How to prepare for Accountancy? Step by Step Guide - Class 12

The Accountancy subject of Commerce aims at teaching the art of recording, classifying and summarizing in a significant manner. In terms of money, student will learn transactions and events which are financial in character and the interpretation of the results of these transactions and events. Also, students will get familiar with the reasons for the successes and failures of various businesses. Accountancy is a practical subject which automatically means that it requires a lot of practice. So you have to practice really good and on a regular basis if you want to score good in this subject. But, you must also learn to study it smart by optimally utilising your time. Accountancy is that commerce subject which is very similar to mathematics. It has many fixed rules, standard procedures, heavy calculations, and several adjustments. Accountancy requires preparations on a regular, if not daily basis, for the first couple of months into the academic year.

Here are some tips to guide you through the preparation of Accountancy for Class 11 and Class 12:

Accountancy for Class 12 (XII) - CBSE and NCERT Curriculum

Includes 95 docs, 136 videos & 20 tests 

1. Understand the Theoretical concepts:

Before moving onto the complex and difficult part of Accounts, begin by studying the theory of concepts from NCERT Textbooks for Accountancy in order to have a clear understanding. Clear all your doubts from NCERT Solutions for Accountancy. The things that need to be focused on initially include various definitions, terminologies with their meanings, conceptual explanations, applications and examples of the concepts. You need to understand the logic and reasoning behind every concept. You should pay attention to the features, advantages and disadvantages of various topics as these questions are asked frequently in the exams.

NCERT Textbooks and solutions for Accountancy

Part A - Company Accounts and Analysis of Financial Statements

Chapter 1 - Accounting for Share Capital

• Chapter 1 - Accounting for Share Capital, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT Solution - Chapter 1 : Accounting for Share Capital-1, Class 12, commerce
• NCERT Solution - Chapter 1 : Accounting for Share Capital-2, Class 12, commerce
• NCERT Solution - Chapter 1 : Accounting for Share Capital-3, Class 12, commerce
• NCERT Solution - Chapter 1 : Accounting for Share Capital-4, Class 12, commerce
• NCERT Solution - Chapter 1 : Accounting for Share Capital-5, Class 12, commerce

Chapter 2 - Issue and Redemption of Debentures

• Chapter 2 - Issue and Redemption of Debentures, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT Solution - Chapter 2 : Issue and Redemption of Debentures -1, Class 12, Commerce
• NCERT Solution - Chapter 2 : Issue and Redemption of Debentures - 2, Class 12, Commerce
• NCERT Solution - Chapter 2 : Issue and Redemption of Debentures - 3, Class 12, Commerce
• NCERT Solution - Chapter 2 : Issue and Redemption of Debentures - 4, Class 12, Commerce

Chapter 3 - Financial Statements of a Company

• Chapter 3 - Financial Statements of a Company, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT Solution - Chapter 3 : Financial Statements of a Company-1, Class 12, commerce
• NCERT Solution - Chapter 3 : Financial Statements of a Company-2, Class 12, commerce

Chapter 4 - Analysis of Financial Statements

• Chapter 4 - Analysis of Financial Statements, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT Solutions - Chapter 4 : Analysis of Financial Statements -1, Class 12, Accountancy
• NCERT Solutions - Chapter 4 : Analysis of Financial Statements - 2, Class 12, Accountancy

Chapter 5 - Accounting Ratios

• Chapter 5 - Accounting Ratios, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT Solution - Chapter 5 : Accounting Ratios -1, Class 12, Accountancy
• NCERT Solution - Chapter 5 : Accounting Ratios -2, Class 12, Accountancy
• NCERT Solution - Chapter 5 : Accounting Ratios - 3, Class 12, Accountancy

Chapter 6 - Cash Flow Statements

• Chapter 6 - Cash Flow Statements, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT Solution - Chapter 6 : Cash Flow Statement - 1, Class 12, Accountancy
• NCERT Solution - Chapter 6 : Cash Flow Statement -2, Class 12, Accountancy
• NCERT Solution - Chapter 6 : Cash Flow Statement - 3, Class 12, Accountancy

Part B - Partnership Accounts

Chapter 1 - Accounting for Partnerships : Basic Concepts

• Chapter 1 - Accounting for Partnerships : Basic Concepts, NCERT Textbook CBSE Class 12 Accountancy
• NCERT Solution - Chapter - 1 : Accounting for Partnership : Basic Concepts - 1, Class 12, Accounts
• NCERT Solution - Chapter - 1 : Accounting for Partnership : Basic Concepts - 2, Class 12, Accounts
• NCERT Solution - Chapter - 1 : Accounting for Partnership : Basic Concepts - 3, Class 12, Accounts

