ACCOUNTS (858)

Aims:
1. To provide an understanding of the principles 2. To develop an understanding of the form and
of accounts and practice in recording classification of financial statements as a
transactions and interpreting individual as means of communicating financial
well as company accounts. information.
CLASS XI
There will be two papers in the subject: 2. Journal, Ledger and Trial Balance
Paper I - Theory: 3 hours ……80 marks (i) Journal: recording of entries in journal with
narration.
Paper II- Project Work………20 marks
(a) Classification of Accounts- traditional
PAPER - I (THEORY) – 80 Marks classification or modern approach.
(b) Double Entry System.
There will be one paper of 3 hours duration of
(c) Rules of journalizing – traditional
80 marks divided into two parts:
classification or modern approach.
Part I (20 marks): will be compulsory and will (d) Meaning of journal; Advantages of
consist of short answer questions, testing using a journal.
knowledge, application and skills relating to (e) Format of journal.
elementary/ fundamental aspects of the entire (f) Simple and compound journal entries.
syllabus. (g) Opening Journal entry.
Part II (60 marks): Candidates will be required to (h) Journal Entries- Input CGST and Input
answer five questions out of eight from this section. SGST / Input IGST; Output CGST and
Each question shall carry 12 marks. Output SGST/ Output IGST) / Setting
off Input GST against Output GST.
1. Introduction to Accounting (ii) Ledger: posting from journal to respective
Background of accounting and accountancy; ledgers.
types of accounts; basic terms used in (a) Meaning of ledger.
accounting, and Accounting Equation. (b) Format of a ledger.
(i) Evolution of accounting: The three phases. (c) Mechanics of posting.
(ii) Basic Terms: Event, Transaction, (d) Closing / Balancing of ledger accounts-
Vouchers, Capital, Assets (intangible, expenses and revenues to be closed by
tangible, fixed, current, liquid, wasting and transferring to Trading / P/L Account
fictitious), Liabilities (internal and external depending upon their direct/ indirect
– current, long-term and contingent), nature and balances of Assets,
Trade Debtors, Trade Creditors, Liabilities and Capital to be carried
Purchases, Sales, Goods traded in, Stock down.
(raw material, work in progress and (e) Adjusting and closing journal entries.
finished goods), Profit, Loss, Expense,
(iii) Sub-division of journal - cash book
Revenue, Income and Drawings.
[including simple cash book and triple
(iii) Accounting equation: Meaning and
column cash book (cash, bank and
usefulness.
discount) with - contra entry pertaining to
(iv) Meaning and definition of Book-keeping,
receipt of cheque not deposited on the same
Accounting and Accountancy; difference
day; adjustments pertaining to a definite
between book-keeping, accounting and
cash balance to be maintained / overdraft
accountancy; accounting cycle.
facility to be availed at the end of the
(v) Users of accounting information.
month. Petty cash book (including
(vi) Subfields of accounting: Meaning of
analytical and imprest system), sales day
financial accounting, cost accounting and
book, purchases day book, sales return day
management accounting.
book, purchases return day book and
NOTE: Practical problems in Accounting Journal proper.
Equation are not required.
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 (a) Cash book [including simple cash book 4. Depreciation
and triple column cash book (cash,
Depreciation, Methods of charging
bank and discount) with - contra entry
depreciation, Method of recording depreciation.
pertaining to receipt of cheque not
deposited on the same day; adjustments (i) Depreciation: meaning, need, causes,
pertaining to a definite cash balance to objectives and characteristics.
be maintained / overdraft facility to be (ii) Methods of charging depreciation: Straight
availed at the end of the period]. Line and Written Down Value method;
(b) Petty cash book (including analytical advantages, limitations of both the methods
and imprest system). and differences between the two.
(c) Sales day book, purchases day book- (iii)Methods of recording depreciation:
Simple (Date, Particulars, I. No, L.F,
charging to asset account, creating
Details, Amount); Columnar (Date,
provision for depreciation / accumulated
Particulars, I. No, L.F, Details, Net
Invoice, Goods, Carriage, GST-Input depreciation.
CGST and Input SGST / Input IGST; (iv) Problems relating to purchase and sale of
Output CGST and Output SGST / assets (with or without asset disposal
Output IGST- Amount or percentage account) incorporating the application of
given). depreciation under the two stated methods.
(d) Sales return day book, purchases return NOTE: Questions on change of method from SLM
day book- Simple (Date, Particulars, to WDV and vice-versa are not required.
Credit/ Debit Note No., L.F, Details,
Amount. 5. Bills of Exchange
(e) Journal proper. (i) Introduction to Negotiable Instruments:
(f) Mechanics of posting from special explanation of basic terms.
subsidiary books. Meaning of negotiable instruments; Bills of
(iv) Trial Balance. exchange, promissory note (including
specimen and distinction), cheque,
(a) Meaning, objectives, advantages and advantages and disadvantages of Bills of
limitations of a Trial Balance. Exchange, explanation of basic terms -
(b) Preparation of the Trial Balance by the drawer, drawee, payee, endorser,
balance method from the given ledger endorsee, bill on demand / bill on sight, bill
account balances. after date, bill after sight, tenure of the bill,
3. Bank Reconciliation Statement days of grace, due date, endorsement and
discounting of bills, bill sent for collection,
Bank Reconciliation statement. dishonour of a bill, holder of a bill, noting
(i) Meaning and need for bank reconciliation charges, notary public, renewal of a bill,
statement. retirement of a bill and insolvency of the
(ii) Preparation of a bank reconciliation drawee/acceptor.
statement from the given cash book balance (ii) Practical problems on the above in the
/ overdraft or pass book balance / books of drawer, drawee and endorsee-
overdraft. Journal entries and Ledger accounts.
(iii) Preparation of a bank reconciliation Self explanatory.
statement from the extract of the cash book
NOTE:
as well as the pass book relating to the
• Accommodation Bill is not required.
same month. (Practical problem not
• Recording in the books of the bank not
required)
required.
(iv) Preparation of an amended cash book and
a bank reconciliation statement after 6. Accounting Concepts
adjusting the cash book balance from the GAAP (Generally Accepted Accounting
given cash book balance. Principles), Basis of Accounting; Accounting
Standards; Knowledge and understanding of
IFRS (International Financial Reporting
Standards).
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 (i) GAAP: Going Concern, Accounting Entity, (iv) Preparation of Trading Account, Profit and
Money Measurement, Accounting Period, Loss Account and Balance Sheet with
Complete Disclosure, Revenue necessary adjustments.
Recognition, Verifiable Objective, Adjustments relating to closing stock,
Matching Principle, Historical Cost, outstanding expenses, prepaid expenses,
Accrual Concept, Dual Aspect Concept, accrued income, income received in
Materiality, Consistency, Prudence and advance, depreciation, bad debts, provision
Timeliness, Industry Practice, Substance for doubtful debts, provision for discount
over legal form. on debtors, manager’s commission (on the
(ii) Basis of accounting – cash basis and net profit before and after charging such
accrual basis (meaning; difference). commission), goods distributed as free
(iii) Accounting Standards: Meaning; Utility/ samples, goods taken by the owner for
Advantages. personal use and abnormal loss; Treatment
(iv) IFRS (International Financial Reporting of Adjusted Purchases and calculation of
Standards) - Meaning; Need for IFRS; cost of goods sold.; Input CGST and Input
Fundamental Assumptions in IFRS- Going SGST/ Input IGST and Output CGST and
Concern, Accrual, Measuring Unit, Output SGST/ Output IGST given in the
Purchasing Power; difference between Trial Balance to offset against each other
IFRS and Indian GAAP; Procedure for in the Balance Sheet.
implementation of IFRS; India and IFRS.
(v) Marshalling of a Balance Sheet: Order of
7. Final Accounts and Concept of Trading, permanence and order of liquidity.
Profit and Loss account and Balance Sheet
(with and without adjustments), Marshalling (vi) Adjusting, closing and transfer entries.
of Balance Sheet NOTE:
(i) Capital and Revenue Expenditure/Income. 1. Practical problems on preparation of provision
(a) Meaning and difference between for doubtful debts account are not required.
capital expenditure and revenue 2. Since creating provision for doubtful debts
expenditure with examples. accounts involves being prudent in the absence
(b) Meaning and difference between of any information of the amount of the new
capital income and revenue income provision, it will be assumed that the amount of
with examples. the new provision will be the same as the old
(c) Meaning and difference between provision.
capital profit and revenue profit with 8. Rectification of Errors
examples.
(d) Meaning and difference between Errors and types of errors: Rectification of
capital loss and revenue loss with errors after the preparation of trial balance and
examples. rectification of errors after the preparation of
(e) Meaning of deferred revenue Final Accounts.
expenditure with examples. (i) Types of Errors: errors of omission, errors
(ii) Provisions and Reserves. of commission, errors of principle,
compensating errors.
Meaning, importance; difference between (ii) Rectification of errors after the preparation
provisions and reserves; types of reserves - of trial balance and through suspense
revenue reserve, capital reserve, general account if required.
reserve, specific reserve and secret reserve. (iii) Rectification of errors after the
(iii) Trading, Profit and Loss Account and preparation of Final Accounts through P/L
Balance Sheet of a sole trader, (Horizontal Adjustment A/c if required.
Format) without adjustments. NOTE: Redrafting of Balance Sheet not required.
Meaning object, importance and
preparation of Trading, Profit and Loss
Account and Balance Sheet of a sole
trader.

