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Question 9 Chapter 4 of +2-B
Current Ratio and Quick Ratio
9. 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. Ratio after the purchase.
| Current Ratio | =2: 1 |
| Current Liabilities | =Rs. 1,75,000 |
Payment of Rs.30,000 to a Creditor will have two effects:
(i) Decrease in Cash by Rs.30,000
| Current Assets= | Rs. 3,50,000 – Rs. 30,000 |
| Current Assets= | =Rs. 3,20,000 |
(ii) Decrease in Creditors by Rs.30,000
| Current Liabilities= | Rs. 1,75,000 - Rs. 30,000 |
| Current Liabilities= | Rs. 1,45,000 |
| Current Ratio= | Current Assets |
| Current Liabilities |
| Current Ratio= | |
Current Ratio=2.21 : 1
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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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