Question 27 Chapter 4 of +2-B - T.S. Grewal 12 Class

Question 27 Chapter 4 of +2-B

Table of Contents

The solution of Question 27 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)

27. The Quick Ratio of a Company is 0.8: 1. State with Reason, whether the
following transactions will increase, decrease or not change the Quick Ratio :
(i) Purchase of loose tools for Rs. 2,000;
(ii) An insurance premium paid in advance Rs. 500;
(iii) Sale of goods on credit Rs. 3,000;
(iv) Honoured bills Payable of Rs. 5,000 on maturity.

The solution of Question 27 Chapter 4 of +2-B: –


Transactions	Impact on Current Ratio	Reason
(i) Purchase of loose tools for Rs. 2,000.	Decrease	There is a decrease in the number of Quick Assets Current Liabilities remain Same.
(ii) The insurance premium paid in advance Rs. 500.	Decrease	In this transaction decrease in the number of Quick Assets, Current Liabilities remain Same.
(iii) Sale of goods on credit Rs. 3,000. 10,000.	Increase	Increase in Quick Assets in the form of the debtor, no change in current liabilities.
(iv) Honoured bills Payable of Rs. 5,000 on maturity.	Decrease	The decrease in Quick Assets, current liabilities also decrease with this transaction.