CBSE Class 12 Accountancy Notes

Accountancy is a practice through which business transactions are recorded, classified, and reported for the proper and successful running of an organization. GeeksforGeeks Class 12 Accountancy Notes have been designed according to the CBSE Syllabus for Class 12. These revision notes consist of detailed Chapterwise important topics and concepts. Here, the learners can get easy access to the Chapterwise notes from the below-mentioned quick links. The notes contain 12 chapters covering every important topic like Accounting for Non-for-Profit Organisation, Partnership, Admission of a Partner, Retirement of a Partner, Issue of Shares, Issue of Debentures, Financial Statements of a Company, Cash Flow Statement, Computerised Accounting of a Company and so on.

PART – A (ACCOUNTING FOR PARTNERSHIP FIRMS AND COMPANIES)

Chapter 1: Accounting for Non-for-Profit Organization

Non-for-Profit Organisation is an organisation that works with the motive to render services to society and not profit-making. Chapter 1 Accounting for Non-for-Profit Organisation of Class 12th Accountancy describes the accounting treatment of different items in this organisation, its financial statements and other aspects. Some of the topics included in this chapter are Balance Sheet in NPO, Introduction to NPO, Income and Expenditure Account of NPO, etc. The notes of this chapter will help build a strong base of the Non-for-Profit Organisation.

• Accounting for Non-for-Profit Organization: Introduction
• Financial Statement of Not-for-Profit Organization: Receipt and Payment Account
• Not-for-Profit Organisations- Features and Financial Statements
• Financial Statement of Not-for-Profit Organization: Income and Expenditure
• Difference between Receipt and Payment Account And Income and Expenditure Account
• Financial Statement of Not-for-Profit Organization: Balance Sheet
• Accounting Treatment of Subscriptions and Expenses
• Accounting Treatment of Consumable Items: Stationery and Sports Material
• Accounting Treatment of: Admission or Entrance Fees, Donation and Legacies, Grants from Government, Sale of Fixed Assets, Life Membership Fees
• Fund based Accounting
• Receipt and Payment Account for Not for Profit Organisation
• Income and Expenditure Account: Accounting Treatment
• Balance Sheet for Not for Profit Organisation

Chapter 2: Accounting for Partnership: Basic Concepts

The concept of partnership is a solution to the problems of the sole proprietorship, such as a single person bearing the risk, investing, and managing the capital alone. The second chapter of Class 12th Accountancy Part-A, Accounting for Partnership:Basic Concepts consists of everything required to know about a partnership firm. It also includes the accounting treatment of different items and capital/current accounts of the partners. Some of the topics included in this chapter are Partnership Deed, Profit and Loss Appropriation Account, Past Adjustments, Guarantee of Minimum Profit to a Partner, and so on.

• Introduction to Accounting for Partnership
• Partnership Deed: Meaning, Elements, Provisions of the Indian Partnership Act 1932
• Accounting Treatment of Interest on Partner’s Capital
• Accounting Treatment of Interest on Drawings
• Accounting Treatment of Partner’s Loan, Rent Paid to a Partner, Commission Payable to a Partner, Manager’s Commission on Net Profit
• Introduction to Profit and Loss Appropriation Account
• Capital Accounts of the Partner: Fixed Capital Method
• Capital Accounts of the Partner: Fluctuating Capital Method
• Difference between Fixed Capital Account and Fluctuating Capital Account
• Past Adjustments: Introduction 
• Guarantee of Minimum Profit to a Partner

Chapter 3: Reconstitution of a Partnership Firm: Change in Profit Sharing Ratio

Any change in the agreement of a partnership, ends the partnership but the firm remains in existence. The existing agreement between partners ends and a new agreement comes into force which changes the relationship of partners. Such change is known as Reconstitution of Partnership. The third chapter of Class 12th Accountancy includes the change in partnership and relationship between partners when the partner change their profit sharing ratio. The topics included in this chapter are Methods of Calculating Goodwill, Accounting treatment of different items such as WCR, IFF, Partner’s Capital Account, etc.

