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dsUnzh; fo|ky; laxBuKendriya Vidyalaya Sangathan

SUPPORT MT!R"#$#SS %"" &$$OU'T'$(

)*++ & )*+)

Pre,ared at

dsUnzh; fo|ky; laxBu- .ka,fyd f/k0kk 1oa izf/k0k2k

la#3kkuds&fo&1l& lad4y- 1u& lh& 1,& dk5yksuh-dkat46ekx78if/,e9- e4a:7< =***>?

Kendriya Vidyalaya Sangathan1 7onal "nstitute of !du:ation < Training

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Tel2 'os2 *))&)D>>=EE> FirCG *))&)D>>?)H=G3ax *))&)D>>=EE>

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PR!PR!F B(1. Mrs.K.PRABAVATHI, PT !"MM., KV MA#KH$R%, m$MBAI2. Mrs.BH$VA#&'(ARI V.M.,PT !"MM., KV #o.) !"*ABA,

m$MBAI3. Ms. A#+$ KRI'H#A#I, PT !"MM., KV #" %&VA*I, nA'IK 4. Mr. %I*IP '"#A*&, PT !"MM., KV #o.- !"*ABA, m$MBAI5. Mrs. 'MITA.'.#AIR, PT !"MM., KV #o.- !"*ABA, m$MBAI6. Mr.+IT%&R.'.RA(AT, PT !"MM, KV "#! PA#V&*,

m$MBAI

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SYLLABUS

CLASS XII

UNITS Marks

Part A: Accounting for Not-For-Profit Organizations,

Partnership Firms and Companies

1. Ao!ntin" #or not$#or$pro#it or"ani%ations. 1&

2. Ao!ntin" #or Partnership Firms &5

3. 'eonstit!tion o# Partnership 2&

4. Ao!ntin" #or Share Capita( and )e*ent!re 25

6&

Part B : Financial Stateent Anal!sis

5. Ana(+sis o# Finania( Statements 12

6. Cash F(o, Statement &-

. Pro/et 0ork 2&

Tota( 4&

Unit $1 Pro/et Fi(e 4 marks

Unit$2 0ritten Test 12 Marks ne ho!r

Unit 3 ia$0ee 4 MarksUnit: ": Accounting for Not-For-#rofit Organizations

7 Not #or pro#it or"ani%ation Meanin" and e8amp(es.

7 'eeipts and Pa+ments Meanin" and onept o9 #!nd *ased ao!ntin".

7 Preparation o# Inome and :8pendit!re Ao!nt and ;a(ane Sheet #rom

'eeipt and Pa+ment Ao!nt ,ith additiona( in#ormation.

Unit: $ Accounting for Partners%i# Firs

7 Nat!re o# Partnership #irm Partnership )eed$meanin"<

importane.

7 Fina( Ao!nts o# Partnership Fi8ed s F(!t!atin" Capita(< )iision o# Pro#it

amon" partners< Pro#it and =oss Appropriation Ao!nt

Unit &:'econstitution of Partners%i#

7 Chan"es in Pro#it Sharin" 'atio amon" the e8istin" partners$Sari#iin" 'atio

and >ainin" 'atio

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7 Ao!ntin" #or 'ea(!ation o# Assets and =ia*i(ities and distri*!tion o#

resere and A!m!(ated Pro#its.

7 >ood,i(( Nat!re< Fators a##etin" and methods o# a(!ation Aera"e pro#it

S!per pro#it and Capita(isation methods.

7 Admission o# a Partner :##et o# Admission o# Partner< Chan"e in Pro#itSharin" 'atio< Ao!ntin" Treatment #or >ood,i((< 'ea(!ation o# Assets and

=ia*i(ities 'eseres a!m!(ated Pro#its and Ad/!stment o# Capita(s.

7 'etirement?)eath o# a Partner@ Chan"e in Pro#it Sharin" ratio< ao!ntin"

treatment o# >ood,i((< 'ea(!ation o# Assets and =ia*i(ities< Ad/!stment o#

a!m!(ated Pro#its 'eseres and apita(s.

Unit : ( Accounting for S%are Ca#ital an) *e+enture

• Share Capita( Meanin"< Nat!re and T+pes.

• Ao!ntin" #or share apita( Iss!e and A((otment o# :!it+ and Pre#erene

Shares@ Priate p(aement o# shares< meanin" o# emp(o+ee stok option p(an

p!*(i s!*sription o# shares@ er S!*sription and !nder s!*sription@ iss!e at

par. premi!m and at diso!nt@ Ca((s in adane< Ca((s in arrears< iss!e or snares

#or onsideration other than ash.

• For#eit!re o# Sharps@ ao!ntin" treatment< re$iss!e o# #or#eited shares

• Presentation o# Shares Capita( and )e*ent!re in Compan+Bs ;a(ane Sheet

• Iss!e o# de*ent!res $ at par and premi!m@ iss!e o# de*ent!re #or onsideration

other than ash.

• 'edemption o# de*ent!re o!t o# Capita(@ redemption methods (!mp s!m<

pa+ment< dra,s *+ (ots. P!rhase in the open market and onersion e8(!din"

!m$interest and e8$interest

Unit 5 Ana(+sis o# Finania( Statements

a Finania( Statements o# a Preparation o# Simp(e ;a(ane

Compan+ Sheet o# a Compan+ in the presri*ed #orm ,ith ma/or headin"s on(+.

* Finania( Statement Ana(+sis Meanin"< Si"ni#iane and P!rpose<

=imitations.

Too(s #or Finania( Statement Comparatie Statements<

Ana(+sis Common Si%e Statements.d Ao!ntin" 'atios Meanin" and */eties< T+pes o# 'atios

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=i!idit+ 'atios C!rrent 'atio< =i!id 'atio.

So(en+ 'atios )e*t to :!it+< Tota( Assets to

)e*t< Proprietar+ 'atio.

Atiit+ 'atios Inentor+ T!rnoer< )e*tors T!rnoer< Pa+a*(e

T!rnoer< 0orkin" Capita( t!rnoer and Fi8ed

Assets T!rnoer.

Pro#ita*i(it+ 'atios >ross Pro#it< peratin" 'atio< Net Pro#it 'atio<

'et!rn on Inestment< :arnin" Per Share<

)iidend Per Share< Prie :arnin" 'atio.

Unit : Cas% Flo Stateent

Cash F(o, Statement Meanin" and */eties< Preparation< Ad/!stment re(ated to

depreiation< diidend and ta8< sa(e and p!rhase o# non$!rrent assets as per reised

standard iss!ed *+ ICAI.

Unit: .Pro/ect 0or1

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C2AP34' 5 I

ACCOUN3IN6 FO' - NO3 - FO' - P'OFI3 5 O'6ANISA3ION

L4A'NIN6 OU3CO74S8

A#ter st!d+in" the (esson< st!dents ,i(( *e a*(e to

• Understand non$pro#it entities and state its meanin".

• )i##erent Ao!ntin" termino(o"+ re(ated to non$pro#it entities.

• :8p(ain the onept o# #!nd ao!ntin".

• Understand 'eeipts and pa+ment ao!nt and its #eat!res.

• Understand Inome and :8pendit!re Ao!nt and its #eat!res.

• Identi#+ the items #or the preparation o# Inome and :8pendit!re Ao!nt.

• )i##erentiate *et,een 'eeipts and Pa+ment Ao!nt and Inome and :8pendit!re

Ao!nt.

• Prepare Inome and :8pendit!re Ao!nt ,ith the "ien reeipts and

Pa+ment Ao!nt and additiona( in#ormation

Intro)uction:

r"anisations are o# t,o t+pes

a. Pro#it makin" or"anisations are the *!siness or"anisations ,hose main o*/etie is to

earn pro#it *+ se((in" "oods or proidin" series. These or"ani%ations are #ormed ,ith

Pro#it$Motie.

b. Not-for-Profit organisations are formed to promote cert ain !(t!ra(< rereationa(<

re(i"io!s< po(itia(< ed!ationa(< media( atiities et. These or"ani%ations are #ormed

,ith Serie Motie. This hapter he(ps in !nderstandin" the ma/or di##erenes ino(edin doin" ao!ntin" #or pro#it makin" or"ani%ations and Non Pro#it makin"

or"ani%ations.

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Salient Points:-

A9 7eaning of Non-Profit Organisations:

Not #or pro#it or"anisations re#er to the or"anisations that are !sed #or the ,e(#are o# the

soiet+ and are set !p as harita*(e instit!tions< ,hih #!ntion ,itho!t an+ pro#it motie.

;. Charateristis o# Not #or Pro#it r"anisation

a. Formed #or proidin" serie to a spei#i "ro!p or p!*(i at (ar"e.

*. r"ani%ed as harita*(e tr!st?soiet+.

. Mana"ed *+ Mana"in" Committee e(eted *+ mem*ers.

d. Main So!re o# Inome is

S!*sriptions< donations< "oernment "enera( "rants et

e. F!nds raised thro!"h ario!s so!res are redited to apita( #!nd

#. >oernment Shoo(s< Charita*(e hospita(s< 'ereationa( C(!*s< et are e8amp(es o# Not

#or pro#it or"anisation.

C9 Basic Accounting 3erinolog!:

1. S!*sription S!*sription is the amo!nt paid *+ mem*er to the non$pro#it or"ani%ation in

order to maintain their mem*ership. It is the main so!re o# inome #or N.P.. and it is sho,n

in the inome side o# Inome and :8pendit!re A?.

2. =i#e mem*ership #ees it is the amo!nt paid *+ mem*er to the non$pro#it or"ani%ation #or the

maintenane o# entire (i#e mem*ership. It is sho,n in the =ia*i(ities side o# ;a(ane sheet.

3. =e"a+ It is the amo!nt reeied as per the ,i(( o# a deeased person. It appears on the

reeipts side o# the 'eeipt and pa+ment ao!nt and is diret(+ added to apita( #!nd ? "enera(#!nd in the *a(ane sheet.

4. :ndo,ment F!nd it is the #!nds reeied #or proidin" permanent means o# s!pport. It is a

apita( reeipt *ea!se the #!nd proides permanent so!re o# inome.

5. >rant it is the amo!nt reeied #rom entra(< state or (oa( "oernment #or ro!tine e8penses

o# these instit!tions. >rant reeied #rom "oernment #or ro!tine e8penses are inome. >rant

reeied #or spei#i p!rpose is treated as (ia*i(it+.

*9 Accounting 'ecor)s of Not for Profit Organisations:

The #inania( statement o# Not #or Pro#it or"ani%ation in(!des

7 1. 'eeipt and Pa+ment A?

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7 2. Inome and :8pendit!re A?

7 3. ;a(ane Sheet.

"9 'ecei#t an) Pa!ent Ac:

a. It is a S!mmar+ o# the Cash ;ook. *. Its sho,s the tota( amo!nt o# a(( reeipts and pa+ments irrespetie o# the Period to

,hih the+ pertains.

. It in(!des a(( reeipts and pa+ments ,hether the+ are o# reen!e or apita( nat!re.d. No non$ash items are sho,n in this A?C.

e. It has *oth openin" and C(osin" Cash *a(ane.

#. Format o#

'ecei#ts an) Pa!ents Account

'eeipts Amo!nt Pa+ments Amo!nt

To ;a(ane *?d

To 'een!e 'eeipts

a. S!*sriptions

*. >enera( )onations

C. Proeeds #rom sa(e

o# Tikets< "rass and

o(d ne,spapers.

d. =oker 'ents.

e. :ntrane #ees< i#

not apita(i%ed

To Capita( 'eeipts

a. Spei#i p!rposedonations

*. =e"aies

. Spei#i P!rpose

donations

d. sa(e o# #i8ed assets

and Inestment

e. Capita(ised

:ntrane #ees

#. (i#e mem*ership

#ees

Note a(( reen!ereeipts "oes to

Inome Side o#

Inome and:8pendit!re

Ao!nt

Note Capita('eeipts "oes to

;a(ane sheets

;+ 'een!e Pa+ment

a. 'ent rates and ta8es.