Chapter 2 - Reconstitution of a Partnership Firm : Admission of a Partner

• Chapter 2 - Reconstitution : Admission of a Partner, NCERT Textbook Class 12 Accountancy
• NCERT Solutions - Chapter 2 : Admission of a Partner -1 ,Partnership Account, Class 12, Accountancy
• NCERT Solutions - Chapter - Admission of a Partner-2, Partnership Account, Class 12, Accountancy
• NCERT Solutions - Chapter 2 - Admission of a Partner-3, Partnership Account, Class 12, Accountancy

Chapter 3 - Reconstitution of a Partnership Firm : Retirement/Death of a Partner

• Chapter 3 - Reconstitution.- Retirement/Death of Partner, NCERT Textbook CBSE Class 12 Accountancy
• NCERT Solution - Chapter 3 : Reconstitution - Retirement/Death of a Partner,-1, Class 12
• NCERT Solution - Chapter 3 : Reconstitution - Retirement/Death of a Partner - 2, Class 12, Accounts
• NCERT Solution - Chapter 3 : Reconstitution - Retirement/Death of a Partner - 3, Class 12, Accounts

Chapter 4 - Dissolution of a Partnership Firm

• Chapter 4 - Dissolution of a Partnership Firm, NCERT Textbook of CBSE Class 12 Accountancy
• NCERT solution - Chapter 4: Dissolution of Partnership - 1, Class 12, Accounts
• NCERT solution - Chapter 4: Dissolution of Partnership - 2, Class 12, Accounts
• NCERT solution - Chapter 4: Dissolution of Partnership - 3, Class 12, Accounts

2. Learn formulas and solve Accounting questions:

Accountancy includes a lot of formulas and these formulas should be well understood and not just crammed. You need to know how each formula is derived and the logic behind it. Unless you have full understanding of the basics of the formulas, you will not be able to solve questions with accuracy. Once you understand the formulas prepare a chapter wise formula sheet and revise them regularly. After the basics and formulas are clear, start solving accounting problems. Start with the simple ones and slowly move further with complex problems. These accounting problems will have terms and concepts that have been explained in the theoretical part of the chapter.

3. Practice a lot:

You need to be completely thorough with all the Accountancy concepts whether theoretical or mathematical. This needs a lot of practice to achieve. Practice with the questions, problems, and adjustments that are available at the end of every chapter of the textbook. This will help you gain confidence in the subject and also give a nice idea about the kind of questions that can be asked in the exam.

4. Never skip Revision:

Once you have completed the entire syllabus of Accountancy, start with the revision. Revision is very very important as it increases your retention ability and you will never forget the formulas and the theoretical concepts that you revised. Start revising from all the notes you prepared, practice registers and formula sheets made by you while studying. You must dedicate a good amount of time to revision. Allocate the time available between all the chapters and start solving those questions which you found difficult to solve while practicing. Revision is sure to take you to success.

5. Evaluation with Previous year papers and sample papers:

It is highly recommended to analyse past year papers of Accountancy. The previous year papers for accountancy will help you to know the pattern of the exam and also the topics and questions that are frequently asked and emphasized. Attempting previous year papers also help you managing your time during the examination. You will gain a lot of confidence with this as you will be able to practice according to the pattern of questions asked.

Finally, evaluate yourself with sample papers. Sample papers will keep you updated with any changes in the question paper format and other changes.

Link to Previous Year papers and sample papers for Accountancy

• Company Accounts Issue Of Shares - Class 12 Accountancy (Practice Test 1)
• Company Accounts Issue Of Debentures - Class 12 Accountancy (Practice Test 1)
• Financial Statements And Their Analysis - Class 12 Accountancy (MCQ Test 1)

Syllabus for Class 11 Accountancy:

Total marks - 90

Duration - 3 hours 

Detailed syllabus for each unit:

Part A: Financial Accounting - I

Unit 1: Theoretical Framework

Introduction to Accounting

• Accounting - concepts objectives, advantages and limitations, types of accounting information; users of accounting information and their needs. Qualitative Characteristics of Accounting Information. Role of Accounting in Business.

• Basic Accounting Terms- Business Transaction, Capital, Drawings. Liabilities (Non Current and Current). Assets (Non Current, Current); Fixed assets (Tangible and Intangible), Expenditure (Capital and Revenue), Expense, Income, Profit, Gain, Loss, Purchase, Sales, Goods, Stock, Debtor, Creditor, Voucher, Discount (Trade discount and Cash Discount)

Theory Base of Accounting

• Fundamental accounting assumptions: GAAP: Concept
• Business Entity, Money Measurement, Going Concern, Accounting Period, Cost Concept, Dual Aspect, Revenue Recognition, Matching, Full Disclosure, Consistency, Conservatism, Materiality and Objectivity
• System of Accounting. Basis of Accounting: cash basis and accrual basis
• Accounting Standards: Need, benefits, limitations, applicability; IFRS- Need
• Goods and Services Tax (GST): Characteristics and Objective.

