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class 12 commerce accountancy study material

class 12 commerce accountancy study material:-Accounting as an information system aids in providing financial information. In class XII, Accounting for Not for Profit Organisations, Partnership Firms and companies are taught as a compulsory part. Students will also be given an opportunity to understand about Computerized Accounting System, as an optional course to Analysis of Financial Statements.

class 12 commerce accountancy study material

class 12 commerce accountancy study material

class 12 commerce accountancy study material

class 12 commerce accountancy study material:-Accountancy : Company Accounts and Analysis of Financial Statements

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class 12 commerce accountancy study material:-Company Accounts and Analysis of Financial Statements Chapter 1 – Accounting for Share Capital

public company:- A public company is defined as a company that offers a part of its ownership in the form of shares, debentures, bonds, securities to the general public through stock market. There must be at least seven members to form a public company. As per the section 3 (1) (iv) of Companies Act 1956, public company means a company which:

a) is not a private company,

b) has a minimum paid up capital of Rs 5,00,000 or such higher paid up capital, as may be prescribed,

c) is a private company, being a subsidiary of a company which is not a private company.

A public company should not be mistakenly understood as a publicly-owned company, as the latter is exclusively owned and controlled by the government. A public company issues its share to general public without any restriction on maximum number of persons. A public company can be segmented into two types:

1. Listed Company– A Company whose shares are listed and traded in the stock exchange like, Tata Motors, Reliance, etc.

2. Unlisted Company– A Company whose shares are not listed in the stock exchange and thereby these shares cannot be traded in the stock exchange.

What is meant by the word ‘Company’? Describe its characteristics.

The Section 3 (1) (i) of the Company Act of 1956 defines an organisation as a company that is formed and registered under the Act or any existing company that is formed and registered under any earlier company laws. In general, a company is an artificial person, created by law that has a separate legal entity, perpetual succession, common seal and has limited liability. It is a voluntary association of person who together contributes in the capital of the company to do business. Generally, the capital of a company is divided into small parts known as shares, the ownership of which is transferable subject to certain terms and conditions. There are two types of company, public company and private company.

Characteristics of Company

1. Association of Person: A company is formed voluntarily by a group of persons to perform a common business. Minimum number of person should be two for formation of a private company and seven for a public company.

2. Artificial Person: Company is an artificial and juristic person that is created by law.

3. Separate Legal Entity: A company has a separate legal entity from its members (shareholders) and Directors. It can open a bank account, sign a contract and can own a property in its own name.

4. Limited Liability: The liability of the members of a company is limited up to the nominal value or the face value of the shares. Unlike a partnership firm, on insolvency of a company, the members and the shareholders are not liable to pay the amount due to the creditors of the company. In fact, the members and the shareholders are only liable to pay the unpaid amount of the shares held by them. For example, if the value of share is Rs 10 and Rs 6 is paid up, then the member is liable to pay only Rs 4.

5. Perpetual Existence: The existence of company is not affected by the death, retirement, and insolvency of its members. That is, the life of a company remains unaffected by the life and the tenure of its members in the company. The life of a company is infinite until it is properly wound up as per the Company Act.

6. Common Seal: The Company is an artificial person and has no physical existence; hence it cannot put its signature. Thus, the Common Seal acts as an official signature of a company that validates the official documents.

7. Transferability of Shares: The shares of public limited company is easily and freely transferable without any consent from other members. But the share of ownership of a private limited company is not transferable without the consent of the other members.

class 12 commerce accountancy study material:-Company Accounts and Analysis of Financial Statements Chapter 2 – Issue and Redemption of Debentures

Debenture :-The word Debenture is derived from a Latin word ‘debere‘ which means to borrow. A debenture is issued in the form of a certificate under the seal of a company and containing a contract for the repayment of the principal sum after a fixed period of time and payment of interest at regular intervals, generally half yearly. Debentures are issued by a company for acquiring long-term borrowings.

types of debentures

The debentures can be classified on the following basis.

