RBSE SS Accountancy cheat sheet

Partnership Deed: written agreement among partners; in absence of a deed, the Indian Partnership Act 1932 defaults apply - no interest on capital, no interest on drawings, no salary, profits shared equally, interest on partner's loan to firm @6% p.a.

Profit-Sharing Ratio (PSR): ratio of profit/loss shared by partners; in absence of agreement it is equal. Any change in PSR requires consent of all partners.

Interest on Capital: allowed only if the deed provides; computed on opening capital, or on opening plus additions minus drawings, for the period of use. Journal: Interest on Capital A/c Dr. to Partners' Capital A/c.

Interest on Drawings: charged only if the deed provides. Equal monthly drawings at start of month = average period 6.5 months; middle = 6 months; end = 5.5 months. Formula: Total drawings x Rate/100 x Average period/12.

Capital Accounts - Fixed vs Fluctuating: under fixed capital, the Capital A/c records only permanent capital and Current A/c records interest, salary, drawings and share of profit; under fluctuating, all adjustments pass through Capital A/c.

Partner's Salary/Commission: debited to Profit & Loss Appropriation A/c, not to Profit & Loss A/c, and only when the deed provides.

Profit & Loss Appropriation A/c: prepared after the P&L A/c; debit interest on capital, salary, commission, transfer to reserve; credit net profit and interest on drawings; balance is distributed in PSR.

Guarantee of Minimum Profit: deficiency borne by the guaranteeing partner(s) in the agreed ratio (or equally) and credited to the guaranteed partner's Capital/Current A/c.

Sacrifice Ratio = Old Share − New Share; the incoming partner's share is contributed by old partners in the sacrifice ratio. Gain Ratio = New Share − Old Share, applicable on retirement or death.

Goodwill on Admission: credited to old partners in sacrifice ratio; the new partner brings it in cash or it is adjusted through capital accounts. Methods: average profit, super profit, capitalisation of average/super profit.

Revaluation Account: prepared on reconstitution to record changes in assets and liabilities at revised values; profit is credited to all old partners in old PSR, loss debited. Revaluation A/c is not prepared for admission if the question values only goodwill.

Hidden/Unrecorded Assets and Liabilities: revalued through the Revaluation A/c; unrecorded assets realised are credited to Revaluation A/c, unrecorded liabilities paid are debited.

Retirement - settlement of dues: amount due to the retiring partner is transferred to his Loan A/c if not paid immediately; interest at the deed rate or 6% p.a. if silent.

Death of a Partner: profit for the current year up to the date of death is estimated on the basis of the previous year's profit or turnover and credited in the old PSR; share of goodwill and revaluation profit also accrue to the deceased partner's account.

Gaining Partners compensate the sacrificing/retiring partner for his share of goodwill in the gain ratio; journal entry: Gaining Partners' Capital A/c Dr. to Retiring/Deceased Partner's Capital A/c.

Adjustment of Capitals: after admission/retirement, capitals may be made proportionate to the new PSR by bringing in or withdrawing cash; the total capital is often based on the incoming partner's capital.

Realisation A/c: opened on dissolution; debit all assets (except cash/bank, fictitious assets and partners' debit balances) at book value and credit all external liabilities; each realisation of an asset and payment of a liability is recorded here.

Order of settlement: (1) realisation of assets and payment of external liabilities, (2) partners' loan, (3) partners' capitals. Any surplus/deficit on Realisation A/c is transferred to partners' Capital A/cs in the profit-sharing ratio.

Bank/Cash A/c: records cash brought in by partners, realisation proceeds, payments to creditors and partners; final balance must be nil.

Insolvency of a Partner - Garner v. Murray rule: the deficiency of an insolvent partner is borne by solvent partners in the ratio of their capitals before dissolution (not in PSR), unless the deed provides otherwise.

If a solvent partner himself has a debit balance (capital deficiency), he must bring in cash to the extent of his deficiency; the remaining deficiency of the insolvent partner is then shared by the solvent partners in their capital ratio.

Unrecorded assets taken over by a partner: debit the partner's Capital A/c and credit Realisation A/c. Unrecorded liabilities paid by a partner: debit Realisation A/c and credit the partner's Capital A/c.

Fictitious assets (debit balance of P&L, advertisement suspense) and accumulated losses are written off against partners' capital accounts in the PSR, not through Realisation A/c.

Workmen Compensation Reserve / Investment Fluctuation Reserve on dissolution: if no liability exists, the reserve is transferred to partners' Capital A/cs in the PSR; if a claim exists, only the excess is distributed.

Share Capital presentation: Authorised, Issued (Subscribed incl. partly paid, Called-up, Paid-up). Share forfeiture A/c is shown as a deduction from Subscribed Capital under 'Share Capital' in the Balance Sheet until reissue.

