CSS Accounting and Auditing Specialized and Corporate Accounting Syllabus

Specialized and Corporate Accounting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Specialized and Corporate Accounting in CSS Accounting and Auditing, not a summary of it.

1. 1

   Partnership Accounts

   5 topics

   • Formation and Profit Sharing
   • Admission of a Partner
   • Retirement and Death of a Partner
   • Dissolution of Partnership
   • Goodwill Treatment
2. 2

   Company Accounts

   4 topics

   • Issue of Shares and Debentures
   • Redemption of Debentures and Preference Shares
   • Final Accounts of Companies
   • Appropriation of Profits and Dividends
3. 3

   Accounting for Non-Profit Organizations

   3 topics

   • Receipts and Payments Account
   • Income and Expenditure Account
   • Balance Sheet of NPOs
4. 4

   Branch and Departmental Accounts

   3 topics

   • Dependent Branch Accounting
   • Independent Branch Accounting
   • Departmental Accounts and Inter-Departmental Transfers
5. 5

   Consignment and Joint Ventures

   3 topics

   • Consignment Accounts
   • Valuation of Unsold Stock
   • Joint Venture Accounts
6. 6

   Analysis and Interpretation of Financial Statements

   3 topics

   • Ratio Analysis
   • Common Size and Trend Analysis
   • Working Capital Analysis

Specialized and Corporate Accounting flashcards for CSS Accounting and Auditing

20 of 51 cards from the Specialized and Corporate Accounting deck — real questions with worked answers.

1. In the absence of a partnership deed, what does the Partnership Act prescribe for profit sharing, interest on capital, interest on loan, and partner's salary?

   Profits/losses are shared equally; no interest on capital is allowed; interest on a partner's loan is allowed at $6\%$ per annum; and no salary or remuneration is allowed to any partner.

2. What is the formula for interest on a partner's capital, and how is it treated in the accounts?

   $\text{Interest on Capital} = \text{Capital} \times \text{Rate} \times \frac{\text{Months}}{12}$. It is an appropriation of profit, debited to the Profit and Loss Appropriation Account and credited to the partners' capital/current accounts.

3. Distinguish between the Fixed Capital Method and the Fluctuating Capital Method of maintaining partners' capital accounts.

   Under the fixed method, capital stays unchanged and all adjustments (drawings, interest, salary, share of profit) go to a separate Current Account. Under the fluctuating method, only one Capital Account is kept and all adjustments are passed through it, so the balance changes each year.

4. What is the purpose of the Profit and Loss Appropriation Account in partnership accounting?

   It shows how the net profit (after the P&L Account) is distributed among partners—covering interest on capital, partners' salaries/commission, interest on drawings, and the final division of the residual profit in the profit-sharing ratio.

5. How is interest on a partner's drawings calculated when drawings are made evenly throughout the year (average period method)?

   $\text{Interest} = \text{Total Drawings} \times \text{Rate} \times \frac{\text{Average Period}}{12}$. For even monthly drawings the average period is $6.5$ months (beginning of month) or $5.5$ months (end of month).

6. Define goodwill in accounting and name the three main methods used to value it.

   Goodwill is the value of a firm's reputation that enables it to earn profits above the normal return. The three valuation methods are: (1) Average Profit Method, (2) Super Profit Method, and (3) Capitalisation Method.

7. State the formula for goodwill under the Super Profit Method and define super profit.

   $\text{Goodwill} = \text{Super Profit} \times \text{Number of Years' Purchase}$, where $\text{Super Profit} = \text{Average Profit} - \text{Normal Profit}$ and $\text{Normal Profit} = \text{Capital Employed} \times \text{Normal Rate of Return}$.

8. Under the Capitalisation of Super Profit method, how is goodwill computed?

   $\text{Goodwill} = \dfrac{\text{Super Profit} \times 100}{\text{Normal Rate of Return}}$, i.e. the super profit is capitalised at the normal rate of return.

9. What is the sacrificing ratio on the admission of a partner, and why is it calculated?

   $\text{Sacrificing Ratio} = \text{Old Ratio} - \text{New Ratio}$. It identifies the proportion in which the old partners surrender their share to the incoming partner, and determines how the new partner's goodwill premium is shared among them.

10. On admission of a partner, how is the premium for goodwill brought in cash treated when paid privately versus through the firm?

    If brought through the firm, Cash/Bank is debited and the premium is credited to the old partners' capital accounts in their sacrificing ratio. If paid privately (outside the books), no entry is recorded in the firm's books.

11. Why is a Revaluation (Profit and Loss Adjustment) Account prepared on the admission of a partner?

    To record the increase or decrease in the value of assets and liabilities so that the resulting profit or loss on revaluation is shared among the OLD partners in their old ratio, before the new partner is admitted.

12. What is the gaining ratio on a partner's retirement and how is it computed?

    $\text{Gaining Ratio} = \text{New Ratio} - \text{Old Ratio}$. It is the ratio in which the continuing partners acquire the retiring partner's share, and is used to charge them for the retiring partner's goodwill.

13. How is the amount due to a deceased partner determined on the date of death?

    It is the deceased partner's capital plus: share of goodwill, share of reserves/accumulated profits, share of revaluation profit, interest on capital, salary, and share of profit up to date of death; less drawings, interest on drawings, and share of any losses.

14. How is a deceased partner's share of profit from the start of the year to the date of death usually estimated?

    On a time or sales basis, e.g. $\text{Share} = \text{Last Year's (or Estimated) Profit} \times \dfrac{\text{Period to date of death}}{12} \times \text{Deceased partner's share}$, credited to his account and debited to P&L Suspense or remaining partners.

15. What account is opened to transfer the balance due to a deceased partner, and how is it typically settled?

    The balance is transferred from the deceased partner's capital account to his Executor's (Legal Representative's) Account, which is then settled by immediate cash payment, instalments with interest, or carried as a loan until paid.

16. Distinguish between dissolution of partnership and dissolution of firm.

    Dissolution of partnership only changes the relationship among partners (e.g. on admission, retirement, or death) while the firm continues. Dissolution of firm means the complete closure of business, realisation of all assets, and settlement of all liabilities—the firm ceases to exist.

17. State the order of payment of liabilities on dissolution of a firm (Garner v. Murray context aside).

    From realisation proceeds: (1) external/third-party liabilities and realisation expenses first; (2) partners' loans/advances next; (3) partners' capital balances; and (4) any surplus is distributed among partners in their profit-sharing ratio.

18. What is the rule in Garner v. Murray regarding an insolvent partner's capital deficiency?

    The deficiency (loss) of an insolvent partner who cannot pay is borne by the solvent partners in the ratio of their last agreed capitals (not the profit-sharing ratio), while normal realisation profits/losses are still shared in the profit-sharing ratio.

19. What is the purpose of the Realisation Account in dissolution, and how is its balance treated?

    It records the sale/realisation of assets and settlement of liabilities to determine the overall profit or loss on dissolution. The resulting profit or loss is transferred to the partners' capital accounts in their profit-sharing ratio.

20. Differentiate between a share and a debenture.

    A share is a unit of ownership capital—its holder is an owner/member entitled to dividends and voting rights. A debenture is a unit of borrowed capital (a loan)—its holder is a creditor entitled to fixed interest, usually with no voting rights, payable whether or not there is profit.

See more Specialized and Corporate Accounting flashcards →

Planning Specialized and Corporate Accounting for CSS Accounting and Auditing

Specialized and Corporate Accounting (CSS Accounting and Auditing) FAQ