ISC Class XII Accountancy Syllabus 2026 – 27

SECTION A

1. Partnership Accounts

A. Fundamentals of Partnership

(i) Definition, meaning and features of a Partnership.

Self-explanatory.

(ii) Provisions of The Indian Partnership Act, 1932, with respect to books of accounts.

(i) Meaning and importance.
(ii) Rules applicable in the absence of a partnership deed.
(iii) Preparation of Profit and Loss Appropriation Account and Partners’ Capital and Current Accounts.

(a) Profit and Loss Appropriation Account.
(b) Partners’ capital accounts: fixed and fluctuating.
(c) Partners’ Current Accounts when fixed capital method is followed.

Interest on capital, interest on drawings, interest on current accounts (debit and credit), salary, commission to partners and managers, transfer to reserves, division of profit among partners.

(d) Guarantee of profits.

(e) Past adjustments (Relating to interest on capital, interest on drawing, salary and profit-sharing ratio).

NOTE:

• Interest on loan given by the partner to the firm is to be taken as a charge against profits. This interest will be debited to the P/L account and credited to his loan account.
• Interest on loan taken by a partner from the firm should be credited to P/L account and debited to his capital/current account as the case may be.
• Rent due to a partner is a charge against profit and is to be credited to partners’ current account in case of fixed capital system or to partners’ capital account when capitals are fluctuating.
• Percentage of Partner’s commission / General Reserve to be calculated only on the correct trading profit and not on the divisible profit.
• Rectification of errors (past adjustments) through a single journal entry/ adjusting and closing journal entries, preparation of partners’ adjusted capital/current accounts.
• Admission of manager as a Partner is excluded from the topic of past adjustments/guarantee of profits.

B. Goodwill

Concept of goodwill and mode of valuation.

(a) Meaning, nature and features of Goodwill.
(b) Factors affecting the value of goodwill.
(c) Mode of Valuation.

• Average profit method – Meaning and practical application.
  • Simple average.
  • Weighted average method.
• Super profit method – Meaning and practical application.
• Capitalization method – Meaning and practical application.
  • Capitalization of average profit.
  • Capitalization of super profit.

NOTE: Capital Employed/Net assets are Total assets (excluding purchased goodwill, non-trade investments and fictitious assets) less outside liabilities.

Investments to be taken as non-trade investments unless specified as trade investments.

C. Reconstitution of Partnership

I. Admission

(i) Calculation of new profit-sharing ratio, sacrificing ratio and gaining ratio.

Self-Explanatory.

(ii) Accounting treatment of goodwill on admission of a partner.

Based on Accounting Standard -26 issued by the Institute of Chartered Accountants of India in the context of Intangible Assets.

(a) Premium for goodwill paid privately.
(b) Premium for goodwill paid (in cash or kind) and retained in the business.
(c) Premium for goodwill paid and withdrawn by the old partners.
(d) When the incoming partner cannot bring premium for goodwill in cash, adjustments are to be done through his current account.
(e) Hidden goodwill.
(f) When goodwill appears in the old Balance Sheet.

(iii) Preparation of Revaluation Account.

Preparation of a Revaluation Account where changes in the values of assets and liabilities are reflected in the new Balance Sheet after reconstitution of a partnership firm.

(iv) Accounting treatment of accumulated profits and 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.

(v) Adjustment of Capitals.

(a) Adjustment of old partner’s Capital Accounts on the basis of the new partner’s capital.
(b) Calculation of new partner’s capital on the basis of old partner’s adjusted capital.

(vi) Change in Profit-Sharing Ratio.

Change in PSR takes place at the time of admission of a partnership firm.

II. Retirement and death of a partner

(i) Calculation of new profit-sharing ratio, gaining ratio and sacrificing ratio.

Self-Explanatory.

(ii) Adjustment with regard to goodwill including hidden goodwill.

Self-Explanatory.

(iii) Adjustment with regard to undistributed profits and losses.

