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dsUnzh; fo|ky; laxBuKendriya Vidyalaya Sangathan
SUPPORT MT!R"#$#SS %"" &$$OU'T'$(
)*++ & )*+)
Pre,ared at
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Kendriya Vidyalaya Sangathan1 7onal "nstitute of !du:ation < Training
KVS $o@,lex1 '$A $olony1 Kan6ur@arg 5estC1Mu@ai& =***>?
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Tel2 'os2 *))&)D>>=EE> FirCG *))&)D>>?)H=G3ax *))&)D>>=EE>
5esiteI www.zietmumbai.in !&@[email protected]
http://www.zietmumbai.in/mailto:[email protected]://www.zietmumbai.in/mailto:[email protected]
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PR!PR!F B(1. Mrs.K.PRABAVATHI, PT !"MM., KV MA#KH$R%, m$MBAI2. Mrs.BH$VA#&'(ARI V.M.,PT !"MM., KV #o.) !"*ABA,
m$MBAI3. Ms. A#+$ KRI'H#A#I, PT !"MM., KV #" %&VA*I, nA'IK 4. Mr. %I*IP '"#A*&, PT !"MM., KV #o.- !"*ABA, m$MBAI5. Mrs. 'MITA.'.#AIR, PT !"MM., KV #o.- !"*ABA, m$MBAI6. Mr.+IT%&R.'.RA(AT, PT !"MM, KV "#! PA#V&*,
m$MBAI
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SYLLABUS
CLASS XII
UNITS Marks
Part A: Accounting for Not-For-Profit Organizations,
Partnership Firms and Companies
1. Ao!ntin" #or not$#or$pro#it or"ani%ations. 1&
2. Ao!ntin" #or Partnership Firms &5
3. 'eonstit!tion o# Partnership 2&
4. Ao!ntin" #or Share Capita( and )e*ent!re 25
6&
Part B : Financial Stateent Anal!sis
5. Ana(+sis o# Finania( Statements 12
6. Cash F(o, Statement &-
. Pro/et 0ork 2&
Tota( 4&
Unit $1 Pro/et Fi(e 4 marks
Unit$2 0ritten Test 12 Marks ne ho!r
Unit 3 ia$0ee 4 MarksUnit: ": Accounting for Not-For-#rofit Organizations
7 Not #or pro#it or"ani%ation Meanin" and e8amp(es.
7 'eeipts and Pa+ments Meanin" and onept o9 #!nd *ased ao!ntin".
7 Preparation o# Inome and :8pendit!re Ao!nt and ;a(ane Sheet #rom
'eeipt and Pa+ment Ao!nt ,ith additiona( in#ormation.
Unit: $ Accounting for Partners%i# Firs
7 Nat!re o# Partnership #irm Partnership )eed$meanin"<
importane.
7 Fina( Ao!nts o# Partnership Fi8ed s F(!t!atin" Capita(< )iision o# Pro#it
amon" partners< Pro#it and =oss Appropriation Ao!nt
Unit &:'econstitution of Partners%i#
7 Chan"es in Pro#it Sharin" 'atio amon" the e8istin" partners$Sari#iin" 'atio
and >ainin" 'atio
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7 Ao!ntin" #or 'ea(!ation o# Assets and =ia*i(ities and distri*!tion o#
resere and A!m!(ated Pro#its.
7 >ood,i(( Nat!re< Fators a##etin" and methods o# a(!ation Aera"e pro#it
S!per pro#it and Capita(isation methods.
7 Admission o# a Partner :##et o# Admission o# Partner< Chan"e in Pro#itSharin" 'atio< Ao!ntin" Treatment #or >ood,i((< 'ea(!ation o# Assets and
=ia*i(ities 'eseres a!m!(ated Pro#its and Ad/!stment o# Capita(s.
7 'etirement?)eath o# a Partner@ Chan"e in Pro#it Sharin" ratio< ao!ntin"
treatment o# >ood,i((< 'ea(!ation o# Assets and =ia*i(ities< Ad/!stment o#
a!m!(ated Pro#its 'eseres and apita(s.
Unit : ( Accounting for S%are Ca#ital an) *e+enture
• Share Capita( Meanin"< Nat!re and T+pes.
• Ao!ntin" #or share apita( Iss!e and A((otment o# :!it+ and Pre#erene
Shares@ Priate p(aement o# shares< meanin" o# emp(o+ee stok option p(an
p!*(i s!*sription o# shares@ er S!*sription and !nder s!*sription@ iss!e at
par. premi!m and at diso!nt@ Ca((s in adane< Ca((s in arrears< iss!e or snares
#or onsideration other than ash.
• For#eit!re o# Sharps@ ao!ntin" treatment< re$iss!e o# #or#eited shares
• Presentation o# Shares Capita( and )e*ent!re in Compan+Bs ;a(ane Sheet
• Iss!e o# de*ent!res $ at par and premi!m@ iss!e o# de*ent!re #or onsideration
other than ash.
• 'edemption o# de*ent!re o!t o# Capita(@ redemption methods (!mp s!m<
pa+ment< dra,s *+ (ots. P!rhase in the open market and onersion e8(!din"
!m$interest and e8$interest
Unit 5 Ana(+sis o# Finania( Statements
a Finania( Statements o# a Preparation o# Simp(e ;a(ane
Compan+ Sheet o# a Compan+ in the presri*ed #orm ,ith ma/or headin"s on(+.
* Finania( Statement Ana(+sis Meanin"< Si"ni#iane and P!rpose<
=imitations.
Too(s #or Finania( Statement Comparatie Statements<
Ana(+sis Common Si%e Statements.d Ao!ntin" 'atios Meanin" and */eties< T+pes o# 'atios
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=i!idit+ 'atios C!rrent 'atio< =i!id 'atio.
So(en+ 'atios )e*t to :!it+< Tota( Assets to
)e*t< Proprietar+ 'atio.
Atiit+ 'atios Inentor+ T!rnoer< )e*tors T!rnoer< Pa+a*(e
T!rnoer< 0orkin" Capita( t!rnoer and Fi8ed
Assets T!rnoer.
Pro#ita*i(it+ 'atios >ross Pro#it< peratin" 'atio< Net Pro#it 'atio<
'et!rn on Inestment< :arnin" Per Share<
)iidend Per Share< Prie :arnin" 'atio.
Unit : Cas% Flo Stateent
Cash F(o, Statement Meanin" and */eties< Preparation< Ad/!stment re(ated to
depreiation< diidend and ta8< sa(e and p!rhase o# non$!rrent assets as per reised
standard iss!ed *+ ICAI.
Unit: .Pro/ect 0or1
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C2AP34' 5 I
ACCOUN3IN6 FO' - NO3 - FO' - P'OFI3 5 O'6ANISA3ION
L4A'NIN6 OU3CO74S8
A#ter st!d+in" the (esson< st!dents ,i(( *e a*(e to
• Understand non$pro#it entities and state its meanin".
• )i##erent Ao!ntin" termino(o"+ re(ated to non$pro#it entities.
• :8p(ain the onept o# #!nd ao!ntin".
• Understand 'eeipts and pa+ment ao!nt and its #eat!res.
• Understand Inome and :8pendit!re Ao!nt and its #eat!res.
• Identi#+ the items #or the preparation o# Inome and :8pendit!re Ao!nt.
• )i##erentiate *et,een 'eeipts and Pa+ment Ao!nt and Inome and :8pendit!re
Ao!nt.
• Prepare Inome and :8pendit!re Ao!nt ,ith the "ien reeipts and
Pa+ment Ao!nt and additiona( in#ormation
Intro)uction:
r"anisations are o# t,o t+pes
a. Pro#it makin" or"anisations are the *!siness or"anisations ,hose main o*/etie is to
earn pro#it *+ se((in" "oods or proidin" series. These or"ani%ations are #ormed ,ith
Pro#it$Motie.
b. Not-for-Profit organisations are formed to promote cert ain !(t!ra(< rereationa(<
re(i"io!s< po(itia(< ed!ationa(< media( atiities et. These or"ani%ations are #ormed
,ith Serie Motie. This hapter he(ps in !nderstandin" the ma/or di##erenes ino(edin doin" ao!ntin" #or pro#it makin" or"ani%ations and Non Pro#it makin"
or"ani%ations.
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Salient Points:-
A9 7eaning of Non-Profit Organisations:
Not #or pro#it or"anisations re#er to the or"anisations that are !sed #or the ,e(#are o# the
soiet+ and are set !p as harita*(e instit!tions< ,hih #!ntion ,itho!t an+ pro#it motie.
;. Charateristis o# Not #or Pro#it r"anisation
a. Formed #or proidin" serie to a spei#i "ro!p or p!*(i at (ar"e.
*. r"ani%ed as harita*(e tr!st?soiet+.
. Mana"ed *+ Mana"in" Committee e(eted *+ mem*ers.
d. Main So!re o# Inome is
S!*sriptions< donations< "oernment "enera( "rants et
e. F!nds raised thro!"h ario!s so!res are redited to apita( #!nd
#. >oernment Shoo(s< Charita*(e hospita(s< 'ereationa( C(!*s< et are e8amp(es o# Not
#or pro#it or"anisation.
C9 Basic Accounting 3erinolog!:
1. S!*sription S!*sription is the amo!nt paid *+ mem*er to the non$pro#it or"ani%ation in
order to maintain their mem*ership. It is the main so!re o# inome #or N.P.. and it is sho,n
in the inome side o# Inome and :8pendit!re A?.
2. =i#e mem*ership #ees it is the amo!nt paid *+ mem*er to the non$pro#it or"ani%ation #or the
maintenane o# entire (i#e mem*ership. It is sho,n in the =ia*i(ities side o# ;a(ane sheet.
3. =e"a+ It is the amo!nt reeied as per the ,i(( o# a deeased person. It appears on the
reeipts side o# the 'eeipt and pa+ment ao!nt and is diret(+ added to apita( #!nd ? "enera(#!nd in the *a(ane sheet.
4. :ndo,ment F!nd it is the #!nds reeied #or proidin" permanent means o# s!pport. It is a
apita( reeipt *ea!se the #!nd proides permanent so!re o# inome.
5. >rant it is the amo!nt reeied #rom entra(< state or (oa( "oernment #or ro!tine e8penses
o# these instit!tions. >rant reeied #rom "oernment #or ro!tine e8penses are inome. >rant
reeied #or spei#i p!rpose is treated as (ia*i(it+.
*9 Accounting 'ecor)s of Not for Profit Organisations:
The #inania( statement o# Not #or Pro#it or"ani%ation in(!des
7 1. 'eeipt and Pa+ment A?
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7 2. Inome and :8pendit!re A?
7 3. ;a(ane Sheet.
"9 'ecei#t an) Pa!ent Ac:
a. It is a S!mmar+ o# the Cash ;ook. *. Its sho,s the tota( amo!nt o# a(( reeipts and pa+ments irrespetie o# the Period to
,hih the+ pertains.
. It in(!des a(( reeipts and pa+ments ,hether the+ are o# reen!e or apita( nat!re.d. No non$ash items are sho,n in this A?C.
e. It has *oth openin" and C(osin" Cash *a(ane.
#. Format o#
'ecei#ts an) Pa!ents Account
'eeipts Amo!nt Pa+ments Amo!nt
To ;a(ane *?d
To 'een!e 'eeipts
a. S!*sriptions
*. >enera( )onations
C. Proeeds #rom sa(e
o# Tikets< "rass and
o(d ne,spapers.
d. =oker 'ents.
e. :ntrane #ees< i#
not apita(i%ed
To Capita( 'eeipts
a. Spei#i p!rposedonations
*. =e"aies
. Spei#i P!rpose
donations
d. sa(e o# #i8ed assets
and Inestment
e. Capita(ised
:ntrane #ees
#. (i#e mem*ership
#ees
Note a(( reen!ereeipts "oes to
Inome Side o#
Inome and:8pendit!re
Ao!nt
Note Capita('eeipts "oes to
;a(ane sheets
;+ 'een!e Pa+ment
a. 'ent rates and ta8es.
