Preparing for Examinations 17

Examples of Cash Inflows from Financing Activities: (i) Cash proceeds from issuing shares (equity or/and preference) (ii) Cash proceeds
from issuing debentures, loans, bonds and other short-term borrowings/long-term borrowings.
Examples of Cash Outflows from Financing Activities: (i) Cash repayments of amounts borrowed, e.g. redemption of debentures or
preference shares, buy back of equity shares, repayment of long-term debts, etc. (ii) Interest paid on debentures and long-term debts
(iii) Dividends paid (both final dividend and interim dividend)
 Treatment of Some Peculiar Items
1. Extraordinary items: Extraordinary items are not the regular phenomenon, i.e. non-recurring in nature. Examples: (i) Loss due to
theft or earthquake or flood (ii) Insurance proceeds from the famine settlement/ earthquake disaster settlement.
2. Interest and Dividend: In case of a non-financial enterprise: (i) Payment of interest and dividends are classified as cash outflows
from financing activities. (ii) Receipt of interest and dividends are classified cash inflows from investing activities.
In case of a financial enterprise (whose main business is lending and borrowing): (i) Interest paid, interest received and dividend
received are classified as operating activities. (ii) Dividend paid is a cash outflow from financing activities.
 Taxes – Treatment in Cash Flow Statement
S. No. Types of Taxes Classification of Activities
1. Income tax (i.e. tax on normal profit/operating profit) Cash outflow from operating activities
2. Capital gains tax (i.e. tax on capital profits e.g. gain on sale of land and building) Cash outflow from investing activities
3. Dividend tax (i.e. tax on the amount distributed as dividend to shareholders) Cash outflow from financing activities
 Non-Cash Transactions: As per AS-3, investing and financing transactions that do not require the use of cash or cash equivalents
are termed as non-cash transactions. They should be excluded from a cash flow statement since there is no inflow or outflow of
cash and cash equivalents. Examples of non-cash transactions: (i) Issue of shares or debentures to the vendors for the purchase of fixed
assets (ii) Redemption of debentures by converting them into equity shares (iii) Issue of fully paid bonus shares.
• An enterprise may hold securities and loans for dealing or for trading purposes. In either case they represent ‘Inventory’ specifically held
for resale. Therefore, cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities.
• Cash advances and loans made by financial enterprises (whose main business is lending and borrowings) are usually classified as
operating activities since they relate to main activity of that enterprise.
• A transaction may include cash flows that are classified differently. For example, when the instalment paid in respect of a fixed
asset acquired on deferred payment basis includes both interest and loan, the interest element is classified under financing
activities and the loan element is classified under investing activities.
• Same activity may be classified differently for different enterprises. For example, purchase of shares is an operating activity for
a share brokerage firm (an investment company) while it is investing activity in case of other enterprises.
• Examples of activities which are an investing activity for every type of enterprise: Purchase of Goodwill, Purchase of Fixed assets,
Sale of fixed assets
• Examples of activities which are a financing investing activity for every type of enterprise: Dividends paid, Issue of  Shares,
Redemption of Preference shares, Buy Back of shares, Issue of Debentures, Redemption of Debentures, Obtaining Long Term
Loans, Repayment of long term loans

Accountancy XII - Formats of Journal and Ledger

Chapter 1: Financial Statements of Not-for-Profit Organizations
 Treatment of Membership Subscriptions
Dr. Subscription Account Cr.
Particulars Amount (`) Particulars Amount (`)
To Balance b/d (outstanding at the beginning) xxx By Balance b/d (opening advance subscription) xxx
To Income and Expenditure A/c (Bal. Fig.) xxx By Receipt and Payment A/c (total subscription received) xxx
To Balance c/d (closing advance subscription) xxx By Balance c/d (outstanding at the end) xxx
xxxx xxxx
 Treatment of Expenses (e.g. Salary, Rent, etc.)
Particulars Amount (`)
Expenses paid during the year (as per Receipts and Payment A/c) xxx
Less: Opening outstanding expenses (xxx)
Add: Closing outstanding expenses xxx
Add: Opening prepaid/advance expenses xxx
Less: Closing prepaid/advance expenses (xxx)
Expenses to be shown in Income and Expenditure A/c xxxx
 18 Accountancy XII Part B – by Subhash Dey

 Special Funds (e.g. match fund, sports fund, building fund, etc.)
Balance Sheet (an extract)
Liabilities Amount (`) Assets Amount (`)
Match Fund x% Match Fund Investment xxx
Opening balance xxx Accrued interest on match fund investment xxx
Add: Income (interest) from match fund investment xxx
received
Add: Accrued income (interest) on match fund xxx
investment
Add: Donation for match fund xxx
Add: Sale of match tickets xxx
Less: Match Expenses (xxx) xxxx

 Preparation of Receipt and Payment Account

Receipt and Payment Account for the year ending ......
Receipts Amount (`) Payments Amount (`)
To Balance b/d By Balance b/d (Bank overdraft)* xxx
   Cash in Hand xxx By Wages and Salaries xxx
   Cash at Bank* xxx By Rent xxx
To Subscriptions from members xxx By Rates and Taxes (e.g. Municipal Taxes) xxx
To General Donations xxx By Electricity and Water charges xxx
To Entrance fees/Admission fees xxx By Miscellaneous Expenses xxx
To Sale of old newspapers/periodicals/waste papers xxx By Insurance Premium xxx
To Sale of old sports materials xxx By Sports Materials xxx
To Interest on fixed deposits with banks/Interest on Bank Deposits xxx By Printing and Stationery xxx
To Interest/Dividend on general investments xxx By Postage and courier charges xxx
To Locker Rent/Rent received xxx By Advertisement xxx
To Sale of scraps xxx By Sundry expenses xxx
To Proceeds from charity show xxx By Telephone charges xxx
To Miscellaneous receipts xxx By Entertainment expenses xxx
To Grants-in-aid xxx By Audit fees xxx
To Legacies xxx By Honorarium xxx
To Life membership fees xxx By Repairs and Renewals xxx
To Specific Donations e.g. Donation for Gym xxx By Upkeep of ground xxx
To Sale of Investments xxx By Charity xxx
To Sale of Fixed Assets xxx By Conveyance charges xxx
To Receipts on account of specific funds xxx By Newspapers xxx
To Interest/Dividend on specific funds investments xxx By Subscription for Periodicals/Magazines xxx
To Balance c/d (Bank Overdraft)* xxx By x% Fixed Deposits with Banks xxx
By Purchases of Assets e.g. Machinery, Computers, etc. xxx
By Purchase of Investments xxx
By Balance c/d
Cash in hand xxx
  Cash at Bank* xxx
xxxxx xxxxx
 Preparation of Income and Expenditure Account
Income and Expenditure Account for the year ending ......
Expenditure Amount (`) Income Amount (`)
To Charities xxx By Interest on General Fund Investment xxx
To Tournament Expenses (if there is no tournament fund) xxx By Fees or Profit from Entertainment xxx
To Salaries and Wages xxx By Subscription xxx
To Consumables xxx By Entrance Fees/Admission Fees xxx
To Rent, Rates and Taxes xxx By Interest/Income from Investment xxx
To Postage, Stamps, Courier charges xxx   (e.g. Interest on Govt. Bonds/Defence Bonds, xxx
To Telephone/Electricity charges xxx   Interest on Fixed Deposits with banks) xxx
To Advertising xxx By Miscellaneous Receipts xxx
To Sundry (or miscellaneous) expenses xxx By Locker Rent xxx
To Entertainment expenses xxx By Hall Rent/Hire of ground for marriage xxx
To Upkeep of field and pavilion, Grass seeds,etc. xxx By General Donation xxx
To Depreciation on fixed assets xxx By Sale of old sports material, old newspapers, xxx
To Fixed assets destroyed xxx    old magazines, old periodicals, waste-paper scraps
To Loss on sale of fixed assets xxx By Profit on sale of assets/old assets
 Preparing for Examinations 19

