CBSE Class 12 Accountancy Formulas – All Chapters (Complete Formula Sheet)

CBSE Class 12 Accountancy Formulas Chapters wise

Chapter 1 – Accounting for Partnership: Basic Concepts

Partnership accounts form the foundation of Class 12 Accountancy. The core formulas here revolve around profit distribution, interest calculations, and capital adjustments.

Do Check – CBSE Class 12 Accountancy Answer Key 2026

Chapter 2 – Goodwill: Nature and Valuation

Goodwill represents the reputation and earning capacity of a business. Three methods are tested in board exams.

Chapter 3 – Reconstitution: Admission of a Partner

When a new partner joins, the existing profit-sharing arrangement changes. Key calculations involve new ratio, sacrifice ratio, and goodwill treatment.

Chapter 4 – Retirement and Death of a Partner

Chapter 5 – Dissolution of Partnership Firm

Chapter 6 – Accounting for Share Capital

Chapter 7 – Issue and Redemption of Debentures

Chapter 8 – Financial Statements of a Company

This chapter involves preparing the Balance Sheet and Statement of Profit & Loss as per Schedule III of the Companies Act 2013.

Key formulas here are structural rather than mathematical, but two critical ones are:

• Retained Earnings (Reserves & Surplus): Opening Balance + Net Profit − Dividend − Transfer to Reserves = Closing Balance
• Depreciation: Straight Line Method: Depreciation = (Cost − Residual Value) / Useful Life

Written Down Value Method: Depreciation = Opening Book Value × Rate / 100

Chapter 9 – Analysis of Financial Statements (Accounting Ratios)

This is the highest-weightage formula chapter in Class 12 Accountancy Part 2. Master these ratios for 12–16 marks in board exams.

Liquidity Ratios

Solvency Ratios

Activity / Turnover Ratios

Profitability Ratios

Important Formulas within Ratios:

• Cost of Revenue from Operations (CROP) = Opening Inventory + Purchases + Direct Expenses − Closing Inventory
• Net Revenue from Operations = Total Revenue − GST/Returns
• Capital Employed = Shareholders’ Funds + Non-current Liabilities = Total Assets − Current Liabilities
• Shareholders’ Funds = Share Capital + Reserves & Surplus
• Working Capital = Current Assets − Current Liabilities

Chapter 10 – Cash Flow Statement

Cash Flow Statement classifies all cash movements into three activities.

Common Mistakes Students Make

• In Accounting Ratios: Students often include Bank Overdraft in Current Liabilities for Debt-Equity Ratio — it should only include long-term debt. Also, prepaid expenses must be excluded from Quick Ratio along with inventory.
• In Cash Flow: Dividend paid is a Financing Activity for the company, not Operating. Interest received is Investing; interest paid can be Operating or Financing. Many students get this wrong.
• In Goodwill: Forgetting to adjust for abnormal profits/losses before calculating average profit is a very common error. Non-recurring items like fire losses or windfall gains must always be removed.
• In Partnership: Applying Garner vs Murray when the firm itself is not insolvent – this rule only applies when the firm is solvent but a partner is personally insolvent.
• In Share Capital: Confusing Securities Premium Reserve (used only for specific purposes) with general reserve – this is a frequent conceptual error.

Memory Tips & Tricks

• CURRENT RATIO: “CA over CL – think 2 is the ideal deal.”
• QUICK RATIO: “CA minus Inventory minus Prepaid – quick means no delays.”
• For Goodwill Methods, remember “ASC”: Average Profit → Super Profit → Capitalisation.
• For Cash Flow adjustments, remember “IDOLA”: Increase in CA = Deduct; Decrease in CA = Add; Increase in CL = Add; Decrease in CL = Deduct.
• For Sacrificing vs Gaining Ratio: “Old minus New = Sacrifice; New minus Old = Gain.” The verbs tell you the direction.
• For ITR vs TRTR: Inventory uses Cost of Revenue from Operations; Debtors use Net Credit Revenue from Operations. Don’t mix them.

