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CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : The Central Board of Secondary Education (abbreviated as CBSE) is a Board of Education for public and private schools, under the Union Government of India. Central Board of Secondary Education (CBSE) has asked all schools affiliated to follow only NCERT curriculum.  The Central Board of Secondary Education (CBSE) is a Board of Education for public and private schools, under the Union Government of India. CBSE affiliates all Kendriya Vidyalayas, all Jawahar Navodaya Vidyalayas, private schools and most of the schools approved by central government of India. CBSE conducts the final examinations for Class 10 and Class 12 every year

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : Here our team members Provides CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details. CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details Included 2 units. These CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details Two units included some topics those are under given following  :

Part A: Accounting for Partnership Firms and Companies

Unit 1: Accounting for Partnership Firms

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.
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 reassessment 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, executor‟s account and preparation of balance sheet.
Dissolution of a 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)).

Unit-2 Accounting for Companies

Accounting for Share Capital
Share and share capital: nature and types.
Accounting for share capital: issue and allotment of equity shares, private placement of shares, Employee Stock Option Plan (ESOP). 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.
Accounting treatment of forfeiture and re-issue of shares.
Disclosure of share capital in company‟s Balance Sheet.
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.
Redemption of debentures: Lump sum, draw of lots and purchase in the open market (excluding ex-interest and cum-interest). Creation of
Debenture Redemption Reserve.
Note: Related sections of the Indian Companies Act, 2013 will apply.

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies :  Accountancy or accounting is the job of sharing financial information about a business to managers and shareholders (people who have invested in the business). Accounting is often called the “language of business”. Accountants are people who do accounting, and also carry out the auditing or checking of a company’s books and records. In Britain, this auditing is often carried out by a qualified person called a “chartered accountant”.

When accountants do accounting work, they write in the books of account (ledgers) that belong to a company. Every time money is spent or earned, it is written in the ledger. The information in the ledger is used to prepare the company accounts monthly, quarterly (every three months) and annually (every year). These annual accounts show what money the company has taken in over time and what it has spent money on. It also shows if the company made a profit in the year (if it made more money than it spent), who owes the company money, who the company owes money to, and any big expensive items the company has bought which they expect to use for many years. Lenders, managers, investors, tax authorities (the people who collect taxes for the government) and other decision-makers look at these annual accounts. Managers and investors look at the ledger and make decisions about how to spend money in the future. Lenders like banks look at the accounts before they lend money to the company. Tax authorities look at them to check that the company is paying the correct amount of taxes.

 CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Partnership Firms

The proprietorship form of ownership suffers from certain limitations such as limited resources, limited skill and unlimited liability. Expansion in business requires more capital and managerial skills and also involves more risk. A proprietor finds him unable to fulfill these requirements. This call for more persons come together, with different edges and start business. For example, a person who lacks managerial skills but may have capital.

Another person who is a good manager but may not have capital. When these persons come together, pool their capital and skills and organised a business, it is called partnership. Partnership grows essentially because of the limitations or disadvantages of proprietorship.

A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract.

Partnerships recognized by a government body may enjoy special benefits from taxation policy. Among developed countries, for example, business partnerships are often favored over corporations in taxation policy, since dividend taxes only occur on profit before they are distributed to the partners. However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.

Download here CBSE Class 12 Commerce Accounting For Partnership Firm in pdf format

few definitions on partnership:

The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all”. The Uniform Partnership Act of the USA defined a partnership “as an association of two or more persons to carry on as co-owners a business for profit”.

According to J. L. Hanson, “a partnership is a form of business organisation in which two or more persons up to a maximum of twenty join together to undertake some form of business activity”. Now, we can define partnership as an association of two or more persons who have agreed to share the profits of a business which they run together. This business may be carried on by all or anyone of them acting for all.

The persons who own the partnership business are individually called ‘partners’ and collectively they are called as ‘firm’ or ‘partnership firm’. The name under which partnership business is carried on is called ‘Firm Name’. In a way, the firm is nothing but an abbreviation for partners.

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Partnership Firms Reconstitution And Dissolution

A partnership firm is not a legal entity. It has no perpetual existence as in case of a company incorporated under Companies Act. However, the Act gives the partnership limited rights of continuity of business despite change of partners. In absence of specific provision in partnership deed, death or insolvency of a partner means dissolution of the firm. However, partnership can provide that the firm will not dissolve in such case. A partnership firm is not a legal entity.