Self-Explanatory.

(iv) Adjustment with regard to share of profits of the retiring or deceased partner from the date of the last Balance Sheet to the date of retirement or death (on the basis of time or turnover).

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).

(v) Preparation of Revaluation Account on retirement or death of a partner.

Self-Explanatory.

(vi) Adjustment of capitals.

(a) Readjusting the adjusted capital of the continuing partners in the new profit-sharing ratio.
(b) Adjusting the capitals of the continuing partners on the basis of the total capital of the new firm.
(c) When the continuing partners bring in cash to pay off the retiring partners.

(vii) Calculation and payment of amount due to retiring partner.

Self-Explanatory.

(viii) Preparation of retiring partner’s loan accounts and deceased partner’s executor’s loan account (with interest on loan accrued and due and interest on loan accrued but not due).

Self-explanatory.

(ix) Change in Profit-Sharing Ratio.

Change in PSR takes place at the time of retirement / death of a partnership firm.

NOTE:

• Preparation of Balance Sheet during retirement / death of a partner to be done in Horizontal format only.
• Memorandum Revaluation Account, Joint Life Policy, Individual life policy are excluded from the syllabus.

III. Dissolution of a Partnership firm.

(i) Meaning of dissolution and settlement of accounts under Section 48 of The Indian Partnership Act 1932.

Self-Explanatory.

(ii) Preparation of Memorandum Balance Sheet, Realization Account, Partner’s Loan Account, Partner’s Capital Account and Cash/Bank Account.

Self-explanatory.

NOTE:

• When an asset or a liability is taken to the realization account any corresponding/related fund or reserve is also transferred to realization account and not to the partners’ capital accounts.
• When accounts are prepared on a fixed capital basis, partners’ current account balances are to be transferred to capital account. No adjustments are required to be passed through current account.
• Bank overdraft is to be taken to the Bank/Cash A/c and not to be transferred to realization account but bank loan must be transferred to realization account.
• If question is silent about the payment of a liability, then it has to be paid out in full.
• If the question is silent about the realized value of tangible assets and investments it should be considered as realized at book value itself.
• If the question is silent about the realized value of intangible assets, accrued income and prepaid expenses it should be considered as nil (zero value).
• Loan taken from a partner will be passed through cash or bank account even if the partner’s capital account has a debit balance.
• Loan given to a partner will be transferred (debited) to his Capital account.
• Realization expenses – paid by the firm; paid by a partner; borne by a partner; to be borne by a partner but paid by the firm on his behalf; partner reimbursed by the firm for the realization expenses paid by him with an asset of the firm.
• Admission cum retirement, amalgamation of firms and conversion/sale to a company together with piecemeal distribution and insolvency of a partner / partners not required.

2. Joint Stock Company Accounts

A. Issue of Shares

Problems on issue of shares.

(a) Issue of shares at par and premium under Companies Act, 2013.

(b) Issue of shares for considerations other than cash:

• To promoters (can be considered either through Goodwill account or Incorporation costs account).
• To underwriters.
• To vendors.

(c) Calls in arrears, calls in advance and interest thereon.

(d) Over and undersubscription (including pro-rata allotment).

(e) Preparation of Journal; Cash Book and Journal Proper; Ledger Accounts.

NOTE: In pro-rata allotment when shares are issued at a premium, excess money received on application will first be adjusted towards the share capital. Any excess thereon will be utilized towards the Securities Premium.

When allotment or any call money is due, it is to be transferred to the calls in arrears account, on which interest, if provided in the Articles of Association, will be calculated.

(f) Forfeiture and reissue of shares at par, premium or discount.

Self-explanatory.

(g) Disclosure of Share capital in the company’s Balance Sheet.

NOTE: Issue of bonus and rights shares, private placement of shares, sweat equity shares, employees’ stock option scheme, reservations for small individual participants and minimum tradable lots are not required.

B. Issue of Debentures

Problems on issue of debentures (at par, at premium and at discount.)

