Question 12 Chapter 4 of +2-B
Table of Contents
I. Liquidity Ratios
12. (Current Ratio & Quick Ratio & Conclusion) Following is the balance sheet of XYZ Ltd. As of 31st March 2018.
| Balance Sheet | ||
| Particular | Note No. | ₹ |
| I. Equity and Liabilities | ||
| Shareholders’ Funds | ||
| Equity Share Capital | 24,000 | |
| 2,400 shares of ₹10 each fully paid up | ||
| Reserves and Surplus | ||
| Statement of Profit and Loss | 6,000 | |
| Non-Current Liabilities | ||
| Long-term Borrowing : | ||
| 10% Debentures | 15,000 | |
| Current Liabilities | ||
| Trade Payable | 23,400 | |
| Provisions | ||
| Provision for Taxation | 600 | |
| 69,000 | ||
| II. Assets : | ||
| Non-Current Assets | ||
| Tangible Assets | ||
| Machinery and Equipment | 45,000 | |
| Current Assets | ||
| Inventory | 12,000 | |
| Trade Receivable | 9,000 | |
| Prepaid Expenses | 720 | |
| Cash at Bank | 2,280 | |
| 69,000 |
The solution of Question 12 Chapter 4 of +2-B: –
| Current Assets | = | Inventory + Trade Receivable + Prepaid Expenses + Cash at Bank |
| = | ₹ 12,000 + ₹ 9,000 + ₹ 2,280 + ₹ 720 | |
| Current Assets | = | ₹ 24,000 |
| Current Liabilities | = | Trade payable Provision for taxation |
| = | ₹ 23,400 + ₹ 600 | |
| Current Liabilities | = | ₹ 24,000 |
| Current Ratio= | Current Assets |
| Current Liabilities |
| Current Ratio | = | ₹ 24,000 |
| ₹ 24,000 | ||
| = | 1: 1 |
| Quick Assets | = | Trade receivables + Cash |
| = | ₹ 9,000 + ₹ 2,280 | |
| Quick Assets | = | ₹ 11,280 |
| Current Liabilities | = | ₹ 24,000 |
| Quick Ratio | = | Quick Assets |
| Current Liabilities | ||
| = | ₹ 11,280 | |
| ₹ 24,000 | ||
| Quick Ratio | = | 0.47 : 1 |
Conclusion:-
Current Ratio (1:1)
The situation is not good because the current assets are equal or sufficient to pay current liabilities.
Liquid Ratio
This is also no so good because there is not margin in liquid assets for the current liabilities of the business.
What are Liquidity Ratios – Formulas and Examples
Comment if you have any question.
Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