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9. Accounts from incomplete records NOTE: Preparation of a Receipt and Payments
Account only or an Income and Expenditure
(i) Single entry and difference with double
Account with a Balance Sheet from incomplete
entry.
records need not be covered (in horizontal
(a) Meaning, characteristics and format).
limitations.
(b) Difference between Statement of 11. Introduction to the use of Computers in
Affairs and Balance Sheet. Accounting
(ii) Ascertainment of profit/loss by statement Introduction to Computerised Accounting
of affairs method including application. System: Components of CAS, Features,
Self-explanatory. Advantages and Limitations of CAS,
NOTE: Single entry system as applied to Accounting Information System and
partnership firms is not required. Management Information System.
Conversion of Single Entry into Double Entry not (i) Components of Computerised
required. Accounting System (CAS)-hardware
10. Non -Trading Organisation and software; operation of the
computer system- input, processing,
(i) Non-Trading Organization: meaning, auxillary storage, output, application
objectives, necessity and treatment of of computer in accounting.
specific items. (ii) Comparison of accounting processes in
Self-explanatory. manual and computerized accounting.
(iii) Advantages and limitations of CAS.
(ii) Different books maintained and differences (iv) Types of Accounting Packages or
between them. software- ready to use, customized,
(a) Receipts and Payments Accounts: tailor-made with their advantages and
meaning, features, differences between limitations.
Receipts and Payments Account and (v) Accounting Information System and
Cash Book. Management Information System-
Meaning.
(b) Income and Expenditure Accounts:
meaning, features, difference, between
Income and Expenditure account and PAPER II – PROJECT WORK – 20 Marks
Profit and Loss account. Candidates will be expected to have completed two
(c) Balance Sheet and its role. projects from any topic covered in Theory.

(iii) Preparation of Income and Expenditure Mark allocation for each Project [10 marks]:
Account and Closing Balance Sheet.
Overall format 1 mark
Preparation of Income and Expenditure
Account and Balance Sheet when Receipts Content 4 marks
and Payments Account and other
information is given. Findings 2 marks