To Loss on sale of investment xxx By Govt. grants in aid (of recurring nature) xxx
To Insurance Premium xxx    (e.g. cash subsidy from government)
To General expenses (e.g. help to needy students) xxx By Sale of food stuff (Refreshment Revenue) xxx
To Charity Show expenses xxx    Less: Purchase of food stuff (Refreshment Expenses)
  Less: Charity Show Receipts By Profit on Sports xxx
  (If charity show expenses exceed receipts) By Receipts from Charity Show xxx
To Conveyance/Travelling expenses xxx Less: Charity show Expenses
To Honorarium (e.g. payment to an artist, lecturer’s fees) xxx   (If charity show receipts exceed expenses)
To Subscription paid for periodicals, magazines, newspapers xxx By Deficit (Excess of expenditure over income) xxx
To Audit Fees/Tuition fees/Meeting expenses xxx
To Office expenses xxx
To Repairs and Renewals xxx
To Expenses on Nukar Drama xxx
To Interest paid on Loan xxx
To Surplus (Excess of income over expenditure) xxx
xxxxx xxxxx

 Preparation of Balance Sheet

Balance Sheet of as on ....
Liabilities Amount (`) Assets Amount (`)
• Capital fund/General Fund • Cash in hand and /or Cash at Bank xxx
Opening Balance xxx • Fixed Deposits with Banks xxx
Add: Surplus (or Less: Deficit) xxx • Interest Accrued on Investments xxx
Add: Legacies xxx • Interest Accrued on Bank Deposits xxx
Add: Life Membership Fees xxx • Accrued Income (e.g. o/s locker rent) xxx
Add: Entrance Fees (Caplitalised portion) xxx xxx • Playground xxx
• Special Fund (e.g. match fund) xxx • Prepaid Expenses xxx
• Specific Donations (e.g. for Billiards Table) xxx • General Fund Investment xxx
• Endowment Fund xxx • Special Fund Investment xxx
• Loan xxx • Interest Accrued on Special Fund Investment xxx
• Income Received in Advance (Locker rent advance) xxx • Stock of Consumables (like Stationery) xxx
• Outstanding Expenses xxx • Advance Paid to Creditors/Suppliers of xxx
• Creditors for Consumables (e.g. Stationery) xxx   Consumables (like Stationery)
• Subscription Received in Advance xxx • Subscription Outstanding (Accrued) xxx
• Bank Overdraft xxx • Fixed Assets (e.g. Building, Sports Equipment,
Machinery, Furniture, Books, Billiards Table,
TV set, etc.)
Opening Balance xxx
Add: Purchase during the year xxx
Less: Book Value of Sales during the year (xxx)
Less: Depreciation (xxx) xxx
• Investments (e.g. x% Bonds or Govt. Papers,
x% Defence Bonds, etc.)
Opening Balance xxx
Add: Purchases during the year xxx
Less: Sale during the year (xxx) xxx
xxxxx xxxxx

Chapter 2: Accounting for Partnership Firms

 Maintenance of Capital Accounts of Partners
1. Fixed Capital Method
Dr. Partner’s Capital Account Cr.
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c (withdrawal of capital) xxx By Balance b/d (opening balance) xxx
To Balance c/d (closing balance) xxx By Bank A/c (additional capital) xxx
xxx xxx
 20 Accountancy XII Part B – by Subhash Dey

Dr. Partner’s Current Account Cr.

Date Particulars Amount (`) Date Particulars Amount (`)

To Balance b/d (Dr. opening balance) xxx By Balance b/d (Cr. opening balance) xxx
To Bank A/c (Drawings) xxx By Interest on capital xxx
To Interest on drawings xxx By Salary xxx
To Profit & Loss A/c (Share of loss) xxx By Commission xxx
To Balance c/d (Cr. closing balance) xxx By Profit & Loss Appropriation A/c xxx
  (share of profit)
By Balance c/d (Dr. closing balance) xxx
xxx xxx
2. Fluctuating Capital Method

Dr. Partner’s Capital Account Cr.

Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c (withdrawal of capital) xxx By Balance b/d xxx
To Bank A/c (Drawings) xxx By Bank (fresh capital introduced) xxx
To Interest on drawings xxx By Interest on capital xxx
To Profit and Loss A/c (for share of loss) xxx By Salary/Commission xxx
To Balance c/d xxx By Profit and Loss Appropriation A/c (for xxx
share of profit)
xxx xxx

 Distribution of Profit among Partners

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
1. Transfer of the balance of Profit and Loss Account to Profit and Loss
Appropriation Account
(a) If Profit and Loss Account shows a credit balance (net profit):
Profit and Loss A/c Dr.
To Profit and Loss Appropriation A/c
If Profit and Loss Account shows a debit balance (net loss):
Profit and Loss Appropriation A/c Dr.
(b) To Profit and Loss A/c
2. Interest on Drawings
(a) For charging interest on drawings to partners’ capital/current A/cs:
Partners’ Capital/Current A/cs (individually) Dr.
To Interest on Drawings A/c
(b) For transferring interest on drawings to Profit and Loss Appropriation A/c:
Interest on Drawings A/c Dr.
To Profit and Loss Appropriation A/c
3. Interest on Capital
(a) For crediting interest on capital to partners’ capital/current A/cs:
Interest on Capital A/c Dr.
To Partner’s Capital/Current A/cs (individually)
(b) For transferring interest on capital to Profit and Loss Appropriation A/c:
Profit and Loss Appropriation A/c Dr.
To Interest on Capital A/c
4. Partner’s Salary
(a) For crediting salary to partner’s capital/current A/cs:
Partner’s Salary A/c Dr.
To Partners’ Capital/Current A/cs (individually)
(b) For transferring salary to Profit and Loss Appropriation Account:
Profit and Loss Appropriation A/c Dr.
To Partner’s Salary A/c
5. Partner’s Commission
(a) For crediting commission to partners’ capital/current A/cs:
Partner’s Commission A/c Dr.
To Partners’ Capital/Current A/cs (individually)
(b) For transferring commission to Profit and Loss Appropriation A/c:
Profit and Loss Appropriation A/c Dr.
To Partner’s Commission A/c
 Preparing for Examinations 21