*. ne,spapers< ma"a%ines< periodia(s

. sa(aries

d. e(etriit+ e8penses.

e. ons!ma*(e items.

;+ Capita( Pa+ment

a. #i8ed assets

*. Inestments et.

Note a(( reen!e

Pa+ments "oes to

:8pendit!re Side o#Inome and

:8pendit!re Ao!nt

Note Capita( Pa+ment

"oes to ;a(ane sheets

$9 Incoe an) 4;#en)iture Account:

The main #eat!res o# Inome and :8pendit!re Ao!nt

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i It is prepared #or an ao!ntin" period on ar!a( onept #o((o,in" the

mathin" prinip(e.

ii n(+ reen!e items are onsidered< ,hi(e apita( item are e8(!ded.

iii A(( items *oth ash and non$ash depreiation are reordedi :8pendit!re are reorded on the de*it side and inomes on the redit side

)i##erene is kno,n as S!rp(!s i# ome in :8pendit!re side or )e#iit i#

ome in Inome side.

&9 Balance S%eet:

;a(ane sheet is prepared #or not$#or pro#it or"ani%ation to asertain the #inania( position o#

the or"ani%ation. it is prepared on the same pattern as in the ase o# pro#it makin" or"ani%ation.

The on(+ di##erene is that DCapita( #!ndE or D>enera( F!ndE is sho,n in p(ae o# Capita( and

S!rp(!s or de#iit as per inome and e8pendit!re ao!nt ,i(( *e added or ded!ted #rom the

apita( #!nd.

Note i# in a !estion apita( #!nd in the *e"innin" o# !rrent +ear is not "ien then ,e hae to

prepare penin" ;a(ane sheet to asertain it.

*9 3OPIC FO'

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$9 Calculation of Aount S#ent on consua+le ite:

Cons!ma*(e item are those item ,hih are ons!med d!rin" the proess o# their !se (ike<

Mediine< Stationer+< Sports materia( et.In Case o# non$pro#it or"ani%ation the amo!nt spent on item ons!med d!rin" the +ear is

sho,n in the e8pendit!re side o# Inome K :8pendit!re A?C$

Forula:

Parti!(ar?:8pendit!re Amo!ntAmo!nt paid #or Cons!ma*(e items

Add1. penin" stok o# Cons!ma*(e items;e"innin" o# !rrent +ear

2. penin" Adane Paid to s!pp(ier Cons!ma*(e items ;e"innin" o#

!rrent +ear3. C(osin" reditor o# Cons!ma*(e items :nd o# !rrent +ear

G88

G88

G88

G88

=ess

1. C(osin" stok o# Cons!ma*(e items :nd o# !rrent +ear

2. C(osin" Adane Paid to s!pp(iers o# Cons!ma*(e items +end o# !rrent+ear

3. penin" reditor o# Cons!ma*(e items ;e"innin" o# !rrent +ear

G88

G88

G88

888

Amo!nt spent on Stationer+ Cons!med d!rin" !rrent Hear to *e sho,n ine8pendit!re side o# Inome and :8pendit!re A?

GGG

3. T':ATM:NT F SP:CIFIC FUN)< ItLs IN:STM:NT< INCM: AN) :GP:NS:S

':=AT:) T T:M$

e.". TU'NAM:NT FUN)< MATC FUN)< P'I: FUN) et.

Spei#i #!nds are !sed #or spei#i p!rposes. 0e hae to sho, their treatment in the *a(ane sheet in the #o((o,in" ,a+ dependin" !pon the in#ormation "ien in !estion

=etLs ass!med that spei#i #!nd is to!rnament #!nd$

;a(ane Sheet o# ..

=ia*i(ities Amo!nt Assets Amo!nt

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To!rnament F!nd 888

Add1. Inome reeied #rom

To!rnament or

To!rnament #!ndinestment. 888

2. Inome ?s #rom

To!rnament orTo!rnament #!nd

inestment 888

G88

=ess1. To!rnament :8penses

Paid 888

2. ?s To!rnamente8penses 888

?S to!rnament e8penses

GGG

GGG

To!rnament #!nd

Inestment

Inome ?s #rom

To!rnament or

To!rnament #!ndinestment

GGG

GGG

" 7ar1 >uestions

O.1. )!rin" the +ear 2&& a (!* reeied 's1< &&ie t,o main so!res o# inome o# a Not #or pro#it or"ani%ationQ

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Ans.5 S!*sriptions< donations< "oernment "enera( "rants et

O.6. 0hat do +o! mean *+ (e"a+Q >ie the Ao!ntin" treatment o# it.

Ans.6 =e"a+ It is the amo!nt reeied as per the ,i(( o# a deeased person. It appears on

the reeipts side o# the 'eeipt and pa+ment ao!nt and is diret(+ added to apita(

#!nd ? "enera( #!nd in the *a(ane sheet.

O.. 0hat is honorari!mQ

Ans. A token pa+ment made to a person ,ho has o(!ntari(+ !ndertaken a serie ,hih

,i(( norma((+ demand o# #ee. It is th!s an e8pression o# "ratit!de rather than a

pa+ment #or the ,ork done.

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&- 7A'=S >U4S3IONS:

O.1.:8trats o# reeipt and pa+ment Ao!nt #or the +ear ended 31st Marh< 2&1& are "ien

*e(o,

S!*sriptions 's.

2&&-$&R 2

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6

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To!rnament F!nd 1

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F' T: H:A' :N):) 31ST MA'C< 2&&R

'eeiptsAmo!nt

's.Pa+ments

Amo!nt

's.

To ash in and

To S!*sriptions

To :ntrane Fees

To Sa(e o# re#reshmentsTo Sa(e o# )ane Tikets

To Interests on Inestments

-

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Fo((o,in" additiona( in#ormation are a(so proided to +o!

i Fo((o,in" ,ere the assets and (ia*i(ities on 31st Marh< 2&&-

Sports e!ipment 's.6

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Note

a(!e o# Inestment in the *e"innin" o# the +ear has *een a(!(ated as #o((o,

Interest Inestment W1&&?'ate o# inestment4

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So(!tion

INCM: AN) :GP:N)ITU': ACCUTN IN T: ;XS F SMNAT 0:=FA':

SCI:TH

F' T: H:A' :N):) 31ST MA'C< 2&&R

:8pendit!re Amo!nt's.

Inome Amo!nt's.

To Sa(aries and 0a"es

To 'ates and Ta8es

To :ntertainment Materia(

64

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;A=ANC: S::T AS AT 31ST MA'C< 2&&R

=ia*i(itiesAmo!nt

's.Assets

Amo!nt

's.

's.YCapita( F!nd 2

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M:M'AN)M ;A=ANC: S::T ' Y;A=ANC:$S::T AS AT 31ST MA'C< 2&&-

=ia*i(itiesAmo!nt

's.

AssetsAmo!nt

's.Creditors #or :ntertainment

Materia(

S!*sription 'eeied

In Adane

;!i(din" F!nd

Capita( F!nd

;a(anin" Fi"!re

5

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C2AP34' - II

Accounting for #artners%i# firs 5 Fun)aentals

L4A'NIN6 OB?4C3I@4S:

A#ter st!d+in" this hapter the st!dent ,i(( *e on#ident to

Understand and e8p(ain the meanin" o# partnership

Understand the harateristis o# Partnership

:8p(ain the meanin" and ontents o# partnership deed.

App(+ their proisions o# Partnership At

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" an) & 7ar1 >uestions

O1 )e#ine partnership.

0hen t,o or more persons enter into an a"reement to arr+ on *!siness and share its

pro#it and (osses< it is a ase o# partnership. The Indian partnership At< 1&31< de#ines

Partnership as #o((o,s

ZPartnership is the re(ation *et,een persons and ,ho hae a"reed to share the pro#itso# a *!siness arried on *+ a(( or an+ o# them atin" #or a((.

O.2 0hat do +o! !nderstand *+ BpartnersB< B#irmB and B#irmsB name Q

The persons ,ho hae entered in to a Partnership ,ith one another are indiid!a((+ a((ed

BPartnersB and o((etie(+ Ba #irmB and the name !nder ,hih the *!siness is arried isa((ed Bthe #irmBs nameB.

O.3 0rite an+ #o!r main #eat!res o# partnership.

:ssentia( e(ements or main #eat!res o# Partnership

i T,o or more persons Partnership is an assoiation o# t,o or more persons.

ii A"reement The Partnership is esta*(ished *+ an a"reement either ora( or in,ritin".

iii =a,#!( ;!siness A Partnership #ormed #or the p!rpose o# arr+in" a *!siness< it

m!st *e a (e"a( *!siness.

i Pro#it sharin" Pro#it o# the #irm is share *+ the partners in an a"reed ration< i# theratio is not a"reed then e!a((+. Pro#it a(so in(!des (oss.

O.4 0hat is the minim!m and ma8im!m n!m*er o# partners in a(( partnershipQ

There sho!(d *e at (east t,o persons to #orm a Partnership. The ma8im!m n!m*er o#

Partners in a #irm arr+in" an *ankin" *!siness sho!(d not e8eed ten and in an+

other *!siness sho!(d not e8eed ten and in an+ other *!siness it sho!(d not e8eed

t,ent+.

O.5 0hat is the stat!s o# partnership #rom an ao!ntin" ie,pointQ

From an ao!ntin" ie,point< partnership is a separate *!siness entit+. From (e"a(

ie,points< ho,eer< a Partnership< (ike a so(e proprietorship< is not separate #rom the

o,ners.

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O.6 0hat is meant *+ partnership deedQ

Partnership deed is a ,ritten a"reement ontainin" the terms and onditions a"reed *+

the Partners.

O. State an+ #o!r ontents o# a partnership deed.

i The date o# #ormation and the d!ration o# the Partnership

ii Name and address o# the Partners

iii Name o# the #irm.

i Interest on Partners apita( and dra,in"s

'atio in ,hih pro#it or (osses sha(( *e shared

O.- In the a*sene o# a partnership deed< ho, are m!t!a( re(ations o# partners "oernedQ

Ans. In the a*sene o# Partnership deed< m!t!a( re(ations are "oerned *+ the Partnership At<

1R32.

O.R >ie an+ t,o reason in #ao!r o# hain" a partnership deed.

Ans. i In ase o# an+ disp!te or do!*t< Partnership deed is the "!idin" do!ment.

ii It an spei#+ the d!ties and po,ers o# eah Partner.

O.1& State the proision o# BIndian partnership At 1R32B re(atin" to sharin" o# pro#its in

a*sene o# an+ proision in the partnership deed.

In the a*sene o# an+ proision in the Partnership deed< pro#it or (osses are share *+ the

Partners e!a((+.

O.11 0h+ is it important to hae a partnership deed in ,ritin" Q

Partnership deed is important Sine it is a do!ment de#inin" re(ationship o# amon"

Partners< th!s is a assistane in sett(ement o# disp!tes< i# an+ and a(so aoid possi*(e

disp!tes it is a "ood eidene in the o!rt.

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O.12 0hat do +o! !nderstand *+ #i8ed apita( o# partnersQ

PartnersB apita( is said to *e #i8ed ,hen the apita( o# Partners remain !na(tered e8ept

in the ase ,here #!rther apita( is introd!ed or apita( is ,ithdra,n permanent(+.

O.13 0hat do +o! !nderstand *+ #(!t!atin" apita( o# partners Q

Partners apita( is said to *e #(!t!atin" ,hen apita( a(ters ,ith eer+ transation in the apita(

ao!nt. For e8amp(e< dra,in"< redit o# interest< et

O.14 >ie t,o ir!mstanes in ,hih the #i8ed apita( o# partners ma+ han"e.

T,o ir!mstanes in ,hih the #i8ed apita( o# Partners ma+ han"e are

i 0hen additiona( apita( is introd!ed *+ the Partners.

ii 0hen a part o# the apita( is permanent(+ ,ithdra,n *+ the Partners.

