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Question 77 Chapter 14 of Class 12 Part – 2 – 2024
77. (Effect of Transactions on Operating Ratio) The operating ratio of a company is 80%. State, giving reasons, which of the following transactions will (a) increase, (b) decrease or (c) not alter the operating ratio:
(i) Credit purchase of goods ₹ 5,000 (ii) Sales Returns ₹ 200
(iii) Payment to Creditors ₹ 1,000 (iv) Selling Expenses ₹ 800
(v) Cash Sales ₹ 10,000 (vi) Purchase Returns ₹ 100
| Transactions |
Effect on Operating ratio | Reason |
|---|---|---|
| (i) Credit purchase of goods ₹ 5,000 | Increase | Cost of goods sold will increase by Credit purchase of goods. |
| (ii) Sales Returns ₹ 200 | Increase | Sales are decreasing with sales returns. |
| (iii) Payment to Creditors ₹ 1,000 | No Effect | There is No Effect on operating expenses and Net Sales. |
| (iv) Selling Expenses ₹ 800 | Increase | This is operating expenditure and it is added to operating expenses. |
| (v) Cash Sales ₹ 10,000 | Decrease | The amount of Net Sales is increasing without a change in Operating Expenses. |
| (vi) Purchase Returns ₹ 100 | Decrease | There is a decrease in the amount of cost of goods sold. |
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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