6. Transfer a proportion of net profit to General Reserve A/c

Profit and Loss Appropriation A/c Dr.
To General Reserve A/c
7. Share of Profit or Loss after appropriations
(a) For distribution of share of profit after appropriations in profit sharing ratio:
Profit and Loss Appropriation A/c Dr.
To Partners’ Capital/Current A/cs (individually)
(b) For distribution of share of loss after appropriations in profit sharing ratio:
Partners’ Capital/Current A/cs (individually) Dr.
To Profit and Loss Appropriation A/c
Dr. Profit and Loss Appropriation A/c Cr.
Particulars Amount (`) Particulars Amount (`)
1. To Profit and Loss A/c (Net Loss) xxx 1. By Profit and Loss A/c (Net Profit) xxx
3. To Interest on Capital (individually) xxx 2. By Interest on Drawings (individually) xxx
4. To Partner’s Salary (individually) xxx 7. By Loss transferred to Partners’ Capital/ xxx
5. To Partner’s Commission (individually) xxx Current A/c (individually in their profit
6. To Transfer to General Reserve xxx sharing ratio)
7. To Profits transferred to Partners’ Capital/ xxx
Current A/c (individually in their profit
sharing ratio)
xxxx xxxx

Chapter 3: Goodwill, Admission of a New Partner and Change in Profit Sharing Ratio
 Treatment of Goodwill: New partner brings goodwill in cash
1. Goodwill (premium) paid through the firm which is retained in the business
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Cash/ Bank A/c Dr.
To Premium for Goodwill A/c
(Amount brought by new partner as premium)
Premium for Goodwill A/c Dr.
To Existing Partners’ Capital A/c (Individually)
(Goodwill distributed among the existing partners in their sacrificing ratio)
2. Goodwill (premium) brought by the new partner and the same withdrawn by the sacrificing partners fully or partly.
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Existing Partner’s Capital A/c (Individually) Dr.
To Cash/Bank A/c
(Being amount of goodwill withdrawn by the existing partners)
3. When the new partner brings in his share of goodwill in cash and goodwill already exists in the Balance Sheet.
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Old Partners’ Capital/Current A/c (individually) Dr.
To Goodwill A/c
(Being existing goodwill written-off in old ratio)
 Treatment of Goodwill: New partner does not bring goodwill premium
1. Goodwill Account is raised and written off at its full value.
A. When no goodwill exists in the books
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
(i) For raising goodwill at full value in the old ratio
Goodwill A/c Dr.
To Old Partners’ Capital/Current A/cs (individually)
(ii) For writing off goodwill at full value in the new ratio
All Partners’ Capital/Current A/cs (individually) Dr.
To Goodwill A/c
 22 Accountancy XII Part B – by Subhash Dey

B. When goodwill already exists in the books

(i) When the value of goodwill appearing in the books is less than the valued goodwill
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Goodwill A/c (valued goodwill – existing goodwill) Dr.
To Old Partners’ Capital/Current A/cs (individually)
(Goodwill raised in old ratio)
All Partners’ Capital/Current A/cs (individually) Dr.
To Goodwill A/c (valued goodwill)
(Goodwill written off in new ratio)
(ii) When the value of goodwill appearing in the books is more than the valued goodwill
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Old Partners’ Capital/Current A/c (individually) Dr.
(existing goodwill – valued goodwill)
To Goodwill A/c
(Goodwill written off in old partners’ accounts in old ratio)
All Partners’ Capital/Current A/c (individually) Dr.
To Goodwill A/c (valued goodwill)
(Goodwill written off in new ratio)
2. Goodwill is adjusted through Partners’ Capital/Current Accounts
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
New Partner’s Capital/Current A/c (his share of goodwill) Dr. 4,000
To Old Partners’ Capital/Current A/c (individually) 1,000
(Goodwill adjusted through Old Partners’ Capital/Current Accounts in their sacrificing ratio) 3,000
 Adjustment for Accumulated Profits and Losses
1. Accumulated Profits:
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Reserve A/c/Profit and Loss A/c Dr.
To Old Partners’ Capital/Current A/cs (individually)
(Being accumulated profits distributed in old profit sharing ratio)
2. Accumulated Losses:
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Old Partners’ Capital/Current A/cs (individually) Dr.
To Profit and Loss A/c
(Being accumulated losses distributed in old profit sharing ratio)

 Revaluation of Assets and Reassessment of Liabilities

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
1. For increase in the value of an asset:
Asset A/c (gain) Dr.
To Revaluation A/c
2. For reduction in the value of a liability:
Liability A/c (gain) Dr.
To Revaluation A/c
3. For recording or selling an unrecorded asset:
Unrecorded Asset A/c or Cash/Bank A/c Dr.
To Revaluation A/c
 Preparing for Examinations 23

4. For reduction in the value of an asset:

Revaluation A/c Dr.
To Asset A/c (loss)
5. For increase in the amount of a liability:
Revaluation A/c Dr.
To Liability A/c (loss)
6. For recording or making payment of an unrecorded liability:
Revaluation A/c Dr.
To Unrecorded Liability A/c or Cash/Bank A/c
7.(a) For transfer of gain on revaluation in old ratio:
Revaluation A/c Dr.
To Old Partners’ Capital/Current A/cs (individually)
Or
(b) For transferring loss on revaluation in old ratio:
Old Partners’ Capital/ Current A/cs (individually) Dr.
To Revaluation A/c

Dr. Revaluation A/c (or Profit and Loss Adjustment A/c) Cr.
Particulars Amount (`) Particulars Amount (`)
4. To Asset A/c (Decrease in value of Asset) xxx 1. By Asset A/c (Increase in value of asset) xxx
5. To Liability A/c (Increase in amount of liability) xxx 2. By Liability A/c (Decrease in amount of liability) xxx
6. To Unrecorded Liability or Cash/Bank A/c xxx 3. By Unrecorded Asset or Cash/Bank A/c xxx
7. (a) To Profit credited to old partners’ capital/ xxx 7. (b) By Loss debited to old partners’ capital/ xxx
current A/cs (individually) in old profit current A/cs (individually) in old profit
sharing ratio sharing ratio
xxxx xxxx
 Treatment of Workmen’s Compensation Fund/Reserve
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Workmen’s Compensation Fund A/c Dr.
To Workmen’s Compensation Claim A/c
To A’s Capital/Current A/c
To B’s Capital/Current A/c
(Being workmen’s compensation claim set off from Workmen’s Compensation Fund
and the Surplus distributed between Old Partners in their old ratio)
OR
Workmen’s Compensation Fund A/c Dr.
Revaluation A/c Dr.
To Workmen’s Compensation Claim A/c
(Being workmen’s compensation claim set off from Workmen’s Compensation Fund
and revaluation A/c)
 Treatment of Investment Fluctuation Fund/Reserve
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Investment Fluctuation Fund A/c Dr.
To Investments A/c
To X’s Capital/Current A/c
To Y’s Capital/Current A/c
(Being fall in value of investment set off from Investment Fluctuation Fund and the
Surplus distributed between Old Partners in their old ratio)
OR
Investment Fluctuation Fund A/c Dr.
Revaluation A/c Dr.
To Investments A/c
(Being fall in value of investment set off from Investment Fluctuation Fund and
revaluation A/c)
 24 Accountancy XII Part B – by Subhash Dey

 Change in Profit Sharing Ratio among the Existing Partners

I Method: Adjustment of goodwill through partners’ capital/current accounts
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Gaining Partner’s Capital/Current A/c Dr.
To Sacrificing Partner’s Capital/Current A/c
(Adjustment of goodwill made between partners due to change in profit sharing ratio)
II Method: Raising goodwill at its full value in the old profit sharing ratio and then writing it off in the new ratio
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Goodwill A/c Dr.
To Partner’s Capital/Current A/c (individually)
(Being goodwill raised at its full value in the old profit sharing ratio)
Partner’s Capital/Current A/c (individually) Dr.
To Goodwill A/c
(Being goodwill written off at its full value in the new profit sharing ratio)