O.15 =ist the items that ma+ appear on the de*it side and redit side o# a partnerBs

#(!t!atin" apita( ao!nt.

n de*it side )ra,in"< interest on dra,in"< share o# (oss< (osin" redit *a(ane o#

the apita(.

n redit side penin" redit *a(ane o# apita(< additiona( apita( introd!ed<

share o# pro#it< interest on apita(< sa(ar+ to a Partner< ommission to a Partner.

O.16 o, ,i(( +o! sho, the #o((o,in" in ase the apita(s are

i Fi8ed and ii F(!t!atin"

. a Additiona( apita( introd!ed

* )ra,in"s

0ithdra,a( o# apita(

d Interest on apita( and

e Interest on (oan *+ a partners Q

i In ase< apita(s are #i8ed

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a on redit side o# apita( * on de*it side o# !rrent A? on de*it side o#

apita( A? d on redit side o# !rrent A? e on redit side o# (oan #rom

partnerBs A?

O.1 I# the partners apita( ao!nts are #i8ed< ,here ,i(( +o! reord the #o((o,in" items

i Sa(ar+ to a partners

ii )ra,in" *+ a partners

iii Interest on apita( and

i Share o# pro#it earned *+ a partner Q

Ans.1 i Credit side o# PartnerBs !rrent A?

ii )e*it side o# PartnerBs !rrent A?

iii Credit side o# Partners !rrent A?

i Credit side o# Partners !rrent A?

O.1- o, ,o!(d +o! a(!(ate interest on dra,in"s o# e!a( amo!nts dra,n on the =ast

da+ o# eer+ month Q

Ans.1- 0hen a partners dra,s a #i8ed amo!nt at the *e"innin" o# eah month< interest on

tota( dra,in" ,o!(d *e on the amo!nt ,ithdra, #or 6.5 months at the a"reed rate o#

interest per ann!m. App(+ the #o((o,in" #orm!(a.

Interest on dra,in" tota( dra,in" 8 12

5.6

1&&×

Rate

O.1R o, ,o!(d +o! a(!(ate interest on dra,in" o# e!a( amo!nts dra,n on the (ast da+

o# eer+ month Q

Ans. 0hen dra,in" o# #i8ed amo!nts are made at re"!(ar month(+ intera(s on the da+ o#

eer+ month< Interest ,o!(d *e har"ed on the amo!nt ,ithdra,n at the a"reed rate o# interest

#or 5.5 months. App(+ the #o((o,in" #orm!(a.

Interest on dra,in" Tota( dra,in" 8 12

5.5

1&&×

Rate

O.2& o, ,o!(d +o! a(!(ate interest on dra,in" o# e!a( amo!nt dra,n in the midd(e o#

eer+ month Q

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O.21 'amesh< a partner in the #irm has adaned a (oan o# a 's. 1

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P';=:MS ;AS:) N FUN)AM:NTA=S

O. 1 A< ; and ,ere partners in a #irm hain" no partnership a"reement. A

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To ;a(ane ?d 53-R& 3226& ;+ ;a(ane *?d 5&&&&& 3&&&&&

;+ interest on apita( 3&&&& 1-&&&

;+ sa(ar+ $ 25&&&

;+ P and =

Appropriation A? 43-R& 2R26&

53-R& 3226& 53-R& 3226&

O.3 G and H are partners sharin" pro#its and (osses in the ratio o# 3 2 ,ith apita(s o# 's.

5&

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2A and ; are partners sharin" pro#its and (osses in the ratio o# 21. A ,ithdra,s 's.15&& at

the *e"innin" o# eah month and ; ,ithdre, 's. 2&&& at the end o# eah month #or 12

months. Interest on dra,in"s ,as har"ed 6 p.a. Ca(!(ate the interest on dra,in"s

o# A and ; #or the +ear ended 31st )eem*er 2&&R.

Ans. 1 Interest on Capita( For P

)AT: AMUNT N . F MNTS P')UCT

1$4$2&&R T 31$3$

1&

5&

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O.5 A< ; and C are partners in a #irm sharin" pro#its and (osses in the ratio o# 235. Their

#i8ed apita(s ,ere 15

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Add )ra,in"s Preio!s(+ ded!ted . $ 3

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O - A< and C are partners ,ith #i8ed apita(s o# 's. 2

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1RR23& 1RR23&

Capita( Ao!nts

Parti!(ars A ; C Parti!(ars A ; C

To *a(ane *?d 2

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The pro#its #or the +ear ended 31st )eem*er< 2&& *e#ore makin" a*oe appropriations

,ere 's. 2

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]So(!tion1& Pro#it and =oss Ao!nt #or the +ear ended

Parti!(ars Amo!nt Parti!(ars Amo!nt

To Interest on PBs =oan A? 12&&& ;+ pro#it *e#ore interest 426-&&

To Pro#it trans#erred to

PK= Appropriation A? 414-&&

426-&& 426-&&

Profit an) Loss A##ro#riation Account for t%e !ear en)e)9


To interest on Capita( ;+ pro#it and =oss A? Pro#it 414-&&

P 36&&& ;+ interest on dra,in"s

O 24&&& 6&&&& P 32&&

To OBs ommission 6&&&& O 2&&& 52&&

To resere A? 3&&&&

To pro#it

PBs Capita( 135&&&

OBs apita( 135&&& 2&&&&

42&&&& 42&&&&

Notes

i I# the rate o# interest on PartnersB =oan is not "ien in the !estion< it is to *e

,ed 6 p.a. aordin" to the Partnership At.

ii Interest on PartnersB =oan is treated as a har"e a"ainst Pro#it< so it is sho,n in

the de*it o# Pro#it and =oss A?.

iii I# the date o# )ra,in"s is not "ien in the !estion< interest on dra,in"s ,i(( *e

har"ed and aera"e period o# 6 months. .

i 'esere F!nd is a(!(ated at 1& on 's. 3

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CAPT:' $ III

':CNSTITUTIN F PA'TN:'SIP

CAN>: IN P'FIT SA'IN> 'ATI AMN> T: :GISTIN> PA'TN:'S<

A)MISSIN F A PA'TN:'< ':TI':M:NT?):AT F A PA'TN:'

Admission o# a Partner

Learning o+/ecties:-

A#ter st!d+in" this (esson< the st!dents ,i(( *e a*(e to

• Identi#+ and dea( e##etie(+ ,ith the sit!ation o# reonstit!tion o# partnership.

• Identi#+ the pro*(em arisin" d!e to admission o# a partner in the #irm.

• Ca(!(ate ne, and sari#ie ratio in di##erent ases.

• Understand< a(!(ate and make treatment o# "ood,i(( in di##erent ases.

• Make ao!ntin" treatment o# the rea(!ation o# assets and (ia*i(ities and distri*!te the

pro#it and (oss on rea(!ation amon" the o(d partners.

• Make ao!ntin" treatment o# !nreorded assets and (ia*i(ities

• Prepare apita( Ao!nts< Cash A? and ;a(ane Sheet o# the Ne, #irm

• Ad/!st the PartnersL Capita( Ao!nts

Sa(ient Points$

1. >ood,i(( is the monetar+ a(!e o# *!siness rep!tation. It is an intan"i*(e asset.

2. >ood,i(( ma+ *e o# t,o t+pes

a. P!rhased "ood,i((

*. Non$p!rhased "ood,i((

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3. 0hen e8istin" #irm #aes pro*(em o# (imited #inania( reso!res and man po,er then

one ne, additiona( partner enters into #irm.

4. There are three methods o# a(!ation o# "ood,i((

a. Aera"e Pro#it Method

*. S!per Pro#it method

. Capita(isation Method

5. 0hen ne, partner is admitted into e8istin" partnership then e8istin" partners hae to

sari#ie in #ao!r o# ne, partner< it is a((ed sari#iin" ratio.

6. Share o# "ood,i(( o# ne, partner ,i(( *e redited to sari#iin" partners into their

sari#iin" ratio.

. At the admission o# ne, partner Pro#it K =oss on rea(!ation o# assets and (ia*i(ities

and *a(anes o# a!m!(ated pro#its K (osses ,i(( *e distri*!ted amon" o(d partners

on(+ in o(d ratio.

O(. At the time o# han"e in pro#it sharin" ratio amon" the e8istin" partners< ,here ,i((

+o! reord an !nreorded (ia*i(it+ Q

Ans. 'ea(!ation Ao!nt$)e*it side

O2. Anand< ;h!tan and Chadha are partners sharin" pro#its in ratio o# 321. n 1st Apri(

2&&< the+ deided to share pro#its e!a((+. Name the partners ,ho is "ainin" on

onse!ene o# s!h han"e.

Ans. Chadha.

O3. >ie t,o harateristis o# "ood,i((.

Ans. i it is an intan"i*(e asset hain" a de#inite a(!e.

ii It he(ps in earnin" more pro#it.

O4. Name an+ t,o #ators a##etin" "ood,i(( o# a partnership #irm.

Ans. i Fao!ra*(e (oation ii Time period

O5. In a partnership #irm assets are 's.5

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O6. State the amo!nt o# "ood,i((< i# "ood,i(( is to *e a(!ed on the *asis o# 2 +earsL

p!rhase o# (ast +earLs pro#it. Pro#it o# the (ast +ear ,as 's.2&ie #orm!(a #or a(!(atin" "ood,i(( !nder ^s!per pro#it methodL.

Ans. >ood,i(( S!per Pro#it 8 N!m*er o# HearsL P!rhase.

O I. Pass the /o!rna( entr+ #or inrease in the a(!e o# assets or derease in the a(!e o#

(ia*i(ities in the 'ea(!ation A?Q

Ans Assets A? )r. ,ith the amo!nt o# inrease

=ia*i(ities A? )r. ,ith the amo!nt o# derease

To 'ea(!ation A? ,ith the tota( amo!nt o# "ain

;ein" rea(!ation o# assets and (ia*i(ities

O((. P

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O12. DThe "ainin" partnerLs sho!(d ompensate to sari#iin" partnerLs ,ith the amo!nt o#

"ain.E [o!rna(ise this statement.

Ans. >ainin" PartnerLs Capita( A? )r

To Sari#iin" PartnerLs Capita( A?

;ein" ompensation "ien *+ "ainin" partner to sari#iin" partner

O13. 0hat are the t,o main ri"hts a!ired *+ the inomin" ne, partner in a partnership

#irmQ <

Ans< The t,o main ri"hts are

i 'i"ht to share the assets o# the #irm.

ii 'i"ht to share the #!t!re pro#its o# the #irm.

O14. A and ; are partners< sharin" pro#its in the ratio o# 32. C admits #or 1?5 share . State

the sari#iin" ratio.

Ans. Sari#iin" 'atio $ 32.

O15. o, sho!(d the "ood,i(( o# the #irm *e distri*!ted ,hen the sari#iin" ratio o# an+

o# the e8istin" partner is ne"atie i.e. he is "ainin"

Ans. In this ase the partner ,ith a ne"atie sari#iin" ratio< i.e. the "ainin" partner to the

e8tent o# his "ain sho!(d ompensate to the sari#iin" partner to the e8tent o# his

"ain.

O(6. In ase o# admission o# a partner< in ,hih ratio pro#its or (oss on rea(!ation o#

assets and reassessment o# (ia*i(ities sha(( *e diidedQ

Ans. (d ratio.

O1. >ie /o!rna( entr+ #or distri*!tion o# ^A!m!(ated Pro#itsY in ase o# admission o# a

partner.

Ans. A!m!(ated Pro#it A? )r.

To (d Partners Capita( A?

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;ein" distri*!tion o# a!m!(ated pro#its amon" o(d partners

O1-. At the time o# admission o# partner ,here ,i(( +o! reord ^!nreorded inestmentLQ

Ans. 'ea(!ation Ao!nt$ Credit side.

