PSEB SS Accountancy cheat sheet

Absence of a partnership deed means profits and losses are shared equally; interest on capital and interest on drawings are not allowed, but interest on a partner's loan to the firm is allowed at 6% p.a.

Interest on capital is computed on the opening capital balance unless the deed specifies otherwise; when opening capital is not given, adjust closing capital backward for drawings, additional capital and share of profit.

In the absence of a deed, a partner is not entitled to salary or commission, and interest on advances by a partner is payable at 6% p.a. even if the firm earns a loss.

Profit and Loss Appropriation Account is debited with interest on capital, partner's salary and commission, and credited with interest on drawings and the net profit from the Profit and Loss Account.

Interest on drawings is charged for the period the money remained withdrawn: 6 months on average for uniform monthly drawings at the start of each month, 6.5 months for the middle of each month, and 5.5 months for the end of each month.

When a partner's capital is fixed, all salary, interest on capital and share of profit are credited to the Current Account, not the Capital Account.

Guarantee of minimum profit to a partner is borne by the other partners in their profit-sharing ratio unless a different agreement exists; the deficiency is debited to the guaranteeing partners.

Goodwill raised in the books at admission or reconstitution is written off among all partners (including the new or retiring partner as agreed) in the new profit-sharing ratio.

Past adjustments are recorded through a single adjustment entry: the partner who was under-credited is debited and the one over-credited is credited, using the net effect of all errors.

On admission, the new partner's share of goodwill is credited to the sacrificing partners in their sacrifice ratio, computed as old share minus new share.

Sacrificing ratio = Old ratio − New ratio; when the new partner acquires share wholly from one partner, that partner alone bears the sacrifice.

Revaluation Account is prepared at admission, retirement or death; an increase in an asset or decrease in a liability is a gain credited to old partners in the old ratio, and the reverse is a loss.

Unrecorded assets brought into the books on reconstitution are credited to the Revaluation Account; unrecorded liabilities are debited to it.

Gaining ratio on retirement or death = New share − Old share; the retiring or deceased partner's share of goodwill is debited to the gaining partners in this ratio.

On retirement, the retiring partner's capital account is settled by transferring cash, and any unpaid balance is transferred to the retiring partner's Loan Account.

On death, the deceased partner's share of profit to the date of death is based on the previous year's profit or average profits, unless a time-based or sales-based estimate is specified.

The deceased partner's capital account is credited with capital, interest on capital, salary, share of goodwill, share of revaluation profit and share of profit up to the date of death, and debited with drawings and interest on drawings.

When a partner retires and the remaining partners agree to settle at a revalued figure, the difference between the book value and agreed value of goodwill is adjusted only among the continuing partners in their gaining ratio.

Shares can be issued at par, at a premium, or at a discount; a discount on issue is permitted only for shares and must be debited to the Securities Premium Account or the Discount on Issue of Shares Account as applicable under current law.

Securities Premium can be used only for issuing fully paid bonus shares, writing off preliminary expenses or issue expenses, or buying back shares; it cannot be used to pay dividends or write off a discount on issue.

Calls in Arrears is an asset shown on the assets side; Calls in Advance is a liability shown on the current liabilities side until adjusted against calls.

When shares are forfeited, the Share Capital Account is debited with the called-up amount, the Calls in Arrears Account is credited with the unpaid amount, and the balance is credited to the Forfeited Shares Account.

On reissue of forfeited shares, any loss on reissue is debited to the Forfeited Shares Account, and the balance left in that account is transferred to Capital Reserve.

Interest on calls in advance is payable at 12% p.a. unless the articles provide otherwise; interest on calls in arrears is charged at 10% p.a. or the rate in the articles.

Debentures issued as collateral security are not recorded as a liability in the balance sheet; a note to the accounts discloses the fact.

When debentures are issued at a discount and redeemable at par, the total discount is written off over the life of the debentures by charging the Statement of Profit and Loss.

Own debentures purchased for cancellation are debited to the Debenture Account at the price paid, and the resulting gain or loss is transferred to the Statement of Profit and Loss.

Not-for-profit organisations prepare a Receipts and Payments Account, an Income and Expenditure Account, and a Balance Sheet; the Income and Expenditure Account is prepared on an accrual basis and corresponds to the Profit and Loss Account.

Receipts and Payments Account records all cash and bank receipts and payments, including capital items, loans and opening/closing balances; it is a summary of the cash book.

Only revenue items are recorded in the Income and Expenditure Account; capital receipts and payments are shown in the Balance Sheet.

Subscription received in advance is a liability (current) and is shown on the liabilities side; subscription outstanding for the current year is an asset and is shown on the assets side.

Specific donations for a purpose (for example, a building fund) are capitalised and shown as a fund on the liabilities side; general donations are treated as income in the Income and Expenditure Account.

Life membership fees are usually treated as capital receipts and credited to a Life Membership Fund, unless the organisation's policy treats them as income.

Consumable items such as stationery and sports materials are adjusted for opening and closing stock: expense = opening stock + purchases − closing stock.

Entrance fees are normally treated as income of the Income and Expenditure Account, while legacies are generally capital receipts unless otherwise specified.

The surplus or deficit from the Income and Expenditure Account is added to or deducted from the Capital or Accumulated Fund in the Balance Sheet.

Schedule III requires the Statement of Profit and Loss to present revenue from operations, other income, expenses, and profit before and after tax, with earnings per share disclosed separately.

The Balance Sheet is presented in the order: Equity and Liabilities (shareholders' funds, non-current liabilities, current liabilities) and then Assets (non-current assets, current assets).

Shareholders' funds comprise share capital, reserves and surplus, and money received against share warrants; reserves and surplus include the securities premium, capital reserve and surplus in the Statement of Profit and Loss.

Trade receivables are shown net of provision for doubtful debts; trade payables are split into dues to micro, small and medium enterprises and others.

Current assets are those expected to be realised within 12 months or the operating cycle, whichever is longer; the operating cycle assumption must be disclosed.

Contingent liabilities and commitments are disclosed by way of notes and are not recognised in the Balance Sheet unless the outflow is probable and measurable.

Debenture interest is a finance cost shown in the Statement of Profit and Loss; it is not an appropriation of profit and is charged before computing profit before tax.

Dividend declared after the reporting period but before approval of the financial statements is disclosed in the notes and not recognised as a liability, as it does not meet the present obligation criterion at the reporting date.

Earnings per share is computed as profit attributable to equity shareholders divided by the weighted average number of equity shares outstanding during the period.