Unit 2: Accounting Process

Recording of Business Transactions 

• Voucher and Transactions: Source documents and Vouchers, Preparation of Vouchers, Accounting

Equation Approach: Meaning and Analysis, Rules of Debit and Credit.

Recording of Transactions: Books of Original Entry-

• Journal
• Special Purpose books:
• Cash Book: Simple, cash book with bank column and petty cash book
• Purchases book
• Sales book
• Purchases return book
• Sales return book
• Ledger: Format, Posting from journal and subsidiary books, Balancing of accounts

Bank Reconciliation Statement:

• Need and preparation, Bank Reconciliation Statement with Adjusted Cash Book

Depreciation, Provisions and Reserves. 

• Depreciation: Concept, Features, Causes, factors
• Other similar terms: Depletion and Amortisation
• Methods of Depreciation:
  • Straight Line Method (SLM)
  • Written Down Value Method (WDV)

Note: Excluding change of method

Difference between SLM and WDV; Advantages of SLM and WDV

Accounting treatment of depreciation

i. Charging to asset account

ii. Creating provision for depreciation/accumulated depreciation account

iii. Treatment for disposal of asset

Provisions and Reserves: Difference

Types of Reserves:

i. Revenue reserve

ii. Capital reserve

iii. General reserve

iv. Specific reserve

v. Secret Reserve

• Difference between capital and revenue reserve Accounting for Bills of Exchange.
• Bill of exchange and Promissory Note: Definition, Specimen, Features, Parties.
• Difference between Bill of Exchange and Promissory Note
• Terms in Bill of Exchange:

i. Term of Bill

ii. Accommodation bill (concept)

iii. Days of Grace

iv. Date of maturity

v. Discounting of bill

vi. Endorsement of bill

vii. Bill after due date

viii. Negotiation

ix. Bill sent for collection

x. Dishonour of bill

xi. Retirement of bill

xii. Renewal of bill

Accounting Treatment

Note: excluding accounting treatment for accommodation bill Trial balance and Rectification of Errors •Trial balance: objectives and preparation

(Scope: Trial balance with balance method only)

Errors: types-errors of omission, commission, principles, and compensating; their effect on Trial Balance.

Detection and rectification of errors; preparation of suspense account.

Part B: Financial Accounting - II

Unit 3: Financial Statements of Sole Proprietorship from Complete and Incomplete Records

Financial Statements

Receipts and Expenditure: Revenue receipts and capital receipts. Capital expenditure, Revenue expenditure and deferred expenditure

Objective and Importance.

Trading and Profit and Loss Account: Gross Profit,

Operating profit and net profit. Preparation.

Balance Sheet: need, grouping and marshalling of assets and liabilities. Preparation.

Adjustments in preparation of financial statements with respect to closing stock, outstanding expenses, prepaid expenses, accrued income, income received in advance, depreciation, bad debts, provision for doubtful debts, provision for discount on debtors, Abnormal loss, Goods taken for personal use/staff welfare, interest on capital and managers commission.

Preparation of Trading and Profit and Loss account and

Balance Sheet of a sole proprietorship with adjustments.

Incomplete Records

Features, Reasons and Limitations.

Ascertainment of profit/loss by statement of affairs method.

Difference between Accounts from incomplete records and Statement of Affairs. Preparation of Trading , Profit and Loss account and Balance Sheet.

Unit 4: Computers in Accounting

• Introduction to computer and accounting information system {AIS}: Introduction to computers (elements, capabilities, limitations of computer system)

• Introduction to operating software, utility software and application software. Introduction to accounting information system (AIS) as a part of Management Information System.

• Automation of accounting process: meaning

• Stages in automation:

(a) Accounting process in a computerised environment; comparison between manual accounting process and computerised accounting process,

(b) Sourcing of accounting software; kinds of software: readymade software; customised software and tailor-made software; generic considerations before sourcing accounting software

(c) creation of account groups and hierarchy

(d) generation of reports - trial balance, profit and loss account and balance sheet.

Scope:

(i) The scope of the unit is to understand accounting as an information system for the generation of accounting information and preparation of accounting reports.

(ii) It is presumed that the working knowledge of any appropriate accounting software will be given to the students to help them learn basic accounting operations on computers.

Part C: Project Work (Any One)

1. Collection of source documents, preparation of vouchers, recording of transactions with the help of vouchers.

2. Preparation of Bank Reconciliation Statement with the given cash book and the pass book with twenty to twenty five transactions.

