Kerala Plus Two Accountancy with AFS (DHSE) 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 cash and bank receipts and payments for a period, starting with opening cash and ending with closing cash; it mixes capital and revenue items.

Income and Expenditure Account

A nominal account prepared on accrual basis for a not-for-profit organisation; it records revenue income and expenses of the current period and shows surplus or deficit.

Capital fund

The excess of total assets over total liabilities of a not-for-profit organisation at a given date; it is similar to owner's capital and increases by surplus.

Specific donation

A donation received for a specified purpose or asset; it is treated as a capital receipt and credited to the relevant fund rather than to Income and Expenditure Account.

Sacrificing ratio

The proportion in which old partners give up their share of profit in favour of a new partner; it equals old profit-sharing ratio minus new profit-sharing ratio.

Profit and Loss Appropriation Account

An account that shows how partnership profit is distributed among partners after charging interest on capital, salary, commission and reserves, and after crediting interest on drawings.

Super profit

The excess of average profit over normal profit; normal profit equals capital employed multiplied by the normal rate of return, and super profit is used in goodwill valuation.

Partner's loan account

A liability account used when a partner lends money to the firm; in the absence of a deed, interest is allowed at six percent per annum and the loan is repaid before partners' capitals.

Gaining ratio

The proportion in which continuing partners acquire the share of a retiring or deceased partner; it equals new profit-sharing ratio minus old profit-sharing ratio.

Revaluation Account

A nominal account prepared at reconstitution to record increases and decreases in assets and liabilities; its profit or loss is shared by old partners in the old ratio.

Retiring partner's loan

The balance due to a retiring partner that is not paid immediately is transferred to this account; interest is paid at the agreed rate or six percent per annum if silent.

Profit till death

The deceased partner's share of profit from the last balance sheet date to the date of death, calculated on a time basis or turnover basis using the agreed method.

Realisation Account

An account opened on dissolution to record the sale of assets and settlement of liabilities; it is closed by transferring its profit or loss to partners' capital accounts.

Unrecorded asset

An asset that does not appear in the firm's books but is realised on dissolution; the proceeds are credited to Realisation Account and cash is debited.

Garner v Murray rule

A rule for insolvency of a partner: the deficiency is borne by solvent partners in the ratio of their capitals, not in profit-sharing ratio, when the deed is silent.

Calls in arrears

The amount of allotted share capital called up but not paid by shareholders by the due date; it is deducted from called-up capital in the balance sheet.

Forfeited shares account

An account credited with amounts already received on shares forfeited for non-payment of calls; the balance is transferred to capital reserve after reissue.

Securities premium

The excess of issue price over face value of shares; it is a capital receipt credited to a separate account and is not available for payment of dividends.

Pro-rata allotment

A method used when applications exceed shares offered; each applicant receives shares in the same proportion as total applications bear to total shares allotted.

Debenture

A written acknowledgement of a debt issued by a company; debenture holders are creditors who receive fixed interest and have no voting rights in the company.

Debenture redemption reserve

A reserve created out of profits to protect debenture holders when debentures are redeemed out of profits; it is not created when redemption is out of capital.

Own debentures

Debentures of a company purchased by the company itself; they may be held as investments or cancelled, and cancellation can produce profit or loss on redemption.

Statement of Profit and Loss

A financial statement showing revenue from operations, other income, expenses, finance costs and tax, ending with profit or loss for the period.

Current liabilities

Liabilities expected to be settled within twelve months or the operating cycle, whichever is longer; examples include trade payables, short-term borrowings and provisions.

Contingent liability

A possible obligation arising from past events whose existence will be confirmed only by future uncertain events; it is disclosed in notes and not recognised in the balance sheet.

Current ratio

A liquidity ratio equal to current assets divided by current liabilities; it indicates the firm's ability to meet short-term obligations as they become due.

Quick ratio

A liquidity ratio equal to quick assets divided by current liabilities; quick assets are current assets excluding inventory and prepaid expenses.

Debt-equity ratio

A solvency ratio equal to long-term debt divided by shareholders' funds; it shows the proportion of borrowed funds to owners' funds in the capital structure.

Return on capital employed

A profitability ratio equal to earnings before interest and tax divided by capital employed, multiplied by one hundred; capital employed is shareholders' funds plus long-term debt.

Operating activities

The principal revenue-producing activities of a company, including cash receipts from sales and cash payments to suppliers, employees and tax authorities; they are reported in the cash flow statement.

Investing activities

Cash flows from acquisition and disposal of long-term assets and investments, including purchase or sale of property, plant and equipment and interest or dividend received by non-financial companies.

Cash and cash equivalents

Cash in hand, bank balances and short-term highly liquid investments with original maturity of three months or less, held to meet short-term cash commitments rather than for investment.