(a) Entrance, admission fees, life Viva-voce based on the Project only 3 marks
membership fees, legacies, special
grants and special donations are to be
A list of suggested Projects is given below:
capitalised.
(b) General donations, general grants and 1. Preparation of Journal / sub-division of journal,
all receipts of a recurring nature such Ledger, Trial balance and Financial Statements
as membership fees/ subscriptions are to of a trading organization on the basis of a case
be taken as revenue receipts. study.
(c) Preparation of accounts of incidental
activities such as restaurant accounts • Develop a case study of a sole trader
are not required. starting business with a certain amount of
capital.
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 He could have got the amount from his past the journal entries, post them into the
savings or by borrowing from a bank by ledger, prepare a trial balance and
mortgaging his personal assets or by thereafter prepare the NPO’s Cash Book,
winning a lottery or any other source. Receipts and Payment Account, its Income
• Write in detail, his transactions during the and Expenditure Account and its Balance
year- his purchases - cash and credit, sales- Sheet.
cash and credit, expenses, purchase of fixed
• The various expenses, for comparison
assets and depreciation charged on them,
purposes, could be depicted in the form of
any outstanding expenses, prepaid
expenses, accrued income, drawing bills of bar diagrams and pie charts.
exchange, accepting bills payable, etc. 3. Prepare a Bank Reconciliation Statement and
• From this case study developed (which Amended Cash Book from the information
should have at least 15 transactions), pass given in your Cash Book and Bank Statement
the journal entries, post them into the (Pass Book) with at least fifteen transactions.
ledger, prepare a Trial Balance and the 4. Complete the labels.
Trading and Profit and Loss Account and
Balance Sheet. (i) Prepare a Spreadsheet as per the following
format:
• The various expenses for comparison
Revenue Jan. Feb. March April
purposes, could be depicted in the form of
Outdoor
bar diagrams and pie charts. Sales
2. Preparation of the accounts of a Indoor Sales
Not-for-Profit-Organisation on the basis of a Total Sales
case study.
Expenses
• Develop a case study of an NPO by Salaries
beginning with the primary motive of Rent &
Utilities
establishing it, that is, why have you
Others
decided to open a club or a library or a
hospital, etc. (ii) Fill the Sales and Expenses for the months
in lakhs and calculate the Total Sales and
• Write in detail about the sources of capital Total Expenses.
fund, subscriptions, donations (ordinary (iii) Calculate the Net Profit using the excel
and special), other receipts and payments formulas by subtracting the expenses from
of your NPO as well as outstanding revenue.
expenses, prepaid expenses, subscription (iv) Highlight all the numbers and prepare a
due but not received, subscription received Bar Chart showing the Indoor and Outdoor
Sales for the months.
in advance, purchase of fixed assets and
(v) Save your work on the desktop as
depreciation charged on them, legacy
Label_Project.
received, etc.
(vi) Print a hard copy of your
• From this case study developed (which work and close the file.
should have at least 15 transactions), pass

101
 CLASS XII

There will be two papers in the subject: (c)Partners’ Current Accounts when
fixed capital method is followed
Paper I - Theory: 3 hours ……80 marks
Interest on capital, interest on
Paper II- Project Work ……20 marks
drawings, interest on current
PAPER - I (THEORY) – 80 Marks accounts (debit and credit) salary,
There will be one paper of 3 hours duration of commission to partners and
80 marks divided into three Sections A, B and C. managers, transfer to reserves,
division of profit among partners,
It will be compulsory for all candidates to attempt
Section A. (d) Guarantee of profits
Section A (60 Marks): will consist of two parts, (e) Past adjustments (Relating to
Part I and Part II and have a total of eight interest on capital, interest on
questions. drawing, salary and profit sharing
Part I (12 Marks): will consist of Question 1 ratio).
(compulsory). This question will include NOTE:
short answer questions, testing
knowledge, application and skills relating • Interest on loan given by the partner to the
to elementary/fundamental aspects. Question 1 firm is to be taken as a charge against profits.
will be based on Section A of the syllabus. This interest will be debited to the P/L
account and credited to his loan account.
Part II (48 Marks): Candidates will be required to
answer four questions out of seven from this part. • Interest on loan taken by a partner from the
Each question shall carry 12 marks. Part II will firm should be credited to P/L account and
also be based on Section A of the syllabus. debited to his capital/current account as the
case may be.
Section B/ C (20 marks): Candidates will have a
choice of attempting questions either from Section • Rent due to a partner is a charge against
B or Section C. Candidates will be required to profit and is to be credited to partners’
answer two questions out of three from the section current account in case of fixed capital
of their choice. Each question shall carry 10 marks. system or to partners’ capital account when
capitals are fluctuating.
SECTION A
• Admission of manager as a Partner is
1. Partnership Accounts excluded from the topic of past adjustments.
A. Fundamentals of Partnership B. Goodwill
(i) Definition, meaning and features of a Concept of goodwill and mode of valuation.
Partnership.
(a) Meaning, nature and features of
Self explanatory. Goodwill.
(ii) Provisions of The Indian Partnership (b) Factors affecting the value of goodwill.
Act, 1932, with respect to books of
(c) Mode of Valuation.
accounts.
• Average profit method – Meaning
(i) Meaning and importance.
and practical application.
(ii) Rules applicable in the absence of a
partnership deed. − Simple average.
(iii) Preparation of Profit and Loss − Weighted average method.
Appropriation Account and Partners’ • Super profit method – Meaning and
Capital and Current Accounts. practical application.
(a) Profit and Loss Appropriation • Capitalization method – Meaning
Account. and practical application.
(b) Partners’ capital accounts: fixed − Capitalization of average profit.
and fluctuating. − Capitalization of super profit.
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NOTE: Capital Employed/Net assets are Total (Debit and Credit balance) and
assets (excluding purchased non-trade investments Advertisement Suspense Account/
and fictitious assets) less outside liabilities. Deferred Revenue Expenditure.
Investments to be taken as non-trade investments (v) Adjustment of Capitals.
unless specified as trade investments.
(a) Adjustment of old partner’s
C. Reconstitution of Partnership Capital Accounts on the basis
I. Admission of the new partner’s capital.
(i) Calculation of new profit sharing (b) Calculation of new partner’s
ratio, sacrificing ratio and gaining capital on the basis of old
ratio. partner’s adjusted capital.
Self Explanatory (vi) Change in Profit Sharing Ratio.
(ii) Accounting treatment of goodwill Change in PSR takes place at the
on admission of a partner. time of admission of a partnership
Based on Accounting Standard –26 firm.
issued by the Institute of Chartered Accounting treatment of
Accountants of India in the context accumulated profits and losses
of Intangible Assets. through one journal entry:
(a) Premium for goodwill paid (Adjustment of the incoming
privately. partner’s share to be done through
(b) Premium for goodwill paid (in his current account-similar to the
cash or kind) and retained in treatment of goodwill not brought
the business. in cash.)
(c) Premium for goodwill paid and Gaining partners cap/current A/c
withdrawn by the old partners. Dr.
(d) When the incoming partner To sacrificing Partners cap/current
cannot bring premium for (in case of profits).
goodwill in cash, adjustments Sacrificing partners’ cap/current A/c
are to be done through his Dr.
current account.
To Gaining Partners cap/current
(e) Hidden goodwill.
(in case of losses)
(f) When goodwill appears in the
old Balance Sheet. General Reserve/ Reserve
(iii)Preparation of Revaluation fund, Workmen Compensation
Account. Reserve/ Fund, Investment
Fluctuation Reserve/ Fund,
Preparation of a Revaluation
Account where changes in the Contingency Reserve, Profit and
values of assets and liabilities are Loss Account (Debit and Credit
reflected in the new Balance Sheet Balance) and Advertisement
after reconstitution of a partnership Suspense Account/ Deferred
firm. Revenue Expenditure.
NOTE: Memorandum revaluation account is II. Retirement and death of a partner
excluded from the syllabus.
(i) Calculation of new profit sharing
(iv) Accounting treatment of ratio, gaining ratio and sacrificing
accumulated profits and losses. ratio.
General Reserve / Reserve Fund, Self Explanatory.
Workmen Compensation Reserve/
(ii) Adjustment with regard to goodwill
Fund, Investment Fluctuation including hidden goodwill.
Reserve/Fund, Contingency
Reserve, Profit and Loss Account Self Explanatory.
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 (iii) Adjustment with regard to Gaining partners cap/current A/c
undistributed profits and losses. Dr.
Self Explanatory. To sacrificing Partners cap/current
(in case of profits).
(iv) Adjustment with regard to share of
Sacrificing partners’ cap/current A/c
profits of the retiring or deceased
Dr.
partner from the date of the last
Balance Sheet to the date of To Gaining Partners cap/current
retirement or death (on the basis of (in case of losses)
time or turnover). General Reserve/ Reserve
fund, Workmen Compensation
Through P & L Suspense A/c (in
Reserve/ Fund, Investment
case of no change in PSR of
Fluctuation Reserve/ Fund,
remaining partners). Contingency Reserve, Profit and
Through Gaining Partners capital/ Loss Account (Debit and Credit
current A/c (in case of change in Balance) and Advertisement
PSR of remaining partners). Suspense Account/ Deferred
Revenue Expenditure.
(v) Preparation of Revaluation Account
on retirement or death of a partner. NOTE:
− Preparation of Balance Sheet in Partnership
Self Explanatory.
Accounts to be done in Horizontal format only.
(vi) Adjustment of capitals.
− Memorandum Revaluation Account, Joint Life
(a) Readjusting the adjusted Policy, Individual life policy are excluded from
capital of the continuing the syllabus.
partners in the new profit
sharing ratio. III. Dissolution of a Partnership firm.

