ASSEB Higher Secondary Accountancy flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Receipts and Payments Account

A summary of all cash and bank receipts and payments during a period, irrespective of whether they relate to capital or revenue, opening with the opening balance and closing with the closing balance.

Income and Expenditure Account

An accrual-based account of revenue receipts and revenue expenses for a period, prepared by a not-for-profit organisation to ascertain surplus or deficit, which is transferred to the Capital Fund.

Subscription adjustment formula

Subscription income equals subscription received plus closing outstanding minus opening outstanding, plus opening advance minus closing advance, giving the amount belonging to the current accounting period.

Capital Fund

The fund representing the accumulated surplus of a not-for-profit organisation; it appears on the liabilities side and is increased by surplus and decreased by deficit.

Absence of partnership deed

Under the Indian Partnership Act 1932, absent a deed, no interest on capital or drawings and no salary is allowed, and profits and losses are shared equally among partners.

Profit and Loss Appropriation Account

An account prepared after the Profit and Loss Account to distribute divisible profit among partners after charging interest on capital, partner's salary or commission and crediting interest on drawings.

Interest on capital restriction

Interest on capital is payable only out of profits; when profits are insufficient, the amount allowed is limited to the available profit and divided in the profit-sharing ratio.

Sacrifice ratio

The ratio in which existing partners give up their share of profit in favour of an incoming partner; it equals old ratio minus new ratio for each old partner.

Gaining ratio

The ratio in which continuing partners acquire the share of a retiring or deceased partner; it equals new ratio minus old ratio and governs payment of goodwill.

Revaluation Account

An account prepared at reconstitution to record increases and decreases in the values of assets and liabilities; the resulting profit or loss is shared by old partners in the old ratio.

Hidden goodwill

Goodwill not stated in the books, computed as the capitalised value of average profits minus net assets of the firm; the outgoing partner's share is compensated by gaining partners.

Realisation Account

An account opened on dissolution to record the realisation of assets and payment of liabilities; the balance is profit or loss on realisation, shared by partners in the profit-sharing ratio.

Garner v. Murray rule

In the absence of a deed, a deficiency arising from an insolvent partner is borne by solvent partners in the ratio of their capitals as they stood immediately before dissolution.

Unrecorded assets on dissolution

Assets not appearing in the books, such as old furniture written off earlier, when realised are credited to the Realisation Account and increase the profit on realisation.

Partner's loan on dissolution

A loan advanced by a partner to the firm is repaid before any capital is returned to partners, after all external liabilities have been settled.

Calls in arrears

The amount of called-up capital not received from shareholders; it is deducted from subscribed capital in the Balance Sheet and is cancelled on forfeiture of the shares.

Forfeiture of shares

Cancellation of shares for non-payment of calls; share capital is debited with the called-up amount, Share Forfeiture is credited, and unpaid calls in arrears are written off.

Securities Premium

The excess amount received over the face value of shares, credited to a separate reserve usable for specified purposes such as issue of bonus shares and writing off preliminary expenses.

Pro-rata allotment

Allotment of shares in proportion to applications received when shares are oversubscribed; excess application money is adjusted against allotment and later calls, with any surplus refunded.

Debenture Redemption Reserve

A reserve created out of profits before redemption of debentures as required by law, ensuring funds are available; the prescribed amount must be invested in specified securities.

Collateral security debentures

Debentures issued as secondary security for a loan; no accounting entry is passed on issue, and disclosure is made by note until the loan is defaulted.

Discount on issue of debentures

A capital loss equal to the excess of face value over issue price, written off against Securities Premium or charged to the Statement of Profit and Loss over the debenture life.

Debenture interest

A charge against profits payable at the coupon rate regardless of profit, accrued at the year end and shown as an outstanding liability in the Balance Sheet.

Schedule III classification

The format prescribed by the Companies Act 2013 for the Balance Sheet, classifying items as current and non-current under Equity and Liabilities and Assets.

Revenue from operations

The amount of sale of goods and services net of returns, trade discounts and GST, disclosed as the first line in the Statement of Profit and Loss.

Current ratio

Current Assets divided by Current Liabilities; it indicates the firm's ability to meet short-term obligations, with 2:1 conventionally regarded as satisfactory.

Quick ratio

Quick assets (current assets excluding inventories and prepaid expenses) divided by current liabilities; a stricter test of liquidity than the current ratio.

Debt-equity ratio

Long-term debt divided by shareholders' funds; it measures financial leverage and the extent to which owners' funds cover outside long-term obligations.

Return on capital employed

Profit before interest and tax divided by capital employed, multiplied by 100; it measures the efficiency with which capital employed generates operating profit.

Operating activities cash flow

Cash generated from the principal revenue-producing activities, computed by adjusting net profit before tax for non-cash items, non-operating items and changes in working capital.

Investing activities

Cash flows from acquisition and disposal of long-term assets and investments, including purchase or sale of fixed assets and interest and dividend received.

Cash and cash equivalents

Cash in hand, bank balances and short-term highly liquid investments with an original maturity of three months or less, readily convertible into known amounts of cash.