Accounts ISC (Commerce) Class 12 CISCE Syllabus 2025-26

• Meaning of Goodwill
• Nature and Features of Goodwill
• Factors Affecting the Value of Goodwill
• Need for Valuation of Goodwill
• Methods of Valuation of Goodwill

1. Average Profits Method
2. Super Profits Method
3. Capitalisation Methods

• Treatment of Goodwill

1. Premium Method
2. Revaluation Method
3. Hidden Goodwill

• Change in PSR takes place at the time of admission of a partnership firm.
• Accounting treatment of accumulated profits and losses through one journal entry:
• Gaining partners cap/current A/c Dr.
• To sacrificing Partners cap/current (in case of profits).
• Sacrificing partners’ cap/current A/c Dr.
• To Gaining Partners cap/current (in case of losses)
• General Reserve/ Reserve fund, Workmen Compensation Reserve/ Fund, Investment Fluctuation Reserve/ Fund, Contingency Reserve, Profit and Loss Account (Debit and Credit Balance) and Advertisement Suspense Account/ Deferred Revenue Expenditure

• Through P & L Suspense A/c (in case of no change in PSR of remaining partners).
• Through Gaining Partners capital/ current A/c (in case of change in PSR of remaining partners).

1. Readjusting the adjusted capital of the continuing partners in the new profit sharing ratio.
2. Adjusting the capitals of the continuing partners on the basis of the total capital of the new firm.
3. When the continuing partners bring in cash to pay off the retiring partners.

• Settlement of accounts under Section 48 of The Indian Partnership Act 1932

• Capital accounts of partners
• Cash and bank a/c (excluding piecemeal distribution, sale to a company and insolvency of partner(s)).

• Issue of debentures at par, at premium and at discount under Companies Act 2013.

• To promoters
• To underwriters
• To vendors

• Interest on debentures (with TDS)

• When debentures are redeemable in a lump sum at the end of a specified period;
• When debentures are redeemable in instalments

• Preparation of Balance sheet from receipt and payment account with additional information

Current Ratio: `"Current Assets"/"Current Liabilities"`

Current Assets = Current Investments + Inventories (excluding Loose Tools and Spare Parts) + Trade Receivables + Cash and Bank Balance + Short-term Loans and Advances + Other Current Assets

Current Liabilities = Short term borrowings + Trade payables + Other Current Liabilities + Short term Provisions.

Quick Ratio / Liquid Ratio : `"Quick Assets"/"Current Liabilities"`

Or

`"All Current Assets- Inventories(excluding Loose Tools and Spare Parts)- Prepaid Expenses"/"Current Liabilities"`

Or

`"Liquid Assets"/"Current Liabilities"`

Debt to Equity Ratio: `"Debt / Long Term Debt"/"Equity / Shareholders' Funds"`

Debt = Long Term Borrowings + Long Term Provisions

Equity / Shareholders’ Funds = Share Capital + Reserves and Surplus

Or

Non Current Assets + (Current Assets – Current Liabilities) - Non Current Liabilities

= Non Current Assets + Working Capital- Non Current Liabilities

= (Tangible Assets + Intangible Assets + Non Current Investments + Long Term Loans and Advances) +  Working Capital – (Long Term Borrowings + Long Term Provisions)

Proprietary Ratio: `"Shareholders Funds/ Equity"/"Total Assets"`

Total Assets = Non Current Assets + Current Assets = Tangible Assets + Intangible Assets + Non Current Investments + Long Term Loans and Advances

+

Current Investments + Inventories (including Loose Tools and Spare Parts) + Trade Receivables + Cash
and Bank Balance + Short-term Loans and Advances + Other Current Assets

Debt to Total Assets Ratio: Debt/Total Assets

Interest coverage ratio = Net profit before interest and taxes/Interest

Interest includes interest on only long term borrowings.

Trade Receivable Turnover Ratio: = Credit Revenue from Operation/Average Trade Receivable

Credit Revenue from Operation = Revenue from Operation – Cash Revenue from Operation

Average Trade Receivables = Opening Trade Receivable + Closing Trade Receivable/2

Trade Payable Turnover Ratio: = Net Credit Purchases/Average Trade Payable

Average Trade Payables = Opening Trade Payable + Closing Trade Payable  / 2

Working Capital Turnover Ratio = Revenue from Operations/Working Capital

Inventory Turnover Ratio = (Cost of Goods Sold /Cost of Revenue from Operation)/Average Inventory

Cost of goods sold= Opening Stock + Net Purchases + Direct Expenses – Closing Stock

Cost of Revenue from Operations = Revenue from Operations – Gross Profit

Or

Cost of Material Consumed (including direct expenses) + Change in inventories of WIP and Finished Goods

Or

Opening Inventory + Net Purchases+ Direct Expenses – Closing inventory

Average Inventory = (Opening Inventory + Closing Inventory)/2

Gross Profit Ratio: `"Gross Profit"/"Revenue from Operations"xx100`

Gross Profit = Revenue from Operations – Cost of Revenue from Operations/ Cost of Goods Sold
Cost of Revenue from Operations = Cost of Material Consumed (including direct expenses) + Change in inventories of WIP and Finished Goods.

Or

Opening Inventory + Net Purchases + Direct Expenses – Closing inventory

Net Profit Ratio = `"Net Profit"/"Revenue from Operations"xx100`

Net Profit = Gross profit + Other Income – Indirect Expenses – Tax

Operating Ratio =``

Operating Expenses = Employee Benefit Expenses + Depreciation and Amortisation Expenses + Selling
and Distribution Expenses+ Office and Administrative Expense

Operating Income = Sale of scrap, trading commission received, cash discount received, revenue from services.

Operating Profit Ratio : ``

Net operating profit = Net Profit after Tax+ Non-Operating Expenses – Non Operating Incomes

Or

Gross Profit – Operating Expenses + Operating Incomes

Non Operating Expenses = Finance Cost (Interest on Borrowings) + Loss on sale of Non Current Assets

Non Operating Incomes = Interest and Dividend Received on Investment + Profit on sale of Non Current Assets

`"Earning per share" = "Net Profit after Tax and Preference Dividend"/"No. of Equity Shares"`

`"Price Earning Ratio" = "Market Value of an Equity share"/"Earning per share"`

Return on Investment = `"Net Pr ofit before Interest and Tax"/"Capital Employed"xx100`