WB HS Accountancy flashcards

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

Sacrificing Ratio

The proportion in which old partners give up their share of profit in favour of a new partner. Computed as Old Ratio minus New Ratio; goodwill brought by the incoming partner is credited in this ratio.

Gaining Ratio

The excess of a partner's new share over the old share, computed as New Ratio minus Old Ratio. Used on retirement or death to distribute the outgoing partner's share of goodwill among continuing partners.

Profit and Loss Appropriation Account

An extension of the Profit and Loss Account prepared for a partnership to distribute profit among partners through interest on capital, salaries, commissions, interest on drawings, and transfer to reserves.

Interest on Drawings Average Period

For equal monthly drawings, the average period is 6.5 months when drawn at the beginning of each month, 5.5 months at the end, and 6 months at mid-month.

Realisation Account

An account opened on dissolution of a firm to record the book value of assets and liabilities, their realisation, and expenses, with the resulting profit or loss transferred to partners in the profit-sharing ratio.

Garner v. Murray Rule

On the insolvency of a partner, the deficiency in capital is borne by the solvent partners in the ratio of their capitals, not in the profit-sharing ratio, unless the deed provides otherwise.

Calls in Arrears

The amount of called-up capital that shareholders have not paid. It is deducted from called-up capital to arrive at paid-up capital and is shown as a note to share capital.

Securities Premium

The excess amount received over the face value of shares on issue. It is credited to a separate reserve usable only for purposes such as bonus shares, writing off preliminary expenses, or buyback.

Share Forfeiture Account

An account credited with amounts already received on shares forfeited for non-payment of calls. After reissue, the remaining balance is transferred to Capital Reserve.

Debenture Interest

A charge against profit payable at a fixed rate on the face value of debentures, irrespective of profits earned, and usually subject to deduction of tax at source.

Schedule III Format

The statutory format under the Companies Act 2013 prescribing the presentation of the balance sheet and statement of profit and loss, with assets and liabilities classified as current and non-current.

Contingent Liability

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

Earnings Per Share

Profit after tax divided by the weighted average number of equity shares outstanding. It is disclosed in the notes to the financial statements as required by accounting standards.

Current Ratio

Current assets divided by current liabilities. It measures short-term liquidity and the ability of the firm to meet obligations falling due within a year.

Quick Ratio

Quick assets divided by current liabilities, where quick assets exclude inventories and prepaid expenses. A stricter test of liquidity than the current ratio.

Debtors Turnover Ratio

Credit revenue from operations divided by average trade receivables. It shows how quickly debts are collected and is used to compute the average collection period.

Return on Investment

Profit before interest, tax, and dividend divided by capital employed, expressed as a percentage. It measures the overall efficiency of the funds employed in the business.

Operating Cash Flow

Cash generated from the principal revenue-producing activities, computed by adjusting net profit for non-cash items and changes in working capital under the indirect method.

Cash Equivalents

Short-term, highly liquid investments readily convertible into known amounts of cash and subject to an insignificant risk of change in value, with original maturity of three months or less.

Investing Activities

Cash flows from acquisition and disposal of long-term assets and other investments not included in cash equivalents, such as purchase or sale of property, plant, equipment, and investments.

Financing Activities

Cash flows that change the size and composition of owners' capital and borrowings, including issue of shares, proceeds and repayment of loans, and payment of dividends.

Receipts and Payments Account

A summary of cash and bank receipts and payments during a period, prepared by a not-for-profit organisation, showing opening and closing balances and including both capital and revenue items.

Income and Expenditure Account

An accrual-based account prepared by a not-for-profit organisation recording revenue income and expenses of the current year, with the resulting surplus or deficit added to or deducted from the capital fund.

Life Membership Fees

A capital receipt received from a member for lifetime membership. It is credited to a separate fund or the capital fund and not to the income and expenditure account.

Capital Fund

The excess of assets over liabilities of a not-for-profit organisation, equivalent to owners' capital. It increases by surplus and decreases by deficit, and also absorbs capital receipts.

Hidden Goodwill

Goodwill inferred when a new partner brings capital but no explicit premium. Computed as the new partner's capital multiplied by the reciprocal of the share, less the firm's net assets.

Revaluation Account

An account prepared on reconstitution to record changes in the value of assets and liabilities. The resulting profit or loss is distributed among the relevant partners in the old ratio.

Partner's Loan Account

An account recording a loan given by a partner to the firm, separate from capital. On dissolution it is repaid after external liabilities but before partners' capital.

Pro-rata Allotment

Allotment of shares to applicants in proportion to their applications when the issue is oversubscribed, with excess application money adjusted against allotment and later calls.

Common-Size Statement

A financial statement in which each item is expressed as a percentage of a common base, such as total revenue or total assets, to allow comparison across periods and firms.

Working Capital Turnover

Revenue from operations divided by working capital. It indicates how efficiently working capital is used to generate sales; a higher ratio generally suggests better utilisation.

Project Viva Marks

Marks awarded in the oral examination of the accountancy project, testing the candidate's understanding of objectives, methodology, findings, and the accounting concepts applied.