Question 12 Chapter 4 of +2-B – USHA Publication 12 Class

Question 12 Chapter 4 of +2-B

Question 12 Chapter 4 of +2-B

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

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

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

2 Book 3 min 225x300 - Question 12 Chapter 4 of +2-B  - USHA Publication  12 Class
T.S. Grewal’s Analysis of Financial Statements

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