Oversubscription and Pro-rata Allotment: applications are allotted proportionately; excess application money is adjusted against allotment and subsequent calls. Journal: Share Application A/c Dr. to Share Capital A/c and to Share Allotment A/c (excess).

Calls in Arrears: shown as a deduction from Called-up Capital. Calls in Advance: shown as a separate line item under 'Current Liabilities' and interest is payable at the deed rate or 12% p.a. if the articles are silent.

Forfeiture: for non-payment of allotment or calls, the company may forfeit shares after notice. Journal: Share Capital A/c Dr. (called-up amount) to Share Forfeiture A/c (amount received) and to Calls in Arrears A/c.

Reissue of Forfeited Shares: may be at par, premium or discount, but total discount cannot exceed the amount in Share Forfeiture A/c. Amount in Share Forfeiture A/c relating to reissued shares is transferred to Capital Reserve.

Issue at Premium: Securities Premium is credited to 'Securities Premium Reserve' under Reserves & Surplus and can be used only for the purposes in Section 52 of the Companies Act 2013 (e.g., issuing fully paid bonus shares, writing off preliminary expenses).

Private placement and ESOP shares are issued under Sections 42 and 62 of the Companies Act 2013; shares can be issued only at a price determined by valuation, not at a discount (Section 53).

Journal for call money received: Bank A/c Dr. to Share Call A/c; then Share Call A/c Dr. to Share Capital A/c when the call is made.

Debenture: a written acknowledgement of debt, usually secured by a charge on assets. Types: secured/unsecured (naked), redeemable/irredeemable, convertible/non-convertible, registered/bearer.

Issue of debentures: Bank A/c Dr. to Debenture Application A/c; on allotment, Debenture Application A/c Dr. to Debentures A/c (and Securities Premium if issued at premium).

Issue of debentures as collateral security: either no entry (only a note) or Debenture Suspense A/c Dr. to Debentures A/c; interest is paid only when the loan is not repaid.

Interest on Debentures: Debenture Interest A/c Dr. to Bank A/c; at year-end, transfer to Statement of Profit & Loss and deduct TDS if applicable. Interest is a charge against profit, not an appropriation.

Redemption - methods: (a) lump-sum payment, (b) redemption by conversion into shares, (c) purchase of own debentures in the open market, (d) sinking fund / Debenture Redemption Reserve (DRR).

DRR: created out of divisible profits; a company must transfer at least 25% of the nominal value of debentures to DRR before redemption (as per Companies (Share Capital and Debentures) Rules, 2014). Investment of DRR in specified securities is required for listed companies.

Own Debentures: purchase at a price below/above face value - profit/loss is transferred to Capital Reserve/Statement of P&L; on cancellation, Debentures A/c Dr. to Own Debentures A/c and to Capital Reserve (if profit).

Sinking Fund: annual appropriation from P&L to Debenture Redemption Fund, invested in Sinking Fund Investments; on redemption, investments are sold and the balance of the fund is transferred to General Reserve.

Schedule III, Companies Act 2013 prescribes the format: Balance Sheet in Part I (Equity & Liabilities, Assets), Statement of Profit and Loss in Part II, Notes to Accounts in Part III.

Balance Sheet - Equity & Liabilities: Shareholders' Funds (Share Capital, Reserves & Surplus, Money received against share warrants), Share Application Money Pending Allotment, Non-current Liabilities (long-term borrowings, deferred tax, long-term provisions), Current Liabilities (short-term borrowings, trade payables, other current liabilities, short-term provisions).

Balance Sheet - Assets: Non-current Assets (PPE, intangible assets, capital WIP, non-current investments, long-term loans & advances), Current Assets (current investments, inventories, trade receivables, cash & cash equivalents, short-term loans & advances).

Statement of Profit and Loss: Revenue from operations, Other income, Total revenue; Expenses (cost of materials, purchases, changes in inventories, employee benefit expense, finance costs, depreciation, other expenses); Profit before tax, Tax, Profit after tax.

Notes to Accounts: each line item on the face of statements is cross-referenced to a note that discloses the breakup (e.g., Share Capital note shows authorised, issued, subscribed, called-up, paid-up and par value).

Contingent liabilities and commitments are disclosed by way of notes, not recognised on the Balance Sheet.

Revenue recognition: revenue from operations includes sale of goods and services net of GST and returns; other income includes interest, dividend and profit on sale of investments.

Dividend: proposed dividend is not recognised as a liability until approved by shareholders; it is disclosed in the notes. Interim dividend paid is deducted from Reserves & Surplus.

Comparative Statement: shows absolute change (Current year − Previous year) and percentage change (Absolute change ÷ Previous year × 100) for each item.