• Reconstitution of a Partnership Firm: Meaning, Reasons, Change in Profit Sharing Ratio amongst the Existing Partner and Sacrificing Partner Ratio and Gaining Partner Ratio
• Goodwill: Meaning, Factors, and Need for Valuation
• Methods of Valuation of Goodwill
• Average Profit Method of Calculating Goodwill
• Super Profit Method of Calculating Goodwill
• Capitalisation Method of Calculating Goodwill
• Accounting Treatment of Accumulated Profits and Reserves: Change in Profit Sharing Ratio
• Accounting Treatment of Workmen Compensation Reserve: Change in Profit Sharing Ratio
• Accounting Treatment of Investment Fluctuation Fund: Change in Profit Sharing Ratio
• Accounting Treatment of Revaluation of Assets and Liabilities: Change in Profit Sharing Ratio
• Accounting Treatment of Partner’s Capital Account: Change in Profit Sharing Ratio (Fixed Capital)
• Accounting Treatment of Partner’s Capital Account: Change in Profit Sharing Ratio (Fluctuating Capital)
• Adjustment in Existing Partner’s Capital Account: Change in Profit Sharing Ratio

Chapter 4: Reconstitution of a Partnership Firm: Admission of a Partner

Any change in the agreement of a partnership, ends the partnership but the firm remains in existence. The existing agreement between partners ends and a new agreement comes into force which changes the relationship of partners. Such change is known as Reconstitution of Partnership. The next chapter of Class 12th Accountancy includes the change in partnership and relationship between partners when a new partner joins the partnership. Some of the topics included in the notes of this chapter are Computation of New Profit Sharing Ratio, Hidden Goodwill, Adjustment of Partner’s Capital Account, Accounting Treatment of different items like Revaluation of Assets and Liabilities, etc.

• Reconstitution of a Partnership Firm: Admission of a Partner 
• Computation of New Profit Sharing Ratio: Admission of a Partner
• Computation of Sacrificing Ratio: Admission of a Partner
• Accounting Treatment of Goodwill: Admission of a Partner
• Hidden Goodwill: Admission of a Partner
• Accounting Treatment of Revaluation of Assets and Liabilities: Admission of a Partner  
• Accounting Treatment of Accumulated Profits and Reserves: Admission of a Partner  
• Accounting Treatment of Workmen Compensation Reserve: Admission of a Partner
• Accounting Treatment of Investment Fluctuation Fund: Admission of a Partner
• Accounting Treatment of Partner’s Capital Account: Admission of a Partner (Fixed Capital)
• Accounting Treatment of Partner’s Capital Account: Admission of a Partner (Fluctuating Capital)
• Preparation of Revaluation Account, Capital Account and Balance Sheet 
• Adjustment of Partner’s Capital Account: Admission of a Partner

Chapter 5: Reconstitution of a Partnership Firm: Retirement or Death of a Partner

Any change in the agreement of a partnership, ends the partnership but the firm remains in existence. The existing agreement between partners ends and a new agreement comes into force which changes the relationship of partners. Such change is known as Reconstitution of Partnership. The next chapter of Class 12th Accountancy includes the change in partnership and relationship between partners when a partner retires or dies. The important topics of this chapter includes Sacrificing and Gaining Ratio of the partners, Settlement Amount due to a Retiring Partner, Calculation of Share of Profit up to the Date of Death, Accounting Treatment of different items in case of Retirement or Death of a Partner, etc.

