ASSEB Higher Secondary Accountancy cheat sheet

Receipts and Payments Account is a summary cash book of all receipts and payments, capital and revenue, for a period; it opens with the opening balance of cash and bank and closes with the closing balance.

Income and Expenditure Account records only revenue items on accrual basis for the period; its surplus or deficit is transferred to the Capital Fund (General Fund).

Only revenue receipts and revenue payments enter the Income and Expenditure Account; capital receipts such as donations for buildings and life membership fees are credited to specific funds or capitalised.

Subscription received during the year is adjusted: add closing outstanding subscription, deduct opening outstanding subscription, add opening subscription received in advance, deduct closing subscription received in advance to get subscription income.

Consumable items such as stationery and sports materials are shown as stock at the year end and deducted from purchases to compute the amount consumed.

Balance Sheet of a not-for-profit organisation shows liabilities (Capital Fund plus specific funds, life membership fund, outstanding expenses, advance receipts) and assets (fixed assets, investments, stock, debtors, cash and bank).

Specific donations and grants are credited to the fund concerned; if the fund is exhausted, the excess expenditure is charged to the Income and Expenditure Account.

Entrance fees, unless specifically capitalised, are treated as revenue income and credited to the Income and Expenditure Account.

In the absence of a partnership deed, the Indian Partnership Act 1932 applies: no interest on capital, no interest on drawings, no salary or commission, and profits and losses shared equally.

Interest on capital is allowed only out of profits; if profits are inadequate, it is restricted to the available profit, distributed in the profit-sharing ratio.

Interest on drawings is charged to partners and credited to the Profit and Loss Appropriation Account; it is computed on the amount and period of withdrawal (for equal monthly drawings, average period is 6.5 months).

Profit and Loss Appropriation Account is prepared after the Profit and Loss Account and shows interest on capital, partner's salary or commission, interest on drawings and the distribution of divisible profit.

When a partner's salary or commission is a percentage of profit, the base is the profit after charging such salary or commission, unless stated otherwise.

Partners' Capital Accounts may be maintained under the fixed capital method (separate Current Accounts for drawings, interest, salary and share of profit) or the fluctuating capital method.

Guarantee of minimum profit to a partner is met by the deficiency being borne by the guaranteeing partner(s) in their agreed ratio, or by the firm, reducing the total distributable profit.

Past adjustments and omitted interest or salary are corrected through a single adjustment entry using the net effect on each partner's capital, with the gaining partner debiting the sacrificing partner.

On admission, the new partner's share of goodwill is credited to the sacrificing partners' capital accounts in their sacrifice ratio; sacrifice ratio equals old ratio minus new ratio.

Revaluation Account is prepared on admission, retirement or death to record changes in asset and liability values; profit on revaluation is credited to old partners, loss debited to old partners.

Accumulated reserves and undistributed profits are credited to old partners in the old ratio; accumulated losses are debited to old partners in the old ratio.

On retirement or death, the retiring partner's share of goodwill is raised by debiting the continuing partners in their gaining ratio and crediting the retiring partner; gaining ratio equals new ratio minus old ratio.

Hidden goodwill under the capitalisation method equals (average or capitalised profit based on normal rate) minus the net assets of the firm; the retiring or deceased partner's share is compensated by gaining partners.

The retiring partner's account is settled as per the deed; if unpaid, the balance is transferred to a Loan Account and interest is paid at the agreed rate.

On death, the deceased partner's share of profit to the date of death is computed on the basis of time (last year's profit) or turnover, and credited to the deceased partner's capital account.

Gaining partners compensate the sacrificing or retiring partner for goodwill in the gaining ratio, which is the ratio in which they absorb the outgoing partner's share.

Realisation Account is prepared to record the sale of assets and settlement of liabilities; it is credited with assets realised and debited with liabilities paid, and the resulting profit or loss is shared by partners in the profit-sharing ratio.

Assets transferred to Realisation Account at book value; cash and bank balances are not transferred to Realisation Account but are shown in the Balance Sheet until settlement.

Liabilities transferred to Realisation Account are paid at the agreed amount; a liability taken over by a partner is not transferred to the Realisation Account but is adjusted in the partner's capital account.

Unrecorded assets realised are credited to the Realisation Account; unrecorded liabilities paid are debited to the Realisation Account.

Realisation expenses borne by a partner are debited to the Realisation Account and credited to the partner's capital account; expenses paid by the firm are simply debited to the Realisation Account.

On dissolution, the partner's loan to the firm is paid before the partners' capital is returned, and the partner's capital balance is settled after all external liabilities.

If a partner becomes insolvent and his deficiency is to be borne by the solvent partners, the deficiency is shared in the ratio of the solvent partners' capitals before dissolution (Garner v. Murray), unless the deed says otherwise.

Dissolution of partnership differs from dissolution of the firm: in the former the firm continues with reconstituted relations, while in the latter the firm's economic activity ends.

Authorised capital is the maximum amount stated in the Memorandum of Association; issued capital is the portion offered; subscribed capital is the amount actually subscribed; called-up capital is the amount demanded; paid-up capital is the amount actually received.

Shares can be issued at par, at a premium (Securities Premium credited to a separate reserve), or at a discount (only permitted under specified conditions, debited to Discount on Issue of Shares Account).

Calls in arrears is a contra to subscribed capital and is shown as a deduction; calls in advance is a liability shown under current liabilities until adjusted against future calls.

Forfeiture of shares: debit Share Capital with the amount called up (or the amount actually called, if issued at a discount and forfeited for non-payment of premium), credit Share Forfeiture, and cancel the unpaid calls in arrears.