*. ne,spapers< ma"a%ines< periodia(s
. sa(aries
d. e(etriit+ e8penses.
e. ons!ma*(e items.
;+ Capita( Pa+ment
a. #i8ed assets
*. Inestments et.
Note a(( reen!e
Pa+ments "oes to
:8pendit!re Side o#Inome and
:8pendit!re Ao!nt
Note Capita( Pa+ment
"oes to ;a(ane sheets
$9 Incoe an) 4;#en)iture Account:
The main #eat!res o# Inome and :8pendit!re Ao!nt
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i It is prepared #or an ao!ntin" period on ar!a( onept #o((o,in" the
mathin" prinip(e.
ii n(+ reen!e items are onsidered< ,hi(e apita( item are e8(!ded.
iii A(( items *oth ash and non$ash depreiation are reordedi :8pendit!re are reorded on the de*it side and inomes on the redit side
)i##erene is kno,n as S!rp(!s i# ome in :8pendit!re side or )e#iit i#
ome in Inome side.
&9 Balance S%eet:
;a(ane sheet is prepared #or not$#or pro#it or"ani%ation to asertain the #inania( position o#
the or"ani%ation. it is prepared on the same pattern as in the ase o# pro#it makin" or"ani%ation.
The on(+ di##erene is that DCapita( #!ndE or D>enera( F!ndE is sho,n in p(ae o# Capita( and
S!rp(!s or de#iit as per inome and e8pendit!re ao!nt ,i(( *e added or ded!ted #rom the
apita( #!nd.
Note i# in a !estion apita( #!nd in the *e"innin" o# !rrent +ear is not "ien then ,e hae to
prepare penin" ;a(ane sheet to asertain it.
*9 3OPIC FO'
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$9 Calculation of Aount S#ent on consua+le ite:
Cons!ma*(e item are those item ,hih are ons!med d!rin" the proess o# their !se (ike<
Mediine< Stationer+< Sports materia( et.In Case o# non$pro#it or"ani%ation the amo!nt spent on item ons!med d!rin" the +ear is
sho,n in the e8pendit!re side o# Inome K :8pendit!re A?C$
Forula:
Parti!(ar?:8pendit!re Amo!ntAmo!nt paid #or Cons!ma*(e items
Add1. penin" stok o# Cons!ma*(e items;e"innin" o# !rrent +ear
2. penin" Adane Paid to s!pp(ier Cons!ma*(e items ;e"innin" o#
!rrent +ear3. C(osin" reditor o# Cons!ma*(e items :nd o# !rrent +ear
G88
G88
G88
G88
=ess
1. C(osin" stok o# Cons!ma*(e items :nd o# !rrent +ear
2. C(osin" Adane Paid to s!pp(iers o# Cons!ma*(e items +end o# !rrent+ear
3. penin" reditor o# Cons!ma*(e items ;e"innin" o# !rrent +ear
G88
G88
G88
888
Amo!nt spent on Stationer+ Cons!med d!rin" !rrent Hear to *e sho,n ine8pendit!re side o# Inome and :8pendit!re A?
GGG
3. T':ATM:NT F SP:CIFIC FUN)< ItLs IN:STM:NT< INCM: AN) :GP:NS:S
':=AT:) T T:M$
e.". TU'NAM:NT FUN)< MATC FUN)< P'I: FUN) et.
Spei#i #!nds are !sed #or spei#i p!rposes. 0e hae to sho, their treatment in the *a(ane sheet in the #o((o,in" ,a+ dependin" !pon the in#ormation "ien in !estion
=etLs ass!med that spei#i #!nd is to!rnament #!nd$
;a(ane Sheet o# ..
=ia*i(ities Amo!nt Assets Amo!nt
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To!rnament F!nd 888
Add1. Inome reeied #rom
To!rnament or
To!rnament #!ndinestment. 888
2. Inome ?s #rom
To!rnament orTo!rnament #!nd
inestment 888
G88
=ess1. To!rnament :8penses
Paid 888
2. ?s To!rnamente8penses 888
?S to!rnament e8penses
GGG
GGG
To!rnament #!nd
Inestment
Inome ?s #rom
To!rnament or
To!rnament #!ndinestment
GGG
GGG
" 7ar1 >uestions
O.1. )!rin" the +ear 2&& a (!* reeied 's1< &&ie t,o main so!res o# inome o# a Not #or pro#it or"ani%ationQ
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Ans.5 S!*sriptions< donations< "oernment "enera( "rants et
O.6. 0hat do +o! mean *+ (e"a+Q >ie the Ao!ntin" treatment o# it.
Ans.6 =e"a+ It is the amo!nt reeied as per the ,i(( o# a deeased person. It appears on
the reeipts side o# the 'eeipt and pa+ment ao!nt and is diret(+ added to apita(
#!nd ? "enera( #!nd in the *a(ane sheet.
O.. 0hat is honorari!mQ
Ans. A token pa+ment made to a person ,ho has o(!ntari(+ !ndertaken a serie ,hih
,i(( norma((+ demand o# #ee. It is th!s an e8pression o# "ratit!de rather than a
pa+ment #or the ,ork done.
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&- 7A'=S >U4S3IONS:
O.1.:8trats o# reeipt and pa+ment Ao!nt #or the +ear ended 31st Marh< 2&1& are "ien
*e(o,
S!*sriptions 's.
2&&-$&R 2
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6
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To!rnament F!nd 1
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F' T: H:A' :N):) 31ST MA'C< 2&&R
'eeiptsAmo!nt
's.Pa+ments
Amo!nt
's.
To ash in and
To S!*sriptions
To :ntrane Fees
To Sa(e o# re#reshmentsTo Sa(e o# )ane Tikets
To Interests on Inestments
-
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Fo((o,in" additiona( in#ormation are a(so proided to +o!
i Fo((o,in" ,ere the assets and (ia*i(ities on 31st Marh< 2&&-
Sports e!ipment 's.6
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Note
a(!e o# Inestment in the *e"innin" o# the +ear has *een a(!(ated as #o((o,
Interest Inestment W1&&?'ate o# inestment4
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So(!tion
INCM: AN) :GP:N)ITU': ACCUTN IN T: ;XS F SMNAT 0:=FA':
SCI:TH
F' T: H:A' :N):) 31ST MA'C< 2&&R
:8pendit!re Amo!nt's.
Inome Amo!nt's.
To Sa(aries and 0a"es
To 'ates and Ta8es
To :ntertainment Materia(
64
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;A=ANC: S::T AS AT 31ST MA'C< 2&&R
=ia*i(itiesAmo!nt
's.Assets
Amo!nt
's.
's.YCapita( F!nd 2
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M:M'AN)M ;A=ANC: S::T ' Y;A=ANC:$S::T AS AT 31ST MA'C< 2&&-
=ia*i(itiesAmo!nt
's.
AssetsAmo!nt
's.Creditors #or :ntertainment
Materia(
S!*sription 'eeied
In Adane
;!i(din" F!nd
Capita( F!nd
;a(anin" Fi"!re
5
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C2AP34' - II
Accounting for #artners%i# firs 5 Fun)aentals
L4A'NIN6 OB?4C3I@4S:
A#ter st!d+in" this hapter the st!dent ,i(( *e on#ident to
Understand and e8p(ain the meanin" o# partnership
Understand the harateristis o# Partnership
:8p(ain the meanin" and ontents o# partnership deed.
App(+ their proisions o# Partnership At
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" an) & 7ar1 >uestions
O1 )e#ine partnership.
0hen t,o or more persons enter into an a"reement to arr+ on *!siness and share its
pro#it and (osses< it is a ase o# partnership. The Indian partnership At< 1&31< de#ines
Partnership as #o((o,s
ZPartnership is the re(ation *et,een persons and ,ho hae a"reed to share the pro#itso# a *!siness arried on *+ a(( or an+ o# them atin" #or a((.
O.2 0hat do +o! !nderstand *+ BpartnersB< B#irmB and B#irmsB name Q
The persons ,ho hae entered in to a Partnership ,ith one another are indiid!a((+ a((ed
BPartnersB and o((etie(+ Ba #irmB and the name !nder ,hih the *!siness is arried isa((ed Bthe #irmBs nameB.
O.3 0rite an+ #o!r main #eat!res o# partnership.
:ssentia( e(ements or main #eat!res o# Partnership
i T,o or more persons Partnership is an assoiation o# t,o or more persons.
ii A"reement The Partnership is esta*(ished *+ an a"reement either ora( or in,ritin".
iii =a,#!( ;!siness A Partnership #ormed #or the p!rpose o# arr+in" a *!siness< it
m!st *e a (e"a( *!siness.
i Pro#it sharin" Pro#it o# the #irm is share *+ the partners in an a"reed ration< i# theratio is not a"reed then e!a((+. Pro#it a(so in(!des (oss.
O.4 0hat is the minim!m and ma8im!m n!m*er o# partners in a(( partnershipQ
There sho!(d *e at (east t,o persons to #orm a Partnership. The ma8im!m n!m*er o#
Partners in a #irm arr+in" an *ankin" *!siness sho!(d not e8eed ten and in an+
other *!siness sho!(d not e8eed ten and in an+ other *!siness it sho!(d not e8eed
t,ent+.
O.5 0hat is the stat!s o# partnership #rom an ao!ntin" ie,pointQ
From an ao!ntin" ie,point< partnership is a separate *!siness entit+. From (e"a(
ie,points< ho,eer< a Partnership< (ike a so(e proprietorship< is not separate #rom the
o,ners.
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O.6 0hat is meant *+ partnership deedQ
Partnership deed is a ,ritten a"reement ontainin" the terms and onditions a"reed *+
the Partners.
O. State an+ #o!r ontents o# a partnership deed.
i The date o# #ormation and the d!ration o# the Partnership
ii Name and address o# the Partners
iii Name o# the #irm.
i Interest on Partners apita( and dra,in"s
'atio in ,hih pro#it or (osses sha(( *e shared
O.- In the a*sene o# a partnership deed< ho, are m!t!a( re(ations o# partners "oernedQ
Ans. In the a*sene o# Partnership deed< m!t!a( re(ations are "oerned *+ the Partnership At<
1R32.
O.R >ie an+ t,o reason in #ao!r o# hain" a partnership deed.
Ans. i In ase o# an+ disp!te or do!*t< Partnership deed is the "!idin" do!ment.
ii It an spei#+ the d!ties and po,ers o# eah Partner.
O.1& State the proision o# BIndian partnership At 1R32B re(atin" to sharin" o# pro#its in
a*sene o# an+ proision in the partnership deed.
In the a*sene o# an+ proision in the Partnership deed< pro#it or (osses are share *+ the
Partners e!a((+.
O.11 0h+ is it important to hae a partnership deed in ,ritin" Q
Partnership deed is important Sine it is a do!ment de#inin" re(ationship o# amon"
Partners< th!s is a assistane in sett(ement o# disp!tes< i# an+ and a(so aoid possi*(e
disp!tes it is a "ood eidene in the o!rt.
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O.12 0hat do +o! !nderstand *+ #i8ed apita( o# partnersQ
PartnersB apita( is said to *e #i8ed ,hen the apita( o# Partners remain !na(tered e8ept
in the ase ,here #!rther apita( is introd!ed or apita( is ,ithdra,n permanent(+.
O.13 0hat do +o! !nderstand *+ #(!t!atin" apita( o# partners Q
Partners apita( is said to *e #(!t!atin" ,hen apita( a(ters ,ith eer+ transation in the apita(
ao!nt. For e8amp(e< dra,in"< redit o# interest< et
O.14 >ie t,o ir!mstanes in ,hih the #i8ed apita( o# partners ma+ han"e.
T,o ir!mstanes in ,hih the #i8ed apita( o# Partners ma+ han"e are
i 0hen additiona( apita( is introd!ed *+ the Partners.
ii 0hen a part o# the apita( is permanent(+ ,ithdra,n *+ the Partners.