Chapter 4: Reconstitution of a Partnership Firm: Retirement/Death of a Partner

 Treatment of Goodwill
I Method: Goodwill is raised at its full value and written off immediately
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For raising goodwill at its full value:
Goodwill A/c Dr.
To All Partners’ Capital/Current A/cs (individually)
(Being goodwill raised at full value and credited to all the partners in their old profit
sharing ratio)
For writing off goodwill:
Remaining Partners’ Capital/Current A/cs (individually) Dr.
To Goodwill A/c
(Being goodwill written off and debited to remaining partners in the new ratio)
II Method: Goodwill is adjusted directly through partners’ capital/current accounts
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Continuing Partners’ Capital/Current A/cs (individually) Dr.
To Retiring/Deceased Partner’s Capital A/c
(Retiring/deceased compensated by the remaining partners in their gaining ratio)
 Adjustment of Accumulated Profits and Losses
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For transfer of accumulated profits (reserves):
Reserves A/c Dr.
Profit and Loss A/c Dr.
To All Partners’ Capital/Current A/cs (Individually)
(Being reserves/accumulated profits transferred to all partners’
capital/current accounts in old profit sharing ratio)
For transfer of accumulated losses:
All Partners’ Capital/Current A/cs (Individually) Dr.
To Profit and Loss A/c
(Being accumulated loss transferred to all partners’ capital/current accounts in their
old profit-sharing ratio)
 Preparing for Examinations 25

 Disposal of Amount Due to Retiring Partner

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
When retiring partner is paid cash in full:
Retiring Partners’ Capital A/c Dr.
To Cash/Bank A/c
When retiring partner’s whole amount is treated as loan:
Retiring Partner’s Capital A/c Dr.
To Retiring Partner’s Loan A/c
When retiring partner is partly paid in cash and the remaining amount treated as
loan:
Retiring Partner’s Capital A/c (Total Amount due) Dr.
To Cash/Bank A/c (Amount Paid)
To Retiring Partner’s Loan A/c (Amount of Loan)
When Loan account is settled by paying in installment includes principal and
interest:
(a) For interest on loan
Interest A/c Dr.
  To Retiring Partner’s Loan A/c
(b) For payment of installment
Retiring Partner’s Loan A/c Dr.
  To Cash/Bank A/c

Chapter 5: Dissolution of a Partnership Firm

 Preparation of Realisation Account

Dr. Realisation Account Cr.
Particulars Amount (`) Particulars Amount (`)
1. To Sundry Assets (excluding cash, bank and 2. By External Liabilities (including provisions,
the fictitious assets)transferred: if any) transferred:
Land and Building xxx Sundry creditors xxx
Plant and Machinery xxx Bills payables xxx
Furniture and Fittings xxx Bank overdraft xxx
Bills receivables xxx Outstanding expenses xxx
Sundry debtors xxx Partner’s relative’s loan xxx
5. To Cash/Bank (payment of liabilities) xxx Provision for doubtful debts xxx
6. To Partner’s Capital /Current A/c (liability xxx Provision for depreciation xxx
assumed by the partner) Investment Fluctuation Fund xxx
7. (b) To Cash/Bank A/c (payment to xxx 3. By Cash/Bank A/c xxx
creditor as amount due exceeds the (sale/realisation of assets)
agreed value of asset taken over) 4. By Partner’s Capital /Current A/c (assets xxx
8. (a) To Cash/Bank A/c xxx taken by the partner)
(payment of realisation expenses) 7. (c) By Cash/ Bank A/c xxx
(b) To Partner’s Capital /Current A/c xxx (amount received from creditor as
(realisation expenses paid by the partner) value of asset taken over exceeds the
(c) (i)To Partner’s Capital/Current xxx amount due)
A/c (remuneration/commission paid 9. By Cash/Bank A/c xxx
to the partner) (sale of unrecorded assets including
10. To Cash/Bank A/c goodwill, if any)
xxx
(payment of unrecorded liabilities) 11. (b) By Partner’s Capital/
xxx
11. (a) To Partner’s Capital /Current A/c Current A/c (individually)
xxx
(individually) (Loss transferred to partners’ capital
(Profit transferred to partners’ capital / /Current accounts in their profit
Current accounts in their profit sharing sharing ratio)
ratio)
xxxxx xxxxx
 26 Accountancy XII Part B – by Subhash Dey

 Journal Entries
Date Particulars L.F. Dr. (`) Cr. (`)
1. For transfer of assets
Realisation A/c (Book value) Dr.
To Assets (Individually) A/c
2. For transfer of external liabilities including provisions, if any
External Liabilities (individually) A/c (Book value) Dr.
To Realisation A/c
3. For sale/realisation of assets
Cash/Bank A/c (realised amount) Dr.
To Realisation A/c
4. For an asset taken over by a partner
Partner’s Capital/Current A/c Dr.
To Realisation A/c
5. For payment of liabilities
Realisation A/c Dr.
To Cash/Bank A/c
6. For a liability which a partner takes responsibility to discharge
Realisation A/c Dr.
To Partner’s Capital/Current A/c
7. For settlement with the creditor through transfer of assets
(a)  When a creditor accepts an asset in full and final settlement of his account:
No journal entry
(b) If the creditor accepts an asset only as part payment of his/her dues, the entry will be
made for cash payment only.
Realisation A/c Dr.
To Cash/Bank A/c
(c) When a creditor accepts an asset whose value is more than the amount due to him, he/
she will pay cash to the firm for the difference.
Cash/Bank A/c Dr. 
To Realisation A/c
8. Realisation Expenses
(a)  When realisation expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(b)  When realisation expenses are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital/Current A/c
(c) When a partner has agreed to undertake the dissolution work for an agreed
remuneration(e.g. commission) and bears the actual realisation expenses:
(i) For agreed remuneration to such partner
Realisation A/c Dr.
  To Partner’s Capital /Current A/c
(ii) For payment of realisation expenses
• If the partner himself incurs/pays the realisation expenses: No journal entry
• If payment of realisation expenses is made by the firm on behalf of the partner:
Partner’s Capital /Current A/c Dr.
  To Cash/Bank A/c
9. For settlement of unrecorded assets
(i) If an unrecorded asset is taken over by a partner:
Partner’s Capital/Current A/c Dr.
To Realisation A/c
(ii) If unrecorded assets are sold:
Cash/Bank A/c Dr.
To Realisation A/c
10. For settlement of any unrecorded liability or contingent liability
Realisation A/c Dr.
To Cash/Bank A/c
11. For transfer of profit or loss on realisation
(a)  In case of profit on realisation
Realisation A/c Dr.
To Partners’ Capital /Current A/c (individually)
 Preparing for Examinations 27