Common-Size Statement: each item is expressed as a percentage of a common base - in the Balance Sheet, total assets or total equity & liabilities = 100; in the P&L, revenue from operations = 100.

Trend Analysis: takes the base year value as 100; Trend % = (Current year value ÷ Base year value) × 100.

Current Ratio = Current Assets ÷ Current Liabilities; ideal 2:1. Quick Ratio = Quick Assets (Current Assets − Inventory − Prepaid) ÷ Current Liabilities; ideal 1:1.

Debt-Equity Ratio = Long-term Debt ÷ Shareholders' Funds (or Debt ÷ Equity); ideal 2:1 or lower. Proprietary Ratio = Shareholders' Funds ÷ Total Assets.

Return on Investment = Net Profit before Interest, Tax and Dividend ÷ Capital Employed × 100; Capital Employed = Shareholders' Funds + Long-term Debt.

Inventory Turnover = Cost of Revenue from Operations ÷ Average Inventory; Debtors Turnover = Credit Revenue ÷ Average Trade Receivables; Interest Coverage = EBIT ÷ Interest.

Ratio limitations: ignore price-level changes, qualitative factors and differing accounting policies; comparisons are meaningful only within similar industries.

Prepared under AS-3 (Revised) using the indirect method for operating activities; three sections - Operating, Investing, Financing - plus reconciliation of opening and closing cash and cash equivalents.

Operating Activities (indirect): Net profit before tax + non-cash items (depreciation, amortisation, provision for doubtful debts) − non-operating incomes + finance cost, then adjust for changes in working capital (inventory, receivables, payables).

Investing Activities: purchase/sale of PPE, purchase/sale of investments, interest and dividend received, loans given and recovered.

Financing Activities: proceeds from issue of shares/debentures, long-term borrowings and repayments, interest paid on borrowings, dividend paid, finance lease payments.

Non-cash transactions (issue of shares for assets, conversion of debentures into shares, bonus issue) are excluded from the Cash Flow Statement and disclosed separately.

Tax paid is treated as an operating outflow (unless specifically linked to investing/financing); interest paid on debentures is a financing outflow for a non-financial company.

Cash and Cash Equivalents: cash in hand, bank balance, cheques in hand, and short-term highly liquid investments with original maturity of three months or less, net of bank overdraft.

Increase/Decrease in cash = Net cash from Operating + Investing + Financing; must reconcile with the difference between opening and closing cash and cash equivalents.

Receipts and Payments Account: a summary of the Cash Book, records all receipts and payments (capital and revenue) during the year, starts with opening cash/bank and ends with closing cash/bank. It is not a double-entry statement.

Income and Expenditure Account: a nominal account prepared on an accrual basis; records revenue items only; surplus or deficit is transferred to the Capital Fund (General Fund).

Balance Sheet: prepared at the year-end with assets and liabilities, including subscriptions in arrears, stock of consumables, and the Capital Fund adjusted by the surplus/deficit of the year.

Subscription accounting: current-year subscription + outstanding of current year − advance of current year = subscription received during the year (adjust for prior-year arrears).

Specific donations (for building, prize fund) are capitalised and shown in the Balance Sheet; general donations are treated as income of the Income & Expenditure Account.

Legacy, life membership fee and endowment income are normally capital receipts and credited to the Capital Fund; life membership fee may be spread over the expected membership period.

Consumables (sports goods, stationery): opening stock + purchases − closing stock = amount consumed, which is charged to Income & Expenditure A/c.

Honorarium to the secretary, salaries, rent and depreciation are revenue expenditures; purchase of fixed assets and repayment of loans are payments shown only in the Receipts and Payments Account and the Balance Sheet.

Computerised Accounting System (CAS): an accounting information system that records, processes and reports transactions using software; data is stored in a database and processed automatically.

Components: hardware, software, data, people (users, accountants, IT staff) and procedures/controls (passwords, audit trails, backup).

Types of accounting software: ready-to-use (off-the-shelf), customised, tailor-made (bespoke); also classified as readymade, semi-customised and customised packages.

Database: a collection of related data organised for easy retrieval; a DBMS (Database Management System) such as MySQL, Oracle or SQL Server is used to create, query and manage the accounting database.

Relational Database Management System (RDBMS): stores data in tables (relations) with rows and columns; primary key uniquely identifies a row, foreign key links tables.

Accounting software modules: general ledger, accounts receivable, accounts payable, inventory, payroll, fixed assets, bank reconciliation, GST/taxation reporting.

Advantages of CAS: speed, accuracy, scalability, real-time reporting, automatic posting and audit trail; limitations: cost, training, security risk, data loss without backup.

Grouping and codification: accounts are organised in groups/sub-groups; a unique code (e.g., 1001 for cash) is assigned to each ledger for consistent entry and reporting.