O.15 =ist the items that ma+ appear on the de*it side and redit side o# a partnerBs
#(!t!atin" apita( ao!nt.
n de*it side )ra,in"< interest on dra,in"< share o# (oss< (osin" redit *a(ane o#
the apita(.
n redit side penin" redit *a(ane o# apita(< additiona( apita( introd!ed<
share o# pro#it< interest on apita(< sa(ar+ to a Partner< ommission to a Partner.
O.16 o, ,i(( +o! sho, the #o((o,in" in ase the apita(s are
i Fi8ed and ii F(!t!atin"
. a Additiona( apita( introd!ed
* )ra,in"s
0ithdra,a( o# apita(
d Interest on apita( and
e Interest on (oan *+ a partners Q
i In ase< apita(s are #i8ed
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a on redit side o# apita( * on de*it side o# !rrent A? on de*it side o#
apita( A? d on redit side o# !rrent A? e on redit side o# (oan #rom
partnerBs A?
O.1 I# the partners apita( ao!nts are #i8ed< ,here ,i(( +o! reord the #o((o,in" items
i Sa(ar+ to a partners
ii )ra,in" *+ a partners
iii Interest on apita( and
i Share o# pro#it earned *+ a partner Q
Ans.1 i Credit side o# PartnerBs !rrent A?
ii )e*it side o# PartnerBs !rrent A?
iii Credit side o# Partners !rrent A?
i Credit side o# Partners !rrent A?
O.1- o, ,o!(d +o! a(!(ate interest on dra,in"s o# e!a( amo!nts dra,n on the =ast
da+ o# eer+ month Q
Ans.1- 0hen a partners dra,s a #i8ed amo!nt at the *e"innin" o# eah month< interest on
tota( dra,in" ,o!(d *e on the amo!nt ,ithdra, #or 6.5 months at the a"reed rate o#
interest per ann!m. App(+ the #o((o,in" #orm!(a.
Interest on dra,in" tota( dra,in" 8 12
5.6
1&&×
Rate
O.1R o, ,o!(d +o! a(!(ate interest on dra,in" o# e!a( amo!nts dra,n on the (ast da+
o# eer+ month Q
Ans. 0hen dra,in" o# #i8ed amo!nts are made at re"!(ar month(+ intera(s on the da+ o#
eer+ month< Interest ,o!(d *e har"ed on the amo!nt ,ithdra,n at the a"reed rate o# interest
#or 5.5 months. App(+ the #o((o,in" #orm!(a.
Interest on dra,in" Tota( dra,in" 8 12
5.5
1&&×
Rate
O.2& o, ,o!(d +o! a(!(ate interest on dra,in" o# e!a( amo!nt dra,n in the midd(e o#
eer+ month Q
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O.21 'amesh< a partner in the #irm has adaned a (oan o# a 's. 1
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P';=:MS ;AS:) N FUN)AM:NTA=S
O. 1 A< ; and ,ere partners in a #irm hain" no partnership a"reement. A
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To ;a(ane ?d 53-R& 3226& ;+ ;a(ane *?d 5&&&&& 3&&&&&
;+ interest on apita( 3&&&& 1-&&&
;+ sa(ar+ $ 25&&&
;+ P and =
Appropriation A? 43-R& 2R26&
53-R& 3226& 53-R& 3226&
O.3 G and H are partners sharin" pro#its and (osses in the ratio o# 3 2 ,ith apita(s o# 's.
5&
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2A and ; are partners sharin" pro#its and (osses in the ratio o# 21. A ,ithdra,s 's.15&& at
the *e"innin" o# eah month and ; ,ithdre, 's. 2&&& at the end o# eah month #or 12
months. Interest on dra,in"s ,as har"ed 6 p.a. Ca(!(ate the interest on dra,in"s
o# A and ; #or the +ear ended 31st )eem*er 2&&R.
Ans. 1 Interest on Capita( For P
)AT: AMUNT N . F MNTS P')UCT
1$4$2&&R T 31$3$
1&
5&
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O.5 A< ; and C are partners in a #irm sharin" pro#its and (osses in the ratio o# 235. Their
#i8ed apita(s ,ere 15
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Add )ra,in"s Preio!s(+ ded!ted . $ 3
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O - A< and C are partners ,ith #i8ed apita(s o# 's. 2
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1RR23& 1RR23&
Capita( Ao!nts
Parti!(ars A ; C Parti!(ars A ; C
To *a(ane *?d 2
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The pro#its #or the +ear ended 31st )eem*er< 2&& *e#ore makin" a*oe appropriations
,ere 's. 2
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]So(!tion1& Pro#it and =oss Ao!nt #or the +ear ended
Parti!(ars Amo!nt Parti!(ars Amo!nt
To Interest on PBs =oan A? 12&&& ;+ pro#it *e#ore interest 426-&&
To Pro#it trans#erred to
PK= Appropriation A? 414-&&
426-&& 426-&&
Profit an) Loss A##ro#riation Account for t%e !ear en)e)9
Parti!(ars Amo!nt Parti!(ars Amo!nt
To interest on Capita( ;+ pro#it and =oss A? Pro#it 414-&&
P 36&&& ;+ interest on dra,in"s
O 24&&& 6&&&& P 32&&
To OBs ommission 6&&&& O 2&&& 52&&
To resere A? 3&&&&
To pro#it
PBs Capita( 135&&&
OBs apita( 135&&& 2&&&&
42&&&& 42&&&&
Notes
i I# the rate o# interest on PartnersB =oan is not "ien in the !estion< it is to *e
,ed 6 p.a. aordin" to the Partnership At.
ii Interest on PartnersB =oan is treated as a har"e a"ainst Pro#it< so it is sho,n in
the de*it o# Pro#it and =oss A?.
iii I# the date o# )ra,in"s is not "ien in the !estion< interest on dra,in"s ,i(( *e
har"ed and aera"e period o# 6 months. .
i 'esere F!nd is a(!(ated at 1& on 's. 3
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CAPT:' $ III
':CNSTITUTIN F PA'TN:'SIP
CAN>: IN P'FIT SA'IN> 'ATI AMN> T: :GISTIN> PA'TN:'S<
A)MISSIN F A PA'TN:'< ':TI':M:NT?):AT F A PA'TN:'
Admission o# a Partner
Learning o+/ecties:-
A#ter st!d+in" this (esson< the st!dents ,i(( *e a*(e to
• Identi#+ and dea( e##etie(+ ,ith the sit!ation o# reonstit!tion o# partnership.
• Identi#+ the pro*(em arisin" d!e to admission o# a partner in the #irm.
• Ca(!(ate ne, and sari#ie ratio in di##erent ases.
• Understand< a(!(ate and make treatment o# "ood,i(( in di##erent ases.
• Make ao!ntin" treatment o# the rea(!ation o# assets and (ia*i(ities and distri*!te the
pro#it and (oss on rea(!ation amon" the o(d partners.
• Make ao!ntin" treatment o# !nreorded assets and (ia*i(ities
• Prepare apita( Ao!nts< Cash A? and ;a(ane Sheet o# the Ne, #irm
• Ad/!st the PartnersL Capita( Ao!nts
Sa(ient Points$
1. >ood,i(( is the monetar+ a(!e o# *!siness rep!tation. It is an intan"i*(e asset.
2. >ood,i(( ma+ *e o# t,o t+pes
a. P!rhased "ood,i((
*. Non$p!rhased "ood,i((
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3. 0hen e8istin" #irm #aes pro*(em o# (imited #inania( reso!res and man po,er then
one ne, additiona( partner enters into #irm.
4. There are three methods o# a(!ation o# "ood,i((
a. Aera"e Pro#it Method
*. S!per Pro#it method
. Capita(isation Method
5. 0hen ne, partner is admitted into e8istin" partnership then e8istin" partners hae to
sari#ie in #ao!r o# ne, partner< it is a((ed sari#iin" ratio.
6. Share o# "ood,i(( o# ne, partner ,i(( *e redited to sari#iin" partners into their
sari#iin" ratio.
. At the admission o# ne, partner Pro#it K =oss on rea(!ation o# assets and (ia*i(ities
and *a(anes o# a!m!(ated pro#its K (osses ,i(( *e distri*!ted amon" o(d partners
on(+ in o(d ratio.
O(. At the time o# han"e in pro#it sharin" ratio amon" the e8istin" partners< ,here ,i((
+o! reord an !nreorded (ia*i(it+ Q
Ans. 'ea(!ation Ao!nt$)e*it side
O2. Anand< ;h!tan and Chadha are partners sharin" pro#its in ratio o# 321. n 1st Apri(
2&&< the+ deided to share pro#its e!a((+. Name the partners ,ho is "ainin" on
onse!ene o# s!h han"e.
Ans. Chadha.
O3. >ie t,o harateristis o# "ood,i((.
Ans. i it is an intan"i*(e asset hain" a de#inite a(!e.
ii It he(ps in earnin" more pro#it.
O4. Name an+ t,o #ators a##etin" "ood,i(( o# a partnership #irm.
Ans. i Fao!ra*(e (oation ii Time period
O5. In a partnership #irm assets are 's.5
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O6. State the amo!nt o# "ood,i((< i# "ood,i(( is to *e a(!ed on the *asis o# 2 +earsL
p!rhase o# (ast +earLs pro#it. Pro#it o# the (ast +ear ,as 's.2&ie #orm!(a #or a(!(atin" "ood,i(( !nder ^s!per pro#it methodL.
Ans. >ood,i(( S!per Pro#it 8 N!m*er o# HearsL P!rhase.
O I. Pass the /o!rna( entr+ #or inrease in the a(!e o# assets or derease in the a(!e o#
(ia*i(ities in the 'ea(!ation A?Q
Ans Assets A? )r. ,ith the amo!nt o# inrease
=ia*i(ities A? )r. ,ith the amo!nt o# derease
To 'ea(!ation A? ,ith the tota( amo!nt o# "ain
;ein" rea(!ation o# assets and (ia*i(ities
O((. P
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O12. DThe "ainin" partnerLs sho!(d ompensate to sari#iin" partnerLs ,ith the amo!nt o#
"ain.E [o!rna(ise this statement.
Ans. >ainin" PartnerLs Capita( A? )r
To Sari#iin" PartnerLs Capita( A?
;ein" ompensation "ien *+ "ainin" partner to sari#iin" partner
O13. 0hat are the t,o main ri"hts a!ired *+ the inomin" ne, partner in a partnership
#irmQ <
Ans< The t,o main ri"hts are
i 'i"ht to share the assets o# the #irm.
ii 'i"ht to share the #!t!re pro#its o# the #irm.
O14. A and ; are partners< sharin" pro#its in the ratio o# 32. C admits #or 1?5 share . State
the sari#iin" ratio.
Ans. Sari#iin" 'atio $ 32.
O15. o, sho!(d the "ood,i(( o# the #irm *e distri*!ted ,hen the sari#iin" ratio o# an+
o# the e8istin" partner is ne"atie i.e. he is "ainin"
Ans. In this ase the partner ,ith a ne"atie sari#iin" ratio< i.e. the "ainin" partner to the
e8tent o# his "ain sho!(d ompensate to the sari#iin" partner to the e8tent o# his
"ain.
O(6. In ase o# admission o# a partner< in ,hih ratio pro#its or (oss on rea(!ation o#
assets and reassessment o# (ia*i(ities sha(( *e diidedQ
Ans. (d ratio.
O1. >ie /o!rna( entr+ #or distri*!tion o# ^A!m!(ated Pro#itsY in ase o# admission o# a
partner.
Ans. A!m!(ated Pro#it A? )r.
To (d Partners Capita( A?
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;ein" distri*!tion o# a!m!(ated pro#its amon" o(d partners
O1-. At the time o# admission o# partner ,here ,i(( +o! reord ^!nreorded inestmentLQ
Ans. 'ea(!ation Ao!nt$ Credit side.