(b) In case of loss on realisation

Partners’ Capital /Current A/c (individually) Dr.
To Realisation A/c
12. For transfer of accumulated profits (reserve fund or general reserve or credit
balance of profit and loss account) and Workmen’s Compensation Fund
Reserve Fund/General Reserve/Profit and Loss A/c Dr.
Workmen’s Compensation Fund A/c Dr.
To Partners’ Capital /Current A/c (individually)
13. For transfer of fictitious assets (e.g. debit balance of profit and loss account,
deferred revenue advertisement expenditure, etc.) to partners’ capital/current
accounts in their profit sharing ratio
Partners’ Capital /Current A/c (individually) Dr.
To Fictitious Asset A/c
14. Settlement of partner’s loan
(a) For settlement of loan advanced by a partner (appearing on the liabilities side of
the balance sheet)
(i) If the partner’s loan is settled at the same amount:
Partner’s Loan A/c Dr.
  To Cash/Bank A/c
(ii) If the partner’s loan is settled at a loss to the firm:
Partner’s Loan A/c Dr.
Realisation A/c Dr.
  To Cash/Bank A/c
(iii) If the partner’s loan is settled at a profit to the firm, the journal entry will be:
Partner’s Loan A/c Dr.
  To Cash/Bank A/c
  To Realisation A/c
(b) For settlement of loan given to a partner by the firm (appearing on the asset
side of the Balance Sheet):
Partner’s Capital/Current A/c Dr.
To Loan to Partner A/c
15. For settlement of partners’ capital accounts
(a) If the partner’s capital account shows a credit balance, the same must be paid to the
partner.
Partners’ Capitals A/cs (individually) Dr.
To Cash/Bank A/c
(b) If any partner’s capital account shows a debit balance, he brings in the necessary cash.
Cash/Bank A/c Dr.
To Partner’s Capital A/c

Chapter 6: Accounting for Share Capital

 Disclosure of Share Capital in Balance Sheet of a Company

Balance Sheet of _____ as at _____ (As per Shedule III of the Companies Act, 2013)
Particulars Note No. Current Year (`) Previous Year (`)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 1.

Notes to Accounts:
Note No. 1: Share Capital
Particulars Current Year (`) Previous Year (`)
Authorised or Registered or Nominal Capital:
... shares of `.... each xxx
Issued Capital:
.... shares of `.... each issued to public xxx
.... shares of `.... each issued to vendor xxx
.... shares of `.... each issued to the signatories to the MOA xxx xxx
 28 Accountancy XII Part B – by Subhash Dey

Subscribed Capital:
Subscribed and fully paid capital
‘x’ shares of `.... each issued to public xxx
... shares of `.... each fully paid issued to vendor xxx
.... shares of `.... each issued to the signatories to the MOA xxx xxx
Subscribed but not fully paid capital
‘x’ shares of `.... each issued to public, `y each called up x×y
Less: Calls-in-arrears* (xxx)
Add: Shares forfeiture account** xxx xxx
xxx
*Only if shares are not forfeited. **Only if forfeited shares are not reissued.
 Accounting Treatment– Issue of Shares to the Public
On application
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c Dr.
To Share Application A/c
(Being amount received on application for ____ shares @ `___ per share including
premium, if any)
On allotment
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For Transfer of Application Money
Share Application A/c Dr.
To Share Capital A/c1
To Securities Premium Reserve A/c2
To Calls-in-Advance A/c3 (Allotment + Call(s))
To Bank A/c4
(Being application money on_____shares transferred to Share Capital)
For Amount Due on Allotment
Share Allotment A/c5 Dr.
To Share Capital A/c6
To Securities Premium Reserve A/c7
(Being allotment money due on _____ shares allotted @ `___ per share)
For Receipt of Allotment Money
Bank A/c10 Dr.
Calls-in-Advance A/c8 Dr.
Calls-in-Arrears A/c9 Dr.
To Share Allotment A/c5
(Being allotment money received on ___Shares @ `___ per share)
1. No. of shares issued and subscribed × Application money rate without premium
2. No. of shares issued and subscribed × Securities premium included in application money rate
3. Excess application money adjusted in allotment and/or call(s) money
4. (No. of shares rejected × Application money rate including premium) + Refund of excess application money after adjusting in allotment and/or call(s).
5. No. of shares issued and subscribed × Allotment money rate including premium
6. No. of shares issued and subscribed × Allotment money rate without premium
7. No. of shares issued and subscribed × Securities premium included in allotment money rate
8. Excess application money adjusted in allotment money
9. Unpaid allotment money
10. (5) – (8) – (9) i.e. (No. of shares issued and subscribed × Allotment money rate including premium) – Excess application money adjusted in
allotment – Unpaid allotment money
On Calls
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
(i) For Call Amount Due
Share Call A/c11 Dr.
To Share Capital A/c12
To Securities Premium Reserve A/c13
(Being call money due on ___Shares @ `____ per share including premium)
 Preparing for Examinations 29

(ii) For Receipt of Call Amount

Bank A/c16 Dr.
Calls-in-Advance A/c14 Dr.
Calls-in-Arrears A/c15 Dr.
To Share Call A/c11
(Being call money received)
11. No. of shares issued and subscribed × Call money rate including premium
12. No. of shares issued and subscribed × Call money rate without premium
13. No. of shares issued and subscribed × Securities premium included in call money rate
14. Excess application money adjusted in call money
15. Unpaid call money
16. (11) – (14) – (15) i.e. (No. of shares issued and subscribed × Call money rate including premium) – Excess application money adjusted in call
money – Unpaid call money
Forfeiture of Shares
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Share Capital A/c 17
Dr.
*Securities Premium Reserve A/c18 Dr.
To Share Forfeiture A/c19
To Calls in Arrears A/c20
(Being ____ shares forfeited for non-payment of allotment money and calls made)
17. Number of shares forfeited × Called up amount rate without premium
18. Number of shares forfeited × Premium amount per share not received
*Securities Premium Reserve A/c is debited only if premium money is not received on the forfeited shares. Thus, if the defaulter
shareholder has paid the full premium amount, Securities Premium Reserve A/c will not be debited.
19. Amount already received on forfeited shares. But it does not include premium amount.
20. Total unpaid allotment and/or calls amount on forfeited shares including premium
Re-issue of Forfeited Shares
Reissue at par/paid-up value
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c Dr.
To Share Capital A/c
(Being forfeited shares reissued at par)
Re-issue at premium (i.e. at a price more than paid-up value)
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Being forfeited shares reissued at premium)
Reissue at Discount (i.e. at a price less than paid-up value)
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c (@ re-issued price) Dr.
Shares Forfeited A/c (Discount on re-issue) Dr.
To Share Capital A/c (@ paid-up value)
(Being forfeited shares reissued at discount)
The balance of Share Forfeiture Account relating to reissued shares only, should be treated as capital profit and transferred to Capital
Reserve Account. The journal entry will be:
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Shares Forfeited A/c Dr.
To Capital Reserve A/c
(Being balance of shares forfeited account after re-issue transferred to capital reserve account)
 30 Accountancy XII Part B – by Subhash Dey

 Issue of Shares for Consideration other than Cash

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
1. On purchase of business
Sundry Assets A/c (individually) Dr.
*Goodwill A/c (if purchase consideration > Net assets taken over) Dr.
To Sundry Liabilities A/c (individually)
To Vendor’s A/c (purchase consideration)
To *Capital Reserve A/c (if purchase consideration < Net assets taken over)
(Being business purchased from the vendor)
2. For payment through cash/cheque/bank draft
Vendor’s A/c Dr.
To Bank A/c
(Being part payment through cash/cheque/bank draft)
OR
For payment through bills of exchange/acceptance/promissory note
Vendor’s A/c Dr.
  To Bills Payable A/c
(Being part payment through bills of exchange/acceptance/promissory note)
3. On issue of shares
(a) At par
Vendor’s A/c Dr.
  To Share Capital A/c
(Being __ shares issued at par for the remaining payment)
(b) At premium
Vendor’s A/c Dr.
  To Share Capital A/c
  To Securities Premium Reserve A/c
(Being __ shares issued at premium for the remaining payment)

* Either of the two will appear.