Problems on issue of debentures to include:

(a) Issue of debentures at par, at premium and at discount under Companies Act 2013.

(b) Issue of debentures as collateral security for a loan.

(c) Issue of debentures for considerations other than cash.

• To promoters.
• To underwriters.
• To vendors.

(d) Accounting entries at the time of issue when debentures are redeemable at par and premium.

(e) Calls in arrears, calls in advance and interest thereon.

(f) Interest on debentures (with TDS).

(g) Disclosure of Debentures in the company’s Balance Sheet.

NOTE: All capital losses to be written off in the year in which they occur. The sequence for writing off such losses will be first from Securities Premium, then from Statement of Profit and Loss and lastly from Capital Reserve.

C. Redemption of Debentures

• Creation of Debenture Redemption Reserve (wherever applicable).
• Redemption of debentures out of profits.
• Redemption of debentures out of capital.
• Redemption of debentures in a lump sum.
• Redemption of debentures in annual instalments by draw of lots (theoretical concepts only).

Self-Explanatory.

NOTE: Calculation of ex-interest and cum-interest are not required.

D. Final Accounts of Companies

Preparation of the Balance Sheet of a company (along with notes to accounts) as per Schedule III Part I of Companies Act 2013.

Amendments:

1. As per the amendment made in Accounting Standard 4, dividend proposed for a year is not a liability till it has been approved by the shareholders. Thus, proposed dividend is not shown as a short-term provision in the current Balance Sheet of a company but disclosed in Notes to Accounts under Contingent Liabilities.
2. Schedule III of the Companies Act, 2013, has been amended whereby the sub-head ‘Fixed Assets’ under Non-Current Assets is replaced with ‘Property, Plant and Equipment and Intangible Assets’, and Tangible Assets under Fixed Assets is replaced with ‘Property, Plant and Equipment’.
3. Current maturities of long-term borrowings to be shown under the Head - Current Liabilities Sub head- Short Term Borrowing.
4. Securities Premium Reserve to be replaced with Securities Premium.

All capital losses to be written off in the year in which they occur unless otherwise mentioned.

NOTE: Schedule III Part II of Companies Act 2013 (Statement of Profit and Loss) is not required for the purpose of preparing final accounts of a Company.

SECTION B

MANAGEMENT ACCOUNTING

3. Financial Statement Analysis

Comparative Statements and Common Size Statements.

Meaning, significance and limitations of Comparative Statements and Common Size Statements.

Preparation of Comparative Balance Sheet and Statement of Profit and Loss (inter-firm and intra-firm) showing absolute change and percentage change.

Common size Balance Sheet to be prepared as a percentage of total assets and total liabilities.

Common size Statement of Profit and Loss to be prepared as a percentage of Revenue from operations.

NOTE: Preparation of comparative statements and common size statements to be made from the Balance Sheets and Statements of P/L without notes to accounts.

4. Cash Flow Statement (Only for Manufacturing Companies)

(i) Meaning, importance and preparation of a Cash Flow Statement.

NOTE: Based on Accounting Standard – 3 (revised) issued by the Institute of Chartered Accountants of India.

(ii) Calculation of net cash flows from operating activities based on Indirect Method only.

Preparation of a Cash Flow Statement from two consecutive years’ Balance Sheet with or without adjustments.

Preparation of complete/partial cash flow statement from extracts of Balance Sheets and Statements of P/L with or without adjustments.

NOTE: Any adjustment or an item in the Balance Sheet relating to extraordinary items and refund of tax are not required.

(iii) Preparation of Cash Flow Statement on basis of operating, investing and financing activities.

The following items are to be taken when calculating net cash flows from financing activities:

• Issue of shares at par and premium, issue of debentures at par, premium and discount.
• Redemption of preference shares and debentures at par.
• Interest paid on Long-Term and Short-Term Borrowings.
• Dividend– interim and final- paid on shares.
• Long-term borrowings and Short-term borrowings – bank overdraft, cash credit and short-term loan, whether taken or repaid.
• Share issue expenses / underwriting commission paid.