(b) Adjusting the capitals of the (i) Meaning of dissolution and

continuing partners on the settlement of accounts under
basis of the total capital of the Section 48 of The Indian
new firm. Partnership Act 1932.

(c) When the continuing partners Self Explanatory

bring in cash to pay off the (ii) Preparation of Realization Account,
retiring partners. Partner’s Loan Account, Partner’s
(vii) Calculation and payment of amount Capital Account and Cash/Bank
due to retiring partner. Account.
Self-explanatory.
Self Explanatory.
NOTE:
(viii) Preparation of retiring partner’s
When an asset or a liability is taken to the
loan accounts and deceased realization account any corresponding/related fund
partner’s executor’s loan account or reserve is also transferred to realization account
(with interest on loan accrued and and not to capital account.
due and interest on loan accrued but
not due). When accounts are prepared on a fixed basis,
partners current account balances are to be
Self-explanatory. transferred to capital account. No adjustments are
(ix) Change in Profit Sharing Ratio. required to be passed through current account.
Change in PSR takes place at the Bank overdraft is to be taken to the bank/cash A/c
time of retirement / death of a and not to be transferred to realization account but
partnership firm. bank loan must be transferred to realization
account.
Accounting treatment of • If question is silent about the payment of a
accumulated profits and losses liability, then it has to be paid out in full.
through one journal entry: • If the question is silent about the realization of
an asset, its value is assumed to be nil.
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• Loan taken from a partner will be passed B. Issue of Debentures
through cash or bank account even if the
partner’s capital account has a debit balance. Problems on issue of debentures (at par, at
• Loan given to a partner will be transferred premium and at discount.)
(debited) to his Capital account. Problems on issue of debentures to include:
• Admission cum retirement, amalgamation of (a) Issue of debentures at par, at premium
firms and conversion/sale to a company and at discount under Companies Act
together with piecemeal distribution and 2013.
insolvency of a partner / partners not required. (b) Issue of debentures as collateral
security for a loan.
2. Joint Stock Company Accounts
(c) Issue of debentures for considerations
A. Issue of Shares other than cash.
Problems on issue of shares. • To promoters.
• To underwriters.
(a) Issue of shares at par and premium
under Companies Act, 2013. • To vendors

(b) Issue of shares for considerations other (d) Accounting entries at the time of issue
than cash: when debentures are redeemable at par
and premium.
• To promoters (can be considered
either through Goodwill account or (e) Interest on debentures (with TDS).
Incorporation costs account). (f) Disclosure of Debentures in the
• To underwriters. company’s Balance Sheet.
• To vendors. (g) Methods of writing off discount / loss on
(c) Calls in arrears, calls in advance and issue of debentures- when debentures
interest thereon including the are redeemable in a lump sum at the
preparation of ledger accounts. end of a specified period; when
(d) Over and undersubscription (including debentures are redeemable in
prorata allotment). instalments.
(h) Disclosure of discount on issue of
NOTE: In prorata allotment when shares are debentures in the company’s Balance
issued at a premium, excess money received on Sheet when debentures are redeemed in
application will first be adjusted towards the instalments.
share capital. Any excess thereon will be
utilized towards the Securities Premium C. Redemption of Debentures
Reserve.
• Creation of Debenture Redemption
When allotment or any call money is due, it is to Reserve (DRR).
be transferred to the calls in arrears account, • Redemption of debentures out of
on which interest if provided in the Articles of profits.
Association will be calculated. • Redemption of debentures out of
(e) Forfeiture and reissue of shares at par, capital.
premium or discount. • Redemption of debentures in a lump
Self explanatory. sum.
(f) Disclosure of Share capital in the • Redemption of debentures in annual
company’s Balance Sheet. instalments by draw of lots.
• Redemption of debentures by purchase
NOTE: Issue of bonus and rights shares, private
placement of shares, sweat equity shares, in the open market.
employees’ stock option scheme, reservations for Self-Explanatory.
small individual participants and minimum tradable
lots are not required.