Chapter 7: Issue and Redemption of Debentures

 Issue of Debentures for Cash
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
On receipt of application money
Bank A/c Dr.
To x% Debenture Application A/c
For adjustment of applications money on allotment
x% Debenture Application A/c Dr.
To x% Debentures A/c
To Securities Premium Reserve A/c
For allotment money due
x% Debenture Allotment A/c Dr.
To x% Debentures A/c
To Securities Premium Reserve A/c
OR
x% Debenture Allotment A/c Dr.
Discount on Issue of Debenture A/c Dr.
To x% Debentures A/c
On receipt of allotment money
Bank A/c Dr.
To x% Debenture Allotment A/c
 Preparing for Examinations 31

 Terms of Issue of Debentures

1. Issued at par and redeemable at par
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For receipt of application money
Bank A/c Dr.
To x% Debenture Application & Allotment A/c
For allotment of debentures
x% Debenture Application & Allotment A/c Dr.
To x% Debentures A/c
2. Issued at a discount and redeemable at par
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For receipt of application money
Bank A/c Dr.
To x% Debenture Application & Allotment A/c
For allotment of debentures at a discount
x% Debenture Application & Allotment A/c Dr.
Discount on Issue of Debentures A/c Dr.
To x% Debentures A/c
3. Issued at premium and redeemable at par
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For receipt of application money
Bank A/c Dr.
To x% Debenture Application & Allotment A/c
For allotment of debentures at a premium
x% Debenture Application & Allotment A/c Dr.
To x% Debentures A/c (with nominal value of debenture)
To Securities Premium Reserve A/c (with premium on issue)
4. Issued at par and redeemable at a premium
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For receipt of application money
Bank A/c Dr.
To Debenture Application & Allotment A/c
For allotment of debentures at par and redeemable at premium
Debenture Application & Allotment A/c Dr.
Loss on Issue of Debentures A/c (with premium on redemption) Dr.
To x% Debentures A/c (with nominal value of debenture)
To Premium on Redemption of Debenture A/c
5. Issued at a discount and redeemable at a premium
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
For receipt of application money
Bank A/c Dr.
To x%Debenture Application & Allotment A/c
For allotment of debentures at a discount and redeemable at premium
x% Debenture Application & Allotment A/c Dr.
Loss on Issue of Debentures A/c (discount on issue and premium on redemption) Dr.
To x% Debentures A/c (nominal value of debenture)
To Premium on Redemption of Debentures A/c
6. Issued at a premium and redeemable at a premium
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c Dr.
To Debenture Application & Allotment A/c
Debenture Application & Allotment A/c Dr.
Loss on Issue of Debentures A/c(with premium on redemption) Dr.
To Debentures A/c (with nominal value of debenture)
To Securities Premium Reserve A/c (with premium on issue)
To Premium on Redemption of Debentures A/c
 32 Accountancy XII Part B – by Subhash Dey

 Writing-off Discount or Loss on Issue of Debentures (AS 16)

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Securities Premium Reserve A/c Dr.
Statement of Profit and Loss Dr.
To Discount or Loss on Issue of Debentures A/c
(Being discount or loss on issue of debentures written-off )
 Interest on Debentures
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
When interest is due
Debenture Interest A/c Dr.
To TDS Payable/Income Tax Payable A/c
To Debentureholders A/c
(Being amount of interest due on debenture and tax deducted at source )
For payment of interest to debentureholders
Debentureholders A/c Dr.
To Bank A/c
(Being amount of interest paid to debentureholders)
On payment of tax deducted at source to the Government
TDS Payable/Income Tax Payable A/c Dr.
To Bank A/c
(For payment of tax deducted at source on interest on debentures)
On transfer of Debenture Interest to Statement of Profit and Loss
Statement of Profit and Loss Dr.
To Debenture Interest A/c
(Being debenture interest transferred to statement of profit and loss)
 Issue of Debentures for Consideration other than Cash
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
1. On purchase of business
Sundry Assets A/c (individually) Dr.
*Goodwill A/c (if purchase consideration > Net assets taken over) Dr.
To Sundry Liabilities A/c (individually)
To Vendor’s A/c (purchase consideration)
To *Capital Reserve A/c (if purchase consideration < Net assets taken over)
(Being business purchased from the vendor)
2. For payment through cash/cheque/bank draft
Vendor’s A/c Dr.
  To Bank A/c
(Being part payment through cash/cheque/bank draft)
OR
For payment through bills of exchange/acceptance/promissory note
Vendor’s A/c Dr.
  To Bills Payable A/c
(Being part payment through bills of exchange/acceptance/promissory note)
3. On issue of debentures
(a) At par
Vendor’s A/c Dr.
  To x% Debentures A/c
(b) At premium
Vendor’s A/c Dr.
  To x% Debentures A/c
    To Securities Premium Reserve A/c
(c) At a discount
Vendor’s A/c Dr.
Discount on Issue of Debenture A/c Dr.
  To x% Debentures A/c
* Either of the two will appear.
 Preparing for Examinations 33

 Issue of Debentures as a Collateral Security

First Method
No entry is made in the books of accounts since no liability is created by such issue of debentures.
Balance Sheet of X Company as at __________
Particulars Note No. Amount (`)
I. EQUITY AND LIABILITIES
1. Non-current Liabilities
Long-term borrowings 1. xxx
Notes to Accounts:
Particulars Amount (`)
1. Long-term borrowings
Bank Loan xxx
(Secured by issue of _____, x% debentures of `_____ each as Collateral Security)
Second Method
The issue of debentures as a collateral security may be recorded by means of journal entry as follows:
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Debenture Suspense A/c Dr. xxx
To 9% Debentures A/c xxx
(For issue of ______, x% debentures of `_____ each as collateral security for bank
loan of `______)
Balance Sheet of X Company as at __________ (an Extract)
Particulars Note No. Amount (`)
I. EQUITY AND LIABILITIES
1. Non-current Liabilities
Long-term borrowings 1. xxx
Notes to Accounts:
Particulars Details Amount (`)
1. Long term borrowings
Bank loan xxx
____, x% debentures of `___ each xxxx
Less: Debenture Suspense A/c (xxx) –
xxx

Top Tip
In both the methods, the journal entry for obtaining loan from bank will be as follows:
Bank A/c Dr. xxx
To Bank Loan A/c xxx
(For obtaining bank loan)

When the loan is repaid, the issue entry will be cancelled by a reverse entry, as given below:
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
x% Debentures A/c Dr. xxx
To Debenture Suspense A/c xxx
(For cancellation of x% debentures on repayment of bank loan)
 Redemption of debentures by payment in lump sum (out of capital)
1. If debentures are to be redeemed at par:
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
x% Debentures A/c Dr.
To Debentureholders A/c
(For amount of debentures due for redemption at par)
Debentureholders A/c Dr.
To Bank A/c
(Being amount paid to debentureholders)
 34 Accountancy XII Part B – by Subhash Dey

