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

Question 12 Chapter 4 of +2-B

Question 12 Chapter 4 of +2-B

Current Ratio and Quick Ratio

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

The solution of Question 12 Chapter 4 of +2-B: –

The Firm paid off liabilities of Rs.1,00,000 
which results in a decrease in current liabilities and current assets by the same amount.
After making the payment:

Current Assets=Rs.4,00,000 (Rs.5,00,000 – Rs.1,00,000)

∴ Let Current Liabilities be = (x – Rs.1,00,000)

Current Ratio=Current Assets=Rs. 8,75,000=2
Current LiabilitiesRs. 3,50,0001
Rs. 4,00,000=2x – Rs. 2,00,000
Rs. 6,00,000=2x
Therefore, x=3,00,000

 

Current Liabilities after payment= – Rs.1,00,000 = Rs.2,00,000
Working Capital after Payment=Current Assets – Current Liabilities
 =Rs.4,00,000 – Rs.2,00,000 =Rs. 2,00,000
Current Assets before payment  Rs.5,00,000
Current Liabilities before Payment=Rs.3,00,000
Therefore, Working Capital Before Payment – Current Assets – Current Liabilities=Rs.5,00,000 – Rs.3,00,000
 =Rs.2,00,000


Therefore, goods worth Rs.1,75,000 must be purchased on credit to maintain the current ratio at 2:1

Balance Sheet: Meaning, Format & Examples

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Also, Check out the solved question of previous Chapters: –

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)

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

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

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T.S. Grewal’s Analysis of Financial Statements

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