O1R. The "ood,i(( o# a partnership is a(!ed at 's.2&
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To 0orkmenLs Compensation 'esere A? 2&&
;ein" ,orkmenLs ompensation estimated at 's. 1ie /o!rna( entr+ #or reordin" deeased partnerLs share in pro#it #rom the (os!re o#
(ast *a(ane sheet ti(( the date o# his death.
Ans. Pro#it K =oss S!spense Ao!nt )r.
To )eeased PartnerLs Capita( Ao!nt
;ein" share o# pro#it to deeased partners
O25. )e#ine "ainin" ratio.
Ans. >ainin" ratio is the ratio in ,hih remainin"?ontin!in" partners a!ire the share o#
the o!t"oin" partners.
O26. >ie t,o ir!mstanes in ,hih "ainin" ratio an *e app(ied.
Ans. i 'etirement o# a partner ii )eath o# a partner. .
O2. At the time o# retirement o# a partner "ie /o!rna( entr+ #or ,ritin" o## the e8istin"
"ood,i((.
Ans. A(( Partners Capita( in(!din" retirin" A? )r.
To >ood,i(( A?
;ein" o(d "ood,i(( ,ritten o## amon" a(( partners in< o(d ratio
1 Mark O!estions
Admission o# a Partner
O.1 State the t,o #inania( ri"hts a!ired *+ a ne, PartnerQ
Ans. Ne, partner is admitted to the partnership i# it proided in the partnership deed or a((
the e8istin" partners a"ree to admit the ne, partner. Setion 31 o# the Indian
Partnership At Proides that a person ma+ *e admitted as a ne, partner into a
partnership #irm ,ith the onsent o# a(( the Partners.
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O.2 >ie the name o# the ompensation ,hih is paid *+ a ne, Partner to sari#iin"
Partners #or sari#iin" their share o# pro#its.
Ans. 0hen a partner /oins the #irm< he "ets the #o((o,in" t,o ri"hts a(on" ,ith others
i 'i"ht to share #!t!re pro#it o# the #irm and
ii 'i"ht to share the assets o# the #irm.
O.3 :n!meration the matters that need ad/!stment at the time o# admission o# a ne,
Partner.
Ans. The matter that needs ad/!stment o# the time o# admission o# a ne, partner are
i Ad/!stment in pro#it sharin" ratio and ad/!stment o# apita(
ii Ad/!stment #or "ood,i((
iii Ad/!stment o# Pro#it ? =oss arisin" #rom the 'eo(!tion o# Assets and
'eassessment o# =ia*i(ities.
i ad/!stment o# a!m!(ated pro#its< reseres and (osses.
O.4 >ie t,o ir!mstanes in ,hih sari#iin" 'atio ma+ *e app(ied.
Ans. Cir!mstanes in ,hih sari#iin" 'atio ma+ *e app(ied are
i At the time o# admission o# a ne, partner #or distri*!tin" "ood,i(( *ro!"ht in *+
the ne, partner.
ii For ad/!stment "ood,i(( in ase o# han"e in Pro#it $ sharin" ratio o# e8istin"
partners.
O.5 0h+ is it neessar+ to rea(!e assets and reassess (ia*i(ities o# a #irm in ase o#
admission o# a ne, partnerQ
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Ans. The assets are rea(!ed and (ia*i(ities o# a #irm are reassess< at the time o# admission
o# a partner *ea!se the ne, partner sho!(d@ neither *ene#it nor s!##er *ea!se han"e
in the a(!e o# assets and (ia*i(ities as on the date o# admission.
O.6 0hat are the a!m!(ated pro#it and a!m!(ated (ossesQ
Ans. The pro#it a!m!(ated oer the +ears and hae not *een redited to partnersL apita(
A? are kno,n as a!m!(ated Pro#it or !ndistri*!ted pro#it< e.". the >enera(
'esere< Pro#it and =oss A? redit *a(ane.
The (osses ,hih hae not +et *een ,ritten o## to the de*it o# PartnersL Capita( A?
are kno,n as a!m!(ated =osses< e.". the Pro#it and =oss A? appearin" on the assets
side o# ;a(ane Sheet< et.
O. :8p(ain the treatment o# "ood,i(( in the *ooks o# a #irm on the admission o# a ne,
Partner ,hen "ood,i(( a(read+ appears in the ;a(ane sheet at its #!(( a(!e and the
ne, partner *rin"s his share o# "ood ,i(( in ash.
Ans. ;+ #o((o,in" ao!ntin" standard $ 1&< the e8istin" "ood,i(( i.e. "ood,i(( appearin"
in the ;a(ane Sheet is ,ritten o## to the o(d partners Capita( a? in their o(d pro#it
sharin" ratio.
(d partners apita( A? )r. .....
To >ood,i(( A? ]in o(d 'atio_
];ein" the e8istin" "?, ,ritten o## in the o(d ratio._
O.- Under ,hat ir!mstanes the premi!m #or "ood,i(( paid *+ the inomin" Partner ,i(( not reorded in the *ooks o# Ao!nts Q
Ans. 0hen the premi!m #or "ood,i(( is paid *+ the inomin" partner priate(+< it is not
reorded in the *ooks o# A? as it is as a matter o!tside the *!siness.
O.R A and ; share pro#its and (osses in the 'atio o# 43< the+ admit C ,ith 3?th share@
,hih he "ets 2?th #rom A and 1? #rom ;. 0hat is the ne, pro#it sharin" ratioQ
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Ans. A $ 4?$2? 2?
; 3?$1?2?C 2?V1?3?
Ne, Pro#it sharin" 'atio is 223.
O.1& The apita( o# A and ; are 's. 5&
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Ans 422
O 3 P K O are partners sharin" in the ratio o# 53. The+ admit ' #or 1?4th share and a"ree toshare *et,een them in the ratio o# 21 in #!t!re. Ca(!(ate ne, ratio.
Ans 211.
6$- Marks O!estions
O.1 )inesh< Hasmine and Faria are partners in a #irm< sharin" pro#its and (osses in 112
respetie(+. The ;a(ane Sheet o# the #irm as on 31st )e 2&&1 ,as as #o((o,s
=ia*i(ities 's. Assets 's.
S!ndr+ Creditors -&& Fator+
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So(!tion 1
;ooks o# )inesh< Hamine< Farte and Anie
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':A=UATIN ACCUNT
Parti!(ars 's. Assets 's.
To ;i((s )iso!nted A? 16& ;+ P!*(i deposits A? 1R&
;+ Mahiner+ A? 2&&
;+ =oss trans#erred to
)ineshBs apita( A? &4
HasmineBs Capita( A? 44-
FariaBs Capita( A? 12- 12-&
16& 16&
PA'TN:'SB CAPITA= ACCUNTS
)r. )r.
Parti!(ars )inesh Hasmine Faria Annie Parti!(ars )inesh Hasmine Faria Annie
's. 's. 's. 's. 's 's. 's. 's.To 'ea(!ation ;+ ;a(ane *?d51&& 3&&& 5&&& $$
A? =oss &4 44- 12- $$ ;+ 'esere F A?4R5 315 R& $$
To F!rnit!re A? -&& -&& -&& $$ ;+ Cash A? $$ $$ $$ 45&&
To )ra,in"s 25& 15& 5&& $$ ;+ Premi!m A?R1 5-3 16 $$
A?
To ;a(ane ?d 225- R&& 3-2R 45&&
6512 3-R- 525 45&& 6512 3-R- 525 45&&
;+ ;a(ane *?d225- R&& 3-2R 45&&
;A=ANC: S::T
as at 31.12.2&&1
Parti!(ars 's. Assets 's.
S!ndr+ Creditors -&& Cash in and 25
P!*(i )eposits 1&&& Fator+ ;!i(din"s 35&
Capita(s )inesh 225- Mahiner+ 2&&&F!rnit!re
2&&
Hashmine R&& Stok 145&Faria 3-2R )e*tors 15&&
Annie 45&& 114- =ess Proision3&& 12&&
;i((s )iso!nted 16&
14R5 14R5
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O.2 G and H are partners as the+ share pro#its in the proportion o# 31 their *a(ane
sheet as at 31.&3.& as #o((o,s.
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;A=ANC: S::T
=ia*i(ities 's. Assets 's.
Capita( Ao!nt =and 1
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PA'TN:'BS CAPITA= ACCUNT
)r. Cr
Parti!(ars G 's. H 's. 's. Parti!(ars G 's. H 's. 's.
HBs C!rrent A? $ 64
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;a(ane sheet
=ia*i(ities 's. Assets 's.
Capita( Ao!nt Cash R&
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;+ 'esere 16&&& -&&& $$
;+ 0ork om.'es. 6&&& 3&&& $
15&&& 136&&& $$ 15&&& 136&&& $$
To ;a(ane ?d145&&& 13&&&& 135&& To ;a(ane ?d 145&&& 13&&&& $
;+ Cash A? $$ $$ 135&&
` o# 's. 145&&& $$ $$ 135&& V 's. 13&&&&
145&&& 13&&&& 135&& 145&&& 13&&&& 135&&
;A=ANC: S::T F A< ; K C AS AT
)r. Cr.
=ia*i(ities 's. Assets 's.
Creditors 3&&&& Cash 255&&;i((s Pa+a*(e 1&&&& Mahiner+ 114&&&
'ashmiBs Capita( 145&&& F!rnit!re R&&&
Poo/aBs apita( 13&&&& Stok 45&&&
SantoshBs apita( 135&& )e*tors 3&&&&
=ess Proision 3&&&
4525&& 4525&&
O.4 A< ; and C are e!a( partners in a #irm< their ;a(ane Sheet as on 31st
Marh 2&&2
,as as #o((o,s
=ia*i(ities 's. Assets 's.
S!ndr+ Creditors 2ood,i(( 1
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. Proision #or (oss on stok and proision #or do!*t#!( de*ts is to *e made at 1& and
5 respetie(+.
d. The a(!e o# *!i(din" is to taken 's. 2enera( 'es. 6&&& 6&&& 6&&&
To C!rrent A?1225&& 15&& $$ ;+ Premi!m A? 2&&&& 2&&&& 2&&&&
To ;a(ane ?d1&&&&& 1&&&&& 1&&&&& ;+ C!rrent A? $$ $$ 45&&
2625&& 2115&& 14&&&& 2625&& 2115&& 14&&&&
;A=ANC: S::T F M?S A< ; K C as at 31st marh 2&82
)r. Cr.
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=ia*i(ities 's. Assets 's
S!ndr+ reditors 2&&& Cash at *ank 12&&&
:mp(o+eesB Proident F!nd 6&&& )e*tors 1&2&&&
;i((s Pa+a*(e 45&&& =ess Proision 51&& R6R&&
ABs Capita( 1&&&&& Mr. G $$
;Bs Capita( 1&&&&& Stok 1&26&&CBs Capita( 1&&&&& F!rnit!re K Fi8t!res 24&&&
)Bs Capita( 1&&&&& P(ant K Mahiner+ 2&&&
ABs C!rrent A? 1225&& =and K ;!i(din" 2&&&&&
;Bs C!rrent A? 15&& CBs C!rrent A? 45&&
62&&& 62&&&
O.5 A< ;and C ,ere partners in a #irm sharin" pro#its e!a((+ Their ;a(ane Sheet
on.31.12.2&& stood as
;A=ANC: S::T AS AT 31.12.&
=ia*i(ities 's. Assets 's.
A 's. 3&ood,i(( 1-
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iii To appreiate =and *+ 15.
i To derease P(ant and Mahiner+ *+ 1&.
Create proision o# 's@6&& on Creditors.
i A s!m o# 's.5
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4-
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'etireent of a Partner
L4A'NIN6 OB?4C3I@4S:
A#ter st!d+in" this (esson< ,e are on#ident< +o! sho!(d *e ompetent eno!"h to
• Identi#+ ad/!stments arisin" d!e to retirement o# a partner.
• Ca(!(ate ne, and "ainin" ratio.
• Make ao!ntin" treatment o# "ood,i(( in di##erent ases.
• Make ao!ntin" treatment o# the rea(!ation o# assets and (ia*i(ities and distri*!tion o#
pro#it or (oss on rea(!ation amon" partners.