105
 NOTE: Statement of Profit and Loss for the year
I. Calculation of ex-interest and cum-interest ended:……………..
are not required. Particulars Note Figures Figures
II. In case of redemption of debentures in No. for the for the
annual instalments by draw of lots: Current Previous
reporting reporting
(i) The entire DRI purchased for the
period period
redemption of the instalment of
debentures is not sold at the end of the I Revenue from
year but sold/further purchased to the operations
extent to maintain 15% of the face II Other Income
value of the debentures to be redeemed
in the next instalment. In case of III Total Revenue
redemption in equal instalments, DRI (I + II)
purchased for the first instalment IV Expenses:
remains invested till the last instalment.
Cost of
(ii) DRR is transferred to General Reserve materials
in proportion to the debentures consumed
redeemed.
Purchases of
D. Final Accounts of Companies Stock-in-Trade
Preparation of the Balance Sheet of a Changes in
company (along with notes to accounts) as inventories of
per Schedule III Part I of Companies Act finished goods
2013.
Work-in-
As per the amendment made in Accounting progress and
Standard 4, dividend proposed for a year is Stock-in Trade
not a liability till it has been approved by
Employee
the shareholders. Thus, proposed dividend
benefits
is not shown as a short-term provision in
expense
the current Balance Sheet of a company but
disclosed in Notes to Accounts under Finance costs
Contingent Liabilities. Depreciation
All capital losses to be written off in the and
year in which they occur unless otherwise amortization
mentioned. expense
NOTE: Schedule III Part II of Companies Act Other expenses
2013 (Statement of Profit and Loss) is not required Total expense
for the purpose of preparing final accounts of a
Company. V Profit before
tax (III-IV)
However, for the preparation of Comparative and
Common Size Income Statements (Section B – VI Less Tax
Unit 4: Financial Statement Analysis), the extent VII Profit after Tax
and format of the Statement of Profit and Loss as (V-VI)
per Schedule III Part II of the Companies
Act 2013 to be studied is as follows:

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 SECTION B The following items are to be taken when
calculating net cash flows from financing
MANAGEMENT ACCOUNTING
activities:
3. Financial Statement Analysis • Issue or redemption of shares and
debentures at par, issue of debentures
Comparative Statements and Common Size at a discount.
Statements. • Interest paid on Long Term and Short
Meaning, significance and limitations of Term Borrowings and dividend –
Comparative Statements and Common Size interim and proposed/paid on shares.
Statements. • Long term borrowings and Short term
borrowings – bank overdraft, cash
Preparation of Comparative Balance Sheet and
Statement of Profit and Loss (inter-firm and credit and short term loan. whether
intra-firm) showing absolute change and taken or repaid.
percentage change. • Share issue expenses / underwriting
commission paid.
Common size Balance Sheet to be prepared as a The following items are to be taken when
percentage of total assets and total liabilities. calculating net cash flows from investing
Common size Statement of Profit and Loss to be activities:
prepared as a percentage of Revenue from • Cash purchase of fixed assets.
operations. • Cash sale of fixed assets.
NOTE: Preparation of comparative statements and • Purchase of shares or debentures or
common size statements to be made from the long term investments of other
Balance Sheets and Statements of P/L without notes companies.
to accounts. • Interest and dividend received on
shares or debentures or long term
4. Cash Flow Statement (Only for Non-
investments of other companies.
Financing Companies)
• Sale of shares or debentures or long
(i) Meaning, importance and preparation of a term investments of other companies.
Cash Flow Statement. The following items are to be taken for cash
and cash equivalents:
NOTE: Based on Accounting Standard – 3
• Cash
(revised) issued by the Institute of
Chartered Accountants of India. • Bank
• Short term investments
(ii) Calculation of net cash flows from operating • Marketable securities
activities based on Indirect Method only. NOTE:
Preparation of a Cash Flow Statement from (i) Adjustments relating to provision for taxation,
two consecutive years’ Balance Sheet with proposed dividend, interim dividend,
or without adjustments. amortization of intangible assets, profit or loss
Preparation of complete/partial cash flow on sale of fixed assets including provision
statement from extracts of Balance Sheets for/accumulated depreciation on them, Profit or
and Statements of P/L with or without loss on sale of investment are also included.
adjustments. (ii) Treatment of proposed dividend:
NOTE: Any adjustment or an item in the Balance (a) Dividend proposed for the previous year
Sheet relating to issue of bonus shares, will be an outflow for cash, unless
extraordinary items and refund of tax are not otherwise stated, on the assumption that the
required. proposed amount has been approved by the
shareholders in the AGM.
(iii) Preparation of Cash Flow Statement on (b) No effect is given to Proposed Dividend for
basis of operating, investing and financing the current year as it is not provided for
activities. and is a contingent liability.
(c) Any unpaid dividend is transferred to
Dividend Payable Account / Unpaid
107
 Dividend Account which is shown in the Debt = Long Term Borrowings +
Balance Sheet of the current year as Other Long Term Provisions Equity /
Current Liabilities under Current Shareholders’ Funds = Share Capital +
Liabilities. Reserves and Surplus
(iii) Treatment of provision for doubtful debts- Or
Provision for doubtful debts can be treated as
Non Current Assets + (Current Assets –
a charge against profits or as part of the
Current Liabilities) - Non Current
working capital changes. In case of good
Liabilities
debtors the provision will be treated as an
appropriation of profit. = Non Current Assets + Working
(iv) To calculate cash flow from operating activities Capital- Non Current Liabilities
the Adjusted Profit and Loss Account is not = (Tangible Assets + Intangible Assets
acceptable as per AS-3. + Non Current Investments +
(v) Calculation of Net Profit before Tax has to be Long Term Loans and Advances) +
shown as a Working Note. Working Capital – (Long Term
Borrowings + Long Term
5. Ratio Analysis
Provisions)
A. Liquidity Ratios:
(ii) Proprietary Ratio:
Current Assets
(i) Current Ratio: Shareholders Funds/ Equity
Current Liabilities
Total Assets
Current Assets = Current Investments Total Assets = Non Current Assets +
+ Inventories (excluding Loose Tools Current Assets
and Spare Parts) + Trade Receivables + = Tangible Assets + Intangible Assets +
Cash and Bank Balance + Short-term Non Current
Loans and Advances + Other Current Investments + Long Term Loans and
Assets Advances
+
Current Liabilities = Short term
Current Investments + Inventories
borrowings + Trade payables + Other (including Loose Tools and Spare Parts)
Current Liabilities + Short term + Trade Receivables + Cash and Bank
Provisions Balance + Short-term Loans and
Advances + Other Current Assets
(ii) Quick Ratio / Liquid Ratio:
(iii) Debt to Total Assets Ratio:
Quick Assets
Debt
Current Liabilities
Total Assets
OR
(iv) Interest coverage ratio =
All Current Assets- Inventories(excluding Loose Tools and Spare Parts)- Prepaid Expenses Net profit before interest and taxes
Interest
Current Liabilities
Interest includes interest on only long
term borrowings.
OR
C. Activity Ratios:
Liquid Assets
Current Liabilities (i) Trade Receivable Turnover Ratio =
Credit Revenue from Operation
B. Solvency Ratios:
Average Trade Receivable
(i) Debt to Equity Ratio:
Credit Revenue from Operation =
Debt / Long Term Debt Revenue from Operation – Cash
Equity / Shareholders' Funds Revenue from Operation Average
Trade Receivables =
108
 Opening Trade Receivable + Closing Trade Receivable expenses) + Change in inventories of WIP
2
and Finished Goods.
Or
Opening Inventory + Net Purchases +
(ii) Trade Payable Turnover Ratio =
Direct Expenses – Closing inventory
Net Credit Purchases (ii) Net Profit Ratio: =
Average Trade Payable
Net Profit
× 100
Average Trade Payables = Revenue from Operations
Opening Trade Payable + Closing Trade Payable
Net Profit = Gross profit + Other Income
2
– Indirect Expenses – Tax

