Accountancy

Current Assets Rs. 3,00,000; Inventories Rs. 60,000; Working Capital Rs. 2,52,000. Calculate Quick Ratio.

SOLUTION Current Liabilities = Current Assets − Working Capital= 3,00,000 − 2,52,000= 48,000Quick Assets = Current Assets − Stock= 3,00,000 − 60,000= 2,40,000 Current ratio = Current assets / Current liabilities= 2,40,000…

Continue ReadingCurrent Assets Rs. 3,00,000; Inventories Rs. 60,000; Working Capital Rs. 2,52,000. Calculate Quick Ratio.

Quick Assets  Rs. 1,50,000; Inventory (Stock) Rs. 40,000; Prepaid Expenses Rs. 10,000; Working Capital Rs. 1,20,000. Calculate Current Ratio.

SOLUTION Quick Assets = 1,50,000Inventory = 40,000Prepaid Expenses = 10,000Current Assets = Quick Assets + Inventory + Prepaid Expenses= 1,50,000 + 40,000 + 10,000= 2,00,000Working Capital = Current Assets − Current…

Continue ReadingQuick Assets  Rs. 1,50,000; Inventory (Stock) Rs. 40,000; Prepaid Expenses Rs. 10,000; Working Capital Rs. 1,20,000. Calculate Current Ratio.

From the following information, calculate Liquid Ratio:

ParticularsAmount(Rs.)ParticularsAmount(Rs.)Current Assets2,00,000Trade Receivables1,10,000Inventories50,000Current Liabilities70,000Prepaid Expenses 10,000   SOLUTION Quick Assets or Liquid Assets = Currents Assets – Inventories – Pre-paid Expenses = 2,00,000 – 50,000 – 10,000 = Rs. 1,40,000Current Liabilities = Rs. 70,000Current ratio = liquid assets or quick…

Continue ReadingFrom the following information, calculate Liquid Ratio:

State giving reasons, which of the following transactions would improve, reduce or not change the Current Ratio, if Current Ratio of a company is (i) 1: 1; or (ii) 0.8: 1(a) Cash paid to Trade Payables.(b) Purchase of Stock-in-Trade on credit.(c) Purchase of Stock-in-Trade for cash.(d) Payment of Dividend payable.(e) Bills Payable discharged.(f) Bills Receivable endorsed to a Creditor.(g) Bills Receivable endorsed to a Creditor dishonoured.

SOLUTION (i)  Let’s assume Current Assets as Rs. 1,00,000 and Current Liabilities as Rs. 1,00,000Current Ratio = Current Assets / Current LiabilitiesCurrent Ratio  = 1,00,000 / 1,00,000 = 1: 1(a) Cash paid to Trade Payables (say Rs. 50,000)Current Ratio = (1,00,000 − 50,000)…

Continue ReadingState giving reasons, which of the following transactions would improve, reduce or not change the Current Ratio, if Current Ratio of a company is (i) 1: 1; or (ii) 0.8: 1(a) Cash paid to Trade Payables.(b) Purchase of Stock-in-Trade on credit.(c) Purchase of Stock-in-Trade for cash.(d) Payment of Dividend payable.(e) Bills Payable discharged.(f) Bills Receivable endorsed to a Creditor.(g) Bills Receivable endorsed to a Creditor dishonoured.

State giving reason, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2: 1 (a) Cash paid to Trade Payables. (b) Bills Payable discharged. (c) Bills Receivable endorsed to a creditor. (d) Payment of final Dividend already declared. (e) Purchase of Stock-in-Trade on credit. (f) Bills Receivable endorsed to a Creditor dishonored. (g) Purchases of Stock-in-Trade for cash. (h) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 45,000. (i) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 60,000.

SOLUTION Let’s assume Current Assets as Rs. 2,00,000 and Current Liabilities as Rs. 1,00,000Current Ratio = Current Assets / Current LiabilitiesCurrent Ratio  = 2,00,000 / 1,00,000= 2: 1 (a) Cash paid to Trade Payables (say Rs. 50,000)Current Ratio = 2,00,000 − 50,000:  1,00,000 −…

Continue ReadingState giving reason, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2: 1 (a) Cash paid to Trade Payables. (b) Bills Payable discharged. (c) Bills Receivable endorsed to a creditor. (d) Payment of final Dividend already declared. (e) Purchase of Stock-in-Trade on credit. (f) Bills Receivable endorsed to a Creditor dishonored. (g) Purchases of Stock-in-Trade for cash. (h) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 45,000. (i) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 60,000.

A firm had Current Assets of Rs. 5,00,000. It paid Current Liabilities of Rs. 1,00,000 and the Current Ratio became 2: 1. Determine Current Liabilities and Working Capital before and after the payment was made.

SOLUTION Firm disposed off liabilities of Rs. 1,00,000 which results in decrease in current liabilities and current assets by the same amount.After disposing liabilities:Current Assets =  Rs. 4,00,000 (Rs. 5,00,000 – Rs. 1,00,000)And, Let Current Liabilities be (x…

Continue ReadingA firm had Current Assets of Rs. 5,00,000. It paid Current Liabilities of Rs. 1,00,000 and the Current Ratio became 2: 1. Determine Current Liabilities and Working Capital before and after the payment was made.

Ratio of Current Assets (Rs. 8,75,000) to Current Liabilities (Rs. 3,50,000) is 2.5: 1. The firm wants to maintain Current Ratio of 2: 1 by purchasing goods on credit. Compute amount of goods that should be purchased on credit.

SOLUTION Current Assets = Rs. 8,75,000Current Liabilities = Rs. 3,50,000Current Ratio  = 2.5: 1The business is interested to maintain its Current Ratio at 2: 1 by purchasing goods on credit.Let the amount of goods…

Continue ReadingRatio of Current Assets (Rs. 8,75,000) to Current Liabilities (Rs. 3,50,000) is 2.5: 1. The firm wants to maintain Current Ratio of 2: 1 by purchasing goods on credit. Compute amount of goods that should be purchased on credit.

Ratio of Current Assets (Rs. 3,00,000) to Current Liabilities (Rs. 2,00,000) is 1.5: 1. The accountant of the firm interested is maintain in  a Current Ratio of 2: 1 by paying off a part of the Current Liabilities. Compute amount of the Current Liabilities that should be paid so that the Current Ratio at the level of 2: 1 may be maintained.

SOLUTION Current ratio = Current assets / Current liabilities = 1.5: 1The company is interested in maintaining the Current Ratio of 2: 1 by paying off the liability. Let the liability…

Continue ReadingRatio of Current Assets (Rs. 3,00,000) to Current Liabilities (Rs. 2,00,000) is 1.5: 1. The accountant of the firm interested is maintain in  a Current Ratio of 2: 1 by paying off a part of the Current Liabilities. Compute amount of the Current Liabilities that should be paid so that the Current Ratio at the level of 2: 1 may be maintained.

Current Liabilities of a company were Rs. 1,75,000 and its Current Ratio was 2: 1. It paid Rs. 30,000 to a Creditor. Calculate Current Ratio after payment.

SOLUTION Current ratio = Current assets / Current liabilities = 2: 1Current Liabilities = Rs. 1,75,000   Payment of Rs. 30,000 to a Creditor will have two effects: Decrease in Cash by Rs. 30,000 and therefore…

Continue ReadingCurrent Liabilities of a company were Rs. 1,75,000 and its Current Ratio was 2: 1. It paid Rs. 30,000 to a Creditor. Calculate Current Ratio after payment.