Reissue of forfeited shares: debit Bank with the amount received, debit Share Forfeiture with the discount allowed on reissue, and credit Share Capital with the paid-up value; the balance in Share Forfeiture is transferred to Capital Reserve.

Shares issued for consideration other than cash require the asset or service to be recorded at the agreed value, and the share capital is credited with the face value.

Pro-rata allotment means excess application money is adjusted against allotment and future calls; any surplus is refunded, and calls in arrears are computed after such adjustment.

Preference shares carry a fixed rate of dividend and priority in repayment of capital; equity shareholders are paid dividend only after preference dividend and have voting rights.

Debentures may be issued at par, at premium or at discount; the discount on issue of debentures is a capital loss and is written off against Securities Premium or profit over the life of the debentures.

When debentures are issued as collateral security, no entry is passed in the books; a note in the balance sheet discloses the fact, and an entry is passed only if the loan is defaulted.

Debenture interest is a charge against profit and is payable at the stated coupon rate even when there is no profit; it is subject to tax deducted at source where applicable.

Redemption by payment in lump sum at maturity requires the creation of a Debenture Redemption Reserve (DRR) as prescribed, and the required amount must be invested in specified securities before redemption.

Redemption by conversion into shares or debentures does not involve outflow of cash; the debenture liability is replaced by share capital or new debentures.

Purchase of own debentures in the open market for cancellation: the difference between the purchase price and the book value is debited or credited to the Profit on Redemption of Debentures Account.

Discount or loss on issue of debentures is amortised over the period the debentures remain outstanding using the fixed instalment method or the effective interest method.

Interest accrued on debentures at the year end is recorded as an outstanding liability, and the corresponding interest expense is charged to the Statement of Profit and Loss.

Statement of Profit and Loss and Balance Sheet are prepared as per Schedule III of the Companies Act 2013; the Balance Sheet shows Equity and Liabilities and Assets, with current and non-current classifications.

Current liabilities include trade payables, short-term borrowings, other current liabilities and short-term provisions; current assets include inventories, trade receivables, cash and cash equivalents and short-term loans and advances.

Shareholders' funds comprise share capital, reserves and surplus and money received against share warrants; share application money pending allotment is shown separately.

Non-current liabilities include long-term borrowings, deferred tax liabilities, other long-term liabilities and long-term provisions.

Revenue from operations includes sale of goods and services net of returns, trade discounts and GST; other income includes interest, dividend, rent and profit on sale of assets.

Expenses are classified as cost of materials consumed, purchases, changes in inventories, employee benefit expense, finance costs, depreciation and other expenses.

Finance costs include interest on borrowings, interest on debentures and amortisation of discount on issue of debentures; they are excluded from operating expenses.

Comparative figures for the previous year must be presented, and contingent liabilities and commitments are disclosed by way of notes.

Current ratio = Current Assets / Current Liabilities; quick ratio = Quick Assets / Current Liabilities, where quick assets exclude inventories and prepaid expenses.

Debt-equity ratio = Debt (long-term borrowings) / Equity (shareholders' funds); a ratio above 2:1 is generally considered risky.

Proprietary ratio = Shareholders' Funds / Total Assets; it measures the proportion of assets financed by owners.

Gross profit ratio = Gross Profit / Revenue from Operations × 100; operating ratio = Operating Cost / Revenue from Operations × 100.

Net profit ratio = Net Profit / Revenue from Operations × 100; return on capital employed = Profit before interest and tax / Capital Employed × 100.

Inventory turnover ratio = Cost of Revenue from Operations / Average Inventory; trade receivables turnover = Credit Revenue from Operations / Average Trade Receivables.

Trade payables turnover = Credit Purchases / Average Trade Payables; working capital turnover = Revenue from Operations / Working Capital.

Earnings per share = Profit available to equity shareholders / Weighted average number of equity shares; a higher EPS signals greater profitability per share.

Cash Flow Statement is prepared under AS-3 (Revised) using the indirect method for operating activities; it classifies flows into operating, investing and financing activities.

Operating activities start with net profit before tax and adjust for non-cash items (depreciation, amortisation, provisions) and non-operating items (interest, dividend, profit on sale of assets).

Changes in working capital are adjusted: an increase in current assets is deducted, an increase in current liabilities is added, and the reverse for decreases.

Investing activities include purchase and sale of fixed assets, investments, and interest and dividend received; financing activities include issue of shares and debentures, borrowings, repayment and dividend paid.

Interest paid on borrowings and dividend paid are financing outflows for a non-financial enterprise; interest and dividend received are investing inflows.

Cash and cash equivalents include cash in hand, bank balances and short-term highly liquid investments with original maturity of three months or less.

Tax paid is shown as an operating outflow, and the tax provision movement is adjusted in the operating section when starting from profit before tax.

Non-cash transactions such as issue of shares for assets or conversion of debentures into shares are excluded from the Cash Flow Statement and disclosed separately.

A project file typically contains a title page, acknowledgement, index, objectives, methodology, data collected, analysis, conclusion and bibliography.

Ratio-based projects must state the formula used for each ratio and show the computation for at least two years to permit comparison.

A common project compares two companies or two years of one company using liquidity, solvency, activity and profitability ratios.

Data sources should be named (published annual reports, stock exchange filings) and the period covered clearly stated.

The project should identify the accounting standard or Schedule III format followed and note any limitations of the analysis.

Marks are awarded for presentation, accuracy of computation, interpretation of results and viva voce; the file must be handwritten or as prescribed by the board.

Segmental or trend analysis may be added using common-size and comparative statements to strengthen interpretation.