Class 12 Accountancy One-Liners
Partnership to Ratio Analysis — free preview by Toppers Hub Academy
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Download the Branded PDFAccounting for Partnership — Basics
- In absence of a deed, profits are shared equally and no salary or commission is allowed.
- Interest on capital is allowed only out of profits, at 6% p.a. if the deed is silent on rate.
- Fixed capital method uses two accounts: Capital and Current.
- Guarantee of profit deficiency is borne by the guaranteeing partners in agreed ratio.
Goodwill — Valuation
- Goodwill = value of reputation that brings super profits.
- Average profit method: Goodwill = average profit × number of years’ purchase.
- Super profit = actual average profit − normal profit.
- Capitalisation method: Goodwill = capitalised value of business − net assets.
Admission of a Partner
- New partner brings capital and premium for goodwill for his share.
- Sacrificing ratio = old ratio − new ratio.
- Revaluation profit or loss goes to OLD partners in OLD ratio.
- Premium for goodwill is shared by sacrificing partners in sacrificing ratio.
Retirement & Death of a Partner
- Gaining ratio = new ratio − old ratio.
- Retiring partner’s share of goodwill is debited to gaining partners.
- Deceased partner’s profit till death is estimated via time or turnover basis.
- Amount due to retiring partner is a loan until fully paid.
Company Accounts — Shares
- Minimum application money is 5% of nominal value (SEBI: 25% of issue price).
- Securities premium can be used only for purposes in Sec 52 of Companies Act.
- Forfeited shares can be reissued at a discount up to the amount forfeited.
- Pro-rata allotment adjusts excess application money towards allotment.
Ratio Analysis
- Current ratio = current assets / current liabilities; ideal 2:1.
- Quick ratio excludes inventory and prepaid expenses; ideal 1:1.
- Debt-equity ratio = long-term debts / shareholders’ funds; ideal 2:1.
- Inventory turnover = cost of revenue from operations / average inventory.
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