• Retirement of a Partner in case of Reconstitution of a Partnership Firm
• Computation of New Profit Sharing Ratio: Retirement of a Partner
• Computation of Gaining Ratio: Retirement of a Partner
• Difference between Sacrificing Ratio and Gaining Ratio
• Accounting Treatment of Goodwill: Retirement of a Partner
• Hidden Goodwill: Retirement of a Partner
• Accounting Treatment of Revaluation of Assets and Liabilities: Retirement of a Partner 
• Accounting Treatment of Accumulated Profits and Reserves: Retirement of a Partner 
• Accounting Treatment of Workmen Compensation Reserve: Retirement of a Partner 
• Accounting Treatment of Investment Fluctuation Fund: Retirement of a Partner 
• Accounting Treatment of Partner’s Capital Account: Retirement of a Partner (Fixed Capital)
• Accounting Treatment of Partner’s Capital Account: Retirement of a Partner (Fluctuating Capital)
• Settlement of Amount due to a Retiring Partner: Full Amount Paid
• Settlement of Amount due to a Retiring Partner: Amount Paid in Installment
• Settlement of Amount due to a Retiring Partner: Transferred to Loan Account
• Adjustment of Capital Account: Retirement of a Partner
• Reconstitution of a Partnership Firm: Death of a Partner
• Calculation of Share of Profit up to the Date of Death 
• Adjustment of Interest on Deceased Partner’s Capital, Deceased Partner’s Share in Goodwill and Accumulated Profits and Reserves
• Accounting Treatment of Revaluation of Assets and Liabilities: Death of a Partner 
• Accounting Treatment of Accumulated Profits and Reserves: Death of a Partner 
• Accounting Treatment of Workmen Compensation Reserve: Death of a Partner 
• Accounting Treatment of Investment Fluctuation Fund: Death of a Partner 
• Accounting Treatment of Partner’s Capital Account: Death of a Partner (Fixed Capital)
• Accounting Treatment of Partner’s Capital Account: Death of a Partner (Fluctuating Capital)
• Accounting Treatment of Amount Due to Deceased Partner
• Accounting Treatment of Joint Life Policy: Death of a Partner
• Accounting Treatment of Individual Life Policy: Death of a Partner

Chapter 6: Dissolution of Partnership Firm

Discontinuance of economic relationship between the partners of an organisation is known as Dissolution of firm. Chapter 6 notes of Class 12th Accountancy Part-A consists of everything a firm can do for dissolution and at the time of dissolution. Some of the important topics of this chapter are Accounting Treatment of Goodwill, Taking over of Business by a Partner, Memorandum Balance Sheet, Accounting Treatment of different items such as Contingent Assets and Liabilities, Joint Life Policy, etc.

• Dissolution of a Partnership Firm: Meaning, Modes of Dissolution, Modes of Settlement of accounts (Section 48)
• Difference between Dissolution of Firm and Dissolution of Partnership
• Difference between Firm’s Debt and Private Debt
• Dissolution of Partnership: Realisation Account
• Difference between Realisation Account and Revaluation Account
• Dissolution of Firm: Accumulated Profits, Reserves and Losses
• Dissolution of Firm: Partner’s Capital Account
• Dissolution of Firm: Cash or Bank Account
• Dissolution of Partnership Firm: Meaning and Example
• Accounting Treatment of Goodwill in case of Dissolution of Firm
• Accounting Treatment of Joint Life Policy in case of Dissolution of a Firm
• Accounting Treatment of Contingent Assets and Contingent Liabilities in case of Dissolution of a firm
• Dissolution of Firm: Rebate on Bills Payable/Creditors and Commission or Remuneration Payable to a Partner
• Dissolution of Firm: Partner’s Current Account
• Dissolution of Firm: Taking Over of Business by a Partner
• Dissolution of Firm: Memorandum Balance Sheet

Chapter 7: Accounting for Share Capital

A company is an artificial person created by law, having separate entity with a perpetual succession and a common seal. For its course of business a company requires funds which it can attain through shares, etc. In the seventh chapter of Class 12th Accountancy Part- A notes, we will discuss about Share Capital and its Accounting in detail. The notes of this chapter cover different topics such as Types of Shares, Issue of Shares at Par, Premium, Oversubscription of Shares, etc.

