Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Ratio of Current Assets (₹8,75,000) to Current Liabilities (₹3,50,000) is 2.5:1. The firm wants to maintain a Current Ratio of 2:1 by purchasing goods on credit. Compute the amount of goods that should be purchased on credit.
Current Assets = ₹8,75,000, Current Liabilities = ₹3,50,000, Current Ratio = 2.5:1.
Let the amount of goods purchased on credit be x (this increases both Inventory and Trade Payables by the same amount).
New Current Liabilities = 3,50,000 + x
New Current Assets = 8,75,000 + x
New Current Ratio: (8,75,000 + x) ÷ (3,50,000 + x) = 2:1
8,75,000 + x = 2(3,50,000 + x) = 7,00,000 + 2x
8,75,000 − 7,00,000 = 2x − x
x = ₹1,75,000
Therefore, goods worth ₹1,75,000 must be purchased on credit to maintain the Current Ratio at 2:1.
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.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.13 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
You can take our custom-built interactive practice quiz directly on this page to test your understanding of "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.13 - Accounting Ratios" instantly.