O1R. The "ood,i(( o# a partnership is a(!ed at 's.2&

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To 0orkmenLs Compensation 'esere A? 2&&

;ein" ,orkmenLs ompensation estimated at 's. 1ie /o!rna( entr+ #or reordin" deeased partnerLs share in pro#it #rom the (os!re o#

(ast *a(ane sheet ti(( the date o# his death.

Ans. Pro#it K =oss S!spense Ao!nt )r.

To )eeased PartnerLs Capita( Ao!nt

;ein" share o# pro#it to deeased partners

O25. )e#ine "ainin" ratio.

Ans. >ainin" ratio is the ratio in ,hih remainin"?ontin!in" partners a!ire the share o#

the o!t"oin" partners.

O26. >ie t,o ir!mstanes in ,hih "ainin" ratio an *e app(ied.

Ans. i 'etirement o# a partner ii )eath o# a partner. .

O2. At the time o# retirement o# a partner "ie /o!rna( entr+ #or ,ritin" o## the e8istin"

"ood,i((.

Ans. A(( Partners Capita( in(!din" retirin" A? )r.

To >ood,i(( A?

;ein" o(d "ood,i(( ,ritten o## amon" a(( partners in< o(d ratio

1 Mark O!estions

Admission o# a Partner

O.1 State the t,o #inania( ri"hts a!ired *+ a ne, PartnerQ

Ans. Ne, partner is admitted to the partnership i# it proided in the partnership deed or a((

the e8istin" partners a"ree to admit the ne, partner. Setion 31 o# the Indian

Partnership At Proides that a person ma+ *e admitted as a ne, partner into a

partnership #irm ,ith the onsent o# a(( the Partners.

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O.2 >ie the name o# the ompensation ,hih is paid *+ a ne, Partner to sari#iin"

Partners #or sari#iin" their share o# pro#its.

Ans. 0hen a partner /oins the #irm< he "ets the #o((o,in" t,o ri"hts a(on" ,ith others

i 'i"ht to share #!t!re pro#it o# the #irm and

ii 'i"ht to share the assets o# the #irm.

O.3 :n!meration the matters that need ad/!stment at the time o# admission o# a ne,

Partner.

Ans. The matter that needs ad/!stment o# the time o# admission o# a ne, partner are

i Ad/!stment in pro#it sharin" ratio and ad/!stment o# apita(

ii Ad/!stment #or "ood,i((

iii Ad/!stment o# Pro#it ? =oss arisin" #rom the 'eo(!tion o# Assets and

'eassessment o# =ia*i(ities.

i ad/!stment o# a!m!(ated pro#its< reseres and (osses.

O.4 >ie t,o ir!mstanes in ,hih sari#iin" 'atio ma+ *e app(ied.

Ans. Cir!mstanes in ,hih sari#iin" 'atio ma+ *e app(ied are

i At the time o# admission o# a ne, partner #or distri*!tin" "ood,i(( *ro!"ht in *+

the ne, partner.

ii For ad/!stment "ood,i(( in ase o# han"e in Pro#it $ sharin" ratio o# e8istin"

partners.

O.5 0h+ is it neessar+ to rea(!e assets and reassess (ia*i(ities o# a #irm in ase o#

admission o# a ne, partnerQ

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Ans. The assets are rea(!ed and (ia*i(ities o# a #irm are reassess< at the time o# admission

o# a partner *ea!se the ne, partner sho!(d@ neither *ene#it nor s!##er *ea!se han"e

in the a(!e o# assets and (ia*i(ities as on the date o# admission.

O.6 0hat are the a!m!(ated pro#it and a!m!(ated (ossesQ

Ans. The pro#it a!m!(ated oer the +ears and hae not *een redited to partnersL apita(

A? are kno,n as a!m!(ated Pro#it or !ndistri*!ted pro#it< e.". the >enera(

'esere< Pro#it and =oss A? redit *a(ane.

The (osses ,hih hae not +et *een ,ritten o## to the de*it o# PartnersL Capita( A?

are kno,n as a!m!(ated =osses< e.". the Pro#it and =oss A? appearin" on the assets

side o# ;a(ane Sheet< et.

O. :8p(ain the treatment o# "ood,i(( in the *ooks o# a #irm on the admission o# a ne,

Partner ,hen "ood,i(( a(read+ appears in the ;a(ane sheet at its #!(( a(!e and the

ne, partner *rin"s his share o# "ood ,i(( in ash.

Ans. ;+ #o((o,in" ao!ntin" standard $ 1&< the e8istin" "ood,i(( i.e. "ood,i(( appearin"

in the ;a(ane Sheet is ,ritten o## to the o(d partners Capita( a? in their o(d pro#it

sharin" ratio.

(d partners apita( A? )r. .....

To >ood,i(( A? ]in o(d 'atio_

];ein" the e8istin" "?, ,ritten o## in the o(d ratio._

O.- Under ,hat ir!mstanes the premi!m #or "ood,i(( paid *+ the inomin" Partner ,i(( not reorded in the *ooks o# Ao!nts Q

Ans. 0hen the premi!m #or "ood,i(( is paid *+ the inomin" partner priate(+< it is not

reorded in the *ooks o# A? as it is as a matter o!tside the *!siness.

O.R A and ; share pro#its and (osses in the 'atio o# 43< the+ admit C ,ith 3?th share@

,hih he "ets 2?th #rom A and 1? #rom ;. 0hat is the ne, pro#it sharin" ratioQ

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Ans. A $ 4?$2? 2?

; 3?$1?2?C 2?V1?3?

Ne, Pro#it sharin" 'atio is 223.

O.1& The apita( o# A and ; are 's. 5&

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Ans 422

O 3 P K O are partners sharin" in the ratio o# 53. The+ admit ' #or 1?4th share and a"ree toshare *et,een them in the ratio o# 21 in #!t!re. Ca(!(ate ne, ratio.

Ans 211.

6$- Marks O!estions

O.1 )inesh< Hasmine and Faria are partners in a #irm< sharin" pro#its and (osses in 112

respetie(+. The ;a(ane Sheet o# the #irm as on 31st )e 2&&1 ,as as #o((o,s

=ia*i(ities 's. Assets 's.

S!ndr+ Creditors -&& Fator+

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So(!tion 1

;ooks o# )inesh< Hamine< Farte and Anie

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':A=UATIN ACCUNT

Parti!(ars 's. Assets 's.

To ;i((s )iso!nted A? 16& ;+ P!*(i deposits A? 1R&

;+ Mahiner+ A? 2&&

;+ =oss trans#erred to

)ineshBs apita( A? &4

HasmineBs Capita( A? 44-

FariaBs Capita( A? 12- 12-&

16& 16&

PA'TN:'SB CAPITA= ACCUNTS

)r. )r.

Parti!(ars )inesh Hasmine Faria Annie Parti!(ars )inesh Hasmine Faria Annie

's. 's. 's. 's. 's 's. 's. 's.To 'ea(!ation ;+ ;a(ane *?d51&& 3&&& 5&&& $$

A? =oss &4 44- 12- $$ ;+ 'esere F A?4R5 315 R& $$

To F!rnit!re A? -&& -&& -&& $$ ;+ Cash A? $$ $$ $$ 45&&

To )ra,in"s 25& 15& 5&& $$ ;+ Premi!m A?R1 5-3 16 $$

A?

To ;a(ane ?d 225- R&& 3-2R 45&&

6512 3-R- 525 45&& 6512 3-R- 525 45&&

;+ ;a(ane *?d225- R&& 3-2R 45&&

;A=ANC: S::T

as at 31.12.2&&1

Parti!(ars 's. Assets 's.

S!ndr+ Creditors -&& Cash in and 25

P!*(i )eposits 1&&& Fator+ ;!i(din"s 35&

Capita(s )inesh 225- Mahiner+ 2&&&F!rnit!re

2&&

Hashmine R&& Stok 145&Faria 3-2R )e*tors 15&&

Annie 45&& 114- =ess Proision3&& 12&&

;i((s )iso!nted 16&

14R5 14R5

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O.2 G and H are partners as the+ share pro#its in the proportion o# 31 their *a(ane

sheet as at 31.&3.& as #o((o,s.

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;A=ANC: S::T


Capita( Ao!nt =and 1

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PA'TN:'BS CAPITA= ACCUNT

)r. Cr

Parti!(ars G 's. H 's. 's. Parti!(ars G 's. H 's. 's.

HBs C!rrent A? $ 64

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;a(ane sheet


Capita( Ao!nt Cash R&

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;+ 'esere 16&&& -&&& $$

;+ 0ork om.'es. 6&&& 3&&& $

15&&& 136&&& $$ 15&&& 136&&& $$

To ;a(ane ?d145&&& 13&&&& 135&& To ;a(ane ?d 145&&& 13&&&& $

;+ Cash A? $$ $$ 135&&

` o# 's. 145&&& $$ $$ 135&& V 's. 13&&&&

145&&& 13&&&& 135&& 145&&& 13&&&& 135&&

;A=ANC: S::T F A< ; K C AS AT

)r. Cr.


Creditors 3&&&& Cash 255&&;i((s Pa+a*(e 1&&&& Mahiner+ 114&&&

'ashmiBs Capita( 145&&& F!rnit!re R&&&

Poo/aBs apita( 13&&&& Stok 45&&&

SantoshBs apita( 135&& )e*tors 3&&&&

=ess Proision 3&&&

4525&& 4525&&

O.4 A< ; and C are e!a( partners in a #irm< their ;a(ane Sheet as on 31st

Marh 2&&2

,as as #o((o,s


S!ndr+ Creditors 2ood,i(( 1

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. Proision #or (oss on stok and proision #or do!*t#!( de*ts is to *e made at 1& and

5 respetie(+.

d. The a(!e o# *!i(din" is to taken 's. 2enera( 'es. 6&&& 6&&& 6&&&

To C!rrent A?1225&& 15&& $$ ;+ Premi!m A? 2&&&& 2&&&& 2&&&&

To ;a(ane ?d1&&&&& 1&&&&& 1&&&&& ;+ C!rrent A? $$ $$ 45&&

2625&& 2115&& 14&&&& 2625&& 2115&& 14&&&&

;A=ANC: S::T F M?S A< ; K C as at 31st marh 2&82

)r. Cr.

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=ia*i(ities 's. Assets 's

S!ndr+ reditors 2&&& Cash at *ank 12&&&

:mp(o+eesB Proident F!nd 6&&& )e*tors 1&2&&&

;i((s Pa+a*(e 45&&& =ess Proision 51&& R6R&&

ABs Capita( 1&&&&& Mr. G $$

;Bs Capita( 1&&&&& Stok 1&26&&CBs Capita( 1&&&&& F!rnit!re K Fi8t!res 24&&&

)Bs Capita( 1&&&&& P(ant K Mahiner+ 2&&&

ABs C!rrent A? 1225&& =and K ;!i(din" 2&&&&&

;Bs C!rrent A? 15&& CBs C!rrent A? 45&&

62&&& 62&&&

O.5 A< ;and C ,ere partners in a #irm sharin" pro#its e!a((+ Their ;a(ane Sheet

on.31.12.2&& stood as

;A=ANC: S::T AS AT 31.12.&


A 's. 3&ood,i(( 1-

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iii To appreiate =and *+ 15.

i To derease P(ant and Mahiner+ *+ 1&.

Create proision o# 's@6&& on Creditors.

i A s!m o# 's.5

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4-

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'etireent of a Partner


A#ter st!d+in" this (esson< ,e are on#ident< +o! sho!(d *e ompetent eno!"h to

• Identi#+ ad/!stments arisin" d!e to retirement o# a partner.

• Ca(!(ate ne, and "ainin" ratio.

• Make ao!ntin" treatment o# "ood,i(( in di##erent ases.

• Make ao!ntin" treatment o# the rea(!ation o# assets and (ia*i(ities and distri*!tion o#

pro#it or (oss on rea(!ation amon" partners.