• Company and its Types
• Difference between Public Company and Private Company
• Types of Shares
• Difference between Preference Shares and Equity Shares
• Share Capital: Meaning, Kinds, and Presentation of Share Capital in Company’s Balance Sheet
• Difference between Capital Reserve and Reserve Capital
• Accounting for Share Capital: Issues of Shares for Cash
• Issue of Shares At Par: Accounting Entries
• Issue of Shares at Premium: Accounting Entries
• Issue of Share for Consideration other than Cash: Accounting for Share Capital
• Issue of Shares: Accounting Entries on Full Subscription with Share Application
• Calls in Arrear: Accounting Entries on Issue of Shares
• Calls in Advance: Accounting Entries on Issue of Shares
• Oversubscription of Shares: Accounting Treatment
• Oversubscription of Shares: Pro-rata Allotment
• Oversubscription of Shares: Pro-rata Allotment with Calls in Arrear
• Forfeiture of Shares: Accounting Entries on Issue of Shares
• Accounting Entries on Issue of Shares: Re-issue of Forfeited Shares
• Disclosure of Share Capital in the Balance Sheet: Accounting Entries on Issue of Shares

Chapter 8: Issue and Redemption of Debentures

A company can also raise funds through issue of debentures. The last chapter of Part-A Class 12th Accountancy, Issue and Redemption of Debentures consists of everything required to know about debentures, its issue, and redemption. Some of the important topics included in this chapter are Kinds of Debentures, Issue of Debentures, Interest on Debentures, Redemption of Debentures, etc.

• Issue of Debentures: Meaning, Characteristics, Purpose of Issuing Debentures and Example
• Types/Kinds of Debentures
• Difference between a Share and a Debenture
• Issue of Debentures
• Issue of Debentures: Accounting Treatment of Issue of Debenture and Presentation of debentures in balance sheet (with format)
• Issue of Debenture at Par and Premium
• Issue of Debenture for Consideration other than Cash
• Issue of Debenture as Collateral Security
• Interest on Debentures
• Redemption of Debentures
• Redemption of Debentures: Meaning, Sources and Rules regarding Redemption
• Redemption of Debentures: In Lump-Sum
• Redemption of Debentures: In Installment
• Redemption of Debentures: Purchase of Own Debentures
• Redemption of Debentures: Conversion into Shares or New Debentures

PART – B (FINANCIAL STATEMENT ANALYSIS)

Chapter 1: Financial Statements of a Company

The accounting process ends with the preparation of the financial statement. The information about the financial position of any company is provided with the help of Financial Statements. The first chapter of Class 12th Accountancy Part-B, Financial Statements of a Company includes the two different financial statements of a company; i.e., Balance Sheet and Profit & Loss Account.

• Introduction to Financial Statement
• Financial Statement of a Company: Balance Sheet
• Financial Statement of a Company: Profit and Loss Account

Chapter 2: Analysis of Financial Statements

The work of a company does not end with the preparation of its financial statements, it also has to analyse those statements and draw meaningful conclusions from them. The second chapter, Analysis of Financial Statements of Class 12th Accountancy Part-B, consists of all the information required to learn about the analysis of financial statements. The topics included in the notes of this chapter are Methods of Analysis, Process of Analysis, Comparative Statement, Common-size Statement, etc.

• Introduction to Financial Analysis 
• Financial Analysis: Objective, Methods, and Process 
• Financial Analysis: Need, Types, and Limitations
• Financial Analysis: Uses, Importance, Limitations
• Comparative Statement: Meaning, Importance and Techniques of Presenting Financial Statements
• Comparative Balance Sheet: Objectives, Advantages and Format of Comparative Balance Sheet
• Comparative Income Statement
• Introduction to Common Size Statement
• Common Size Income Statement: Objectives, Preparation, Format of Common Size Statement

Chapter 3: Accounting Ratios

One of the methods to analyse the financial statements of a company is Ratio Analysis. It defines relationship between various financial factors of a business. Accounting Ratio is the third chapter of Class 12th Accountancy Part-B and consists of different types of accounting ratios. The notes of this chapter give a detailed knowledge about the Different Types of Accounting Ratios, their Formula, and their Significance, with some examples in each for a better understanding of the topic.