• Make ao!ntin" treatment o# !ndistri*!ted pro#it or (oss.
• )etermine the amo!nt pa+a*(e to retirin" partner and make pa+ment as per a"reement
and proisions o# (a,.
• Make ad/!stment o# partnersL apita( ao!nt
Sa(ient Points$
1. An e8istin" partner ma+ ,ish to ,ithdra, #rom a #irm #or ario!s reasons.
2. The amo!nt d!e to a retirin" partner ,i(( *e the tota( o# $
a. his apita( in the #irm
*. is share in #irmLs a!m!(ated pro#its and (osses.
. is share o# pro#it or (oss on rea(!ation o# assets and (ia*i(ities
d. @his share o# pro#its ti(( the date o# retirement
e. is rem!neration and interest on apita(.
#. is share in #irmLs "ood,i((.
3. The ratio in ,hih the ontin!in" remainin" partners hae a!ired the share #rom
the o!t"oin" partner is a((ed "ainin" ratio.
4. Share o# "ood,i(( o# o!t"oin" partner ,i(( *e de*ited to "ainin" partners in their
"ainin" ratio.
5. At the retirement o# a partner Pro#it K =oss on 'ea(!ation o# Assets and (ia*i(ities
and *a(anes o# a!m!(ated Pro#its and (osses ,i(( *e distri*!ted amon" a((
partners in(!din" o!t"oin" partner in their o(d ratio.
6. The o!tstandin" *a(ane o# o!t"oin" partnerLs apita( A?C ma+ *e sett(ed *+ #!((+ or
Part(+ pa+ment and or trans#errin" into his (oan ao!nt.
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O.1 0hat is meant *+ retirement o# a partnerQ
Ans. 'etirement o# a partner is one o# the modes o# reonstit!tin" the #irm in ,hih o(d
partnership omes to an end and a ne, partner amon" the ontin!in" remainin"
partners i.e.< partners other than the o!t"oin" partner omes into e8istene.
O.2 ^o, an a partner retire #rom the #irmQ
Ans. A partner ma+ retire #rom the #irm@
i in aordane ,ith the terms o# a"reement@ or
ii ,ith the onsent o# a(( other partners@ or
iii ,here the partnership is at ,i((< *+ "iin" a notie in ,ritin" to a(( the partners o#
his intention to retire.
O.3 0hat do +o! !nderstand *+ ^>ainin" 'atioYQ
Ans. >ainin" 'atio means the ratio *+ ,hih the share in pro#it stands inreased. It is
omp!ted *+ ded!tin" o(d ratio #rom the ne, ratio.
O.4 0hat do +o! !nderstand *+ ^>ainin" PartnerLQ
Ans >ainin" Partner is a partner ,hose share in pro#it stands inreased as a res!(t o#
han"e in partnership.
O.5 )istin"!ish *et,een Sari#iin" 'atio and >ainin" 'atio.
Ans. )istintion *et,een Sari#iin" 'atio and >ainin" 'atio
O.6 >ie t,o ir!mstanes in ,hih "ainin" ratio is omp!ted. Ans. >ainin" 'atio is
omp!ted in the #o((o,in" ir!mstanes i 0hen a partner retires or dies. ii 0hen
there is a han"e in pro#it$sharin" ratio.
O. 0h+ is it neessar+ to rea(!e assets and reassess (ia*i(ities at the time o# retirement
o# a partner Q
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Ans. At the time o# retirement or death o# a partner< assets are rea(!ed and (ia*i(ities are
reassessed so that the pro#it or (oss arisin" on ao!nt o# s!h rea(!ation !pto the
date o# retirement or death o# a partner ma+ *e asertained and ad/!sted in a((
partnersL apita( ao!nts in their o(d pro#it$sharin" ratio.
O.- 0h+ is it neessar+ to distri*!te 'eseres A!m!(ated< Pro#its and =osses at thetime o# retirement or death o# a partnerQ
Ans. 'eseres< a!m!(ated pro#its and (osses e8istin" in the *ooks o# ao!nt as on the
date o# retirement or death are trans#erred to the Capita( Ao!nts or C!rrent
Ao!nts o# a(( the partners in(!din" o!t"oin" or deeased partner in their o(d
pro#it$sharin" ratio so that the d!e share o# an o!t"oin" partner in reseres<
a!m!(ated pro#its?(osses "ets ad/!sted in his Capita( or C!rrent Ao!nt.
O.R 0hat are the ad/!stments re!ired on the retirement or death o# a partnerQ
Ans. At the time o# the retirement or death o# a partner< ad/!stments are made #or the
#o((o,in"
i Ad/!stment in re"ard to "ood,i((.
ii Ad/!stment in re"ard to rea(!ation o# assets and reassessment o# (ia*i(ities.
iii Ad/!stment in re"ard to !ndistri*!ted pro#its.
i Ad/!stment in re"ard to the [oint =i#e Po(i+ and indiid!a( po(iies.
O.1& G ,ants to retire #rom the #irm. The pro#it on rea(!ation o# assets on the date o#
retirement is 's. 1&
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Ans. 0hen a partner retires or dies< his share o# pro#it is taken oer *+ the remainin"
partners. The remainin" partners then ompensate the retirin" or deeased partner in
the #orm o# "ood,i(( in their "ainin" ratio. The #o((o,in" entr+ is reorded #or this
p!rpose
'emainin" PartnersL Capita( A?s ...)r.]>ainin" 'atio_
To 'etirin"?)eeased PartnerLs Capita( A? ]0ith his share o# "ood,i((_
I# "ood,i(( or Premi!m ao!nt a(read+ appears in the o(d ;a(ane Sheet< it sho!(d
*e ,ritten o## *+ reordin" the #o((o,in" entr+
A(( PartnersL Capita(?C!rrent A?s ...)r. ](d 'atio_
To >ood,i(( or Premi!m A?
O.12 G< and are partners sharin" pro#its and (osses in the ratio o# 3 2 1. retires and
the #o((o,in" [o!rna( entr+ is passed in respet o# >ood,i((
HLs Capita( A? ...)r. 2&
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The ne, ratio *et,een G and H is 1 2.
O.13 State the ratio in ,hih pro#it or (oss on rea(!ation ,i(( *e shared *+ the partners
,hen a partner retires. @
Ans. Pro#it or (oss on rea(!ation o# assets?(ia*i(ities ,i(( *e shared *+ the partners
in(!din" the retirin" partner hi their o(d pro#it$sharin" ratio.
O.14 o, is the ao!nt o# retirin" partner sett(edQ
Ans. The retirin" partner ao!nt is sett(ed either *+ makin" pa+ment in ash or *+
promisin" the retirin" partner to pa+ in insta((ments a(on" ,ith interest or *+ makin"
pa+ment part(+ in a(( and part(+ trans#errin" to his (oan ao!nt. The $#o((o,in"
[o!rna( entr+ is passed
'etirin" PartnerLs Capita( A? ...)r.
To CashY ]I# paid in ash_
r
To 'etirin" PartnerLs =oan ]I# trans#erred to (oan_
6 to - marks !estions
O.1 The *a(ane sheet o# G< < ,ho ,as sharin" pro#its in proportion o# apita( as #o((o,s $
Parti!(ars Amo!nt Parti!(ars Amo!nt
S!nda+ reditors 1
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1. That the stok *e depreiated *+ 5
2. That the proision #or do!*t#!( de*ts *e inreased to 5 on de*tors.
3. That a proision o# 'S.5& *e made in respet o# o!tstandin" (e"a( har"es.
4. That the (and and *!i(din" *e appreiated *+ 2&.
5. That the "ood,i(( o# the entire #irm *e #i8ed at 's. 16
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To *a( C?d 25115& $ 11-5& ;+ GLs Cap A? $ 135& $
>?0
;+ GLs ap A?
>?0 $ 4&5& $
265&& 266&& 15R&& 265&& 266&& 15R&&
To *ank A? 115& $ $ ;+ *a( *?d 2515& $ 11-5&
To ;a( C?d 24&&& $ 24&&& ;+ ;ank $ $ 1215&
2515& $ 24&&& 2515& 24&&& 2515&
)r. ;ank A? Cr.
To ;a( ;?d 15
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S!ndr+ Creditors 1
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46
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i >ood,i(( to *e a(!ed on 3 +earsL p!rhase o# aera"e pro#it o# (ast 4 +ears
,hih ,ere 2&&4 's.5&
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To CLs Capita( A? 2
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*4A32 OF A PA'3N4'
Learning O+/ecties:
A#ter st!d+in" this Unit< st!dents ,i(( *e a*(e to !nderstand and prepare
a )eeased partners apita( ao!ntb )eeased partners :8e!tor ao!ntc :8e!tors (oan ao!ntd Ca(!(ation o# share o# pro#it and >ood,i(( o# the deeased partner.
SALI4N3 POIN3S:
>ainin" 'atio 0hen the partner retires or dies< his share o# pro#it is taken oer
*+ the remainin" partners.
>ainin" ratio is app(ied #or the p!rpose o# a(!(atin" >ood,i(( to *e paid o##
to the deeased partner. The deeased partner s share o# pro#it ti(( the date o# death ,i(( *e a(!(ated *+
preparin" Pro#it and =oss S!spense ao!nt on the date o# )eath.
S'T OU:STINS$$$ 3$4 MXS. A
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3. 'am< Mohan and Sohan ,ere partners sharin" pro#its and (osses in the ratio o# 532. n31st Marh< 2&&6 their ;a(ane Sheet ,as as !nder
=ia*i(ities 's Assets 's
Capita(s =easeho(d 1ood,i(( o# the #irm 1
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SohanLs share o# "ood,i(( 1
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PLs :8e!torLs =oan
a? 5&&&&
615&& 615&&
0orkin" Note
a Interest on Capita( 3&
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5. G< H and are partners sharin" pro#its and (osses in the ratio o# 221 respetie(+. Their
;a(ane Sheet as on 31st marh 2&& ,as as #o((o,s ;a(ane Sheet as on 31?&3?1&
=ia*i(ities 's Assets 's
S!ndr+ Creditors 1
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Ls :8e!torLs Ao!nt
)ate Parti!(ars 's )ate Parti!(ars 's.
3&?&R?& ;ank a? 154&& 3&?&R?& Ls Capita( a? 54&&
31?&3?&- ;a(ane ?d 636&&
31?&3?&- Interest on =oan
on 's6&
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16-&& 16-&&
6 Ani(< [atin and 'amesh ,ere sharin" pro#it in the ratio o# 211. Their ;a(ane Sheet as
at 31.12.2&&1 stood as #o((o,s$
Lia+ilities 's Assets 's
Creditors 24ood,i(( *e a(!ed at 2 +earsL p!rhase o# the aera"e pro#it o# the past #ie
+ears.
# 'ameshLs share o# pro#it to the death *e a(!(ated on the *asis o# the pro#it o#
the preedin" +ear. pro#it #or the +ears 1RR< 1RR-< 1RRR and 2&&& ,ere 's.
26
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'ealuation Account
Parti!(ars 's Parti!(ars 's
Inestment A? 1
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'ameshLs :8e!torLs ao!nt
Particulars 's Particulars 's
Cash Ao!nt 1-425 'ameshLs Capita(
ao!nt
5&R25
;a(ane ?d 325&&
5&R25 5&R25
Balance s%eet
=ia*i(ities 's Assets 's
;ank =oan 1&< &&& Cash -1
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*ISSOLU3ION OF PA'3N4'S2IP FI'7
=earnin" */eties
A#ter St!d+in" this !nit< the st!dents ,i(( *e a*(e to !nderstand
YMeanin" o# )isso(!tion
Y )istintion *et,een )isso(!tion o# Partnership and )isso(!tion o# Partnership #irm.
Y Preparation o# 'ea(isation Ao!nt
Y Proed!re o# sett(ement o# ao!nts
Y Preparation o# Memorand!m ;a(ane sheet to #ind o!t missin" #i"!res
Y Neessar+ /o!rna( entries to (ose the *ooks o# the #irm.