(iii) Operating Ratio:

(iii) Working Capital Turnover Ratio =
Revenue from Operations Cost of Revenue from Operations/Cost of Goods Sold + Operating Expenses
× 100
Revenue from Operations
Working Capital
Operating Expenses = Employee Benefit
(iv) Inventory Turnover Ratio = Expenses + Depreciation + Selling and
Cost of Goods Sold / Distribution Expenses+ Office and
Cost of Revenue from Operation Administrative Expense.

Average Inventory Operating Income = Sale of scrap, trading

commission received, cash discount received,
Cost of goods sold= Opening Stock + revenue from services.
Net Purchases + Direct Expenses –
Closing Stock (iv) Operating Profit Ratio:
Cost of Revenue from Operations = Net Operating Profit
Revenue from Operations – Gross × 100
Revenue from Operations
Profit
Or Net operating profit = Net Profit
after Tax+ Non-Operating Expenses – Non
Cost of Material Consumed (including Operating Incomes
direct expenses) + Change in Or
inventories of WIP and Finished Goods
Gross Profit – Operating Expenses +
Or Operating Incomes
Opening Inventory + Net Purchases+ Non Operating Expenses = Finance
Direct Expenses – Closing inventory Cost (Interest on Borrowings) + Loss on
Average Inventory = sale of Non Current Assets

Opening Inventory + Closing Inventory Non Operating Incomes = Interest and

Dividend Received on Investment + Profit
2 on sale of Non Current Assets.
D. Profitability Ratios: (v) Earning per share:
Net Profit after Tax and Preference Dividend
(i) Gross Profit Ratio:
No. of Equity Shares
Gross Profit
× 100
Revenue from Operations (vi) Price Earning Ratio

Gross Profit = Revenue from Operations – Market Value of an Equity share

Cost of Revenue from Operations/ Cost of Earning per share
Goods Sold
Cost of Revenue from Operations = Cost
of Material Consumed (including direct

109
 (vii) Return on Investment worksheet. Opening and moving around in
an existing worksheet. Toolbars and Menus,
Net Pr ofit before Interest and Tax
= × 100 keyboard shortcuts. Working with single
Capital Employed and multiple workbooks - copying,
renaming, moving, adding and deleting,
NOTE: copying entries and moving between
1. Current Ratio includes Net Debtors (Gross workbooks. Formatting of worksheet- Auto
Debtors – Provision for doubtful debts) while format, changing -alignment, character
Trade Receivables Turnover Ratio includes styles, column width, date format, borders
Gross Debtors. and colours. Previewing and Printing
2. Capital employed = Shareholders’ Funds + worksheet - Page setting, Print titles,
Non-current liabilities – non trade investments Adjusting margins, Page break, headers
OR and footers. Formulas – summation,
Non-current assets (excluding Non-trade subtraction, division, multiplication,
investments) + Working Capital average and percentage. Functions: date,
OR if-then- else, freezing panes.
Fixed Assets + Trade Investments + Working (iii) Application of spreadsheets in generating
Capital the following accounting information:
3. Investments to be taken as non-trade
1. Payroll
investments unless specified as trade
Components of payroll – Basic, HRA,
investments. DA and TA, CCA, deduction for PF and
4. In Return on Investments Ratio- Net Profit income tax.
before interest and tax will not include interest
on non-trade investments. 2. Data Presentation
5. Revenue from operation (for a manufacturing Graphs and charts- using wizards,
company) various charts type, formatting grid
• Net Sales lines and legends, previewing &
For a manufacturing printing charts
• Sale of scrap company Database - creation, sorting, query and
filtering a database.
Other Income: (for a manufacturing company)
• Rent received (non- operating) 7. Database Management System (DBMS)
• Commission received (operating) (i) Concept and Features of DBMS.
• Interest and Dividend Received (non- Types and features of DBMS.
operating) A conceptual understanding of the basic
• Profit from Sale of Fixed Assets (non- features of Data Base Management System
operating) (DBMS), i.e. data update and retrieval
• Cash discount received (operating) using basic functions and commands of
SQL.
Basic Commands: Select, Where, And, Or,
SECTION C Update, Delete and
Basic Functions: Avg, Count, Max, Min,
COMPUTERISED ACCOUNTING Sum.
6. Accounting Application of Electronic Spread (ii) DBMS in Business Application.
Sheet
Database design, tables, fields,
(i) Concept of Electronic Spreadsheet. relationships, forms reports and indexing.
Meaning, utility, merits and demerits of
The following examples of DBMS in
Electronic spreadsheets.
business application:
(ii) Features offered by Electronic Spreadsheet.
• Accounting Information
An understanding of basic features of
electronic spreadsheets such as: Creating • Debtors and Creditors
worksheet, entering data into worksheet,
• Bank Reconciliation Statement
heading information, data, text, dates,
alphanumeric values, saving & quitting • Asset Accounting