3. Comprehensive project of any sole proprietorship business. This may state with journal entries and their ledgering, preparation of Trial balance. Trading and Profit and Loss Account and Balance Sheet. Expenses, incomes and profit (loss), assets and liabilities are to be depicted using pie chart / bar diagram.

Syllabus for Class 12 Accountancy:

Total marks - 80

Duration  - 3 hours

Detailed syllabus for each unit:

Part A: Accounting for Not-for-Profit Organizations, Partnership Firms and Companies

Unit 1: Financial Statements of Not-for-Profit Organizations

• 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

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

Note: Interest on partner's loan is to be treated as a charge against profits.

Accounting for Partnership firms - Reconstitution and Dissolution.

• Change in the Profit Sharing Ratio among the existing partners - sacrificing ratio, gaining ratio, accounting for revaluation of assets and reassessment of liabilities and treatment of reserves and accumulated profits. Preparation of revaluation account and balance sheet.
• Admission of a partner - effect of admission of a partner on change in the profit sharing ratio, treatment of goodwill (as per AS 26), treatment for revaluation of assets and reassessment of liabilities, treatment of reserves and accumulated profits, adjustment of capital accounts and preparation of balance sheet.
• Retirement and death of a partner: effect of retirement / death of a partner on change in profit sharing ratio, treatment of goodwill (as per AS 26), treatment for revaluation of assets and reassessment of liabilities, adjustment of accumulated profits and reserves, adjustment of capital accounts and preparation of balance sheet. Preparation of loan account of the retiring partner.
• Calculation of deceased partner’s share of profit till the date of death. Preparation of deceased partner’s capital account, executor’s account and preparation of balance sheet.
• Dissolution of a partnership firm: types of dissolution of a firm. Settlement of accounts -preparation of realization account, and other related accounts: capital accounts of partners and cash/bank a/c (excluding piecemeal distribution, sale to a company and insolvency of partner(s).

Note:

(i) The realized value of each asset must be given at the time of dissolution.

(ii) In case, the realization expenses are borne by a partner, clear indication should be given regarding the payment thereof.

Unit-3 Accounting for Companies

Accounting for Share Capital

• Share and share capital: nature and types.

• Accounting for share capital: issue and allotment of equity shares, private placement of shares, Employee Stock Option Plan (ESOP). Public subscription of shares - over subscription and under subscription of shares; issue at par and at premium, calls 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 re-issue of shares.
• Disclosure of share capital in company’s Balance Sheet.

Accounting for Debentures

• Debentures: Issue of 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.
• Redemption of debentures: Lump sum, draw of lots and purchase in the open market (excluding ex interest and cum-interest). Creation of Debenture Redemption Reserve.

Conversion method

Note: Related sections of the Indian Companies Act, 2013 will apply.

Part B: Financial Statement Analysis

Unit 4: Analysis of Financial Statements

• Financial statements of a company: Statement of Profit and Loss and Balance Sheet in the prescribed form with major headings and sub-headings (as per Schedule III to the Companies Act, 2013).

Note: Exceptional items, extraordinary items and profit (loss) from discontinued operations are excluded.

• Financial Statement Analysis: Objectives, importance and limitations.
• Tools for Financial Statement Analysis: Comparative statements, common size statements, cash flow analysis, ratio analysis.
• Accounting Ratios: 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.

Note: Net Profit Ratio is to be calculated on before and after tax.

Unit 5: Cash Flow Statement

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

Note:

(i) Adjustments relating to depreciation and amortization, profit or loss on sale of assets including investment, dividend (both final and interim) and tax.

(ii) Bank overdraft and cash credit to be treated as short term borrowings.

(iii) Current Investments to be taken as Marketable securities unless otherwise specified.

Project Work

Refer to the CBSE guidelines 

OR

Part B: Computerised Accounting

Unit 4: Computerised Accounting

Overview of Computerised Accounting System.

• Introduction: Application in Accounting.
• Features of Computerised Accounting System.
• Structure of CAS.
• Software Packages: Generic; Specific; Tailored.

Accounting Application of Electronic Spreadsheet.

Concept of electronic spreadsheet.

Features offered by electronic spreadsheet.

Application in generating accounting information - bank reconciliation statement; asset accounting; loan repayment of loan schedule, ratio analysis.

Data representation - graphs, charts and diagrams.

Using Computerized Accounting System.

Steps in 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 closing entries and opening entries. Need and security features of the system.

Database Management System (DBMS)

Concept and Features of DBMS.

DBMS in Business Application.

Generating Accounting Information - Payroll.

Part C: Practical Work

Refer to the CBSE guidelines.

Similarly, Prepare For Other Subjects :

How to prepare Reasoning for Business Studies?
How to prepare Reasoning for English Exam?
How to prepare for Economics?