SALI4N3 POIN3S:
)isso(!tion )isso(!tion o# the #irm is di##erent #rom )isso(!tion o# Partnership.
'ea(isation ao!nt It is prepared to rea(i%e the ario!s assets and pa+ o## the
(ia*i(ities. C(os!re o# the ;ooks o# Ao!nts 0hen the #irm is disso(ed< #ina((+ a(( the *ooks o#
ao!nts are (osed thro!"h ;ank Ao!nt.
1. )istin"!ish *et,een )isso(!tion o# Partnership and )isso(!tion o# Partnership #irm
)isso(!tion o# Partnership )isso(!tion o# partnership #irm
aThe Partnership is disso(ed *!t the
*!siness ontin!es. The ;!siness
is not terminated
aThe #irm ,inds !p the *!siness.
* Assets and (ia*i(ities are rea(!ed
thro!"h rea(!ation ao!nt and
the ;a(ane sheet is prepared
*Assets are so(d and the (ia*i(ities are
paid o## thro!"h 'ea(isation ao!nt.
The ;ooks o# ao!nts are not
(osed as the *!siness is not
terminated.
d The ;ooks o# ao!nts are (osed.
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2.State the proisions o# Setion 4- o# the Partnership At 1R32 re"ardin" sett(ement o#
Ao!nts d!rin" the )isso(!tion o# Partnership #irm.
Ans. Aordin" to setion 4-
a=osses in(!din" the de#iienies o# Capita(s are to *e paid$$$
i First o!t o# pro#its
ii Ne8t o!t o# Capita(s o# the partners
iii =ast(+ i# re!ired< *+ the partners indiid!a((+ in their pro#it sharin" ratioas
their (ia*i(it+ is !n(imited
* The Assets o# the #irm and the amo!nt ontri*!ted *+ the partners to make !p the
de#iien+ o# apita( sha(( *e app(ied #or
i First to pa+ the de*ts o# the #irm to the third parties.
ii Ne8t< Partners =oanPartner has adaned to the #irm
iii Partners apita(s
i The resid!e< i# an+ sha(( *e distri*!ted amon" the partners in their pro#it sharin"
ratio.
3. )istin"!ish *et,een 'ea(isation ao!nt and 'ea(!ation ao!nt
'ea(isation Ao!nt 'ea(!ation Ao!nt
a It is prepared in the ase o#
)isso(!tion o# Partnership #irm.
aIt is prepared in the ase o#
)isso(!tion o# Partnership.
* This ao!nt is prepared to rea(ise
the assets K pa+ o## the (ia*i(ities .
* This Ao!nt is prepared to rea(!e
the assets and (ia*i(ities d!rin"
Admission< 'etirement and )eath o#the partner.
4. A and ; are partners sharin" pro#its and (osses e!a((+. The+ deided to disso(e their
#irm. Assets and =ia*i(ities hae *een trans#erred to 'ea(isation Ao!nt. Pass
neessar+ [o!rna( entries #or the #o((o,in".
a A ,as to *ear a(( the e8penses o# 'ea(isation #or ,hih he ,as "ien a ommissiono# 's 4&&&.
* Adertisement s!spense ao!nt appeared on the asset side o# the ;a(ane sheetamo!ntin" 's 2-&&&
Creditors o# 's 4&
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# ;ank (oan o# 's 12&&& ,as paid o##.
[U'NA=
SN Parti!(ars =F )e*it's Credit's
a 'ea(isation ao!nt )r
ALs Capita( ao!nt
;ein" ommission "ien to A
4&&&
4&&&
* ALs Capita( ao!nt )r
;Ls Capita( ao!nt )r
Adertisement S!spense ao!nt;ein" Adertisement s!spense
,ritten o##
14&&&
14&&&
2-&&&
'ea(isation ao!nt )r
Cash ao!nt
;ein" reditors paid o##
13&&&
13&&&
d ;Ls Capita( ao!nt )r
'ea(isation ao!nt
;ein" asset taken oer *+ the partner
4R&&
4R&&
e ALs =oan ao!nt )r Cash ao!nt
;ein" partners (oan paid o##
15&&&15&&&
# 'ea(isation ao!nt $$ )r
Cash ao!nt
;ein" ;ank (oan paid o##
12&&&
12&&&
5.G and H are partners in the #irm ,ho deided to disso(e the #irm. Assets and =ia*i(itiesare trans#erred to 'ea(isation ao!nt. Pass neessar+ /o!rna( entries
aCreditors ,ere 's 1
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S.N Parti!(ars =F )e*it's Credit's
a Cash ao!nt )r
'ea(isation ao!nt;ein" ash reeied #rom the
reditor
4&&&&
4&&&&
* Cash a? )r
'ea(isation a?
;ein" ash reeied #rom a de*tor,hose ao!nt ,as ,ritten o##
ear(ier
4&&
4&&
GLs Capita( a? )r
HLs Capita( a? )r
'ea(isation a?;ein" Inestments taken oer *+
the partners
R&&
R&&
1-&&
d 'ea(isation a? )r
GLs Capita( a? HLs apita( a?
;ein" pro#it on 'ea(isation
distri*!ted amon" the partners
42&&&
21&&&21&&&
e Cash a?)r
'ea(isation a?;ein" =and and ;!i(din" rea(i%ed
2R4&&&
2R4&&&
# N [U'NA= :NT'H
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=N> OU:STINS6$- MXS
6 Fo((o,in" is the ;a(ane sheet o# Xaran and Sandeep ,ho share pro#its and (osses e!a((+
as on 31st marh 2&1&
=ia*i(ities 's Assets 's
Capita(s$$ ;ank 4&
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'ealisation account
Parti!(ars 's Parti!(ars 's
S!ndr+ assets
)e*tors$25&&&
Stok$35
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Partners Ca#ital accounts
Parti!(ars Xaran Sandeep Parti!(ars Xaran Sandeep
'ea(isation
a?stok
155& ;a(ane *?d 1
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6. Fo((o,in" is the ;a(ane sheet o# G and H ,ho share pro#its in the ratio o# 41 as on 31st
marh 2&1&
;a(ane sheet
=ia*i(ities 's Assets 's
S!ndr+ Creditors -
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Parti!(ars Amt's Parti!(ars Amt's
S!ndr+ Assets
)e*tors 1
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Parti!(ars Amt 's Parti!(ars Amt's
;a(ane *?d 2&
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Partners Ca#ital Accounts
Parti!(ars A ; C Parti!(ars A ; C
Cash a? 6&
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C(osin" Capita( 5-
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7eoran)u Balance s%eet as on &""$$
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UNI3 ( Co#an! Accounts- S%are ca#ital *e+entures
L4A'NIN6 OB?4C3I@4S
Understand the meanin" and #eat!res o# ompan+
IG C(assi#iation o# share apita(
IIG Understand the ao!ntin" treatment o# oer s!*sription< a((s in arrears< premi!m
and diso!nt on iss!e o# shares.
IIIG Understand the meanin" o# #or#eit!re o# shares
I@G Pass /o!rna( entries re"ardin" #or#eit!re and reiss!e o# shares
@G Ca(!(ate apita( resere
@IG )i##erentiate *et,een apita( resere and resere apita(
@IIGUnderstand the dis(os!re o# the share apita( in the *a(ane sheet
Sa(ient Feat!res
YA ompan+ is an arti#iia( person hain" separate (e"a( entit+.
YA ompan+ is reated *+ (a, and e##eted *+ (a,.
YA priate ompan+ an *e #ormed ,ith minim!m t,o mem*ers and ma8im!m #i#t+.
YFor a p!*(i ompan+ minim!m mem*ers re!ired are and there is no ma8im!m (imit.
YThe apita( o# the ompan+ is diided into !nits o# sma(( denominations ,hih are a((ed shares.
YTho!"h the ompan+ is an arti#iia( person< it has to per#orm a(( stat!tor+ o*(i"ation (ike a person.
assoiation.
YA p!*(i ompan+ an a((ot shares in ase o# minim!m s!*sription is reeied.
YShares an *e iss!ed at par< premi!m< or een atdiso!nt.
YPre#erenes shareho(der en/o+ pre#erene ri"hts ,hereas e!it+ share ho(der en/o+ otin"
ri"hts.
Y0hen a shareho(der #ai(s to pa+ one or more insta((ments d!e on the shares he(d *+ him<
the ompan+ has the a!thorit+ to #or#eit s!h shares.
YA ompan+ an re$iss!e the #or#eited shares in aordane ,ith the proisions ontained in the
arti(es o# the ompan+.
1 marks
O.1 >ie the de#inition o# a ompan+ as ontained in the Companies At
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!nder
an+ o# the #ormer ompanies Ats.Z
O.2 Can #or#eited shares *e iss!ed at a diso!ntQ I# so to ,hat e8tentQAns
.
'e$iss!e o# #or#eited shares For#eited shares an *e reiss!ed at a diso!nt. o,eer<
the
diso!nt on the reiss!e o# s!h shares an not e8eed the amo!nt ear(ier #or#eited on
s!h shares.In other ,ords< amo!nt reeied on reeied on re$iss!e p(!s amo!nt a(read+ reeied
on #or#eited
shares m!st not *e (ess than the paid !p a(!e o# shares.
O.3As a diretor o# a ompan+ +o! had inited app(iations #or 2&!ide(ines re"ardin" )e*ent!re 'edemption 'esere.
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Ans. At per S:;I >!ide(ines< an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st *e
trans#erred to )'' *e#ore the redemption *e"ins. In other ,ords< *e#ore redemption<
at (east an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st stand to the redit o# )''
O.R Name the head !nder ,hih diso!nt on iss!e o# de*ent!res appears in the ;a(ane
Sheet o# ZCZ Compan+.
Ans. )iso!nt on iss!e o# de*ent!res ,i(( appear !nder the headin" Mise((aneo!s:8pendit!re.
O.1& Can a ompan+ iss!e share o# diso!ntQ 0hat onditions m!st a ompan+ omp(+
,ith *e#ore the iss!e o# s!h sharesQ
Ans. Setion R o# the ompanies At< 1R56 permits a ompan+ to iss!e shares at adiso!nt on(+ i# the #o((o,in" onditions are #!(#i((ed
1 The shares are o# a (ass a(read+ iss!ed.
2 At (east one +ear m!st hae e(apsed sine the ompan+ *eome entit(ed to
ommene *!siness.
3 The iss!e o# shares at diso!nt is a!thorises *+ a reo(!tion passed *+ the
ompan+ in its "enera( meetin" and santioned *+ the entra( >oernment.
The reso(!tion spei#ies the ma8im!m rate o# diso!nt at ,hih the shares are to *e iss!ed. The
rate m!st not e8eed 1& !n(ess santioned *+ the entra( >oernment.
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O.11 0rite the di##erene *et,een an e!it+ share and pre#erene share.
Ans.
Y;asis
Pre#erene shares :!it+ shares
Y)iid
endrate
Pre#erene share ho(ders
are paid diidend at a #i8edrate.
The rate o# diidend on e!it+ shares ar+#rom +ear to +ear dependin" !pon pro#its
Y'edemption The+ an *e redeemed The+ anBt *e redeemed.
YPa+ment o# These shares hae a Pa+ment o# diidend is made a#ter pa+in" to
diide
nd Pre#erentia( ri"ht to reeie pre#erene share ho(ders.diidend *e#ore an+
diidend is paid on e!it+
shares.
O.12
)i##erentiate *et,een 'esere apita( and
apita( resere.
Ans.Y;asis 'esere apita(
Capita(resere
YMean
in" and
'esere apita( re#ers to a Capita( resere is reated o!t o# apita(
reation
portion o# !na((ed apita( pro#its.
YSpei
a(
Is re!ired
no Speia( reso(!tion re!ired
reso(!tion
YTime,hen it
It an *e !sed on(+ in the It an *e !sed to ,rite o## apita( (osses
an *e
!sed
eent o# ompan+Bs
,indin" !p
or to iss!e *on!s shares.
