Kerala Plus Two Accountancy with AFS (DHSE) key terms

The amount paid periodically by members to a not-for-profit organisation to keep their membership alive. It is revenue income for the period to which it relates, and any amount received for a future period is shown as a liability.

A lump sum paid once by a member so that no further subscription is due from that member. It is capital in nature and is usually credited to a separate life membership fund rather than to the Income and Expenditure Account.

The excess of a not-for-profit organisation's assets over its outside liabilities, built up from past surpluses and donations. It plays the role that owners' capital plays in a business and appears on the liabilities side of the balance sheet.

A summary of actual cash and bank receipts and payments during a period, drawn from the cash book. It records both capital and revenue items, opens with the opening balance and closes with the closing balance.

A nominal account prepared by a not-for-profit organisation that records only revenue income and revenue expenses of the current period on an accrual basis, showing either a surplus or a deficit.

A written agreement among partners setting out their profit sharing ratio, capital contributions, interest terms, salary, drawings rules and how the firm will be wound up. It reduces disputes, and in its absence the Partnership Act defaults apply.

An extension of the profit and loss account of a partnership that shows how the year's profit is distributed among partners through interest on capital, salary or commission, interest on drawings and transfer to reserves.

An account opened when partners keep their capitals fixed, recording day-to-day dealings such as interest on capital, salary, share of profit, drawings and interest on drawings. Its balance is settled only when the partner retires or dies.

A charge made against a partner who withdraws money before the agreed time, compensating the firm for the funds taken out. It is income for the firm and is debited to the partner's capital or current account.

The value of a firm's reputation, customer base and earning capacity beyond its net assets. In partnership, it is paid in cash or through capital adjustments when a partner is admitted, retires or dies.

An arrangement where one or more partners promise that a specified partner will receive at least a minimum share of profit. Any shortfall is borne by the guaranteeing partners in the agreed ratio.

The proportion in which existing partners give up their share of profit in favour of an incoming partner. It is calculated as old share minus new share and determines how the premium for goodwill is divided.

The proportion in which the continuing partners take over the share of a retiring or deceased partner. It is new share minus old share, and it decides the division of goodwill payable to the outgoing partner.

A temporary account prepared at reconstitution to record the increase or decrease in the value of assets and liabilities. The resulting profit or loss is shared by the old partners in their old ratio.

The amount an incoming partner pays for the share of future profits acquired from existing partners. It is shared by the sacrificing partners and may be brought in cash or adjusted through capital accounts.

An account opened when a firm is dissolved to record the sale of assets, settlement of liabilities and realisation expenses. Its balance shows the profit or loss on realisation, shared by all partners in their profit sharing ratio.

A rule applied when a partner becomes insolvent and cannot make good the debit balance of his capital account. The deficiency is borne by the solvent partners in the ratio of their capitals, not their profit sharing ratio.

Assets that exist and are sold on dissolution but do not appear in the firm's books. The sale proceeds are credited to the Realisation Account, and if such an asset is taken over by a partner, his capital account is debited.

Apportionment of shares among applicants when a public issue is oversubscribed, so that each applicant receives a proportionate number. Excess money received may be adjusted against calls or refunded to applicants.

The amount on allotted shares that shareholders have failed to pay by the due date. It is deducted from called-up capital in the balance sheet and attracts interest until it is finally paid.

Money received from shareholders before a call is due. It is a liability shown separately in the balance sheet and normally earns interest at the rate given in the articles of association.

Cancellation of shares by the company when a shareholder does not pay calls. The amount already paid is retained in a forfeited shares account, and the shares can later be reissued to another person.

The amount received by a company over and above the face value of its shares. It is credited to a separate account and can be used only for purposes permitted by the Companies Act.

A reserve created out of capital profits, such as the premium on forfeited shares reissued or profit on sale of fixed assets. It is not available for distribution to shareholders as dividend.

A written acknowledgement of a loan taken by a company, usually carrying a fixed rate of interest and repayable after a stated period. Debenture holders are creditors of the company, not its owners.

The difference between the face value of debentures and the lower amount at which they are issued. It is a capital loss written off against securities premium or against the statement of profit and loss over the life of the debentures.

An amount payable by the company to debenture holders above the face value when the debentures are redeemed at a premium. It is a known loss provided for out of profits over the years before redemption.

A reserve created out of divisible profits by companies required to do so under the Companies Act, so that funds are available for redeeming debentures. It is shown under reserves and surplus.

Investments in specified securities that certain companies must make, equal to a prescribed percentage of the debentures to be redeemed, before the redemption date. They are encashed to provide funds for redemption.

The company's income statement prepared under Schedule III, showing revenue from operations, other income, expenses, tax and the resulting profit or loss for the year, usually with figures for the previous year.

A possible obligation whose existence depends on a future event, such as a pending lawsuit or a guarantee given for another party. It is not recorded in the books but is disclosed by way of a note.

The owners' claim on the company, made up of share capital, reserves and surplus and the balance in the statement of profit and loss, after deducting accumulated losses and the debit balance of the profit and loss account.

A liquidity ratio found by dividing current assets by current liabilities. It shows whether short-term assets are enough to meet short-term obligations, and roughly 2:1 is considered satisfactory for most businesses.

A solvency ratio comparing long-term debt or outside liabilities with shareholders' funds. A high ratio means greater reliance on borrowed money and therefore higher financial risk for the company.

The number of times inventory is sold and replaced during the year, calculated as cost of revenue from operations divided by average inventory. It measures how efficiently the firm's stock is moving.

The share of operating expenses, including cost of revenue from operations and other operating expenses, in net revenue from operations. A lower ratio leaves a larger operating profit margin for the company.

Short-term, highly liquid investments that can be converted into cash quickly and are subject to only an insignificant risk of change in value, such as treasury bills and short-term bank deposits.

The principal revenue-producing activities of an entity and other activities that are neither investing nor financing, such as cash received from customers and payments made to suppliers and employees.

Acquisition and disposal of long-term assets, investments and other items that are not cash equivalents, for example machinery purchased, a building sold or shares of another company bought.

Transactions that change the size and composition of owners' capital and borrowings, such as issuing shares, taking or repaying loans and paying dividends to shareholders.