Download here CBSE Class 12 Commerce Accounting For Partnership Firms Reconstitution And Dissolution in pdf format.

Any change in agreement of partnerships called reconstitution of partnership firm. In following circumstances a partnership firm may be reconstituted:

1. Change in Profit Sharing Ratio

2. Admission of a partner

3. Retirement/Death of a partner

Change in profit sharing ratio among the existing partners

Meaning:

When all the partners of a firm agree to change their profit sharing ratio, the ratio may be changed. In this case one profit is purchasing a share of partner from another one. In other words, share of one partner may increase and share of another partner may decrease.

Accounting treatment of goodwill: In case of change in profit sharing ratio, the gaining partner must compensate the sacrificing partner by paying the proportionate amount of goodwill.

Illustration 1 Amit and Kajal were partners in a firm sharing profits in the ratio of 3:2. With effect from January 1,2012 they agreed to share profits equally. For this purpose the goodwill of the firm was valued at ‘60,000. Pass the necessary journal entry. Accounting treatment of Reserves and Accumulated Profits: Case (i) When reserves and accumulated profits/losses are to be distributed At the time of change in profit sharing ratio, if there are some reserves or accumulated profits/losses existing in the books of the firm, these should be distributed to partners in their old profit sharing ratio.

Illustration 2 : Vaishali, Vinod and Anjali are partners sharing profits in the ratio of 4:3:2. From April 1,2011, they decided to share the profits equally. On that date their books showed a credit balance of ‘3,60,000 in the profit and loss account and a balance of ‘ 90,000 in the General reserve. Record the journal entry for distribution of these profits and reserves.

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Partnership Firms Change In The Profit Sharing Ratio

If the existing partners decide to make a change in the existing profit sharing ratio, the future profit sharing will be different from the existing ratio. By making changes in the profit sharing ratio, some partner will lose his share of the profit in future and some partner will gain. The partner, who gains in the new ratio, will have to compensate the losing partner.

Download here CBSE Class 12 Commerce Accounting For Partnership Firms Change In The Profit Sharing Ratio in pdf format.

In other words, one partner makes a purchase of a share of profits from one partner, who was enjoying it previously. For instance, A and B are partners sharing profits in the ratio of 2: 1. They mutually agreed to make changes in the profit sharing ratio as 1: 1, and then A is forgoing or selling to B 1 /6th share of profits. Because the mutual profit sharing ratio changes, now A gets 3/6 (2/3 – 1/6) and B gets 3/6 (1/3 + 1/6). That is, 1/6th share of profit is gained by B and to that extent A is losing. If the profit is Rs 60,000, according to old profit sharing ratio, A gets Rs 40,000 and B gets Rs 20,000.

After the change of profit sharing ratio, A and B get equal share i.e. each gets Rs 30,000. Thus, now A loses Rs 10,000, which is a gain to B. Therefore, B will pay to A an amount equal to 1/6th of the total value of goodwill. If the total value of goodwill is Rs 18,000, B must pay to A 1/6th of Rs 18,000 i.e. Rs 3,000.

Illustration:

A and B are trading in partnership sharing profits and losses in the ratio of 3: 1. As from 1st January 2005, it was decided to change the profit sharing ratio to 3: 2. Goodwill will be valued at two years’ purchase of the average of three years’ profits. The profits for 2002 Rs. 15,000; 2003 Rs. 20,000 and 2004 Rs. 25,000. Pass the necessary journal entry to give effect to the arrangement.

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CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Partnership Firms Admission Of A Partner

REVALUATION OF ASSETS AND LIABILITIES The actual value of the assets and liabilities may be different from their book value as shown by the balance sheet. So Revaluation account is prepared at the time of admission of a new partner to record any increase/decrease in the value of assets and liabilities.The value of some assets may increase with time and some may show a decrease. Similarly some liabilities may also show a increase/decrease in the value.

Download here CBSE Class 12 Commerce Accounting For Partnership Firms Admission Of A Partner in pdf format.

Admission of a Partner: Goodwill, Revaluation and Other Calculations!

Treatment of Goodwill:

CBSE Class 12 Commerce Accounting For Partnership Firms Admission Of A Partner :  Depending upon the share of profits to be given to the new partner, either a sum of money will be directly paid by him to the old partners (through the firm or privately) or after recording new partner’s capital, new partner’s capital account will be debited with his share of goodwill, the credit being given to the old partners in the ratio of their sacrifice of future profits. The latter is an indirect method of payment for goodwill by the new partner. The payment is justified became the new partner will take a share of profits which comes out of the shares of other partners. The old partners must be compensated for such a loss.