2. If debentures are to be redeemed at premium:

Journal
Date Particulars L.F. Dr. (`) Cr. (`)
x% Debentures A/c Dr.
Premium on Redemption of Debentures A/c Dr.
To Debentureholders A/c
(For amount of debentures due for redemption at premium)
Debentureholders A/c Dr.
To Bank A/c
(Being amount paid to debentureholders)
 Redemption on Debentures Out of Profits by Creating Debenture Redemption Reserve (DRR)
Journal
Date Particulars L.F. Dr. (`) Cr. (`)
Surplus, i.e. Balance in Statement of Profit and Loss Dr.
To Debenture Redemption Reserve A/c
(For creation of debenture redemption reserve)
Debenture Redemption Investment A/c Dr.
To Bank A/c
(For purchase of Debenture Redemption Investment)
Bank A/c Dr.
TDS Collected/Deposited A/c Dr.
To Interest on Debenture Redemption Investment A/c
(Being interest received on Debenture Redemption Investment)
Bank A/c Dr.
To Debenture Redemption Investment A/c
(Being Debenture Redemption Investment sold)
Debentures A/c Dr.
To Debentureholders A/c
(For amount of debentures due for redemption at par)
OR
Debentures A/c Dr.
Premium on Redemption of Debentures A/c Dr.
To Debentureholders A/c
(For amount of debentures due for redemption at premium)
Debentureholders A/c Dr.
To Bank A/c
(Being amount paid to debentureholders)
Debentureholders A/c Dr.
To Bank A/c
(Being amount paid to debentureholders)
Interest on Debenture Redemption Investment Dr.
To Statement of Profit and Loss
(For transfer of Interest on Debenture Redemption Investment)
Debenture Redemption Reserve A/c Dr.
To General Reserve A/c
(Being debenture redemption reserve transferred to general reserve)

Chapter 8: Analysis of Financial Statements

 Statement of Profit and Loss
Statement of Profit and Loss for the year ended 31 March, 20.....

Particulars Note No. Current Year (`) Previous Year (`)

I. Revenue from operations (Sale of products and services, Other operating revenues)
II. Other income (Interest income, Dividend income, Net gain on sale of investments,
Other non-operating income)
III. Total Revenue (I+II)
 Preparing for Examinations 35

IV. Less: Expenses:

• Cost of materials consumed
• Purchases of stock-in-trade
•  Changes in inventories of finished goods, Work-in-progress and stock-
in-trade (opening inventory – closing inventory)
• Employee benefits expense (salary, wages, etc.)
• Finance costs (interest payments)
• Depreciation and amortisation expense
• Other expenses
Total expenses
V. Profit before tax (III–IV)
VI. Less: Tax provision
VII. Profit after tax (V–VI)
 Balance Sheet of Company
Balance Sheet of Company as at 31st March, 20....

Particulars Note No. Figure as at the end Figure as at the end

of current year (`) of previous year (`)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital
(b) Reserves and Surplus
(c) Money received against share warrants
2. Share Application money pending allotment
3. Non-current Liabilities
(a) Long term borrowings
(b) Deferred tax liabilities (net)
(c) Other long term liabilities
(d) Long term provisions
4. Current Liabilities
(a) Short-term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short-term provisions
Total
II. ASSETS
1. Non-Current Assets
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-progress
(iv) Intangible assets under development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and advances
(e) Other non-current assets
2. Current Assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short term loans and advances
(f ) Other current assets
Total
 Comparative Statement of Profit and Loss
Particulars Note 2019-20 2018-19 Absolute Increase/ Percentage Increase/
No. (`) (`) Decrease (`) Decrease (%)
I. Revenue from operations
II. Other income
III. Total Revenue (I+II)
 36 Accountancy XII Part B – by Subhash Dey

IV. Less: Expenses:

• Cost of materials consumed
• Purchases of stock-in-trade
•C hanges in inventories of finished goods,
work-in-progress and stock-in-trade
• Finance costs
• Depreciation and amortisation expense
• Other expenses
Total expenses
V. Profit before tax (III–IV)
VI. Less: Tax provision
VII. Profit after tax (V–VI)
 Comparative Balance Sheet
Particulars Note No. March 31, 2019 (`) March 31, 2020 (`) Absolute Change (`) Percentage Change (%)
I. Equity and Liabilities
1. Shareholders’ Funds
(a) Share capital
(b) Reserve and surplus
2. Non-current Liabilities
Long-term borrowings
3. Current liabilities
Trade payables
Total
II. Assets
1. Non-current assets
(a) Fixed assets
Tangible assets
Intangible assets
2. Current assets
Inventories
Cash and Cash Equivalents
Total
 Common Size Statement of Profit and Loss
X Ltd. Y Ltd.
Particulars X Ltd. (`) Y Ltd. (`) As a % of Revenue from As a % of Revenue from
operations operations
I. Revenue from Operation
II. Add: Other Incomes
III. Total Revenue (I+II)
IV. Less: Expenses
Cost of material Consumed
Employee benefit expenses
Total expenses
V. Profit Before Tax (III-­IV)
VI. Less: Tax
VII. Profit after Tax (V-­VI)

 Common Size Balance Sheet

Particulars Absolute Amounts Percentage of Balance Sheet Total
P Ltd. (`) Q Ltd. (`) P Ltd. (%) Q Ltd. (%)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share capital
(b) Reserve and surplus
2. Non-current Liabilities
Long-term borrowings
3. Current liabilities
Trade payables
Total
 Preparing for Examinations 37

II. ASSETS
1. Non-current assets
a) Fixed assets
Tangible assets
Intangible assets
b) Non- Current investments
2. Current assets
Inventories
Total

Chapter 9: Cash Flow Statement

 Preparation of Cash Flow Statement
CASH FLOW STATEMENT OF _____ (Company) for the year ending _____

Particulars Details (`) Amount (`)

I. CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit/Loss before Tax and Extraordinary Items xxx or (xxx)
Add: Non-cash and non-operating expenses for which deductions already made
• Depreciation xxx
• Intangible Assets amortised (Goodwill, Patents, etc. written-off ) xxx
• Loss on sale of fixed assets or non-current assets xxx
• Finance cost (Interest paid on long-term borrowings) xxx
• Preliminary expenses written off xxx
• Discount/loss on issue of debentures written off xxx
• Provision made for doubtful debts xxx
• Premium on redemption of debentures xxx
Less: Non-operating incomes for which additions already made in Statement of Profit and Loss
• Interest income (xxx)
• Dividend income (xxx)
• Rental income (xxx)
• Profit on sale of fixed assets or non-current assets (xxx)
• Excess provision for depreciation written back (xxx)
• Excess provision for doubtful debts written back (xxx)
Operating Profit before working capital changes xxx or (xxx)
Add:
•D  ecrease in current assets (other than current investments, cash and cash equivalents and xxx
short-term loans and advances)
• Increase in current liabilities (other than short-term borrowings and short-term provisions) xxx
Less:
• Increase in current assets (other than current investments, cash and cash equivalents and short- (xxx)
term loans and advances)
• Decrease in current liabilities (other than short-term borrowings and short-term provisions) (xxx)
Cash Generated from (or used in) Operating Activities before Tax and Extraordinary Items xxx or (xxx)
Less: Income Tax paid (Tax on normal profits/operating profits) (xxx)
Add: Income Tax Refund received xxx
Cash Generated from (or used in) Operating Activities after Tax but before Extraordinary Items xxx or (xxx)
+/– Effects of Extraordinary Items (e.g. insurance proceeds from earthquake disaster settlement xxx or (xxx)
will be added whereas loss due to theft will be subtracted
A. Net Cash from (or used in) Operating Activities xxx or (xxx)
II. CASH FLOWS FROM INVESTING ACTIVITIES
(i) Proceeds from Sale of Tangible Fixed Assets xxx
(ii) Proceeds from Sale of Non-Current Investments xxx
(iii) Interest received, Dividend received and Rent received xxx
(iv) Purchase of Fixed Tangible Assets and Intangible Assets like goodwill (xxx)
(v) Purchase of Non-Current Investments (xxx)
(vi) Capital Gain Tax paid (xxx)
B. Net Cash from (used in) Investing Activities xxx or (xxx)
 38 Accountancy XII Part B – by Subhash Dey

III. CASH FLOWS FROM FINANCING ACTIVITIES

(a) Proceeds from issue of Share Capital (both equity and preference shares) xxx
(b) Proceeds from Long-term Borrowings (e.g., debentures, bonds, long-term loan from bank, xxx
x% deposits)
(c) Securities Premium Reserve (Premium on issue of shares or debentures) xxx
(d) Proceeds from Bank Overdraft raised xxx
(e) Redemption of Debentures or Preference Shares (including premium on redemption) (xxx)
(f ) Repayment of Long-term Loan from Bank/x% Deposits (xxx)
(g) Buy Back of Equity Shares (xxx)
(h) Dividend Paid (both final dividend and interim dividend) (xxx)
(i) Interest on Long-term Borrowings Paid (e.g. interest on debentures, long-term loan from (xxx)
bank, x% deposits)
(j) Dividend Tax paid (xxx)
C. Net Cash from (used in) Financing Activities xxx or (xxx)
NET INCREASE (OR DECREASE) IN CASH & CASH EQUIVALENTS (A+B+C) xxx
Add: Cash and Cash Equivalents in the beginning
Cash in hand xxx
Cash at bank xxx
Current Investments (marketable securities) xxx xxx
Cash and cash Equivalents at the end of the year
Cash in hand xxx
Cash at bank xxx
Current Investments (marketable securities) xxx xxx
Working Notes:
1. Calculation of Tax paid/Provision for Tax made during the current year:
Dr. Provision for Tax A/c Cr.
Particulars Amount (`) Particulars Amount (`)
To Bank A/c (Tax paid) By Balance b/d
To Balance c/d By Statement of Profit and Loss
(Tax provision of current year)

2.
Dr. Tangible Fixed Assets A/c Cr.
Particulars Amount (`) Particulars Amount (`)
To Balance b/d By Depreciation
To Statement of Profit and Loss (profit on sale)* By Bank A/c (sale)
To Bank A/c (purchase) By Statement of Profit and Loss (loss on sale)*
By Balance c/d

* Either of the two will appear.

OR
When accumulated depreciation account is appearing in notes to accounts of Balance Sheet:
Dr. Tangible Fixed Assets A/c Cr.
Particulars Amount (`) Particulars Amount (`)
To Balance b/d By Bank A/c  (proceeds from sale)
To Statement of Profit and Loss (profit on sale)* By Accumulated Depreciation (on fixed asset sold)
To Bank A/c (new fixed assets purchased) By Statement of Profit and Loss (loss on sale)*
By Balance c/d

* Either of the two will appear.

Dr. Accumulated Depreciation Account Cr.
Particulars Amount (`) Particulars Amount (`)
To Tangible Fixed Assets A/c (accumulated By Balance b/d
depreciation on fixed asset sold) By Statement of Profit and Loss
To Balance c/d   (Depreciation charged during the year)
 Preparing for Examinations 39

3. Calculation of Net profit/loss before tax and extraordinary items:

Particulars Amount (`)
Net Profit/Loss after Appropriations (difference between the current year’s and previous year’s balance of Statement of xxx or (xxx)
Profit and Loss)
Add: Interim Dividend paid xxx
Add: Final Dividend paid xxx
Add: Transfer to Reserves (e.g. transfer to general reserve) xxx
Add: Provision for Tax made during the current year xxx
Less: Income Tax Refund received (xxx)
Net Profit/Loss before Tax xxx or (xxx)
Less: Loss due to earthquake (Extraordinary item) (xxx)
Net Profit before Tax and Extraordinary Items xxx or (xxx)

Important Tips for Attempting CBSE Accountancy Examination

 During 15 minutes reading time, first of all read the questions having internal choice ( Accounting for Share
Capital – 8 marks question, Accounting for Partnership Firm – 8 marks question, etc.) and make selection of
the option in those questions.
The questions will be written first in Hindi with Question Number, and then in English without Question Number.
Be very careful! There may be chances to miss some question (s) to be answered. If possible, you may cross Hindi
Questions and write Question Number on English Questions using pencil.
Then read all the Objective Type Question, MCQs and Calculate their answers.
 Make Formats properly including Date Column, J.F/L.F Column etc. (Format is not compulsory in Theory Questions)
 Don’t forget to write Account Heads – Revaluation Account, Partners’ Capital Accounts, etc.
 Don’t forget to write Question Number you are answering.
 Read all questions word to word. Otherwise you may miss important information, e.g. X Ltd. issued 1,00,000
shares at a premium of `10 per share payable as `10 on Application, `30 (including premium) on Allotment and
`10 on first and final call each.
In this question there are two calls of `10 each. So the Face Value of a share is `50.
Similarly, the profit sharing ratio of partners, sometimes, may not be given in the beginning but at the end of the
question.
 Write Working Notes only when asked in the questions with instruction – ‘Show your workings clearly.’
 Answer each question from new page (except 1 mark questions)
 Always follow Step by Step Calculation in questions related to Ratio Analysis, Valuation of Goodwill, Stationery
Consumed etc.
 If you are a slow-writer and not able to finish the paper on time in your school examinations, you must follow
the following important tips to be able to finish your paper on time with some revision time on hand:
• Y ou needn’t use pencil and scale to draw formats. You may use the pen itself you are writing with to draw
formats.
• You needn’t write ‘To’ and ‘By’ in Ledger Accounts. It will save at least 5 minutes of time in total.
• Write narrations of the journal entries as briefly as possible without writing ‘Being’ or ‘For’, for example,
‘Forfeiture of 1,000 shares.’
 Attempting the full paper on time with 20-25 minutes Revision Time in hand is necessary to score 100% marks.
The following Time Schedule will help you managing your time when sitting the examination hall.
Time Schedule
S. No. Questions Marks Duration Time
1. Part B – Analysis of Financial Statements 20 marks 40 minutes 11:10 a.m.
• 7 objective type questions of 1 marks each = 7 marks
• 1 short question on ratio analysis/balance sheet = 3 marks
• 1 short question on comparative/common size statement = 4 marks
• 1 long question on cash flow statement = 6 marks