Y)is(
os!re
It is not sho,n in
ompan+Bs
It is mentioned !nder the headin" reseres
in
*a(ane sheet
*a(ane sheet
and s!rp(!s on the (ia*i(ities side o#
*a(ane sheet
O.13 :mp(o+ees stok option p(an$ZA ri"ht to *!+ and not an o*(i"ationZ. Comment
Ans. :mp(o+ees stok option p(an is the ri"ht "ranted to the emp(o+ees o# the ompan+ to p!rhases the, shares (o,er than the market pries. It is ,orth mentionin" the the
options proide a ri"ht and not the o*(i"ation to *!r shares. It means that the
emp(o+ees !nder this p(an are not neessari(+ re!ired to p!rhase the shares. It istheir ,ish to *!+ or not neessari(+ re!ired to p!rhase the shares. It is their ,ish to
*!+ or not.
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O.14 0rite a short note on minim!m s!*sriptionQ
Ans Minim!m s!*sription is the amo!nt reeied #rom share ho(ders ,hih is s!##ieint #rom the
point o# ie, o# diretors #or #o((o,in" p!rposes
a For p!rhasin" neessar+ assets o# the ompan+.
* For pa+in" pre(iminar+ e8penses and ommission on sa(es o# shares.
b For pa+in" (oan i# arran"ed #or a*oe t,o p!rposes.
d For ,orkin" apita( and #or an+ other p!rposes ,hih the diretors a"ree !pon.
O.15 'ohit =td. P!rhased assets #rom 'ohan K o. #or 's. 3
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O.16 5& shares o# 's. 1& eah< iss!ed at as premi!m o# 's. 5 per share< ,ere #or#eited *+ sohan =td.
#or the nonpa+ment o# a((otment mone+ o# 's.R per share in(!din" premi!m. The #irst and
#ina( a(( on these shares at 's. c per share ,as not made. For#eited shares ,ere re$iss!ed 's.
12 per share< #!((+ paid !p. [o!rna(ise
Ans )ate Parti!(ars (.# de*it redit
amt amt
Share apita( a? dr. 35&
se!rities premi!m a? dr. 25&
To share #or#eited a? 15&
To share a((otment a? 45&
;ein" 5& shares #or#eited #or
non
pa+ment o# a((otment mone+ as
per
*oardBs reso(!tion dated
;ank A? dr. 6&&
To share apita(
a? 5&&
To se!rities Premi!m a? 1&&
;ein" 5& shares reiss!ed
's.12
per share< #!((+ paid
Shares For#eited A? )r. 15&
To apita( resere a? 15&
*ein" the *a(ane o# #or#eited
shares
trans#erred to apita( resere.
O1 A; =td. Inited app(iations #or iss!in" 1
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ans. [o!rna( :ntries in the *ooks o# A*=td.
)ate?S
r. Parti!(ars (.# )e*it Credit
Amt.'s Amt.'s.
1 ;ank A? )r. 4
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re$iss!e har"ed #rom share #or#eit!re
a?.
1& Share For#eit!re )r. 2
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[U'NA=
)ate Parti!(ars =.F. )r. 's. Cr.'s
Share Capita( A? 1&& 8 's. - ...)r. -&&
To For#eited Shares A? 1&& 8's. 4 4&&To )iso!nt on Iss!e o# Shares 1 && 8 'e. 1 1&&
To Share First Ca(# A? 1&& 8 's. 3 3&&
;ein" 1&& sares #or#eited #or non$pa+ment o# #irst a(( ...
;ank A? 6& 8 's. ...)r. 42&
)iso!nt on iss!e o# Shares A? 6& 8 'e. 1 ...)r. 6&
For#eited Shares A? ...)r. 6&
To Share Capita( A? 54&
;ein" 6& shares ,ere reiss!ed at 's. per share<
as 's. - paid !p
For#eited Shares A? ...)r. 1-&
To Capita( 'esere A? 1-&
;ein" the trans#er o# pro#it on reiss!e oB shoesB
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ACCOUN3IN6 FO' *4B4N3U'4S
L4A'NIN6 OB?4C3I@4S
I Understand the meanin" and #eat!res o# de*ent!res.
II )i##erentiate *et,een shares and de*ent!res.
III Understand di##erent (asses o# de*ent!res
I [o!rna( entries re"ardin" iss!e o# de*ent!res #or ash and #or onsideration other than
ash.
Ao!ntin" treatment o# de*ent!res iss!ed as o((atera( se!rit+
I Ao!ntin" treatment o# iss!e and redemption o# de*ent!res at par< diso!nt and at
premi!m.
II Understand the methods o# redemption o# de*ent!res.
III Ao!ntin" treatment o# redemption o# de*ent!res o!t o# apita( and pro#it.
IG Understand the redemption o# de*ent!res *+ p!rhase in the open market
G Understand redemption o# de*ent!res *+ onersion into shares and ne, de*ent!res.
1 0hat do +o! meant *+ )e*ent!resQ
)e*ent!res is an instr!ment o# de*t o,ned *+ a ompan+ as an akno,(ed"ement o#
de*t< s!h meas!rements are iss!ed !nder the sea( o# ompan+ and d!(+ si"ned *+ a!thori%ed
si"nator+.
2 0rite an+ #o!r t+pes o# de*ent!res
i 'edeema*(e de*ent!res
ii Perpet!a( )e*ent!res
iii Conerti*(e de*ent!res
i Se!red de*ent!res
3 0hat is de*ent!re Tr!st )eedQ
)e*ent!re tr!st deed is a do!ment reated *+ the ompan+ ,here*+ tr!stee is appointed
to protet the interest o# de*ent!re ho(ders *e#ore the+ are o##ered #or p!*(i
s!*sription.4 0hat is meant *+ onerti*(e de*ent!resQ
Conerti*(e de*ent!res are those< the ho(ders o# ,hih are "ien an option to e8han"in"the amo!nt o# their de*ent!res ,ith e!it+ shares or other se!rities a#ter a spei#ied
period.
5 0h+ is premi!m on the iss!e o# de*ent!res onsidered as a apita( pro#itQPremi!m on the iss!e o# de*ent!res is onsidered a apita( pro#it *ea!se it is not an
inome arisin" #rom the norma( o!rse o# *!siness operations.
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6 :8p(ain deep diso!nt ;ond
0hen de*ent!res are iss!ed ,itho!t interest rate and iss!e prie is there*+ diso!nted<the iss!e o# de*ent!re is said to hae *een made as deep diso!nt *ond.
)i##erentiate *et,een shareho(ders and de*ent!re ho(der<
Point o# )i##erene Share ho(der )e*ent!re ho(der
1 Stat!s There are the o,ners o# the
ompan+
The+ are the reditors o# the
ompan+
2 'et!rn The+ are paid )iidend The+ are paid interest
3 Se!rit+ Shares are not se!red )e*ent!res are ordinari(+
se!red
- 0hat is the nat!re o# interest on de*ent!resQ
Interest on de*ent!res is a har"e a"ainst pro#its.R State in *rie#< the S:;I >!ide(ines re"ardin" )e*ent!re 'edemption 'esere.Ans. At per S:;I >!ide(ines< an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st *e
trans#erred to )'' *e#ore the redemption *e"ins. In other ,ords< *e#ore redemption<
at (east an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st stand to the redit o# )''
1& Name the head !nder ,hih diso!nt on iss!e o# de*ent!res appears in the ;a(ane
Sheet o# ZCZ Compan+.Ans. )iso!nt on iss!e o# de*ent!res ,i(( appear !nder the headin" Mise((aneo!s
:8pendit!re.
11 0hat are the e8eptions #or reatin" de*ent!re 'edemption 'esereQ
i An in#rastr!t!re ompan+< ii )e*ent!res are iss!ed #or (ess than 1- monthsmat!rit+ period iii i# de*ent!res iss!ed *+ priate p(aement.
12 0hat do +o! mean *+ de*ent!res iss!ed as o((atera( se!rit+QThe iss!e o# de*ent!res as a o((atera( se!rit+ means the iss!e o# de*ent!res as an
additiona( se!rit+ a"ainst the (oan in addition to prinipa( se!rit+ that ma+ *e o##ered.
13 Sho, the ao!ntin" treatment o# de*ent!res iss!ed as o((atera( se!rit+. )e*ent!res iss!ed as o((atera( se!rit+ an *e sho,n in the *ooks in t,o di##erent ,a+s
i The dis(os!re o# iss!e o# de*ent!re as o((atera( se!rit+ in the *a(ane sheet is
sho,n as *e(o,
=IA;I=ITI:S Amo!nt's. Assets Amo!nt's.
=oan
se!rit+ *+ 8 de*ent!res o#
's eah as o((atera(
se!rit+
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ii ;+ ,a+ o# [o!rna( entr+
)ate Parti!(ars )e*it Amt Credit Amt
;ank a? )r.
To ;ank =oan a?
;ein" (oan taken #rom ;ank
)e*ent!res S!spense a? )r.
To )e*ent!re a?
;ein" )e*ent!res iss!ed as o((atera(
se!rit+
)e*ent!re s!spense ao!nt ,i(( *e ,ritten o## a#ter the (oan is paid o##.
14 A =td iss!ed 5
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Pass /o!rna( entries and a(so sho, ho, the de*ent!res and *ank (oan ,i(( appear in the
*a(ane sheet.
;ank a? )r.
To ;ank (oan a?
;ein" (oan taken #rom *ank
3
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1 Pass [o!rna( :ntries to reord the Iss!e o# )e*ent!res
1 5&&& 15 de*ent!re o# 's.1&& eah iss!ed at )iso!nt o# 5 and redeema*(e at premi!m
at 5 a#ter 5 +ears.
2 1&&&& 15 de*ent!re o# 's.1&& eah iss!ed at a premi!m o# 1& and redeema*(e at para#ter 6 +ears.
Ans [o!rna( :ntries
1 ;ank a? )r.
(oss on iss!e o# )e* a? )r.
To15 de*ent!re a?
To premi!m on redemption o# de*ent!re
;ein" iss!e o# de*ent!re at diso!nt andredeema*(e at 5 premi!m
4
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at par redeema*(e at par
*
;ank a? )r.
To de*ent!re App(iation a?
;ein" )e*ent!re app(iation mone+
reeied
R5&
R5&
)e*ent!re App(iation a? )r.
)iso!nt on iss!e o# )e*ent!res )r.
To )e*ent!re a?
;ein" 1& de*ent!res o# 's. 1&& eah iss!ed
at a diso!nt o# 5 and repa+a*(e at par.
R5&
5&
1
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e
;ank a? )r.
To de*ent!re App(iation a?
;ein" )e*ent!re app(iation mone+
reeied
R5&
R5&
)e*ent!re App(iation a? )r.
=oss on iss!e o# de*ent!res a? )r.
To )e*ent!res a?
To Premi!m on redemption o#
de*ent!res a?
;ein" 1& de*ent!res o# 's. 1&& eah iss!ed
at diso!nt o# 5 *!t repa+a*(e at a
premi!m o# 5
R5&
1&&
1
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)ate Parti!(ars =.F )r. 's. Cr.'s.
P(ant and Mahiner+ a? )r.
;!i(din" a? )r.
Stok a? )r.
)e*tors a? )r.
To CreditorLs a?
To Xrishna Traders
To Capita( 'esere ;a(. Fi"
;ein" assets and (ia*i(ities taken oer
#rom the endor ompan+.
4
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23 A ompan+ a!thori%ed its 's.1< 1&
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[o!rna( :ntries
Ans
1 12 )e*ent!re a? )r.To diso!nt on iss!e o# de*ent!re a?
To de*ent!re ho(ders a?
;ein" the amo!nt d!e to de*ent!re ho(ders ononersion o# 2&&< 12 de*ent!re
2&
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on redemption.
)e*ent!re ho(ders a? )r.
To :!it+ share apita( a?
To Se!rities Premi!m a?
;ein" pa+ment made to de*ent!re ho(ders
1
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;ank a? )r.