• Ratio Analysis- Importance, Advantages and Limitations
• Types of Accounting Ratios 
• Liquidity Ratio 
• Current Ratio: Meaning, Significance and Examples
• Liquid/Quick Ratio: Meaning, Formula, Significance and Examples
• Solvency Ratio: Meaning, Formula, and Significance
• Debt Ratio 
• Debt-Equity Ratio: Meaning, Formula, Significance and Examples
• Total Assets to Debt Ratio: Meaning, Formula and Examples
• Proprietary Ratio: Meaning, Formula, Significance and Examples
• Interest Coverage Ratio 
• Activity Ratio 
• Turnover Ratio 
• Activity Ratio – II 
• Trade Receivables Turnover Ratio 
• Trade Payable Turnover Ratio: Meaning, Formula, Significance and Examples
• Working Capital Turnover Ratio: Meaning, Formula, Significance and Examples
• Profitability Ratio or Income Ratio 
• Overall Profitability Ratio 
• Gross Profit Ratio: Meaning, Formula, Significance and Examples
• Operating Ratio
• Operating Profit Ratio: Meaning, Formula, Significance and Examples
• Net Profit Ratio 
• Return on Investment (R.O.I): Meaning, Formula, Significance, and Examples

Chapter 4: Cash Flow Statement

The financial statements of a company do not depict the true cash position of the company. For this, it has to prepare a Cash Flow Statement which is a summary of the different sources and applications of cash during a specific time period and analyses the reasons behind changes in cash balance between the two balance sheet dates. The fourth chapter of Class 12th Accountancy Part-B, Cash Flow Statement consists in detail of every information required to understand the concept with the help of examples. The topics included in the notes of this chapter are Objectives of Cash Flow Statement, Cash Flow from three different Business Activities, Treatment of Special Items, etc.

• What is a Cash Flow Statement?
• Cash Flow Statement: Objectives, Importance and Limitations
• Cash Flow Statement – Part II
• Classification of Business Activities in Cash Flow: Operating, Investing and Financing Activities
• Cash Flow from Operating Activities
• Treatment of Special Items in Cash Flow Statement
• Treatment of Special Items in Cash Flow Statement-II 
• Examples of Cash Flow from Operating Activities
• Cash Flow from Investing Activities
• Cash Flow from Financing Activities
• Cash Flow Statement: 2 Examples

OR 

PART – B (COMPUTERISED ACCOUNTING)

Chapter 1: Overview of Computerised Accounting System

A company’s accounting system is the core of its financial management, as it processes all transactions within the organization. It is a software application that automates financial records and reporting processes to make them faster, more accurate, and easier to manage. The first chapter of Class 12th Accountancy Part-B gives detailed knowledge about the Computerised Accounting System of a Company. The topics included in this chapter are Sourcing of Accounting Software, Features of Computerised Accounting System, Computer and its Components, etc.

• Sourcing of Accounting Software
• Computerised Accounting System
• Computerised Accounting System: Meaning, Features, Advantages, and Disadvantages
• Difference between Manual and Computerised Accounting
• Management Information System (MIS) and Accounting Information System (AIS)
• Evolution of Computerised Accounting 
• Computer and its Components
• Computer System in Accounting 

Chapter 2: Accounting Application of Electronic Spreadsheet

A company requires spreadsheet applications to add and process its data. The next chapter of Class 12th Accountancy Part-B, Accounting Application of Electronic Spreadsheet consists of information regarding the concept of Electronic Spreadsheet, its Features, Application in Generating Accounting Information, and Data Representation.

• Concept of Electronic Spreadsheet 
• Features offered by Electronic Spreadsheet 
• Application in generating accounting information: Bank Reconciliation Statement, Asset Accounting, Loan Repayment of Loan Schedule, and Ratio Analysis 
• Data Representation: Graphs, Charts, and Diagrams

Chapter 3: Using Computerised Accounting System

The last chapter of Class 12th Accountancy Part-B, Using Computerised Accounting System includes topics like Installation of CAS, Data: Entry, Validation, and Verification, Adjusting Entries, and Need and Security Features of the Computerised Accounting System.

• Steps in the installation of CAS, codification and Hierarchy of account heads, creation of accounts  
• Data: Entry, Validation and Verification 
• Adjusting Entries, Preparation of Balance Sheet, Profit and Loss Account with Opening and Closing Entries 
• Need and Security features of the system