
s
w.

• Degree of competition

ww. P
. P
• Tenure of the business enterprises
w
w . P
. P
w
www
• Other factors w
www
2. How is goodwill calculated under the super profit method?
ww

• Average profit = Total profits / Number of years

• Normal profit = Capital employed x NRR

N Neett N Neett
• Capital employed = Fixed assets + Current assets – Current liabilities

l a
l i
a .i. • Super profit
l a
lai.i.
= Average profit – Normal profit
l a
l i
a
assaa saa s aa
• Goodwill
ddaa s d d a s
= Super profit x No. of years of purchase
a
.P. Paa . P
. Pa
3. How is the value of goodwill calculated under the capitalization method?
a
• Capitalized value of the business = Average profits / No. of years x 100

w w
w w w
w
www www
• Capital employed = Fixed asset + Current asset – Current liabilities
• Goodwill = Capitalized value of the business – Capital
Employed

N Neett N N e ett
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a .i.
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N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa
CHAPTER-5 ADMISSION OF A PARTNER

aassaa aassaa
I VERY SHORT ANSWERS
P Paadd P Paadd
ww. . w
w . .
1. What is meant by revaluation of assets and liabilities?
w
www w
www
• When a partner is admitted into the partnership the assets and liabilities are
revalued as the current value may differ from book value.
• Determination of current value of assets and liabilities is called revaluation of assets
and liabilities.

N Nett
e N Neett
2. How are accumulated profits and losses distributed among the partners at the time of

lalai.i. admission of a new partner?

l a
l i
a .i. l a
l i
a

et
assaa aa aa
• Any reserve fund, accumulated profit and loss belong to the old partners and hence

ddas
a s d a
d s
a s
these should be distributed to the old partners in the old profit-sharing ratio.

. P
.Paa . P
. Paa
• Profit and losses of previous year which are not distributed to the partners are called

.N
w w
w www
www www
accumulated profits and losses.
3. Give the journal entry for writing off existing goodwill at the time of admission of a new
partner.

tt
lai tt
Date Particulars L.F. Debit Credit

i N
.i. Nee i N
.i.
Old partner capital a/c
Nee Dr.
i XXX

l a
l a l a
l
To Goodwill a/c
a l a
l a XXX
sa
assaa aaddaasaa
s
(Being existing goodwill is written off)

aaddaassaa
ww. P
. P
4. What is sacrificing ratio?
w
w . P
. P
w
www w
www
da

• It is ratio of share sacrificed by the old partners.

• Share of the new partner is the sum of share sacrificed by the old partners.
5. State whether the following will be debited or credited in the revaluation account.
(a)Depreciation on assets (b)Unrecorded of liability
Pa

N Neett N Neett
(c)Provision for outstanding expenses (d)Appreciation of assets

l a
l i
a .i. l
(a) Depreciation on assets
a
lai .i. -
l
Debited
a
l i
a
assaa ad
adaassaa
(b)Unrecorded of liability -
aaddaasaa
s
Debited
w.

. P
. P
(c)Provision for outstanding expenses
ww w
w .
- P
. P Debited
w
www
(d)Appreciation of assets w
www - Credited
ww

II SHORT ANSWERS

N Neett N eett
1. What are the adjustments required at the time of admission of a partner?
• Distribution of accumulated profits, reserves and losses.
N
l a
l i
a .i. l a
lai.i.
• Revaluation of assets and liabilities.
l a
l i
a
assaa aadd asaa
s
• Adjustment for goodwill.
ad
a d s
a aa
s
• Determination of new profit-sharing ratio and sacrificing ratio.
a a
w
w .P. P w
w. P
. P
• Adjustment of capital on the basis of new profit-sharing ratio.
w
www w
www
2. What are the journal entries to be passed on revaluation of assets and liabilities?

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SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM CH-89

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N Neett N Neett
lalai .i. l l i
a .i.
*For increase in the value of asset
a
*For decrease in the amount of liability
l a
l i
a
assaa aassaa
*For recording unrecorded asset

aadd JOURNAL ENTRY

aaddaassaa
Date
ww. P
. P
Particulars
w
w .P.P L.F. Debit Credit
w
www Concerned asset a/c
Concerned liability a/c
w
www Dr.
Dr.
XXX
XXX
To Revaluation a/c XXX
(Assets and liabilities are recorded)

N Nett
e N Neett
lalai.i. l a
l i
a .i.
*For decrease in the value of asset
*For increase in the amount of liability
l a
l i
a

et
assaa aaddas
a aa
s
*For recording unrecorded liability
JOURNAL ENTRY
ad
a a
d s
a aa
s
. P
.P . P
. P

