Sample Papers, Important Questions, Notes - Class 12 Accountancy

Class 12 Accountancy Term Wise Syllabus

Part A: Accounting for Not-for-Profit Organizations, Partnership Firms and Companies

Unit 1: Financial Statements of Not-for-Profit Organizations (10 Marks)

• Not-for-profit organizations: concept
• Receipts and Payments Account: features and preparation.
• Income and Expenditure Account: features, preparation of income and expenditure account and balance sheet from the given receipts and payments account with additional information

Scope

• Adjustments in a question should not exceed 3 or 4 in number and restricted to subscriptions, consumption of consumables and sale of assets/ old material.
• Entrance/admission fees and general donations areto be treated as revenue receipts.
• (iii) Trading Account of incidental activities is not to beprepared

Unit 2: Accounting for Partnership Firms (30 Marks)

Partnership: features, Partnership Deed

Provisions of the Indian Partnership Act 1932 in the absence of partnership deed.

Fixed v/s fluctuating capital accounts.

Preparation of Profit and Loss Appropriation account - division of profit among partners, guarantee of profits

• Past adjustments (relating to interest on capital, interest on drawing, salary and profit sharing ratio)
• Goodwill: nature, factors affecting and methods of valuation - average profit, super profit and capitalization

Note: Interest on partner's loan is to be treated as a charge against profits.

Goodwill to be adjusted through partners capital/current account or by raising and writing off goodwill (AS 26)

Accounting for Partnership firms - Reconstitution and Dissolution

• Change in the Profit Sharing Ratio among the existing partners - sacrificing ratio, gaining ratio, accounting for revaluation of assets and reassessment of liabilities and treatment of reserves and accumulated profits. Preparation of revaluation account and balance sheet
• Admission of a partner -effect of admission of a partner on change in the profit sharing ratio, treatment of goodwill (as per AS 26), treatment for revaluation of assets and re- assessment of liabilities, treatment of reserves and accumulated profits, adjustment of capital accounts and preparation of balance sheet.
• Retirement and death of a partner: effect of retirement / death of a partner on change in profit sharing ratio, treatment of goodwill (as per AS 26), treatment for revaluation of assets and reassessment of liabilities, adjustment of accumulated profits and reserves, adjustment of capital accounts and preparation of balance sheet. Preparation of loan account of the retiring partner.
• Calculation of deceased partner’s share of profit till the date of death. Preparation of deceased partner’s capital account and his executor’s account

Dissolution of a partnership firm: meaning of dissolution of partnership and partnership firm, types of dissolution of a firm. Settlement of accounts - preparation of realization account and other related accounts: capital accounts of partners and cash/bank a/c (excluding piecemeal distribution, sale to a company and insolvency of partner(s)).

Note:

• The realized value of each asset must be given at the time of dissolution.
• In case, the realization expenses are borne by a partner, clear indication should be given regarding the payment thereof.

Unit-3 Accounting for Companies (20 Marks)

Accounting for Share Capital

• Share and share capital: nature and types.
  • Accounting for share capital: issue and allotment of equity and preferences shares. Public subscription of shares- over subscription and under subscription of shares; Issue at par and at premium, calls in advance and arrears (excluding interest), issue of shares for consideration other than cash.
• Concept of Private Placement and Employee Stock Option Plan (ESOP)
• Accounting treatment of forfeiture and re-issue of shares.
• Disclosure of share capital in the Balance Sheet of a company.

Accounting for Debentures

• Debentures: Issue of debentures at par, at a premium and at a discount, issue of debentures for consideration other than cash; Issue of debentures with terms of redemption; debentures as collateral security-concept, interest on debentures. Writing off discount / loss on issue of debentures.
  Note: discount or loss on issue of debentures to be written off in the year debentures are allotted from security premium reserve (if it exists and then from statement of profit and loss as financial cost (AS 16)
• Redemptionof debentures-Method:Lump sum, draw of lots.Creation of Debenture Redemption Reserve
  Note: Related sections of the Companies Act, 2013 will apply

Part B: Financial Statement Analysis

Unit 4: Analysis of Financial Statements (12 Marks)

Financial Statements of a Company: statement of Profit and Loss and Balance Sheet in prescribed form with major headings and sub headings (as per Schedule III to the Companies Act, 2013). Note: Exceptional items, extraordinary items and profit(loss) from discontinued operations are excluded

• Financial Statement Analysis: Objectives, importance and limitations
• Tools for Financial Statement Analysis: Comparative statements, common size statements, cash flow analysis, ratio analysis.
• Accounting Ratios: Meaning, Objectives classification and computation.

Liquidity Ratios: Current ratio and Quick ratio.

Solvency Ratios: Debt to Equity Ratio, Total Asset to Debt Ratio, Proprietary Ratio and Interest Coverage Ratio.

Activity Ratios: Inventory Turnover Ratio, Trade Receivables Turnover Ratio, Trade Payables Turnover Ratio and Working Capital Turnover Ratio

Profitability Ratios: Gross Profit Ratio, Operating Ratio, Operating Profit Ratio, Net Profit Ratio and Return on Investment.