The following items are to be taken when calculating net cash flows from investing activities:

• Cash purchase of Property, Plant & Equipment & intangible assets.
• Cash sale of Property, Plant & Equipment & intangible assets.
• Purchase and proceeds from the sale of shares or debentures or long-term investments of other companies.
• Loans and advances given (whether short-term or long-term).
• Repayment of Loans and advances given (whether short-term or long-term).
• Interest and dividend received on shares or debentures or long-term investments of other companies.
• Interest received on Loans and advances given (whether short-term or long-term).

The following items are to be taken for cash and cash equivalents:

• Cash
• Bank
• Short term investments
• Marketable securities

NOTE:

1. Adjustments relating to provision for taxation, proposed dividend, interim dividend, amortization of intangible assets, profit or loss on sale of fixed assets including provision for/accumulated depreciation on them, Profit or loss on sale of investment, uses of Securities Premium as per Companies Act, 2013.
2. Treatment of proposed dividend:
   • Dividend proposed for the previous year will be an outflow for cash, unless otherwise stated, on the assumption that the proposed amount has been approved by the shareholders in the AGM.
   • No effect is given to Proposed Dividend for the current year as it is not provided for and is a contingent liability.
   • Any unpaid dividend is transferred to Dividend Payable Account / Unpaid Dividend Account which is shown in the Balance Sheet of the current year as Other Current Liabilities under Current Liabilities.
3. Treatment of provision for doubtful debts- Provision for doubtful debts can be treated as a charge against profits or as part of the working capital changes. In case of good debtors, the provision will be treated as an appropriation of profit.
4. To calculate cash flow from operating activities the Adjusted Profit and Loss Account is not acceptable as per AS-3.
5. Calculation of Net Profit before Tax has to be shown as a Working Note.
6. Excluded: Any transaction pertaining to Capital Reserve.

5. Ratio Analysis

A. Liquidity Ratios:

(i) Current Ratio:

\displaystyle \frac{\text{Current Assets}}{\text{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.

(ii) Quick Ratio / Liquid Ratio / Acid Test Ratio:

\displaystyle \frac{\text{Quick Assets}}{\text{Current Liabilities}}

Quick Assets = All Current Assets − Inventories (excluding Loose Tools and Spare Parts) − Prepaid Expenses.

B. Solvency Ratios:

(i) Debt to Equity Ratio:

\displaystyle \frac{\text{Debt}}{\text{Equity / Shareholders’ Funds}}

Debt = Long Term Borrowings + Long Term Provisions.

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

(ii) Proprietary Ratio:

\displaystyle \frac{\text{Shareholders’ Funds / Equity}}{\text{Total Assets}}

(iii) Debt to Total Assets Ratio:

\displaystyle \frac{\text{Debt}}{\text{Total Assets}}

(iv) Interest coverage ratio:

\displaystyle \frac{\text{Net Profit before Interest and Tax}}{\text{Fixed Interest Charges}}

Fixed Interest Charges includes interest on only long-term borrowings.

C. Activity Ratios:

(i) Trade Receivables Turnover Ratio:

\displaystyle \frac{\text{Credit Revenue from Operations}}{\text{Average Trade Receivables}}

(ii) Trade Payables Turnover Ratio:

\displaystyle \frac{\text{Net Credit Purchases}}{\text{Average Trade Payables}}

(iii) Working Capital Turnover Ratio:

\displaystyle \frac{\text{Revenue from Operations}}{\text{Working Capital}}

(iv) Inventory Turnover Ratio:

\displaystyle \frac{\text{Cost of Revenue from Operations}}{\text{Average Inventory}}

D. Profitability Ratios:

(i) Gross Profit Ratio:

\displaystyle \frac{\text{Gross Profit}}{\text{Revenue from Operations}} \times 100

(ii) Net Profit Ratio:

\displaystyle \frac{\text{Net Profit}}{\text{Revenue from Operations}} \times 100

Net Profit = Gross profit + Other Income − Indirect Expenses − Provision for Tax.