• Make ao!ntin" treatment o# !ndistri*!ted pro#it or (oss.

• )etermine the amo!nt pa+a*(e to retirin" partner and make pa+ment as per a"reement

and proisions o# (a,.

• Make ad/!stment o# partnersL apita( ao!nt

Sa(ient Points$

1. An e8istin" partner ma+ ,ish to ,ithdra, #rom a #irm #or ario!s reasons.

2. The amo!nt d!e to a retirin" partner ,i(( *e the tota( o# $

a. his apita( in the #irm

*. is share in #irmLs a!m!(ated pro#its and (osses.

. is share o# pro#it or (oss on rea(!ation o# assets and (ia*i(ities

d. @his share o# pro#its ti(( the date o# retirement

e. is rem!neration and interest on apita(.

#. is share in #irmLs "ood,i((.

3. The ratio in ,hih the ontin!in" remainin" partners hae a!ired the share #rom

the o!t"oin" partner is a((ed "ainin" ratio.

4. Share o# "ood,i(( o# o!t"oin" partner ,i(( *e de*ited to "ainin" partners in their

"ainin" ratio.

5. At the retirement o# a partner Pro#it K =oss on 'ea(!ation o# Assets and (ia*i(ities

and *a(anes o# a!m!(ated Pro#its and (osses ,i(( *e distri*!ted amon" a((

partners in(!din" o!t"oin" partner in their o(d ratio.

6. The o!tstandin" *a(ane o# o!t"oin" partnerLs apita( A?C ma+ *e sett(ed *+ #!((+ or

Part(+ pa+ment and or trans#errin" into his (oan ao!nt.

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O.1 0hat is meant *+ retirement o# a partnerQ

Ans. 'etirement o# a partner is one o# the modes o# reonstit!tin" the #irm in ,hih o(d

partnership omes to an end and a ne, partner amon" the ontin!in" remainin"

partners i.e.< partners other than the o!t"oin" partner omes into e8istene.

O.2 ^o, an a partner retire #rom the #irmQ

Ans. A partner ma+ retire #rom the #irm@

i in aordane ,ith the terms o# a"reement@ or

ii ,ith the onsent o# a(( other partners@ or

iii ,here the partnership is at ,i((< *+ "iin" a notie in ,ritin" to a(( the partners o#

his intention to retire.

O.3 0hat do +o! !nderstand *+ ^>ainin" 'atioYQ

Ans. >ainin" 'atio means the ratio *+ ,hih the share in pro#it stands inreased. It is

omp!ted *+ ded!tin" o(d ratio #rom the ne, ratio.

O.4 0hat do +o! !nderstand *+ ^>ainin" PartnerLQ

Ans >ainin" Partner is a partner ,hose share in pro#it stands inreased as a res!(t o#

han"e in partnership.

O.5 )istin"!ish *et,een Sari#iin" 'atio and >ainin" 'atio.

Ans. )istintion *et,een Sari#iin" 'atio and >ainin" 'atio

O.6 >ie t,o ir!mstanes in ,hih "ainin" ratio is omp!ted. Ans. >ainin" 'atio is

omp!ted in the #o((o,in" ir!mstanes i 0hen a partner retires or dies. ii 0hen

there is a han"e in pro#it$sharin" ratio.

O. 0h+ is it neessar+ to rea(!e assets and reassess (ia*i(ities at the time o# retirement

o# a partner Q

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Ans. At the time o# retirement or death o# a partner< assets are rea(!ed and (ia*i(ities are

reassessed so that the pro#it or (oss arisin" on ao!nt o# s!h rea(!ation !pto the

date o# retirement or death o# a partner ma+ *e asertained and ad/!sted in a((

partnersL apita( ao!nts in their o(d pro#it$sharin" ratio.

O.- 0h+ is it neessar+ to distri*!te 'eseres A!m!(ated< Pro#its and =osses at thetime o# retirement or death o# a partnerQ

Ans. 'eseres< a!m!(ated pro#its and (osses e8istin" in the *ooks o# ao!nt as on the

date o# retirement or death are trans#erred to the Capita( Ao!nts or C!rrent

Ao!nts o# a(( the partners in(!din" o!t"oin" or deeased partner in their o(d

pro#it$sharin" ratio so that the d!e share o# an o!t"oin" partner in reseres<

a!m!(ated pro#its?(osses "ets ad/!sted in his Capita( or C!rrent Ao!nt.

O.R 0hat are the ad/!stments re!ired on the retirement or death o# a partnerQ

Ans. At the time o# the retirement or death o# a partner< ad/!stments are made #or the

#o((o,in"

i Ad/!stment in re"ard to "ood,i((.

ii Ad/!stment in re"ard to rea(!ation o# assets and reassessment o# (ia*i(ities.

iii Ad/!stment in re"ard to !ndistri*!ted pro#its.

i Ad/!stment in re"ard to the [oint =i#e Po(i+ and indiid!a( po(iies.

O.1& G ,ants to retire #rom the #irm. The pro#it on rea(!ation o# assets on the date o#

retirement is 's. 1&

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Ans. 0hen a partner retires or dies< his share o# pro#it is taken oer *+ the remainin"

partners. The remainin" partners then ompensate the retirin" or deeased partner in

the #orm o# "ood,i(( in their "ainin" ratio. The #o((o,in" entr+ is reorded #or this

p!rpose

'emainin" PartnersL Capita( A?s ...)r.]>ainin" 'atio_

To 'etirin"?)eeased PartnerLs Capita( A? ]0ith his share o# "ood,i((_

I# "ood,i(( or Premi!m ao!nt a(read+ appears in the o(d ;a(ane Sheet< it sho!(d

*e ,ritten o## *+ reordin" the #o((o,in" entr+

A(( PartnersL Capita(?C!rrent A?s ...)r. ](d 'atio_

To >ood,i(( or Premi!m A?

O.12 G< and are partners sharin" pro#its and (osses in the ratio o# 3 2 1. retires and

the #o((o,in" [o!rna( entr+ is passed in respet o# >ood,i((

HLs Capita( A? ...)r. 2&

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The ne, ratio *et,een G and H is 1 2.

O.13 State the ratio in ,hih pro#it or (oss on rea(!ation ,i(( *e shared *+ the partners

,hen a partner retires. @

Ans. Pro#it or (oss on rea(!ation o# assets?(ia*i(ities ,i(( *e shared *+ the partners

in(!din" the retirin" partner hi their o(d pro#it$sharin" ratio.

O.14 o, is the ao!nt o# retirin" partner sett(edQ

Ans. The retirin" partner ao!nt is sett(ed either *+ makin" pa+ment in ash or *+

promisin" the retirin" partner to pa+ in insta((ments a(on" ,ith interest or *+ makin"

pa+ment part(+ in a(( and part(+ trans#errin" to his (oan ao!nt. The $#o((o,in"

[o!rna( entr+ is passed

'etirin" PartnerLs Capita( A? ...)r.

To CashY ]I# paid in ash_

r

To 'etirin" PartnerLs =oan ]I# trans#erred to (oan_

6 to - marks !estions

O.1 The *a(ane sheet o# G< < ,ho ,as sharin" pro#its in proportion o# apita( as #o((o,s $


S!nda+ reditors 1

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1. That the stok *e depreiated *+ 5

2. That the proision #or do!*t#!( de*ts *e inreased to 5 on de*tors.

3. That a proision o# 'S.5& *e made in respet o# o!tstandin" (e"a( har"es.

4. That the (and and *!i(din" *e appreiated *+ 2&.

5. That the "ood,i(( o# the entire #irm *e #i8ed at 's. 16

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To *a( C?d 25115& $ 11-5& ;+ GLs Cap A? $ 135& $

>?0

;+ GLs ap A?

>?0 $ 4&5& $

265&& 266&& 15R&& 265&& 266&& 15R&&

To *ank A? 115& $ $ ;+ *a( *?d 2515& $ 11-5&

To ;a( C?d 24&&& $ 24&&& ;+ ;ank $ $ 1215&

2515& $ 24&&& 2515& 24&&& 2515&

)r. ;ank A? Cr.

To ;a( ;?d 15

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S!ndr+ Creditors 1

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46

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i >ood,i(( to *e a(!ed on 3 +earsL p!rhase o# aera"e pro#it o# (ast 4 +ears

,hih ,ere 2&&4 's.5&

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To CLs Capita( A? 2

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*4A32 OF A PA'3N4'

Learning O+/ecties:

A#ter st!d+in" this Unit< st!dents ,i(( *e a*(e to !nderstand and prepare

a )eeased partners apita( ao!ntb )eeased partners :8e!tor ao!ntc :8e!tors (oan ao!ntd Ca(!(ation o# share o# pro#it and >ood,i(( o# the deeased partner.

SALI4N3 POIN3S:

>ainin" 'atio 0hen the partner retires or dies< his share o# pro#it is taken oer

*+ the remainin" partners.

>ainin" ratio is app(ied #or the p!rpose o# a(!(atin" >ood,i(( to *e paid o##

to the deeased partner. The deeased partner s share o# pro#it ti(( the date o# death ,i(( *e a(!(ated *+

preparin" Pro#it and =oss S!spense ao!nt on the date o# )eath.

S'T OU:STINS$$$ 3$4 MXS. A

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3. 'am< Mohan and Sohan ,ere partners sharin" pro#its and (osses in the ratio o# 532. n31st Marh< 2&&6 their ;a(ane Sheet ,as as !nder

=ia*i(ities 's Assets 's

Capita(s =easeho(d 1ood,i(( o# the #irm 1

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SohanLs share o# "ood,i(( 1

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PLs :8e!torLs =oan

a? 5&&&&

615&& 615&&

0orkin" Note

a Interest on Capita( 3&

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5. G< H and are partners sharin" pro#its and (osses in the ratio o# 221 respetie(+. Their

;a(ane Sheet as on 31st marh 2&& ,as as #o((o,s ;a(ane Sheet as on 31?&3?1&


S!ndr+ Creditors 1

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Ls :8e!torLs Ao!nt

)ate Parti!(ars 's )ate Parti!(ars 's.

3&?&R?& ;ank a? 154&& 3&?&R?& Ls Capita( a? 54&&

31?&3?&- ;a(ane ?d 636&&

31?&3?&- Interest on =oan

on 's6&

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16-&& 16-&&

6 Ani(< [atin and 'amesh ,ere sharin" pro#it in the ratio o# 211. Their ;a(ane Sheet as

at 31.12.2&&1 stood as #o((o,s$

Lia+ilities 's Assets 's

Creditors 24ood,i(( *e a(!ed at 2 +earsL p!rhase o# the aera"e pro#it o# the past #ie

+ears.

# 'ameshLs share o# pro#it to the death *e a(!(ated on the *asis o# the pro#it o#

the preedin" +ear. pro#it #or the +ears 1RR< 1RR-< 1RRR and 2&&& ,ere 's.

26

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'ealuation Account

Parti!(ars 's Parti!(ars 's

Inestment A? 1

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'ameshLs :8e!torLs ao!nt

Particulars 's Particulars 's

Cash Ao!nt 1-425 'ameshLs Capita(

ao!nt

5&R25

;a(ane ?d 325&&

5&R25 5&R25

Balance s%eet


;ank =oan 1&< &&& Cash -1

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*ISSOLU3ION OF PA'3N4'S2IP FI'7

=earnin" */eties

A#ter St!d+in" this !nit< the st!dents ,i(( *e a*(e to !nderstand

YMeanin" o# )isso(!tion

Y )istintion *et,een )isso(!tion o# Partnership and )isso(!tion o# Partnership #irm.

Y Preparation o# 'ea(isation Ao!nt

Y Proed!re o# sett(ement o# ao!nts

Y Preparation o# Memorand!m ;a(ane sheet to #ind o!t missin" #i"!res

Y Neessar+ /o!rna( entries to (ose the *ooks o# the #irm.

SALI4N3 POIN3S:

)isso(!tion )isso(!tion o# the #irm is di##erent #rom )isso(!tion o# Partnership.

