Question 26 Chapter 4 of +2-B - T.S. Grewal 12 Class

Question 26 Chapter 4 of +2-B

Table of Contents

The solution of Question 26 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)

26. Quick Ratio of a company is 2: 1. State giving reasons, which of the
following transactions would (i) Improve, (ii) Reduce, (iii) Not change the Quick Ratio:
Purchase of goods for cash;
Purchase of goods on credit;
Sale of goods (costing Rs. 10,000) for Rs. 10,000;
Sale of goods (costing Rs. 10,000) for Rs. 11,000;
Cash received from Trade Receivables.

The solution of Question 26 Chapter 4 of +2-B: –


Transactions	Impact on Current Ratio	Reason
(a) Purchase of goods for cash.	Reduce	There is a decrease in the amount of Cash (Current Assets) and increase in, Inventory, Liquid Assets are decreased by payment of goods.
(b) Purchase of goods on credit.	Reduce	The is Increase in the number of Current Liabilities and Liquid Assets remain the same.
(c) Sale of goods (costing Rs. 10,000) for Rs. 10,000.	Improve	Increase in Quick Assets in the form of either in cash or debtor. This results in no change in current liabilities.
(d) Sale of goods (costing Rs. 10,000) for Rs. 11,000	No Change	Increase in Quick Assets in the form of either in cash or debtor. This results in no change in current liabilities.
(e) Cash received from Trade Receivables.	No Change	With this transaction, the Quick Assets value decrease beside this also decrease in Quick Assets in Form of Debtors.