The various possibilities as regards goodwill are:

(i) The new partner brings goodwill in cash which is left in the business.

(ii) The new partner brings goodwill in cash but the cash is withdrawn by the old partners.

(iii) The amount of goodwill is paid by the new partner to the old partners privately.

(iv) The new partner does not bring in cash for goodwill as such; but an adjustment entry is passed by which the new partner’s capital account is debited with his share of goodwill and the amount is credited to old partners’ capital accounts in the ratio of sacrifice. This entry reduces the capital of the new partner by the amount of his share of goodwill and results in payment for goodwill by the new partner to the old partners.

Before considering the entries to be made in the above cases, one must decide regarding the ratio in which goodwill is to be credited to the old partners. Traditionally, goodwill was credited to the old partners in the old profit-sharing ratio and, if the amount was to be written off as in case (v) above, it was written off to all the partners in the new profit-sharing ratio.

There would be no doubt that this should be the case when, on the admission of a new person as partner, the ratio as among the old partners does not change. But what if on the admission of a new partner, the profit-sharing ratio of old partners as among themselves is also changed.

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Partnership Firms Retirement And Death Of A Partner

The retirement of a partner extinguishes his interest in the Partnership firm and this leads to dissolution of the firm or reconstitution of the Partnership. A partner, who goes out of a firm, is called retiring partner or outgoing partner. Causes for the retirement may be that a retiring partner may be too old or he may have better opportunity in a different line or he may dislike the co-partners’ attitude or any other reasons.

Download here CBSE Class 12 Commerce Accounting For Partnership Firms Retirement And Death Of A Partner in pdf format.

The following are the ways in which a partner can retire:

1. With the consent of all the other partners,

2. In accordance with an express agreement among the partners,

3. By giving a written notice of intention to retire to all the other partners where partnership is at will.

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures

According to S.2 (12) of the companies Act, 1956, debentures include “debenture stock, bonds and any other securities of a company”. The basic difference between debentures and bonds is that the debentures are usually secured. Unlike debentures bonds can be floated with a fixed interest or floating interest rate. They can also be issued without interest as discount bonds. Discount bonds are issued at a discount on the face value. The investor gets full amount on redemption of debenture. From the point of view of investor, bonds are instruments carrying higher risks and higher rates of returns compared to debentures.

Download here CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

 Types of debentures

i)          Redeemable debentures

ii)         Perpetual Debentures

iii)        Convertible debentures

iv)        Secured debentures

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Partnership Firms Dissolution Of A Partnership Firm

Dissolution of a partnership firm merely involves a change in the relation of partners; whereas the dissolution of firm amounts to a complete closure of the business. When any of the partners dies, retires or become insolvent but if the remaining partners still agree to continue the business of the partnership firm, then it is dissolution of partnership not the dissolution of firm. Dissolution of partnership changes the mutual relations of the partners. But in case of dissolution of firm, all the relations and the business of the firm comes to an end. On dissolution of the firm, the business of the firm ceases to exist since its affairs are would up by selling the assets and by paying the liabilities and discharging the claims of the partners. The dissolution of partnership among all partners of a firm is called dissolution of the firm.

Download here CBSE Class 12 Commerce Accounting For Partnership Firms Dissolution Of A Partnership Firm Notes

Dissolution of a Partnership firm may be effected in the following ways:

Dissolution without the intervention of the Court.

Dissolution by Court.

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies : 

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures

According to S.2 (12) of the companies Act, 1956, debentures include “debenture stock, bonds and any other securities of a company”. The basic difference between debentures and bonds is that the debentures are usually secured. Unlike debentures bonds can be floated with a fixed interest or floating interest rate. They can also be issued without interest as discount bonds. Discount bonds are issued at a discount on the face value. The investor gets full amount on redemption of debenture. From the point of view of investor, bonds are instruments carrying higher risks and higher rates of returns compared to debentures.

Download here CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

 Types of debentures

i)          Redeemable debentures

ii)         Perpetual Debentures

iii)        Convertible debentures

iv)        Secured debentures

CBSE Class 12 Commerce Accountancy Part A Accounting For Partnership Firms And Companies Complete Details

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