Conclusion

Class 12 Accountancy is built on formulas – but understanding what each formula measures is what separates a good score from a great one.

Here is a quick recap of the most critical formulas by chapter:

Partnership Basics covers interest on capital, interest on drawings, and commission formulas. Goodwill Valuation requires mastery of Average Profit, Super Profit, and Capitalisation methods. Reconstitution chapters test New PSR, Sacrificing Ratio, and Gaining Ratio consistently. Share Capital and Debentures involve entry-level calculations around premium, discount, and forfeiture. Accounting Ratios is the highest-scoring analytical chapter  covering Liquidity, Solvency, Turnover, and Profitability Ratios. Cash Flow Statement requires understanding of all three activity classifications and their adjustment logic.

The students who score 95+ in Accountancy are not necessarily the most talented – they are the most prepared. They have their formula sheet ready, they practise adjustments until they are automatic, and they never leave the Cash Flow Statement for the last day.

You now have everything you need. Revise this formula sheet regularly, apply each formula to at least two practice problems, and walk into your board exam with confidence. You have got this.

CBSE Class 12 Accountancy Formulas related FAQs

Q1. What is the formula for Current Ratio in Class 12 Accountancy?

Current Ratio = Current Assets / Current Liabilities. The ideal current ratio is 2:1, meaning for every ₹2 of current assets, there should be ₹1 of current liabilities. It measures a firm’s short-term liquidity. Current Assets include debtors, inventory, cash, and short-term investments.

Q2. How is goodwill calculated in Class 12 Accountancy?

Goodwill is calculated using three methods: Average Profit Method (Average Profit × Years’ Purchase), Super Profit Method (Super Profit × Years’ Purchase), and Capitalisation Method. Super Profit = Average Profit − Normal Profit, where Normal Profit = Capital Employed × Normal Rate of Return / 100.

Q3. What is the difference between Sacrificing Ratio and Gaining Ratio?

Sacrificing Ratio = Old Share − New Share; it applies when a partner gives up share (on admission). Gaining Ratio = New Share − Old Share; it applies when remaining partners gain share (on retirement). They are exact opposites in context and calculation direction.

Q4. What are the formulas for Cash Flow from Operating Activities?

Under the Indirect Method: Start with Net Profit, add back non-cash items like depreciation, adjust for working capital changes (increase in CA is deducted; decrease in CA is added; increase in CL is added; decrease in CL is deducted), then deduct tax paid. The result is Net Cash from Operating Activities.

Q5. What is the formula for Return on Investment (ROI)?

ROI = (Net Profit before Interest and Tax / Capital Employed) × 100. Capital Employed = Shareholders’ Funds + Long-term Debt = Total Assets − Current Liabilities. It measures how efficiently a company uses its total capital to generate profit.

Q6. What is the Debt to Equity Ratio formula and its ideal value?

Debt to Equity Ratio = Long-term Debt / Shareholders’ Funds. The ideal ratio is 2:1, meaning long-term debt should not exceed twice the equity. A higher ratio indicates greater financial risk. Shareholders’ Funds = Share Capital + Reserves and Surplus.

Q7. How is Interest on Drawings calculated in partnership accounts?

If drawings are equal and monthly: Interest = Total Drawings × Rate/100 × 6.5/12 (average period). If drawings are made at specific intervals, use the Product Method: multiply each drawing by months remaining in the year, sum all products, then multiply by Rate/(100 × 12). This gives the exact interest charge.

Q8. What formulas are important for the Dissolution of a Partnership Firm?

The Realisation Account captures: assets transferred at book value (Dr), liabilities transferred (Cr), assets realised in cash (Dr Cash, Cr Realisation), liabilities paid in cash (Dr Realisation, Cr Cash). Profit or Loss on Realisation = Cash received from assets − Book value of assets + Liabilities transferred − Cash paid for liabilities. Distributed in old PSR.