'ea(isation ao!nt It is prepared to rea(i%e the ario!s assets and pa+ o## the

(ia*i(ities. C(os!re o# the ;ooks o# Ao!nts 0hen the #irm is disso(ed< #ina((+ a(( the *ooks o#

ao!nts are (osed thro!"h ;ank Ao!nt.

1. )istin"!ish *et,een )isso(!tion o# Partnership and )isso(!tion o# Partnership #irm

)isso(!tion o# Partnership )isso(!tion o# partnership #irm

aThe Partnership is disso(ed *!t the

*!siness ontin!es. The ;!siness

is not terminated

aThe #irm ,inds !p the *!siness.

* Assets and (ia*i(ities are rea(!ed

thro!"h rea(!ation ao!nt and

the ;a(ane sheet is prepared

*Assets are so(d and the (ia*i(ities are

paid o## thro!"h 'ea(isation ao!nt.

The ;ooks o# ao!nts are not

(osed as the *!siness is not

terminated.

d The ;ooks o# ao!nts are (osed.

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2.State the proisions o# Setion 4- o# the Partnership At 1R32 re"ardin" sett(ement o#

Ao!nts d!rin" the )isso(!tion o# Partnership #irm.

Ans. Aordin" to setion 4-

a=osses in(!din" the de#iienies o# Capita(s are to *e paid$$$

i First o!t o# pro#its

ii Ne8t o!t o# Capita(s o# the partners

iii =ast(+ i# re!ired< *+ the partners indiid!a((+ in their pro#it sharin" ratioas

their (ia*i(it+ is !n(imited

* The Assets o# the #irm and the amo!nt ontri*!ted *+ the partners to make !p the

de#iien+ o# apita( sha(( *e app(ied #or

i First to pa+ the de*ts o# the #irm to the third parties.

ii Ne8t< Partners =oanPartner has adaned to the #irm

iii Partners apita(s

i The resid!e< i# an+ sha(( *e distri*!ted amon" the partners in their pro#it sharin"

ratio.

3. )istin"!ish *et,een 'ea(isation ao!nt and 'ea(!ation ao!nt

'ea(isation Ao!nt 'ea(!ation Ao!nt

a It is prepared in the ase o#

)isso(!tion o# Partnership #irm.

aIt is prepared in the ase o#

)isso(!tion o# Partnership.

* This ao!nt is prepared to rea(ise

the assets K pa+ o## the (ia*i(ities .

* This Ao!nt is prepared to rea(!e

the assets and (ia*i(ities d!rin"

Admission< 'etirement and )eath o#the partner.

4. A and ; are partners sharin" pro#its and (osses e!a((+. The+ deided to disso(e their

#irm. Assets and =ia*i(ities hae *een trans#erred to 'ea(isation Ao!nt. Pass

neessar+ [o!rna( entries #or the #o((o,in".

a A ,as to *ear a(( the e8penses o# 'ea(isation #or ,hih he ,as "ien a ommissiono# 's 4&&&.

* Adertisement s!spense ao!nt appeared on the asset side o# the ;a(ane sheetamo!ntin" 's 2-&&&

Creditors o# 's 4&

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# ;ank (oan o# 's 12&&& ,as paid o##.

[U'NA=

SN Parti!(ars =F )e*it's Credit's

a 'ea(isation ao!nt )r

ALs Capita( ao!nt

;ein" ommission "ien to A

4&&&

4&&&

* ALs Capita( ao!nt )r

;Ls Capita( ao!nt )r

Adertisement S!spense ao!nt;ein" Adertisement s!spense

,ritten o##

14&&&

14&&&

2-&&&

'ea(isation ao!nt )r

Cash ao!nt

;ein" reditors paid o##

13&&&

13&&&

d ;Ls Capita( ao!nt )r

'ea(isation ao!nt

;ein" asset taken oer *+ the partner

4R&&

4R&&

e ALs =oan ao!nt )r Cash ao!nt

;ein" partners (oan paid o##

15&&&15&&&

# 'ea(isation ao!nt $$ )r

Cash ao!nt

;ein" ;ank (oan paid o##

12&&&

12&&&

5.G and H are partners in the #irm ,ho deided to disso(e the #irm. Assets and =ia*i(itiesare trans#erred to 'ea(isation ao!nt. Pass neessar+ /o!rna( entries

aCreditors ,ere 's 1

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S.N Parti!(ars =F )e*it's Credit's

a Cash ao!nt )r

'ea(isation ao!nt;ein" ash reeied #rom the

reditor

4&&&&

4&&&&

* Cash a? )r

'ea(isation a?

;ein" ash reeied #rom a de*tor,hose ao!nt ,as ,ritten o##

ear(ier

4&&

4&&

GLs Capita( a? )r

HLs Capita( a? )r

'ea(isation a?;ein" Inestments taken oer *+

the partners

R&&

R&&

1-&&

d 'ea(isation a? )r

GLs Capita( a? HLs apita( a?

;ein" pro#it on 'ea(isation

distri*!ted amon" the partners

42&&&

21&&&21&&&

e Cash a?)r

'ea(isation a?;ein" =and and ;!i(din" rea(i%ed

2R4&&&

2R4&&&

# N [U'NA= :NT'H

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=N> OU:STINS6$- MXS

6 Fo((o,in" is the ;a(ane sheet o# Xaran and Sandeep ,ho share pro#its and (osses e!a((+

as on 31st marh 2&1&


Capita(s$$ ;ank 4&

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'ealisation account

Parti!(ars 's Parti!(ars 's

S!ndr+ assets

)e*tors$25&&&

Stok$35

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Partners Ca#ital accounts

Parti!(ars Xaran Sandeep Parti!(ars Xaran Sandeep

'ea(isation

a?stok

155& ;a(ane *?d 1

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6. Fo((o,in" is the ;a(ane sheet o# G and H ,ho share pro#its in the ratio o# 41 as on 31st

marh 2&1&

;a(ane sheet


S!ndr+ Creditors -

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Parti!(ars Amt's Parti!(ars Amt's

S!ndr+ Assets

)e*tors 1

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Parti!(ars Amt 's Parti!(ars Amt's

;a(ane *?d 2&

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Partners Ca#ital Accounts

Parti!(ars A ; C Parti!(ars A ; C

Cash a? 6&

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C(osin" Capita( 5-

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7eoran)u Balance s%eet as on &""$$

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UNI3 ( Co#an! Accounts- S%are ca#ital *e+entures

L4A'NIN6 OB?4C3I@4S

Understand the meanin" and #eat!res o# ompan+

IG C(assi#iation o# share apita(

IIG Understand the ao!ntin" treatment o# oer s!*sription< a((s in arrears< premi!m

and diso!nt on iss!e o# shares.

IIIG Understand the meanin" o# #or#eit!re o# shares

I@G Pass /o!rna( entries re"ardin" #or#eit!re and reiss!e o# shares

@G Ca(!(ate apita( resere

@IG )i##erentiate *et,een apita( resere and resere apita(

@IIGUnderstand the dis(os!re o# the share apita( in the *a(ane sheet

Sa(ient Feat!res

YA ompan+ is an arti#iia( person hain" separate (e"a( entit+.

YA ompan+ is reated *+ (a, and e##eted *+ (a,.

YA priate ompan+ an *e #ormed ,ith minim!m t,o mem*ers and ma8im!m #i#t+.

YFor a p!*(i ompan+ minim!m mem*ers re!ired are and there is no ma8im!m (imit.

YThe apita( o# the ompan+ is diided into !nits o# sma(( denominations ,hih are a((ed shares.

YTho!"h the ompan+ is an arti#iia( person< it has to per#orm a(( stat!tor+ o*(i"ation (ike a person.

assoiation.

YA p!*(i ompan+ an a((ot shares in ase o# minim!m s!*sription is reeied.

YShares an *e iss!ed at par< premi!m< or een atdiso!nt.

YPre#erenes shareho(der en/o+ pre#erene ri"hts ,hereas e!it+ share ho(der en/o+ otin"

ri"hts.

Y0hen a shareho(der #ai(s to pa+ one or more insta((ments d!e on the shares he(d *+ him<

the ompan+ has the a!thorit+ to #or#eit s!h shares.

YA ompan+ an re$iss!e the #or#eited shares in aordane ,ith the proisions ontained in the

arti(es o# the ompan+.

1 marks

O.1 >ie the de#inition o# a ompan+ as ontained in the Companies At

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!nder

an+ o# the #ormer ompanies Ats.Z

O.2 Can #or#eited shares *e iss!ed at a diso!ntQ I# so to ,hat e8tentQAns

.

'e$iss!e o# #or#eited shares For#eited shares an *e reiss!ed at a diso!nt. o,eer<

the

diso!nt on the reiss!e o# s!h shares an not e8eed the amo!nt ear(ier #or#eited on

s!h shares.In other ,ords< amo!nt reeied on reeied on re$iss!e p(!s amo!nt a(read+ reeied

on #or#eited

shares m!st not *e (ess than the paid !p a(!e o# shares.

O.3As a diretor o# a ompan+ +o! had inited app(iations #or 2&!ide(ines re"ardin" )e*ent!re 'edemption 'esere.

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Ans. At per S:;I >!ide(ines< an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st *e

trans#erred to )'' *e#ore the redemption *e"ins. In other ,ords< *e#ore redemption<

at (east an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st stand to the redit o# )''

O.R Name the head !nder ,hih diso!nt on iss!e o# de*ent!res appears in the ;a(ane

Sheet o# ZCZ Compan+.

Ans. )iso!nt on iss!e o# de*ent!res ,i(( appear !nder the headin" Mise((aneo!s:8pendit!re.

O.1& Can a ompan+ iss!e share o# diso!ntQ 0hat onditions m!st a ompan+ omp(+

,ith *e#ore the iss!e o# s!h sharesQ

Ans. Setion R o# the ompanies At< 1R56 permits a ompan+ to iss!e shares at adiso!nt on(+ i# the #o((o,in" onditions are #!(#i((ed

1 The shares are o# a (ass a(read+ iss!ed.

2 At (east one +ear m!st hae e(apsed sine the ompan+ *eome entit(ed to

ommene *!siness.

3 The iss!e o# shares at diso!nt is a!thorises *+ a reo(!tion passed *+ the

ompan+ in its "enera( meetin" and santioned *+ the entra( >oernment.

The reso(!tion spei#ies the ma8im!m rate o# diso!nt at ,hih the shares are to *e iss!ed. The

rate m!st not e8eed 1& !n(ess santioned *+ the entra( >oernment.

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O.11 0rite the di##erene *et,een an e!it+ share and pre#erene share.

Ans.

Y;asis

Pre#erene shares :!it+ shares

Y)iid

endrate

Pre#erene share ho(ders

are paid diidend at a #i8edrate.

The rate o# diidend on e!it+ shares ar+#rom +ear to +ear dependin" !pon pro#its

Y'edemption The+ an *e redeemed The+ anBt *e redeemed.

YPa+ment o# These shares hae a Pa+ment o# diidend is made a#ter pa+in" to

diide

nd Pre#erentia( ri"ht to reeie pre#erene share ho(ders.diidend *e#ore an+

diidend is paid on e!it+

shares.

O.12

)i##erentiate *et,een 'esere apita( and

apita( resere.

Ans.Y;asis 'esere apita(

Capita(resere

YMean

in" and

'esere apita( re#ers to a Capita( resere is reated o!t o# apita(

reation

portion o# !na((ed apita( pro#its.

YSpei

a(

Is re!ired

no Speia( reso(!tion re!ired

reso(!tion

YTime,hen it

It an *e !sed on(+ in the It an *e !sed to ,rite o## apita( (osses

an *e

!sed

eent o# ompan+Bs

,indin" !p

or to iss!e *on!s shares.

