Question 10 Chapter 4 of +2-B - T.S. Grewal 12 Class

Question 10 Chapter 4 of +2-B

Table of Contents

The solution of Question 10 Chapter 4 of +2-B: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

Current Ratio and Quick Ratio

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

The solution of Question 10 Chapter 4 of +2-B: –

Current Ratio	=	Current Assets	=	1.5
		Current Liabilities		1

Current Liabilities=Rs. 1,75,000

The company is interested in maintaining Current Ratio 2: 1 by paying off the liability.

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∴ Let the liability paid-off by the company = x

New Current Assets	=	3,00,000 – x	=	2
		2,00,000 – x		1

or,Rs. 4,00,000 – 2x =Rs. 3,00,000 – x
x=Rs. 1,00,000
Therefore, the liability of Rs. 1,00,000 need to be paid off by the company in order to maintain the Current Ratio of 2: 1.