Accountancy Class 12 Notes

Accountancy is undoubtedly the most important subject of the Commerce syllabus of class 12. While students are too scared of it as one minor mistake would cost them heavily. Hence, while preparing students must do it with their utmost attention. The class 12 board exam is one of the most crucial stages in a student’s life. With competition increasing every day, students try to give their best. In this blog, we shall discuss the Accountancy Class 12 Notes.

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Accountancy Class 12 Format

First, let’s have a look at the paper format for this subject. The table below shows the division of marks and students can use this to plan out their preparation.

Units		Marks
Part A	Accounting for Not-for-Profit Organizations, Partnership Firms and Companies
	Unit 1. Financial Statements of Not-for-Profit Organizations	10
	Unit 2. Accounting for Partnership Firms	30
	Unit 3. Accounting for Companies	20
		60
Part B	Financial Statement Analysis
	Unit 4. Analysis of Financial Statements	12
	Unit 5. Cash Flow Statement	8
		20

UNIT 1: Financial Statements of Non-Profit Organisation

The first unit in Accountancy Class 12 Notes is Financial Statements of Non-Profit Organisation. A thorough revision of this chapter will enable students to analyse the meaning of a Not-for-profit organisation and its distinction from a profit-making entity and also understand the conceptual basis topics like receipts and payments accounts, and understanding its features. 

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

UNIT 2: Accounting for Partnership Firms

This chapter shall help students analyse carefully the important aspects of partnership firms, differentiate between fixed and fluctuating capital, outline the process and develop the understanding and skill of preparation of Profit and Loss Appropriation Account.

• Partnership: features, Partnership Deed.
• Provisions of the Indian Partnership Act 1932 in the absence of a partnership deed.
• Fixed v/s fluctuating capital accounts. Preparation of Profit and Loss Appropriation account- a division of profit among partners, a 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.

Check out the Full Chapter of Accounting for Partnership Firms

UNIT 3: Accounting for Companies

This chapter is divided into two segments : 

 Accounting for Share Capital

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

Class 12 Accountancy Sample Paper

Accounting for Debentures

• Debentures: Issue debentures at par, at a premium and at a discount. Issue of debentures for consideration other than cash; Issue of debentures with terms of redemption; debentures as collateral security concept, interest on debentures. Writing off discount/loss on issue of debentures.
  Note: Discount or loss on issue of debentures to be written off in the year debentures are allotted from Security Premium Reserve (if it exists) and then from Statement of Profit and Loss as Financial Cost (AS 16).
• Creation of Debenture Redemption Reserve.

The learning outcome of this chapter would be that students shall be able not only to gain knowledge of the meaning of share and share capital but also differentiate between equity shares and preference shares and different types of share capital. The other ub topics covered under this unit would help students get a detailed insight into debentures and share capital and how it processes.

Also Read: Career in Accountancy

UNIT 4: Analysis of Financial Statements

• Financial Statement Analysis: Objectives, importance and limitations.
• Tools for Financial Statement Analysis: Comparative statements, common size statements, cash flow analysis, ratio analysis.
• Accounting Ratios: Meaning, Objectives, classification and computation.
• Liquidity Ratios: Current ratio and Quick ratio.
• Solvency Ratios: Debt to Equity Ratio, Total Asset to Debt Ratio, Proprietary Ratio and Interest Coverage Ratio.
• Activity Ratios: Inventory Turnover Ratio, Trade Receivables Turnover Ratio, Trade Payables Turnover Ratio and Working Capital Turnover Ratio.
• Profitability Ratios: Gross Profit Ratio, Operating Ratio, Operating Profit Ratio, Net Profit Ratio and Return on Investment.

This chapter forms an integral part of the Accountancy syllabus and will help students develop the skill of computing debt-equity ratio, total asset-to-debt ratio, proprietary ratio and interest coverage ratio.

Check out the full PDF for an Analysis of Financial Statements

UNIT 5: Cash Flow Statement

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

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

Check out the full PDF for Cash Flow Statement

So, this was all about Accountancy Class 12 notes. If you wish to read more from our class 12 section, please visit our official webpage. We hope our content helps you in preparing for your class 12 board exams. All the best! For more educational content, stay connected with Leverage Edu!