Note: Net Profit Ratio is to be calculated on the basis profit before and after tax.

Unit 5: Cash Flow Statement (8 Marks)

Meaning, objectives and preparation (as per AS 3 (Revised) (Indirect Method only)

Note:

1. Adjustments relating to depreciation and amortization, profit or loss on sale of assets including investments, dividend (both final and interim) and tax
2. Bank overdraft and cash credit to be treated as short term borrowings.
3. Current Investments to be taken as Marketable securities unless otherwise specified.

Note: Previous years’ Proposed Dividend to be given effect, as prescribed in AS-4, Events occurring after the Balance Sheet date. Current years’ Proposed Dividend will be accounted for in the next year after it is declared by the shareholders.

Part C: Project Work (20 Marks)

Note: Kindly refer to the Guidelines published by the CBSE.

Accountancy Question Paper Design - Class XII

What Is Accounting?

The purpose of accounting is to provide information that will help you make correct financial decisions. The accountant’s job is to provide the information needed to run a business as efficiently as possible while maximising profits and keeping costs low.

Accounting plays a role in businesses of all sizes. Your kids’ lemonade stand, a one-person business, and a multinational corporation all use the same basic accounting principles. Accounting is legislated; it affects your taxes; even the president plays a role in how accounting affects you.

Accounting is the language of business. It is the process of recording, classifying, and summarising economic events through certain documents or financial statements. Like any other language, accounting has its own terms and rules. To understand how to interpret and use the information accounting provides, you must first understand this language. Understanding the basic concepts of accounting is essential to success in business.

Accounting and Bookkeeping

Bookkeeping procedures and bookkeepers record and keep track of the business transactions that are later used to generate financial statements. Most bookkeeping procedures have been systematised and, in many cases, can be handled by computer programs. Bookkeeping is a very important part of the accounting process, but it is just the beginning. There is currently no certification required to become a bookkeeper in the United States.

Accounting is the process of preparing and analysing financial statements based on the transactions recorded through the bookkeeping process. Accountants are usually professionals who have completed at least a bachelor’s degree in accounting, and often have passed a professional examination, like the Certified Public Accountant Examination, the Certified Management Accountant Examination, or the Certified Fraud Auditor Examination. Accounting goes beyond bookkeeping and the recording of economic information to include the summarising and reporting of this information in a way that is meant to drive decision making within a business.

Who Uses Accounting Information?

In the world of business, accounting plays an important role to aid in making critical decisions. The more complex the decision, the more detailed the information must be. Individuals and companies need different kinds of information to make their business decisions.

Let’s start with you as an individual. Why would you be interested in accounting? Accounting knowledge can help you with investing in the stock market, applying for a home loan, evaluating a potential job, balancing a chequebook, and starting a personal savings plan, among other things.

Managers within a business also use accounting information daily to make decisions, although most of these managers are not accountants. Some of the decisions they might make for which they will use accounting information. Without the proper accounting information, these types of decisions would be very difficult, if not impossible, to make.

Bankers continually use accounting information. They are in the business of taking care of your money and making money with your money, so they absolutely must make good decisions. Accounting is fundamental to their decision-making process. Figure 1.3 looks at some of the decisions bankers make using accounting information.

Accountability in Accounting

A business’s financial statements can also be of great interest to other members of the local or national community. Labor groups might be interested in what impact management’s financial decisions have on their unions and other employees. Local communities have an interest in how a business’s financial decisions (for example, layoffs or plant closings) will impact their citizens.

As the economy becomes more complex, so do the transactions within a business, and the process of reporting them to various users and making them understandable becomes more complex as well. A solid knowledge of accounting is helpful to individuals, managers, and business owners who are making their decisions based on the information accounting documents provide.

Financial Statements

The basic financial statements include the Balance Sheet, the Income Statement, the Statement of Cash Flows, and the Statement of Retained Earnings. We will look at these in depth in the following chapters and see how they all interact with each other. As we discuss these financial statements, you will see they are not as scary as you might think they are. Many of the concepts will already be familiar to you.

The Balance Sheet is the statement that presents the Assets of the company (those items owned by the company) and the Liabilities (those items owed to others by the company). The Income Statement shows all of the Revenues of the company less the Expenses, to arrive at the “bottom line,” the Net Income.

The Statement of Cash Flows shows how much cash we started the period with, what additions and subtractions were made during the period, and how much cash we have left over at the end of the period.

The Statement of Retained Earnings shows how the balance in Retained Earnings has changed during the period of time (year, quarter, month) for which the financial statements are being prepared. Normally there are only two types of events that will cause the beginning balance to change: 1) the company makes a profit, which causes an increase in Retained Earnings (or the company suffers a loss, which would cause a decrease) and 2) the owners of the company withdraw money, which causes the beginning balance to decrease (or invest more money, which will cause it to increase).Financial statements vary in form depending upon the type of business in which they are used.