Y)is(

os!re

It is not sho,n in

ompan+Bs

It is mentioned !nder the headin" reseres

in

*a(ane sheet

*a(ane sheet

and s!rp(!s on the (ia*i(ities side o#

*a(ane sheet

O.13 :mp(o+ees stok option p(an$ZA ri"ht to *!+ and not an o*(i"ationZ. Comment

Ans. :mp(o+ees stok option p(an is the ri"ht "ranted to the emp(o+ees o# the ompan+ to p!rhases the, shares (o,er than the market pries. It is ,orth mentionin" the the

options proide a ri"ht and not the o*(i"ation to *!r shares. It means that the

emp(o+ees !nder this p(an are not neessari(+ re!ired to p!rhase the shares. It istheir ,ish to *!+ or not neessari(+ re!ired to p!rhase the shares. It is their ,ish to

*!+ or not.

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O.14 0rite a short note on minim!m s!*sriptionQ

Ans Minim!m s!*sription is the amo!nt reeied #rom share ho(ders ,hih is s!##ieint #rom the

point o# ie, o# diretors #or #o((o,in" p!rposes

a For p!rhasin" neessar+ assets o# the ompan+.

* For pa+in" pre(iminar+ e8penses and ommission on sa(es o# shares.

b For pa+in" (oan i# arran"ed #or a*oe t,o p!rposes.

d For ,orkin" apita( and #or an+ other p!rposes ,hih the diretors a"ree !pon.

O.15 'ohit =td. P!rhased assets #rom 'ohan K o. #or 's. 3

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O.16 5& shares o# 's. 1& eah< iss!ed at as premi!m o# 's. 5 per share< ,ere #or#eited *+ sohan =td.

#or the nonpa+ment o# a((otment mone+ o# 's.R per share in(!din" premi!m. The #irst and

#ina( a(( on these shares at 's. c per share ,as not made. For#eited shares ,ere re$iss!ed 's.

12 per share< #!((+ paid !p. [o!rna(ise

Ans )ate Parti!(ars (.# de*it redit

amt amt

Share apita( a? dr. 35&

se!rities premi!m a? dr. 25&

To share #or#eited a? 15&

To share a((otment a? 45&

;ein" 5& shares #or#eited #or

non

pa+ment o# a((otment mone+ as

per

*oardBs reso(!tion dated

;ank A? dr. 6&&

To share apita(

a? 5&&

To se!rities Premi!m a? 1&&

;ein" 5& shares reiss!ed

's.12

per share< #!((+ paid

Shares For#eited A? )r. 15&

To apita( resere a? 15&

*ein" the *a(ane o# #or#eited

shares

trans#erred to apita( resere.

O1 A; =td. Inited app(iations #or iss!in" 1

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ans. [o!rna( :ntries in the *ooks o# A*=td.

)ate?S

r. Parti!(ars (.# )e*it Credit

Amt.'s Amt.'s.

1 ;ank A? )r. 4

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re$iss!e har"ed #rom share #or#eit!re

a?.

1& Share For#eit!re )r. 2

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[U'NA=

)ate Parti!(ars =.F. )r. 's. Cr.'s

Share Capita( A? 1&& 8 's. - ...)r. -&&

To For#eited Shares A? 1&& 8's. 4 4&&To )iso!nt on Iss!e o# Shares 1 && 8 'e. 1 1&&

To Share First Ca(# A? 1&& 8 's. 3 3&&

;ein" 1&& sares #or#eited #or non$pa+ment o# #irst a(( ...

;ank A? 6& 8 's. ...)r. 42&

)iso!nt on iss!e o# Shares A? 6& 8 'e. 1 ...)r. 6&

For#eited Shares A? ...)r. 6&

To Share Capita( A? 54&

;ein" 6& shares ,ere reiss!ed at 's. per share<

as 's. - paid !p

For#eited Shares A? ...)r. 1-&

To Capita( 'esere A? 1-&

;ein" the trans#er o# pro#it on reiss!e oB shoesB

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ACCOUN3IN6 FO' *4B4N3U'4S

L4A'NIN6 OB?4C3I@4S

I Understand the meanin" and #eat!res o# de*ent!res.

II )i##erentiate *et,een shares and de*ent!res.

III Understand di##erent (asses o# de*ent!res

I [o!rna( entries re"ardin" iss!e o# de*ent!res #or ash and #or onsideration other than

ash.

Ao!ntin" treatment o# de*ent!res iss!ed as o((atera( se!rit+

I Ao!ntin" treatment o# iss!e and redemption o# de*ent!res at par< diso!nt and at

premi!m.

II Understand the methods o# redemption o# de*ent!res.

III Ao!ntin" treatment o# redemption o# de*ent!res o!t o# apita( and pro#it.

IG Understand the redemption o# de*ent!res *+ p!rhase in the open market

G Understand redemption o# de*ent!res *+ onersion into shares and ne, de*ent!res.

1 0hat do +o! meant *+ )e*ent!resQ

)e*ent!res is an instr!ment o# de*t o,ned *+ a ompan+ as an akno,(ed"ement o#

de*t< s!h meas!rements are iss!ed !nder the sea( o# ompan+ and d!(+ si"ned *+ a!thori%ed

si"nator+.

2 0rite an+ #o!r t+pes o# de*ent!res

i 'edeema*(e de*ent!res

ii Perpet!a( )e*ent!res

iii Conerti*(e de*ent!res

i Se!red de*ent!res

3 0hat is de*ent!re Tr!st )eedQ

)e*ent!re tr!st deed is a do!ment reated *+ the ompan+ ,here*+ tr!stee is appointed

to protet the interest o# de*ent!re ho(ders *e#ore the+ are o##ered #or p!*(i

s!*sription.4 0hat is meant *+ onerti*(e de*ent!resQ

Conerti*(e de*ent!res are those< the ho(ders o# ,hih are "ien an option to e8han"in"the amo!nt o# their de*ent!res ,ith e!it+ shares or other se!rities a#ter a spei#ied

period.

5 0h+ is premi!m on the iss!e o# de*ent!res onsidered as a apita( pro#itQPremi!m on the iss!e o# de*ent!res is onsidered a apita( pro#it *ea!se it is not an

inome arisin" #rom the norma( o!rse o# *!siness operations.

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6 :8p(ain deep diso!nt ;ond

0hen de*ent!res are iss!ed ,itho!t interest rate and iss!e prie is there*+ diso!nted<the iss!e o# de*ent!re is said to hae *een made as deep diso!nt *ond.

)i##erentiate *et,een shareho(ders and de*ent!re ho(der<

Point o# )i##erene Share ho(der )e*ent!re ho(der

1 Stat!s There are the o,ners o# the

ompan+

The+ are the reditors o# the

ompan+

2 'et!rn The+ are paid )iidend The+ are paid interest

3 Se!rit+ Shares are not se!red )e*ent!res are ordinari(+

se!red

- 0hat is the nat!re o# interest on de*ent!resQ

Interest on de*ent!res is a har"e a"ainst pro#its.R State in *rie#< the S:;I >!ide(ines re"ardin" )e*ent!re 'edemption 'esere.Ans. At per S:;I >!ide(ines< an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st *e

trans#erred to )'' *e#ore the redemption *e"ins. In other ,ords< *e#ore redemption<

at (east an amo!nt e!a( to 5& o# the de*ent!re iss!e m!st stand to the redit o# )''

1& Name the head !nder ,hih diso!nt on iss!e o# de*ent!res appears in the ;a(ane

Sheet o# ZCZ Compan+.Ans. )iso!nt on iss!e o# de*ent!res ,i(( appear !nder the headin" Mise((aneo!s

:8pendit!re.

11 0hat are the e8eptions #or reatin" de*ent!re 'edemption 'esereQ

i An in#rastr!t!re ompan+< ii )e*ent!res are iss!ed #or (ess than 1- monthsmat!rit+ period iii i# de*ent!res iss!ed *+ priate p(aement.

12 0hat do +o! mean *+ de*ent!res iss!ed as o((atera( se!rit+QThe iss!e o# de*ent!res as a o((atera( se!rit+ means the iss!e o# de*ent!res as an

additiona( se!rit+ a"ainst the (oan in addition to prinipa( se!rit+ that ma+ *e o##ered.

13 Sho, the ao!ntin" treatment o# de*ent!res iss!ed as o((atera( se!rit+. )e*ent!res iss!ed as o((atera( se!rit+ an *e sho,n in the *ooks in t,o di##erent ,a+s

i The dis(os!re o# iss!e o# de*ent!re as o((atera( se!rit+ in the *a(ane sheet is

sho,n as *e(o,

=IA;I=ITI:S Amo!nt's. Assets Amo!nt's.

=oan

se!rit+ *+ 8 de*ent!res o#

's eah as o((atera(

se!rit+

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ii ;+ ,a+ o# [o!rna( entr+

)ate Parti!(ars )e*it Amt Credit Amt

;ank a? )r.

To ;ank =oan a?

;ein" (oan taken #rom ;ank

)e*ent!res S!spense a? )r.

To )e*ent!re a?

;ein" )e*ent!res iss!ed as o((atera(

se!rit+

)e*ent!re s!spense ao!nt ,i(( *e ,ritten o## a#ter the (oan is paid o##.

14 A =td iss!ed 5

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Pass /o!rna( entries and a(so sho, ho, the de*ent!res and *ank (oan ,i(( appear in the

*a(ane sheet.

;ank a? )r.

To ;ank (oan a?

;ein" (oan taken #rom *ank

3

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1 Pass [o!rna( :ntries to reord the Iss!e o# )e*ent!res

1 5&&& 15 de*ent!re o# 's.1&& eah iss!ed at )iso!nt o# 5 and redeema*(e at premi!m

at 5 a#ter 5 +ears.

2 1&&&& 15 de*ent!re o# 's.1&& eah iss!ed at a premi!m o# 1& and redeema*(e at para#ter 6 +ears.

Ans [o!rna( :ntries

1 ;ank a? )r.

(oss on iss!e o# )e* a? )r.

To15 de*ent!re a?

To premi!m on redemption o# de*ent!re

;ein" iss!e o# de*ent!re at diso!nt andredeema*(e at 5 premi!m

4

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at par redeema*(e at par

*

;ank a? )r.

To de*ent!re App(iation a?

;ein" )e*ent!re app(iation mone+

reeied

R5&

R5&

)e*ent!re App(iation a? )r.

)iso!nt on iss!e o# )e*ent!res )r.

To )e*ent!re a?

;ein" 1& de*ent!res o# 's. 1&& eah iss!ed

at a diso!nt o# 5 and repa+a*(e at par.

R5&

5&

1

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e

;ank a? )r.

To de*ent!re App(iation a?

;ein" )e*ent!re app(iation mone+

reeied

R5&

R5&

)e*ent!re App(iation a? )r.

=oss on iss!e o# de*ent!res a? )r.

To )e*ent!res a?

To Premi!m on redemption o#

de*ent!res a?

;ein" 1& de*ent!res o# 's. 1&& eah iss!ed

at diso!nt o# 5 *!t repa+a*(e at a

premi!m o# 5

R5&

1&&

1

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)ate Parti!(ars =.F )r. 's. Cr.'s.

P(ant and Mahiner+ a? )r.

;!i(din" a? )r.

Stok a? )r.

)e*tors a? )r.

To CreditorLs a?

To Xrishna Traders

To Capita( 'esere ;a(. Fi"

;ein" assets and (ia*i(ities taken oer

#rom the endor ompan+.

4

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23 A ompan+ a!thori%ed its 's.1< 1&

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[o!rna( :ntries

Ans

1 12 )e*ent!re a? )r.To diso!nt on iss!e o# de*ent!re a?

To de*ent!re ho(ders a?

;ein" the amo!nt d!e to de*ent!re ho(ders ononersion o# 2&&< 12 de*ent!re

2&

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on redemption.

)e*ent!re ho(ders a? )r.

To :!it+ share apita( a?

To Se!rities Premi!m a?

;ein" pa+ment made to de*ent!re ho(ders

1

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;ank a? )r.