.N
Date Particulars L.F. Debit Credit
w w
w www
www www
Revaluation a/c Dr. XXX
To Concerned asset a/c XXX
To Concerned liability a/c XXX

lai
(Assets and liabilities are recorded)

N Neett N Neett
l a
l i
a .i. *For profit on revaluation

l a
l i
a .i. JOURNAL ENTRY
l a
l i
a
sa
assaa Date

aaddaas
Particularsaa
s
Revaluation a/c
aaddaassaa
Dr.
L.F. Debit
XXX
Credit

ww. P
. P
To Old partner capital a/c
w
w . P
. P XXX

w
www w
www
da

(Revaluation of profit transferred to capital

account)
Pa

N Neett *For loss on revaluation

N Neett
l a
l i
a .i. Date Particulars
l a
lai .i. JOURNAL ENTRY

l a
l i
a
L.F. Debit Credit

assaa aassaa
Old partner capital a/c

ad
ad aaddaas
Dr.aa
s XXX
w.

To Revaluation a/c XXX

ww. P
. P w
w . P
. P
(Revaluation of profit transferred to capital a/c

w
www w
www
3. Write a short note on accounting treatment of goodwill.
When new partner brings cash towards goodwill
ww

• When the new partner brings cash towards goodwill in addition to the amount of
capital.

N Neett N N ett
• It is distributed to the existing partners in the sacrificing ratio.
e
l a
l i
a .i. l a
lai.i. l a
l i
a
When the new partner does not bring goodwill in cash or in kind

assaa •
addaasaa
s
ad
a a
d s
a aa
s
If the new partner does not bring goodwill in cash or in kind, his share of goodwill
a
w
w P. P w
w. P
. P
must be adjusted through the capital accounts of the partners.
.
w
www w
www
When the new partner brings only a part of the goodwill in cash or in kind

• Sometimes the new partner may bring only a part of the goodwill in cash or assets.

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SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM CH-89

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a .i. l a
l i
a
assaa d da as saa
daassaa
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N Neett •
N Neett
lalai .i. l a
l i
a .i. l a
l i
In such a case, for the cash or the assets brought, the respective account is debited
a
assaa aa aa
and for the amount not brought in cash or kind, the new partners capital account is
debited.
ddaass ddaass
. P
. Paa
Existing goodwill
.P.Paa
www w w
w
•
www www
If goodwill already appears in the books of accounts, at the time of admission if the
partners decide.
• It can be written off by transferring it to the existing partner capital or current
account in the old profit-sharing ratio.

N Nett
e N Neett
lalai.i. l a
l i
a .i. l a
l i
a

et
assaa s aa
s s aa
s
**************ALL THE BEST *************

aaddaa ad
a a
d a
. P
.P . P
. P

.N
w w
w www
www www

l a
l i
a N
.i. Neett
lail a
l i
a N
.i. Neett
l a
l i
a
sa
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
da
Pa

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ad
adaassaa
aaddaasaa
s
w.

ww. P
. P w
w . P
. P
w
www w
www
ww

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www
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SWAAMI VIVEKANANDA MATRIC HR SEC SCHOOL RAMAPURAM CH-89

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N Neett N Neett
lalai .i. l a
l i
a .i.
CHAPTER-6 RETIREMENT AND DEATH OF A PARTNER
l a
l i
a
assaa ssaa ssaa
I VERY SHORT ANSWERS

aaddaa
1. What is meant by retirement of a partner?
aaddaa
ww. P
. P w
w .P.P
• When a partner leaves from a partnership firm, it is known as retirement.
w
www w
www
• It is also called outgoing or retirement partner.
• On retirement of a partner, existing agreement comes to an end.
2. What is gaining ratio?
• The continuing partners may gain a portion of the share of profit of the retiring

N Nett
e partner.
N Neett
lalai.i. l a
l i
a .i.
• Gaining ratio = New share – Old share
l a
l i
a

et
assaa s aa
s s aa
s
• It is calculated at the time of retirement.

aaddaa
3. What is the purpose of calculating gaining ratio?
ad
a a
d a
. P
.P . P
. P
• The purpose of finding the gaining ratio is to be bear the goodwill to be paid to the

.N
w w
w www
www www
retiring partner.
4. What is the journal entry to be passed to transfer the amount due to the decreased
partner to the executor of the deceased partner?

lai
Date Particulars L.F. Debit Credit

N Neett Deceased partner capital a/c

N Neett Dr. XXX

l a
l i
a .i. l a
l i
a .i.
To Deceased partner executor a/c
l a
l i
a XXX
sa
assaa saa
s ssaa
(Being deceased partner amount transferred to

aaddaa
capital account)
aaddaa
ww. P
. P w
w . P
. P
w
www w
www
da

II SHORT ANSWERS

1. List out the adjustments made at the time of retirement of a partner in a partnership firm.
• Distribution of accumulated profits, reserves and losses.
Pa

• Revaluation of assets and liabilities.