110
 least five additional information (depreciation,
PAPER II – PROJECT WORK – 20 Marks
purchase/ sale of fixed assets, dividend paid/
Candidates will be expected to have completed two proposed, tax paid/ proposed, amortization of
projects from any topic covered in Theory. intangible assets, profit or loss on sale of fixed
assets including provision for depreciation on
The project work will be assessed by the teacher
them and profit or loss on sale of investment).
and a Visiting Examiner appointed locally and
approved by the Council. • The results of the operating, investing and
financing activities could be shown
Mark allocation for each Project [10 marks]:
graphically and/ or pictorially (bar diagrams
Overall format 1 mark and pie charts).
Content 4 marks 3. Preparation of Common Size and Comparative
Income Statement and Balance Sheet of a
Findings 2 marks company by taking into account its audited,
Viva-voce based on the Project only 3 marks unaudited / imaginary financial results of two
consecutive quarters of an accounting year or of
A list of suggested Projects is given below: two consecutive accounting years.

1. Preparation of Journal / sub-division of journal, • The comparison has to be made in the form
Ledger, Trial balance and Financial Statements of Common Size and Comparative Income
of a partnership form of business on the basis of Statement and Balance Sheet.
a case study. • The comparison could also be shown
• Develop a case study showing how two or graphically and/ or pictorially (bar diagrams
more friends decide to come together and and pie charts).
start a business with a certain amount of
capital. 4. Taking the audited/ unaudited / imaginary
• Prepare their Partnership Deed including financial results of any leading company, its
interest on capital, partner’s salary, liquidity, solvency, activity and profitability
commission, interest on drawings, interest ratios of two consecutive accounting years or of
on partner’s loan and rent paid to a partner. two consecutive quarters of an accounting year
• Write in detail, their transactions during the should be calculated and the comparison of the
year: purchases - cash and credit, sales - ratios of both the years or quarters should be
cash and credit, expenses, purchase of fixed shown graphically and/ or pictorially (bar
assets and depreciation charged on them, diagrams and pie charts).
any outstanding expenses, prepaid
expenses, accrued income, drawing bills of 5. Employee Salary Sheet:
exchange, accepting bills payable etc. (i) Design a spreadsheet using the following
• From this case study developed (which fields:
should have at least 15 transactions), pass
the journal entries, post them into the Employee’s Name: String Variable of
ledger, prepare a Trial Balance and the maximum size of 40 characters
Trading and Profit and Loss Account, Profit
and Loss Appropriation Account and Date of Joining: Date in English U.K.
Balance Sheet. format
• The various expenses, for comparison Basic Salary: upto 2 places after decimal
purposes, could be depicted in the form of
bar diagrams and pie charts. Calculate their net salary using the
Employee’s data. [Feed in random data for
• Calculate relevant accounting ratios like
liquidity, solvency, activity and profitability 20 to 25 employees]
giving their formulae and computation Some of the instructions are given below:
(all this could be part of the viva-voce).
• The ratios could also be shown graphically Important Instructions:
and/ or pictorially (bar diagrams and pie Dearness Allowance (DA) is paid @ 45%
charts) and if possible, could be compared of Basic Salary.
with the ratios of the industry.
House Rent Allowance (HRA) is paid @
2. Preparation of a Cash Flow Statement with the 15% of (Basic Salary + DA)
help of audited / unaudited / imaginary Balance
Sheets of a company for two consecutive City Compensatory Allowance (CCA) is
accounting years or two consecutive quarters of paid @ 8.3% of (Basic Salary + DA +
an accounting year could be taken along with at HRA)
111
 Provident Fund (PF) is deducted @ 12% of 7. Spreadsheet on Outstanding Report
(Basic Salary + DA)
Prepare and Present a Spreadsheet for a list of
Income Tax (IT) is deducted @ 10% of outstanding notes receivable each month. The
(Basic Salary + DA + HRA + CCA) information for a particular month is as follows:
Net Salary is summation of Basic Salary + Use the following financial information:
DA + HRA + CCA less PF and IT
Face Interest Other details
(ii) Save your worksheet on the desktop as Value Rate
Employee_Salary.
0 10.8% Late Penalty: 11%
(iii) Print a Hard Copy of your work and close
the file. 500 9.2% Report date: July 30,
2011
6. Revenue and Commission Statement
1000 8.96% Days / Year: 365
Prepare a Spreadsheet for a certain Company,
which pays a commission based upon books
sold. Note Face Period
Issue Date
Prepare a revenue and commission statement Number Value Days
based upon the following information: 1 Rs. 525 90 7/2/2011
Number of Number of 2 Rs. 612 60 14/3/2011
Name of
Soft Cover Hard Cover
Salesperson 3 Rs. 210 45 19/5/2011
Books sold Books sold
Suresh Mehta 1546 360 4 Rs. 800 120 10/6/2011
Gladstone David 1788 315 5 Rs. 1469 30 24/6/2011
Manish Arora 1340 294 Show the Interest rate, Days outstanding,
Interest earned, Late penalty and Total due.
Manmeet Singh 990 450
Use appropriate Lines and Shading to make the
Vineet Saighal 1105 689 report interesting and easy to read. Use two
Assumption: places after the decimals where appropriate.
Price of Hard Cover Books: @Rs. 34.45 per Prepare a chart to show the above information.
Book
Price of Soft Cover Books: @ Rs. 22.05 per 8. Database Management
Book (i) Create a Database with at least 10 records
Commission on Hard Cover Books: 9.0% with each record having the following
Commission on Soft Cover Books: 12% fields:
Prepare a spreadsheet showing your calculation Employees Details: PAN Number, Name,
to determine: Address and Phone Number
(i) Revenue (Hard Cover Books and Soft (ii) Sort the names in alphabetical order.
Cover Books) (iii) The Employee database has another table
(ii) Total Revenue called Loan Details that stores the details of
loan taken by various employees. Create a
(iii) Commission (Hard Cover Books and Soft query that gives a list of employees names
Cover Books) along with loan details.
(iv) Total Commission The loan details table has following fields:
(v) Create a Chart (any style) showing the Loan Amount, Loan Date, Interest Rate,
above information. Amount Paid and Amount Balance.
Open the original page (with lines and shading) (iv) Create a Report as per the format given
as well as a formula page. (The entire formula below:
must been shown)
Use “=round (.0)” where applicable so that all
columns add correctly.

