Assertion Reason MCQs of Accounting Ratio (Accountancy Class 12
Looking for important Assertion Reason Based MCQs with answers of Accounting Ratio chapter of accountancy (Volume 1) class 12 CBSE, ISC, and state Board.
We have compiled very important Assertion Reason based Multiple choice questions of Accounting Ratios chapter of accountancy Volume 3 class 12
Assertion Reason Multiple Choice Questions of Accounting Ratio of Accountancy class 12
Let’s Practice
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Activity Ratios are the ratios that are calculated for measuring the efficiency of operations of business based on effective utilisation of resources.
Reason (R): Current ratio and Quick Ratio are liquidity ratios
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – b)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): The limitations of financial statements also form the limitations of the ratio analysis.
Reason (R): Since the ratios are derived from the financial statements, any weakness in the original financial statements will also creep in the derived analysis in the form of Accounting Ratios.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – a)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): If the debt-equity ratio is 1:2, it is considered to be safe.
Reason (R): From a Security point of view, a capital structure with less debt and more equity is considered favourable as it reduces the changes of bankruptcy.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – d)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Interest Coverage Ratio expresses the relationship between profits available for payment of interest and the amount of interest payable.
Reason (R): A higher ratio ensures lesser safety of interest on debts.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – c)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Ratio analysis is an indispensable part of the interpretation of results revealed by the financial statements
Reason (R): Ratio analysis, is a technique that involves regrouping of data by application of arithmetical relationships, though its interpretation is a complex relationship.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – b)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Activity Ratio indicates the speed at which the activities of the business are being performed.
Reason (R): Lower turnover ratio means better utilization of assets and signifies improved efficiency and profitability.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – c)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Higher Trade Receivable Turnover means speedy collections from trade receivable.
Reason (R): Trade Receivable Turnover Ratio indicates the number of times the receivables are turned over and converted into cash in an accounting period.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true
Ans – a)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Personal bias can be reflected in ratio analysis.
Reason (R): Different people may interpret the same ratio in different ways, which affects its trustability.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is false but Reason (R) is true
d) Assertion (A) is true but Reason (R) is false
Ans – a)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Inventories and prepaid expenses are not considered as quick assets.
Reason (R): Inventories take some time before it is converted into cash while prepaid expenses can be converted into cash.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is false but Reason (R) is true
d) Assertion (A) is true but Reason (R) is false
Ans – d)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): The debt to equity ratio will increase at the time of the issue of equity shares for cash.
Reason (R): The issue of equity shares will increase the shareholder’s funds but the long-term debts will remain the same.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is false but Reason (R) is true
d) Assertion (A) is true but Reason (R) is false
Ans – c)
1. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Current ratio is computed to assess the short-term financial position of the enterprise.
Reason (R): Current ratio explains the relation between long-term assets and current liabilities of a business.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
c) Assertion (A) is false but Reason (R) is true
d) Assertion (A) is true but Reason (R) is false
Ans – d)