(iii) Operating Ratio:

\displaystyle \frac{\text{Cost of Revenue from Operations + Operating Expenses}}{\text{Revenue from Operations}} \times 100

(iv) Operating Profit Ratio:

\displaystyle \frac{\text{Net Operating Profit}}{\text{Revenue from Operations}} \times 100

(v) Earning per share:

\displaystyle \frac{\text{Net Profit after Tax and Preference Dividend}}{\text{Number of Equity Shares}}

(vi) Price Earning Ratio:

\displaystyle \frac{\text{Market Value of an Equity Share}}{\text{Earning per Share}}

(vii) Return on Investment:

\displaystyle \frac{\text{Net Profit before Interest and Tax}}{\text{Capital Employed}} \times 100

NOTE:

1. Current Ratio includes Net Debtors (Gross Debtors – Provision for doubtful debts) while Trade Receivables Turnover Ratio includes Gross Debtors.
2. Other Current Assets is restricted to Prepaid Expenses and Accrued Income.
3. Capital employed = Shareholders’ Funds + Non-current Liabilities – Non-trade Investments; OR Non-current Assets (excluding Non-trade Investments) + Working Capital; OR Property, Plant & Equipment & Intangible Assets + Trade Investments + Working Capital.
4. Investments to be taken as non-trade investments unless specified as trade investments.
5. In Return on Investments Ratio, Net Profit before interest and tax will not include interest on non-trade investments.
6. Problems on effect of transactions on ratios to be restricted to Current Ratio, Quick Ratio and Debt-Equity Ratio.
7. Net Profit Ratio is to be calculated on ‘Net Profit after Tax’.

SECTION C

COMPUTERISED ACCOUNTING

6. Accounting Application of Electronic Spread Sheet

(i) Concept of Electronic Spreadsheet.

Meaning, utility, merits and demerits of Electronic spreadsheets.

(ii) Features offered by Electronic Spreadsheet.

An understanding of basic features of electronic spreadsheets such as: Creating worksheet, entering data into worksheet, heading information, data, text, dates, alphanumeric values, saving & quitting worksheet. Opening and moving around in an existing worksheet. Toolbars and Menus, keyboard shortcuts. Working with single and multiple workbooks - copying, renaming, moving, adding and deleting, copying entries and moving between workbooks. Formatting of worksheet- Auto format, changing alignment, character styles, column width, date format, borders and colours. Previewing and Printing worksheet - Page setting, Print titles, Adjusting margins, Page break, headers and footers. Formulas – summation, subtraction, division, multiplication, average and percentage. Functions: date, if-then- else, freezing panes.

(iii) Application of spreadsheets in generating the following accounting information:

1. Payroll — Components of payroll – Basic, HRA, DA and TA, CCA, CTC deduction for PF and income tax.
2. Sale of goods - finding profit on sales; cost / commission of salesmen.
3. Marks obtained by students - Total marks / average marks.
4. Business transactions - Journal.

(iv) Data Presentation

Graphs and charts- using wizards, various charts type, formatting grid lines and legends, previewing & printing charts.

Database - creation, sorting, query and filtering a database.

7. Database Management System (DBMS)

(i) Concept and Features of DBMS.

Types and features of DBMS.

A conceptual understanding of the basic features of Data Base Management System (DBMS), i.e. data update and retrieval using basic functions and commands of SQL.

Basic Commands: Select, Where, And, Or, Update, Delete.

Basic Functions: Avg, Count, Max, Min, Sum.

(ii) DBMS in Business Application.

Database design, tables, fields, relationships, forms reports and indexing.

The following examples of DBMS in business application:

• Accounting Information
• Debtors and Creditors
• Bank Reconciliation Statement
• Asset Accounting