  • On the basis of Security
  • Secured Debentures– Mortgaged Debentures are those debentures that are secured against asset/s of a company. These are also known as secured debentures. In case the company fails to pay back the principal amount of debenture or fails to meet its interest obligations on the due date, then the debenture holders have the right to sell the mortgaged asset in order to realise their amount due to the company.
  • Unsecured Debentures– These debentures are treated as unsecured creditors. They do not have any security. These are uncommon now days.
  • On the basis of Tenure
  • Redeemable Debenture– These debentures are payable after the expiry of a specific period. These debentures can be redeemed at par or premium either in lump sum or in installment. Generally all debentures are redeemable.
  • Irredeemable Debenture– Irredeemable Debentures are those debentures that cannot be repayable or redeemable by a company during its life time. These are repayable only at the time of winding up of the company. These are also known as Perpetual Debentures that means debentures having indefinite life. In India, now days, no company can issue irredeemable debentures.
  • On the basis of Mode of Redemption
  • Convertible Debentures– Convertible Debentures are those debentures that can be converted into equity shares after a specified period of time. These are of following two types:
  • Fully Convertible Debentures: When the whole amount of a debenture is  convertible into equity shares of equivalent amount, then these debentures are called Fully Convertible Debentures. There is no need to maintain Debenture Redemption Reserves for such debentures.
  1. Partly Convertible Debentures: When only a part of the amount of a debenture is  convertible into equity shares, then these debentures are called Partly Convertible Debentures. In this regards, the Debenture Redemption Reserve is maintained only for the non-convertible part of the debenture.
  1. Non-Convertible Debenture– These debentures cannot be converted into shares. Generally debentures are non convertible.
  • On the basis of Coupon Rate
  • Zero Coupon Rate– These debentures do not contain a specific rate of interest and can be issued at discount. The excess of the face value of the debenture over its issue price is considered as interest amount.
  • Specific Rate– These debentures carry a specific rate of interest which may be fixed or floating.
  • On the basis of Registration
  • Registered Debenture– While issuing such debentures, the company maintains a record regarding name, address and number of holding of debentures in the Register of Debenture Holders of the company.
  • Bearer Debentures– When a company does not maintain any record of the debenture holders and the debenture is transferable mere by delivery, then the type of the debenture held by the holders is termed as Bearer Debenture. Interests on such debentures are paid to the persons who produce the interest coupons that are attached with these debentures in a specified bank.

class 12 commerce accountancy study material:-Company Accounts and Analysis of Financial Statements Chapter 3 – Financial Statements of a Company

List the techniques of Financial Statement Analysis.

The following are the commonly used techniques of Financial Statement analysis :

  1. Comparative Financial Statements
  2.   Common Size Financial Statements
  3.   Trend Analysis
  4.   Ratio Analysis
  5.   Cash Flow Statement
  6.   Fund Flow Statement

The above listed techniques can be classified on the following basis:

  1. On the basis of Comparison

    • Inter-firm Comparison

      • Comparative Statement (Balance Sheet, Profit and Loss Account)
      • Common size Statement (of the same period)
      • Ratio of two or more Competitive Firms (of the same period)
      • Cash Flow Statement of two or more Competitive firms
      • Polygon, Bar Diagram
    • Intra-firm Comparison

      • Comparative Statement (Balance Sheet, Profit and Loss Account)
      • Common size Statement (of the same period)
      • Ratio of two or more Competitive Firms (of the same period)
      • Cash Flow Statement of two or more Competitive firms
      • Polygon, Bar Diagram
  • Horizontal Comparison
  • Vertical Comparison
  • On the basis of Time

    • Inter-period Comparison

      • Comparative statement (two or more periods)
      • Cash Flow statement (two or more period) etc.
    • Cross Sectional (Intra-period) Comparison

      • Common size statement
      • Ratio Analysis
  • Horizontal Analysis

    • Time series
    • Bar Diagram
    • Polygon
    • Comparative statement
    • Ratio Analysis
  • Vertical Analysis

    • Common size statement
    • Pie Diagram

class 12 commerce accountancy study material

Recommended post :- class 12 commerce accountancy study material

class 12 commerce accountancy study material

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Important Note – Preparing for XI & XII Commerce?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below – 
For any questions Request A Call Back  
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