N Neett N Neett
• Determination of new profit-sharing ratio and gaining ratio.

l a
l i
a .i. l a
lai .i.
• Adjustment for goodwill.
l a
l i
a
assaa ad
adaassaa
aaddaasaa
s
• Adjustment for current year profit or loss up to the date of retirement.
w.

• Settlement of the amount due to the retiring partner.

ww. P
. P w
w . P
. P
2. Distinguish between sacrificing ratio and gaining ratio.
w
www
Basic
w
www
Sacrificing ratio Gaining ratio
ww

Meaning A share of profit sacrificed by the A share of profit gained by existing

old partner to a new partner partner from retiring partner

N Neett Time of
eett
It is calculated at the time of
N N
It is calculated at the time of

l a
l i
a .i. calculation
l lai.i.
admission of a partner
a l a
l i
retirement of a partner
a
assaa aa aa
Formula Sacrificing ratio = old ratio - new Gaining ratio = new ratio – old

d aass
ratio
d d a
d s
a s ratio
Purpose
.P. Paa . P
. Paa
It is calculated to determine the It is calculated to determine the

w w
w w
w
amount to be adjusted towards
w
amount to be adjusted towards

www www
goodwill for the sacrificing partners goodwill for the gaining partners

3. What are the ways in which the final amount due to an outgoing partner can be settled?
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N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aa aa
*Cash due paid immediately

ddaass JOURNAL ENTRY

ddaass
Date
. P
. Paa
Particulars
.P.Paa L.F. Debit Credit

wwwRetiring partner capital a/c

w w
w Dr. XXX

www To Cash/Bank a/c

www
(Being cash due paid immediately recorded)
XXX

*Cash due not paid immediately

N Nett
e N Neett
JOURNAL ENTRY

lalai.i. Date Particulars

l a
l i
a .i. l a
l i
a
L.F Debit Credit

et
assaa aa aa
Retiring partner capital a/c Dr. XXX

as
a s
To Retiring partners loan a/c
dd d a
d s
a s XXX

. .Paa . P
. Paa
(Being cash due not paid immediately recorded)
P

.N
w w
w www
www
*Cash due paid partly immediately www
JOURNAL ENTRY

lai
Date Particulars L.F. Debit Credit

N Neett To cash/ Bank a/c

N Neett
Retiring partner capital a/c Dr. XXX
XXX

l a
l i
a .i. l a
l i
a .i.
To Retiring partners loan a/c
l a
l i
a
sa
assaa saa
s ssaa
(Being cash due paid partly immediately recorded)

aaddaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
da
Pa

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ad
adaassaa
aaddaasaa
s
w.

ww. P
. P w
w . P
. P
w
www w
www
ww

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www
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lalai .i. l a
l i
a .i.
CHAPTER-7 COMPANY ACCOUNTS
l a
l i
a
assaa ssaa ssaa
I VERY SHORT ANSWERS

a
1. What is share?
addaa aaddaa
ww. P
. P w
w .P.P
• The capital of a accompany is divided into small units of fixed amount.
w
www
• These units are called shares.
2. What is over subscription?
w
www
• When the number of shares applied fir is more than the number of shares
offered for subscription.

N Nett
e N Neett
• It is said to be over subscription.

lalai.i. l a i
a .i.
3. What is meant by calls in arrear?
l l a
l i
a

et
assaa s aa
s s aa
s
• Sometimes shareholders may fail to pay the amount due on calls.

aaddaa ad
a a
d a
• The amount called up but not paid is called calls in arrears.

. P
.P . P
. P
4. Write a short note on securities premium account.

.N
w w
w www
www www
• When a company issue shares at a price more than the face value, shares are
said to be issued at premium.
• The excess is called as premium.

lai
• The amount of securities premium may be included in application money or

N Neett N Ne
allotment money or in call.
ett
l a
l i
a .i. 5. Why are shares forfeited?
l a
l i
a .i. l a
l i
a
sa
• If the shareholders fail to pay the amount due on calls, shares will be forfeited.

assaa II SHORT ANSWERS

aaddaasaa
s
aaddaassaa
ww. P
. P
1. What is reissue of forfeited shares?
w
w . P
. P
w
www w
www
da

• Shares forfeited can be reissued by the company.