112
 Employee Loan Details: The Worksheet format is as follows:

Emp. Emp. Loan Loan Amount Balance Test- Test- Test- Test-
No. Name Amount Date Paid Amount Name of 1 2 3 4
Decide tables, relationships etc. on your own. S.N. the (Max (Max (Max (Max
Candidate 25 25 25 25
9. Database Management: Mks) Mks) Mks) Mks)
(i) Create an Accounts Table by following the Alfred
steps given below: 1 24 22 18 23
Gomes
(a) Click on the new button and highlight
Design View in the dialog box that Shankar
2 17 20 17 20
appears. Pandey
(b) Click the OK button and the Table Ali
Design View will appear. 3 Hassan 22 19 20 14
(c) Fill in the Field Name, Data Type and Raza
Description for each column/field in the P. Subba
Account Table. 4 20 19 19 17
Rao
Field Name Data Description Sushanto
Type 5 19 21 24 22
Mukerjee
CustomerID Number The Unique Identifier
for a Customer (ii) Compute the percentage for each
candidate’s total. Show the total score and
AccountNo Number The Unique Identifier the percentage for each candidate.
for a Bank Account
(iii) Create a Header for the Chart. Include your
AccountType Text The type of account name.
(Checking, Saving etc.)
(iv) Save your work on the desktop as
DateOpened Date The date the account Merit_Project.
was opened
(v) Print a hard copy of your work and close
Balance Number The current balance the file.
(money) in this account.
(ii) Define a Primary Key for the Accounts NOTE: No question paper for Practical work will
table. Click on the Account Number field be set by the Council.
with the right mouse button and choose
Primary Key from the pop-up menu.
(iii) Save the new Accounts Table.

10. Selection Grade Card

(i) Make a Spreadsheet of a Selection Grading
Chart using the following details:
Candidate’s Name: String
type
Test 1: Integer
type
Test 2: Integer
type
Test 3: Integer
type
Test 4: Integer
type

113
 *EXPLANATION AND PRESENTATION OF ITEMS UNDER SHAREHOLDERS’ FUNDS
Share Capital

Particulars Note No. Figures at the end of the current Figures at the end of the previous
reporting period reporting period
1 2 3 4
I. EQUITY AND LIABILITIES
1. Shareholders Funds
(a) Share Capital 1 xxx

Notes to Accounts: 1.
Particulars Amount (`)
(a) Share Capital
Authorised Capital
...... shares of `..... each xxx

Issued Capital
..... shares of `..... each xxx
(of the above shares…..shares are allotted as fully paid up pursuant to a contract without payment being received in cash)
Subscribed Capital
Subscribed and fully paid up xxx
..... shares of `.... each
(of the above shares…..shares are allotted as fully paid up pursuant to a contract without payment being received in cash) xxx
Subscribed but not fully paid up
..... shares of `.... each, .... ` Called up x x x
Less calls –in- arrear (xx)
Add Shares Forfeited A/c x

TOTAL xxx
Points to be noted:
♦ Equity share capital and preference share capital to be shown separately.
If the authorised/issued capital is not mentioned in the question it has to be shown in the notes to accounts. However, no figures will be shown as illustrated above.

114
 **FORMAT OF THE BALANCE SHEET OF A JOINT STOCK COMPANY
PART-1
BALANCE SHEET
Name of the Company....................
Balance Sheet as at.........................
(Rupees in ................)
Particulars Note No. Figures at the end of the current reporting period Figures at the end of the previous reporting period
1. 2 3 4.
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 Bank Balance
(e) Short-term loans and advances
(f) Other current assets
TOTAL
115
 SAMPLE TABLE FOR PRACTICAL WORK
S. No. Unique PROJECT 1 PROJECT 2 TOTAL
Identification MARKS
Number A B C D E F G H I J
(Unique ID) of Teacher Visiting Average Viva-Voce Total Marks Teacher Visiting Average Viva-Voce Total Marks (E + J)
the candidate Examiner Marks by Visiting (C + D) Examiner Marks by (H + I)
(A + B ÷ 2) Examiner (F + G ÷ 2) Visiting
Examiner
7 Marks* 7 Marks* 7 Marks 3 Marks 10 Marks 7 Marks* 7 Marks* 7 Marks 3 Marks 10 Marks 20 Marks
1

10

*Breakup of 7 Marks to be awarded separately by the

Name of Teacher:
Teacher and the Visiting Examiner is as follows:
Signature: Date
Overall Format 1 Mark
Content 4 Marks Name of Visiting Examiner
Findings 2 Marks
Signature: Date
NOTE: VIVA-VOCE (3 Marks) for each Project is to be conducted only by the Visiting Examiner, and should be based on the Project only.
116