To ;ank =oan a?

;ein" =oan *orro,ed

1&

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>ain on ane((ation o# o,n )e*ent!res a?

To apita( resere a?

;ein" >ain trans#erred to apita( resere

43

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UNI3 H9 FINANCIAL S3A3474N3 ANALYSIS:


A#ter st!d+in" the (esson< st!dents ,i(( *e a*(e to

Understand the meanin" o# #inania( statements and their o*/eties. Identi#+ the parties interested in the #inania( statements.

Understand the meanin" o# #inania( ana(+sis and its o*/eties

Understand the parties interested in #inania( Ana(+sis

Ana(+se the (imitation o# #inania( ana(+sis

Prepare omparatie Inome statement and Position Statement.

Prepare Common Si%e Statements

Understand the too(s o# Finania( Ana(+sis.

SALI4N3 POIN3S:-

• Ana(+sis o# Finania( statement is the s+stemati proess o# identi#+in" the #inania(

stren"th and ,eaknesses o# the #irm *+ esta*(ishin" the re(ationship *et,een the items

o# the ;a(ane Sheet and inome statement.

• The in#ormation aai(a*(e #rom the Ana(+sis< seres the interest o# di##erent setions

(ike Mana"ement< shareho(ders< ,orkers< reditors< "oernment< Potentia( Inestors<:onomist and 'esearhers and Stok :8han"e.

• Finania( ana(+sis an *e :8terna( Ana(+sis and Interna( Ana(+sis< ori%onta( ana(+sis

and ertia( Ana(+sis.

• :8terna( Ana(+sis ,hen ana(+sis is made on the *asis o# P!*(ished statements< reports

and in#ormation then this is kno,n as :8terna( ana(+sis.

• Interna( Ana(+sis This ana(+sis is *ased !pon the in#ormation aai(a*(e to the *!siness

on(+.

• ori%onta( Ana(+sis This ana(+sis is *ased on the #inania( statements o# di##erent +ears

o# the same *!siness !nit or #inania( statements o# a parti!(ar +ear o# di##erent

*!siness !nits.

• ertia( Ana(+sis Aordin" to this ana(+sis #inania( statement o# the same period or

di##erent items o# the same #inania( statements are ompared.

• Comparatie statements< Common Si%e statements< Trend Ana(+sis< 'atio Ana(+sis<

F!nd F(o, Statement< Cash #(o, statement are the Too(s o# #inania( statement

ana(+sis.

• Comparatie Statements it he(ps in asertainin" han"e in the items o# inome

statement and Position Statement o# di##erent +ears in terms o# #i"!res and perenta"e.

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"9 Co#aratie Incoe stateent:( 7ar1sGParti!(ar P.H

amo!nt

C.H.

amo!nt

Chan"e in

amo!nt

Chan"e in Perenta"e

>ross sa(es

=ess Sa(es ret!rn

G88

888

G88

G88

C.H P.H. C.H$P.H G 1&&

P.H.

Net Sa(es=ess C..>.S.

G88888

G88G88

do do

>ross Pro#it

=ess

Indiret :8penses? peratin" e8pense

G88

888

G88

888

do do

peratin" Pro#it

Add

Non$operatin" inome

=ess

non$operatin" e8penses

G88

G88

888

G88

G88

888

do do

Pro#it *e#ore ta8

=ess ta8

G88

888

G88

888

do do

Pro#it a#ter ta8 888 888 do do

$9 Co#aratie Balance S%eet: - ( 7ar1sG

Parti!(ar P.H. amo!nt C.H.

Amo!nt

Chan"e in

amo!nt

Chan"e in Perenta"e

1. Share Capita( 888 G88 C.H P.H C.H$P.H G 1&&

P.H.

2. 'esere and s!rp(!s G88 888 do do

3.Se!red (oan G88 888 do do

4. Unse!red =oan G88 G88 do do5. C!rrent (ia*i(ities K

Proision

G88 G88 do do

Tota( G88 G88 C.H P.H C.H$P.H G 1&&

P.H.

1. Fi8ed Assets G88 G88 do do

2. Inestments G88 G88 do do

3. C!rrent assets and=oans K Adanes

G88 G88 do do

4. Mise((aneo!s

:8pendit!re

G88 G88 do do

5. PK=)e*it *a(ane G88 G88 do doTota( 888 G88 C.H P.H C.H$P.H G 1&&

P.H.

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• Common Si%e Statements In ommon si%e statements eer+ item o# the statement is

presented in the #orm o# perenta"e o# its important headin" i.e Net Sa(es in ase o#

Common Si%e inome Statement and Tota( o# Assests and =ia*i(itiesin ase o# Common Si%e ;a(ane Sheets

"9 Coon Size Incoe stateent: ( 7ar1sG

Parti!(ar P.Hamt.

C.H.amt.

Perenta"e o# Net sa(esin P.H.

Perenta"e o# Net sa(es inC.H.

>ross sa(es

=ess Sa(es ret!rn

G88

888

G88

G88

P.H. Amo!nt G 1&&

P.H. net sa(es

C.H. Amo!nt G 1&&

C.H. net sa(es

Net Sa(es

=ess C..>.S.

G88

888

G88

G88

1&&

P.H. Amo!nt G 1&&P.H. net sa(es

1&&

C.H. Amo!nt G 1&&C.H. net sa(es

>ross Pro#it

=ess

Indiret :8pense?

peratin" e8pense

G88

888

G88

888

do do

peratin" Pro#itAdd

Non$operatin" inome

=ess

non$operatin" e8penses

G88

G88

888

G88

G88

888

do do

Pro#it *e#ore ta8

=ess ta8

G88

888

G88

888

do do

Pro#it a#ter ta8 888 888 do do

$9 Coon Size Balance S%eet:- ( 7ar1sGParti!(ar P.H.

amo!

nt

C.H.

Amo

!nt

o# tota( in P.H. o# tota( in C.H.

1. Share Capita( 888 G88 P.H amo!nt G 1&&

Tota( o# P.H.

C.H. amo!nt G 1&&

Tota( o# C.H.

2. 'esere and s!rp(!s G88 888 do do

3.Se!red (oan G88 888 do do

4. Unse!red =oan G88 G88 do do

5. C!rrent (ia*i(ities K

Proision

G88 G88 do do

Tota( G88 G88 1&& 1&&

1. Fi8ed Assets G88 G88 P.H amo!nt G 1&&

Tota( o# P.H.

C.H. amo!nt G 1&&

Tota( o# C.H.

2. Inestments G88 G88 do do

3. C!rrent assets and=oans K Adanes

G88 G88 do do

4. Mise((aneo!s:8pendit!re

G88 G88 do do

5. PK=)e*it *a(ane G88 G88 do do

Tota( 888 G88 1&& 1&&

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>U4S3IONS

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-. Name t,o too(s o# Finania( Ana(+sisQ 1

Ans. i Comparatie Finania( Statements.ii 'atio Ana(+sis et.

R. 0hat is ori%onta( Ana(+sisQ 1

Ans The ana(+sis ,hih is made to reie, and ompare the #inania( statements o# t,o or more then t,o Hears is a((ed ori%onta( Ana(+sis.

1&. >ie the e8amp(e o# ori%onta( Ana(+sis. 1 Ans. Comparatie Finania( Statement.

11. 0hat is ertia( Ana(+sisQ 1

Ans11 The Ana(+sis ,hih is made to reie, the #inania( statements o# one parti!(ar

+ear on(+ is a((ed ertia( Ana(+sis.

12. >ie the e8amp(e o# ertia( Ana(+sisQ 1

Ans. 'atio Ana(+sis.

OU:STINS &3 MA'XS

1. >ie the #ormat o# the ;a(ane sheet o# a ompan+ main headin"s on(+ as per there!irement o# Shed!(e I o# the ompanies At.1R56.


1. Share apita( 1.Fi8ed Assets

2.'esere K s!rp(!s 2.Inestment 3.Se!red =oans 3. C!rrent Assets<

4.Unse!red =oans =oan and Adanes

a C!rrent Assets

* =oans KAdane

5.C!rrent =ia*i(ities K Proision 4. Mise((aneo!s :8pendit!re

a C!rrent =ia*i(ities 5. P K= A? )r. ;a(ane* Proision

]

2. >ie the headin" !nder ,hih the #o((o,in" items ,i(( *e sho,n in

a ompan+Ls ;a(ane sheeti >ood,i((.

ii Pre(iminar+ :8penses

iii =oose Too(si Capita( 'edemption 'esae.

=ie Stok.

i Patent

Ans i Fi8ed Assets.

ii Mise((aneo!s :8pendit!res

iiiC!rrent Assets =oans K Adane !nder C!rrent Assets. i'esere and S!rp(!s.

Fi8ed Assets.

iFi8ed Assets

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3. The #o((o,in" *a(ane hae *een #rom the *ook o# Sahara =td. Share apita(

's.1&

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OU:STINS &4 MA'XS

1. Prepare Comparatie and Common Si%e inome statement #rom the #o((o,in"

in#ormation #or the +earLs ended marh 31< 2&&- and 2&&R.

Parti!(ars 2&&-'s. 2&&R's.

1.Net Sa(es2.Cost o# >oods So(d

3.Indiret :8penses

4.Inome Ta8 rate

-

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'ATI AN) ANA=HSIS

=earnin" o!tomes

• :8p(ain the meanin" o# ao!ntin" ratios.

• Understand the o*/eties and (imitation o# ao!ntin" ratios.

• C(assi#+ the ratios as pro#ita*i(it+< atiit+ and so(en+.• Comp!te ario!s pro#ita*i(it+< atiit+ and so(en+ ratios.

• :8press +o!r ie,s a*o!t the operationa( e##iien+ and #inania( so!ndness o# the

ompan+.

• Comment !pon the per#ormane o# the enterprise.

• 'eommend #inania( meas!res to *e adopted to stren"then #inania( str!t!re o# the

ompan+

IMP'TANT F'MU=A: F 'ATI ANA=HSIS

Pro#ita*i(it+ ratio1. >ross Pro#it 'atio >ross pro#it?Net sa(esY1&& "ross pro#itNet sa(es$ ost o#

"oods so(dJ2. a Net pro#it ratio Net Pro#it?Net sa(esY1&& Net Pro#it>ross pro#itVoperatin"

and non operatin" inome$operatin" and non operatin" e8penses.J*peratin" Net pro#it ratio peratin" Net pro#it?Net sa(esY1&

3 peratin" 'atio Cost o# "oods so(d V peratin" e8penses 8 1&&

Net Sa(es

4 'et!rn on inestment 'I Net Pro#it *e#ore interest

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0orkin" Capita( C!rrent assets$ !rrent =ia*i(ities

3 )e*tors t!rnoer ratio Net redit sa(es

Aera"e )e*tors

Aera"e )e*tors)e*torsin the *e"innin"V)e*tors at the end

2

'eeia*(es )e*torsV;i((s reeia*(e

4 Pa+a*(e t!rnoer ratio Net redit p!rhases

Ao!nt Pa+a*(e

5 Fi8ed Assets T!rnoer ratio Sa(es or ost o# "oods so(d

Net #i8ed assets

6 C!rrent assets T!rnoer 'atioNet sa(es or ost o# "oods so(d

!rrent

Assets

=IOUI)ITH 'ATIS

1 C!rrent ratio !rrent Assets

!rrent (ia*i(ities2 =i!id or !ik or aid test ratio (i!id assets

!rrent (ia*i(ities

So(en+ ratios

1 )e*t to e!it+ ratio =on" term (oans

Shareho(derBs #!nds

2 Tota( assets to de*t ratio Tota( assets

=on" term de*ts

3 Proprietar+ ratio Proprietors #!nd or shareho(ders #!nd

Tota( Assets

4 C!rrent asset t!rnoer ratio Net sa(es?ost o# "oods so(d !rrent assets

5 Fi8ed assets t!rnoer ratio Net sa(es

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20 (1).doc

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