• The shares can be reissued at any price.
• But the reissues price cannot be less than the amount unpaid on forfeited
Pa

N Neett shares.

N Neett
2. Write a brief note on calls in advance.

l a
l i
a .i. l a
lai .i. l a i
a
• The excess amount paid over the called-up value of share is known as calls in
l
assaa adda
advance.
assaa
a ddaasaa
s
• It is the excess money paid on application or allotment or calls.
a a
w.

ww. P
. P w
w . P
. P
3. State the difference between preference shares and equity shares.
w
www
Basic
w
www
Preference shareholders Equity shareholders
ww

Meaning Preference shares are those Equity shares are those shares
shares which have preferential which have no preferential rights

N Neett N Neett
rights regarding dividend and so, they are called ordinary shares

l a
l i
a .i. Rate of
l a
la .i.
return of capital
i
Fixed rate of dividend is payable
l a
l i
a
Rate of dividend changes

assaa dividend

aaddaasaa
s
ad
a a
d s
a aa
s
according to profit earned by
company
.P.
Voting power
w
w P .
They do not have any voting
w
w P
. P They have voting rights according

w
www
rights
w
www
to number of shares held by
members

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N Neett N Neett
lalai .i. Affairs of
company
l l i
a .i.
They do not have any rights to
a
appoint board of directors
l l i
They have to appoint the board of
a a
directors through voting

assaa Payment of
dividend
aad aassaa
Dividend first distributed to
d
preference shareholders
aad aassaa
Dividend distributed after paying
d
preference shareholders

ww. P
. P w
w .P.P
w
www w
www
4. Write a short note on (a)Authorized capital (b)Reserve capital
Authorized capital
• It means such capital as is authorized by the memorandum of association.
• It is the maximum amount which can be raised as capital.

N Nett
e N N ett
• It is also known as registered capital or nominal capital.
e
lalai.i. Reserve capital
l a
l i
a .i. l a
l i
a

et
assaa aa aa
• The company can reserve a part of its subscribed capital to be called up only at the

ddas
a s
time of winding up.
d a
d s
a s
P aa
• It is called reserve capital.
. .P . P
. Paa

.N
w w
w www
5. What is meant by issue of shares for consideration other than cash?
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• A company may issue equity shares either for cash or for consideration other than
cash.

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• When shares are issued for cash, the cash may be received

N Neett (a) In instalments

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(b) At one time
Neett
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lalai .i. l a
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assaa ssaa ssaa
CHAPTER-8 FINANCIAL STATEMENT ANALYSIS

I VERY SHORT ANSWERS

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1. What are financial statements?
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• Financial statements are the statements prepared by the business concerns at the
end of the accounting period to ascertain the operating results and the financial
position.

N Nett
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2. List the tools of financial statement analysis.
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lalai.i. • Comparative statement
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• Common size statement i
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• Trend analysis
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• Fund flow analysis ad
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• Cash flow analysis
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3. What is working capital?
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• The capital of a business which is used in its day-to-day trading operation.
• Working capital = Current asset – Current liabilities

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4. When is trend analysis preferred to other tools?

N Neett N Neett
• When data of more than two years are to be analyzed it may be difficult to use

l a
l i
a .i. l a
l i
a
comparative statement..i. l a
l i
a
sa
assaa aadd asaa
s
• For this purposes trend analysis may be used.
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II SHORT ANSWERS
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1. ‘Financial statements are prepared based on the past data’. Explain how this is a
limitation.
• Financial statements are prepared based on historical data.
• They may not reflect current position.
Pa

N Neett N Neett
• The previous data does not reveal the opening results and financial position of the

l a
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a .i. business concern.
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• So, it is a limitation.

ddaass
2. Write a short note on cash flow analysis.
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• It is concerned with preparation of cash flow statement which shows the inflow and
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outflow of cash and cash equivalents in a given period of time.
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• Cash includes cash in hand and demand deposits with banks.
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3. Briefly explain any three limitations of financial statements.

N Neett(a) Record of historical

N Neett
• Financial statements are prepared based on historical data.

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• They may not reflect the current position.
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(b) Ignore price level changes

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a a
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• Adjustments for price level changes are not made in the financial statements.

