CBSE XII Accountancy Paper : Last moment quick revision (Partnership)

The countdown for CBSE XII Accountancy paper has begin. Just 6 days to go for exam. Students are giving final touch to their preparation. This is the time to be wise and selective while going through the revision. If you are also little bit confused with the topic you should go through at last moment in Accountancy. This post may help you to give your studies a final touch. This post is divided in three parts. In part-1, I am going to discuss the chapter wise important entries/items/points to be kept in mind and just go through once as a strategy of  quick revision.

 Partnership (35 Marks)

Fundamentals of Partnership :

• Provisions of Partnership Act in the absence of Partnership deed ( No salary, No commission, No IOC , No IOD, PSR- Equal, IOL-6% P.A.).


• There are only two cases when capital is treated as fixed capital: First when it is clearly specified in question or second when Partner's Current Account has given.


• We need to prepare Two accounts in case when Capital is fluctuating Profit and Loss Appropriation Account and Partner's Capital Account.


• We need to prepare three accounts in case when Capital is fixed Profit and Loss Appropriation Account, Partner's Capital Account and Partner's Current Account.


• Profit and Loss Account and Profit and Loss Appropriation Account is Nominal Account, whereas Partner's Capital Account and Partner's Current Account is Personal Account.


• Interest on loan is a charge so it has to be given even in case of loss.


• Interest on loan and Manager's Commission is a part of Profit and Loss Account. So it has to be shown in Dr. side of Profit and Loss Account as a part of working notes or deduct it directly from Net Profit while preparing Profit and Loss Appropriation Account.


• Interest on Capital is always calculated on Opening Capital.


• Drawing out of Capital is shown in Dr. side of Partner's Capital Account in both of the cases whether Capital is fixed or Fluctuating.

• If expenses of the firm are more than profit.  In the case necessary adjustments is to be made in contribution ratio.

Valuation of Goodwill :

• Factors affecting value of goodwill ( Quality, location, Managerial efficiency, time, patents, contracts etc.)


• Self generated goodwill is written off from books.


• Need for valuation of Goodwill (Admission, retirement, psr, Death, two firms join hands, amalgamation and acquisition).


• Abnormal profits are deducted and abnormal losses are added back in profit while calculating value of goodwill.

 Change in Profit Sharing Ratio:

• Gaining partner is the partner who gain their share due to reconstitution of partnership firm.


• Sacrificing partner is the partner who sacrifice their share due to reconstitution of partnership firm.


• Accumulated Loss, Advertising Suspense, Goodwill(Appeared)- to be debited in Partner's Capital Account in Old Ratio.


• Accumulated Profit/ General Reserve- In the absence of any specific information credited to Partner's Capital Account in old ratio. In the case when it has to be shown in new balance sheet/books- adjusted in SR/GR.


• Gaining partner is always debited and Sacrificing partner is always credited.


• Revaluation Account is also known as Profit and Loss Adjustment Account.


• Revaluation Account is a Nominal Account.


• Revaluation Account  is prepared in case of reconstitution of firm.


• Gaining ratio and sacrificing ratio is calculated in case of reconstitution of firm.


• Memorandum Revaluation Account is prepared when altered values are not updated in reconstituted balance sheet.

 Admission of  partner:

• A partner can be admitted by mutual consent of all partners.


• A person with unsound mind, insolvent or insane can't be admitted as a partner.


• Why there is a need to admit a partner ( Capital, skills, time devotion, Goodwill).


• Whenever a partner is admitted he/she contribute Premium for goodwill and capital may be in cash or in form of goods or assets.


• A minor can be admitted as a partner but doesn't participate in decision making nor bear risk or contribute for losses.


• Stock or any other tangible asset was found to be undervalued- credited to Revaluation Account.


• Stock or any other tangible asset was found to be overvalued- debited to Revaluation Account.


• Unexpired Insurance premium - credited to revaluation account.


• Creditors were written back - credited to revaluation account.


• If a partner is unable to bring amount of premium is cash, his/ her Capital Account is debited or current account is opened as per instruction given. In the absence of any specific information capital account has to be debited.


• While making capital adjustment necessary surplus or deficit is settled through cash or current account as per instruction given in question.

Retirement /death of partner : 

• There is no need to prepare loan Account if not instructed to do so.


• Profit and Loss Suspense Account denote that profit or loss is estimated.


• While calculating profit, IOC, IOD, salary consider number of months in case of death/ retirement during the year.

 Dissolution of firm: 

• Dissolution of firm and dissolution of partnership are different from each other. Dissolution of firm means firm comes to an end whereas dissolution of partnership means partnership comes to an end.


• In the absence of any specific information if assets remain unsold it is assumed that it was valueless.


• In the absence of any specific information liabilities are paid at their book vale.


• Means of dissolution of firm ( by notice, by mutual consent, completion of project, by court, happening of an event).


• Partner's loan is settled by preparing Partner's Loan Account.

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For quick revision points in NPO and Company just go through the following link: NPO and Company quick revision points

 

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