To ;ank =oan a?
;ein" =oan *orro,ed
1&
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>ain on ane((ation o# o,n )e*ent!res a?
To apita( resere a?
;ein" >ain trans#erred to apita( resere
43
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UNI3 H9 FINANCIAL S3A3474N3 ANALYSIS:
L4A'NIN6 OB?4C3I@4S:
A#ter st!d+in" the (esson< st!dents ,i(( *e a*(e to
Understand the meanin" o# #inania( statements and their o*/eties. Identi#+ the parties interested in the #inania( statements.
Understand the meanin" o# #inania( ana(+sis and its o*/eties
Understand the parties interested in #inania( Ana(+sis
Ana(+se the (imitation o# #inania( ana(+sis
Prepare omparatie Inome statement and Position Statement.
Prepare Common Si%e Statements
Understand the too(s o# Finania( Ana(+sis.
SALI4N3 POIN3S:-
• Ana(+sis o# Finania( statement is the s+stemati proess o# identi#+in" the #inania(
stren"th and ,eaknesses o# the #irm *+ esta*(ishin" the re(ationship *et,een the items
o# the ;a(ane Sheet and inome statement.
• The in#ormation aai(a*(e #rom the Ana(+sis< seres the interest o# di##erent setions
(ike Mana"ement< shareho(ders< ,orkers< reditors< "oernment< Potentia( Inestors<:onomist and 'esearhers and Stok :8han"e.
• Finania( ana(+sis an *e :8terna( Ana(+sis and Interna( Ana(+sis< ori%onta( ana(+sis
and ertia( Ana(+sis.
• :8terna( Ana(+sis ,hen ana(+sis is made on the *asis o# P!*(ished statements< reports
and in#ormation then this is kno,n as :8terna( ana(+sis.
• Interna( Ana(+sis This ana(+sis is *ased !pon the in#ormation aai(a*(e to the *!siness
on(+.
• ori%onta( Ana(+sis This ana(+sis is *ased on the #inania( statements o# di##erent +ears
o# the same *!siness !nit or #inania( statements o# a parti!(ar +ear o# di##erent
*!siness !nits.
• ertia( Ana(+sis Aordin" to this ana(+sis #inania( statement o# the same period or
di##erent items o# the same #inania( statements are ompared.
• Comparatie statements< Common Si%e statements< Trend Ana(+sis< 'atio Ana(+sis<
F!nd F(o, Statement< Cash #(o, statement are the Too(s o# #inania( statement
ana(+sis.
• Comparatie Statements it he(ps in asertainin" han"e in the items o# inome
statement and Position Statement o# di##erent +ears in terms o# #i"!res and perenta"e.
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"9 Co#aratie Incoe stateent:( 7ar1sGParti!(ar P.H
amo!nt
C.H.
amo!nt
Chan"e in
amo!nt
Chan"e in Perenta"e
>ross sa(es
=ess Sa(es ret!rn
G88
888
G88
G88
C.H P.H. C.H$P.H G 1&&
P.H.
Net Sa(es=ess C..>.S.
G88888
G88G88
do do
>ross Pro#it
=ess
Indiret :8penses? peratin" e8pense
G88
888
G88
888
do do
peratin" Pro#it
Add
Non$operatin" inome
=ess
non$operatin" e8penses
G88
G88
888
G88
G88
888
do do
Pro#it *e#ore ta8
=ess ta8
G88
888
G88
888
do do
Pro#it a#ter ta8 888 888 do do
$9 Co#aratie Balance S%eet: - ( 7ar1sG
Parti!(ar P.H. amo!nt C.H.
Amo!nt
Chan"e in
amo!nt
Chan"e in Perenta"e
1. Share Capita( 888 G88 C.H P.H C.H$P.H G 1&&
P.H.
2. 'esere and s!rp(!s G88 888 do do
3.Se!red (oan G88 888 do do
4. Unse!red =oan G88 G88 do do5. C!rrent (ia*i(ities K
Proision
G88 G88 do do
Tota( G88 G88 C.H P.H C.H$P.H G 1&&
P.H.
1. Fi8ed Assets G88 G88 do do
2. Inestments G88 G88 do do
3. C!rrent assets and=oans K Adanes
G88 G88 do do
4. Mise((aneo!s
:8pendit!re
G88 G88 do do
5. PK=)e*it *a(ane G88 G88 do doTota( 888 G88 C.H P.H C.H$P.H G 1&&
P.H.
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• Common Si%e Statements In ommon si%e statements eer+ item o# the statement is
presented in the #orm o# perenta"e o# its important headin" i.e Net Sa(es in ase o#
Common Si%e inome Statement and Tota( o# Assests and =ia*i(itiesin ase o# Common Si%e ;a(ane Sheets
"9 Coon Size Incoe stateent: ( 7ar1sG
Parti!(ar P.Hamt.
C.H.amt.
Perenta"e o# Net sa(esin P.H.
Perenta"e o# Net sa(es inC.H.
>ross sa(es
=ess Sa(es ret!rn
G88
888
G88
G88
P.H. Amo!nt G 1&&
P.H. net sa(es
C.H. Amo!nt G 1&&
C.H. net sa(es
Net Sa(es
=ess C..>.S.
G88
888
G88
G88
1&&
P.H. Amo!nt G 1&&P.H. net sa(es
1&&
C.H. Amo!nt G 1&&C.H. net sa(es
>ross Pro#it
=ess
Indiret :8pense?
peratin" e8pense
G88
888
G88
888
do do
peratin" Pro#itAdd
Non$operatin" inome
=ess
non$operatin" e8penses
G88
G88
888
G88
G88
888
do do
Pro#it *e#ore ta8
=ess ta8
G88
888
G88
888
do do
Pro#it a#ter ta8 888 888 do do
$9 Coon Size Balance S%eet:- ( 7ar1sGParti!(ar P.H.
amo!
nt
C.H.
Amo
!nt
o# tota( in P.H. o# tota( in C.H.
1. Share Capita( 888 G88 P.H amo!nt G 1&&
Tota( o# P.H.
C.H. amo!nt G 1&&
Tota( o# C.H.
2. 'esere and s!rp(!s G88 888 do do
3.Se!red (oan G88 888 do do
4. Unse!red =oan G88 G88 do do
5. C!rrent (ia*i(ities K
Proision
G88 G88 do do
Tota( G88 G88 1&& 1&&
1. Fi8ed Assets G88 G88 P.H amo!nt G 1&&
Tota( o# P.H.
C.H. amo!nt G 1&&
Tota( o# C.H.
2. Inestments G88 G88 do do
3. C!rrent assets and=oans K Adanes
G88 G88 do do
4. Mise((aneo!s:8pendit!re
G88 G88 do do
5. PK=)e*it *a(ane G88 G88 do do
Tota( 888 G88 1&& 1&&
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>U4S3IONS
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-. Name t,o too(s o# Finania( Ana(+sisQ 1
Ans. i Comparatie Finania( Statements.ii 'atio Ana(+sis et.
R. 0hat is ori%onta( Ana(+sisQ 1
Ans The ana(+sis ,hih is made to reie, and ompare the #inania( statements o# t,o or more then t,o Hears is a((ed ori%onta( Ana(+sis.
1&. >ie the e8amp(e o# ori%onta( Ana(+sis. 1 Ans. Comparatie Finania( Statement.
11. 0hat is ertia( Ana(+sisQ 1
Ans11 The Ana(+sis ,hih is made to reie, the #inania( statements o# one parti!(ar
+ear on(+ is a((ed ertia( Ana(+sis.
12. >ie the e8amp(e o# ertia( Ana(+sisQ 1
Ans. 'atio Ana(+sis.
OU:STINS &3 MA'XS
1. >ie the #ormat o# the ;a(ane sheet o# a ompan+ main headin"s on(+ as per there!irement o# Shed!(e I o# the ompanies At.1R56.
=ia*i(ities 's. Assets 's.
1. Share apita( 1.Fi8ed Assets
2.'esere K s!rp(!s 2.Inestment 3.Se!red =oans 3. C!rrent Assets<
4.Unse!red =oans =oan and Adanes
a C!rrent Assets
* =oans KAdane
5.C!rrent =ia*i(ities K Proision 4. Mise((aneo!s :8pendit!re
a C!rrent =ia*i(ities 5. P K= A? )r. ;a(ane* Proision
]
2. >ie the headin" !nder ,hih the #o((o,in" items ,i(( *e sho,n in
a ompan+Ls ;a(ane sheeti >ood,i((.
ii Pre(iminar+ :8penses
iii =oose Too(si Capita( 'edemption 'esae.
=ie Stok.
i Patent
Ans i Fi8ed Assets.
ii Mise((aneo!s :8pendit!res
iiiC!rrent Assets =oans K Adane !nder C!rrent Assets. i'esere and S!rp(!s.
Fi8ed Assets.
iFi8ed Assets
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3. The #o((o,in" *a(ane hae *een #rom the *ook o# Sahara =td. Share apita(
's.1&
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OU:STINS &4 MA'XS
1. Prepare Comparatie and Common Si%e inome statement #rom the #o((o,in"
in#ormation #or the +earLs ended marh 31< 2&&- and 2&&R.
Parti!(ars 2&&-'s. 2&&R's.
1.Net Sa(es2.Cost o# >oods So(d
3.Indiret :8penses
4.Inome Ta8 rate
-
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'ATI AN) ANA=HSIS
=earnin" o!tomes
• :8p(ain the meanin" o# ao!ntin" ratios.
• Understand the o*/eties and (imitation o# ao!ntin" ratios.
• C(assi#+ the ratios as pro#ita*i(it+< atiit+ and so(en+.• Comp!te ario!s pro#ita*i(it+< atiit+ and so(en+ ratios.
• :8press +o!r ie,s a*o!t the operationa( e##iien+ and #inania( so!ndness o# the
ompan+.
• Comment !pon the per#ormane o# the enterprise.
• 'eommend #inania( meas!res to *e adopted to stren"then #inania( str!t!re o# the
ompan+
IMP'TANT F'MU=A: F 'ATI ANA=HSIS
Pro#ita*i(it+ ratio1. >ross Pro#it 'atio >ross pro#it?Net sa(esY1&& "ross pro#itNet sa(es$ ost o#
"oods so(dJ2. a Net pro#it ratio Net Pro#it?Net sa(esY1&& Net Pro#it>ross pro#itVoperatin"
and non operatin" inome$operatin" and non operatin" e8penses.J*peratin" Net pro#it ratio peratin" Net pro#it?Net sa(esY1&
3 peratin" 'atio Cost o# "oods so(d V peratin" e8penses 8 1&&
Net Sa(es
4 'et!rn on inestment 'I Net Pro#it *e#ore interest
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0orkin" Capita( C!rrent assets$ !rrent =ia*i(ities
3 )e*tors t!rnoer ratio Net redit sa(es
Aera"e )e*tors
Aera"e )e*tors)e*torsin the *e"innin"V)e*tors at the end
2
'eeia*(es )e*torsV;i((s reeia*(e
4 Pa+a*(e t!rnoer ratio Net redit p!rhases
Ao!nt Pa+a*(e
5 Fi8ed Assets T!rnoer ratio Sa(es or ost o# "oods so(d
Net #i8ed assets
6 C!rrent assets T!rnoer 'atioNet sa(es or ost o# "oods so(d
!rrent
Assets
=IOUI)ITH 'ATIS
1 C!rrent ratio !rrent Assets
!rrent (ia*i(ities2 =i!id or !ik or aid test ratio (i!id assets
!rrent (ia*i(ities
So(en+ ratios
1 )e*t to e!it+ ratio =on" term (oans
Shareho(derBs #!nds
2 Tota( assets to de*t ratio Tota( assets
=on" term de*ts
3 Proprietar+ ratio Proprietors #!nd or shareho(ders #!nd
Tota( Assets
4 C!rrent asset t!rnoer ratio Net sa(es?ost o# "oods so(d !rrent assets
5 Fi8ed assets t!rnoer ratio Net sa(es
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