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• Hence, financial statements may not reveal the current position.
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(c) Lack of consistency w
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• Different business concerns may use different accounting methods.
• Hence comparison between two business concerns becomes difficult.
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lalai .i. l a
l i
a .i.
4. Explain the step involved in preparing comparative statement?
• Column 1: Particulars of items
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a
assaa aassaa
• Column 2: Enter absolute amount of year 1
aadd
• Column 3: Enter absolute amount of year 2
aaddaassaa
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• Column 4: Show the different in amounts between year 1
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• Calculations of percentage increases and decreases
= Absolute amount of increases or decreases
………………………………………………………………… *100
Year 1 amount

N Nett
e N Neett
5. Explain the procedure for preparing common-size statement?

lalai.i. l a
l i
a .i.
Common – size statement can be prepared with three columns
l a
l i
a

et
assaa s aa s aa
• Column 1: Particulars of items of income statement or balance sheet

ddaa s
• Column 2: Enter absolute amount
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• Column 3: Choose a common base as 100
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For example, revenue from operations can be taken as the base for income
statement and total of balance sheet can be taken as the base for balance sheet.

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lalai .i. l a
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a .i. Chapter – 9 RATIO ANALYSIS
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I VERY SHORT ANSWER QUESTION

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1. What is meant by accounting ratio?
aaddaa
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• When ratios are calculated on the on the basis of accounting information, these are
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called accounting ratios. w
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• It is the numerical relationship between two items.
2. What is quick ratio?
• Quick ratio gives the proportion of quick assets to current liabilities.

N Nett
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• It is otherwise called liquid or acid test ratio.

lalai.i. l a
l i
a .i.
• It is calculated as follows:
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et
assaa s aa
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Quick ratio =Quick assets/Current liabilities

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3. What is meant by debit equity ratio?
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• It is calculated to assess the long-term solvency position

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• It expresses the relationship between long term debt and shareholders funds
• It is computed as follows:
Debt equity ratio =Long term debt/Shareholders funds

lai
4. What does return on investment ratio indicate?

N Neett N N ett
• It shows the proportion of net profit before interest and tax to capital employed
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l a
l i
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a .i.
• It is an overall measure of profitability of a business concern
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sa
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• It is computed as follows:

ddaass d aass
Return on investment (ROI) = Net profit before interest and tax/Capital
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5. State any two limitations of ratio analysis?
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(a)Ratios are only means:

• Ration are not end in themselves but they are only means to achieve a particular
purpose.
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(b)Accuracy of financial information:
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It depends on the accuracy of information taken from financial statements.

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II SHORT ANSWER QUESTION
aadaassaa
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1. Explain the objectives of ratio analysis.
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• To simplify accounting figures
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• To facilitate analysis of financial statements
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• To analysis the operational efficiency of a business

• To analyze the operational efficiency of a business

N Neett N Neett
• To help in budgeting and forecasting

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lai.i. l a
l i
• To facilitate intra firm and inter firm comparison of performance
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assaa saa s aa
2. What is inventory conversion period? How is it calculated?

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• Inventory conversion period is the time taken to sell the inventory.

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• A shorter inventory conversion period indicates more efficiency in the
.
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management of inventory.
• It is computed as follows:

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lalai .i. l a
l i
a .i.
Inventory conversion = Number of days in a year/Inventory turnover ratio
l a
l i
a
assaa
Period (in days)

aassaa aassaa
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Inventory conversion = Number of months in a year/Inventory turnover ratio

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Period (in months)
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3. How is operating profit ascertained?
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• Operating profit = Gross profit – Operating expenses

• Gross profit = Sales – Cost of goods sold

N Nett
e OR
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lalai.i. • Gross profit
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= Revenue from operation – Cost of revenue from operation
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• Operating expenses = Selling + Office + Distribution + Administration expenses

ddas
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4. State any three advantages of ratio analysis.
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(a)Measuring financial solvency
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• Ratio analysis helps to ascertain the liquidity or short term.
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• Solvency and long-term solvency of a business concern.

(b)Facilitating investment decisions

l a
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.i. Neett •

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Ratio analysis helps the management in making effective decisions regarding
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profitable avenues of investment.
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(c)Analyzing the profitability

• aaddaa aaddaa
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investments.
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Ratio analysis helps to analyze the profitability of a business in terms of sales and

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5. Bring out the limitations of ratio analysis.

(a)Ratios are only means
• Ratios are not end in themselves but they are only means to achieve a particular
purpose.
Pa

N Neett N Neett
l a
l i
a .i. l lai .i.
(b)Accuracy of financial information
a l a
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s
• It depends on the accuracy of information taken from financial statements.
•
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If the statements are inaccurate, ratios are also be inaccurate.

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(c)Change in price level
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•
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Ratio analysis may not reflect price level changes and current values as they are
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calculated based on historical data given in financial statements.

N Neett N N ett
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