KSEAB II PUC Accountancy flashcards

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

Sacrificing Ratio

The ratio in which old partners give up their share of profit in favour of an incoming partner. Calculated as 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. Calculated as new ratio minus old ratio.

Goodwill

The value of a firm's reputation and earning capacity beyond the normal return on its net assets. It is an intangible asset brought in by an incoming partner.

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.

Profit and Loss Appropriation Account

An extension of the Profit and Loss Account prepared to distribute profit among partners through interest on capital, salary, commission and share of profit.

Partner's Current Account

An account used when partners maintain fixed capitals, to record drawings, interest on capital, salary, commission and share of profit or loss.

Interest on Drawings

Interest charged on amounts withdrawn by partners for personal use. It is debited to the partner's capital or current account and credited to the Profit and Loss Appropriation Account.

Partner's Loan

A loan advanced by a partner to the firm, treated as a liability of the firm. When the deed is silent, interest is allowed at 6% per annum.

Realisation Account

An account opened on dissolution to record the sale of assets and settlement of liabilities. Its balance shows profit or loss on realisation.

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 the profit-sharing ratio.

Dissolution of Partnership

A change in the relation among partners caused by admission, retirement, death or insolvency. The firm may continue with a new agreement.

Unrecorded Assets

Assets that do not appear in the books of the firm. When realised on dissolution, the proceeds are credited to the Realisation Account.

Securities Premium

Amount received above the face value of shares. It is a capital reserve used for bonus shares, preliminary expenses, or premium on redemption of debentures and preference shares.

Calls in Arrears

The amount not received from shareholders on calls made. It is deducted from called-up capital to arrive at paid-up capital and shown as a current asset.

Calls in Advance

Amount received from shareholders before the call is made. It is a current liability and interest may be paid on it as per the Articles.

Forfeiture of Shares

Cancellation of shares when a shareholder fails to pay calls. Share Capital is debited with the called-up amount and the amount received is credited to Share Forfeiture Account.

Debenture Redemption Reserve

A reserve created out of profits to protect debenture holders. It is mandatory for certain companies under the Companies Act 2013 before redemption.

Debenture Interest

A fixed rate of interest paid on the face value of debentures. It is a charge against profit and is payable even if the company incurs a loss.

Redemption of Debentures

Repayment of the amount borrowed through debentures. It may be done by lump sum payment, instalments, open market purchase, or conversion into shares.

Loss on Issue of Debentures

The excess of the redemption amount plus discount over the issue price. It is written off against Securities Premium or over the life of the debentures.

Schedule III

The format prescribed under the Companies Act 2013 for preparing the Balance Sheet and Statement of Profit and Loss of a company.

Shareholders' Funds

The owners' claim on the company, comprising Share Capital, Reserves and Surplus, and Money Received against Share Warrants.

Other Comprehensive Income

Income and expenses not recognised in profit or loss, such as revaluation surplus and certain actuarial gains. It is presented separately in the Statement of Profit and Loss.

Contingent Liability

A possible obligation whose existence depends on a future event. It is disclosed by way of notes and not recognised in the balance sheet.

Comparative Statement

A financial statement showing figures of two or more years side by side, along with absolute change and percentage change, to reveal trends.

Common-Size Statement

A statement in which each item is expressed as a percentage of a common base, such as total assets or revenue from operations, to compare firms of different sizes.

Quick Ratio

Quick assets divided by current liabilities. Quick assets exclude inventory and prepaid expenses; the ideal ratio is 1:1.

Debt-Equity Ratio

Long-term debt divided by shareholders' funds. It measures financial leverage and indicates the proportion of outsiders' funds to owners' funds.

Inventory Turnover Ratio

Cost of goods sold divided by average inventory. It measures how many times inventory is converted into sales during a period.

Cash and Cash Equivalents

Cash in hand, bank balances, and short-term highly liquid investments with an original maturity of three months or less, as defined by AS-3.

Operating Activities

The principal revenue-producing activities of an enterprise, including cash receipts from customers and cash payments to suppliers and employees.

Codification of Accounts

Assigning unique numeric or alphanumeric codes to ledger accounts in a computerised accounting system to speed up data entry and reporting.