[DK Goel] Q. 5,6,7,8 Accounting Ratios Solutions Class 12 CBSE (2026-27)
the solutions of Question number 5, 6, 7, 8 of Accounting Ratios chapter 5 of DK Goel Class 12 CBSE (2026-27)
Q. 5. Assuming that the current ratio is 1.5 : 1, state giving reasons, which of the following transactions would (i) improve, (ii) reduce, (iii) not alter the current ratio:-
(1) Realisation of current assets
(2) Payment of current liabilities
(3) Sale of goods at par
(4) Sale of goods at profit
(5) Sale of goods at loss
(6) Purchase of goods for cash
(7) Purchase of goods on credit of 3 months
(8) Sale of furniture for cash
(9) Sale of machinery on a credit of 5 months
(10) Sale of land on long-term deferred payment basis
(11) Purchase of motor car for cash.
(12) Purchase of a building on a credit of 4 months.
(13) Purchase of a plot of land on long-term deferred payment basis.
(14) Repayment of long-term loan which was availed from a bank.
(15) Issue of shares for cash.
Solution:-
| TR. No. | Current Ratio will | Reasons |
| 1 | Not Alter | It will increase the cash (Current Assets) and decrease the (Current Assets) by the same amount. |
| 2 | Improve | It will decrease the cash (Current Assets) and decrease the Current Liabilities with the same amount. |
| 3 | Not Alter | It will increase (Cash) Current Assets and decrease (Inventory) Current Assets with the same amount. |
| 4 | Improve | It will increase Cash (Current Assets) more as compared to decrease in Inventory (Current Assets) |
| 5 | Reduce | It will increase (Cash) Current Assets less as compared to a decrease in Inventory (Current Assets) |
| 6 | Not Alter | It will increase inventory (Current Assets) and decrease cash (Current Assets) with the same amount. |
| 7 | Reduce | It will increase Inventory (Current Assets) and Increase (Creditors) with the same amount. |
| 8 | Improve | It will increase cash (Current Assets) and Current Liabilities will remain the same. |
| 9 | Improve | It will increase Cash (Current Assets) and Current Liabilities remain unchanged. |
| 10 | Not Alter | It will change neither Current Assets nor Current Liabilities |
| 11 | Reduce | It will increase Cash (Current Assets) and Current Liabilities remain unchanged. |
| 12 | Reduce | It will reduce cash (Current Assets) and Current Liabilities remain unchanged. |
| 13 | Not Alter | It will change neither Current Assets nor Current Liabilities |
| 14 | Reduce | It will reduce cash (Current Assets) and Current Liabilities remain unchanged. |
| 15 | Improve | It will increase (Current Assets) and Current Liabilities will remain unchanged. |
Q. 6. The Current Ratio of a Company is 3 : 1. State giving reasons which of the following suggestions would (i) improve; (ii) reduce; (iii) not change; the Current Ratio:-
(a) Payment of Trade Payables.
(b) Sale of goods costing ₹ 20,000 for ₹ 20,000 for Cash.
(c) Sale of goods costing ₹ 20,000 for ₹ 18,000 on Credit.
(d) Sale of goods costing ₹ 20,000 at a profit of ₹ 3,000.
(e) Purchase of goods on credit.
(f) Purchase of goods for cash.
(g) Purchase of machinery against long-term loan.
[Ans. (a) Improve; (b) No change; (c) Reduce; (d) Improve; (e) Reduce; (f) No Change; (g) No Change.]
Solution:-
The Current Ratio as given in the question is 3 : 1. In order to understand the question in a simple manner, It may be assumed that current assets are ₹ 3,00,000 and current liabilities are ₹ 1,00,000.
(a) Payment of Trade Payables:-
Let’s Suppose, Trade Payables are ₹ 3,00,000.
It will decrease Cash (Current Assets) and decrease Trade Payables (Current Liabilities) with the same amount.
(b) Sale of goods costing ₹ 20,000 for ₹ 20,000 for Cash:-
It will increase Cash (Current Assets) and decrease Inventory (Current Assets) with the same amount. It will not change the Current Ratio.
It will not change the Current Ratio.
(c) Sale of goods costing ₹ 20,000 for ₹ 18,000 on Credit:-
It will increase Debtors (Current Assets) less than the Inventory (Current Assets). It will reduce the Current Ratio.
It will reduce the Current Ratio.
(d) Sale of goods costing ₹ 20,000 at a profit of ₹ 3,000:-
It will increase Cash (Current Assets) more than reduce Inventory (Current Assets). It will Improve the Current Ratio.
It will improve the Current Ratio.
(e) Purchase of goods on credit:-
Let’s ₹ 50,000 is purchased on Credit.
It will increase Inventory (Current Assets) and increase Creditors (Current Liabilities) with the same amount.
It will reduce the Current Ratio.
(f) Purchase of goods for cash:-
Let’s suppose ₹ 50,000 goods are purchased for cash.
It will increase Inventory (Current Assets) and reduce Cash (Current Assets) with the same amount.
It will not change the Current Ratio.
(g) Purchase of machinery against long-term loan:-
It will not change both Current Assets and Current Liabilities.
Q. 7. State giving reason, whether the Current Ratio will improve or decline or will have no effect in each one of the following transactions if Current Ratio is (i) 2.5 : 1, (ii) 1 : 1, (iii) 0.75 : 1.
- Paid ₹ 50,000 to a Creditor.
- Sale of goods at a loss of 10%.
- Sale of a machinery for ₹ 1,00,000 (Book Value ₹ 1,20,000).
- Payment of outstanding salaries.
- Received ₹ 25,000 from a Debtor of ₹ 30,000 in full settlement of his account.
- Bills payable discharged on maturity.
- Bills Receivable drawn on debtor.
- Purchased goods on credit.
- Issued debentures to the vendors of machinery.
- Payment of dividend.
Solution:
(i) If Current Ratio is 2.5 :1,
Improve: 1,3,4,6,10; Decline : 2,5,8; No effect : 7,9
(ii) If Current Ratio is 1 : 1,
Improve : 3; Decline : 2, 5; No effect : 1, 4, 6, 7, 8, 9, 10
(iii) If Current Ratio is 0.75 : 1,
Improve : 3, 8; Decline : 1, 2, 4, 5, 6, 10; No effect : 7, 9]
Q. 8. State giving reasons which of the following transactions would improve; Reduce; or Not Change the Quick Ratio if Quick Ratio is (i) 1.5 : 1; (ii) 1 : 1 or (iii) 0.8 : 1.
(a) Payment of Outstanding Liabilities
(b) Debentures of ₹ 2,00,000 converted into equity shares.
(c) Purchase of goods on Credit of 2 months.
(d) B/R endorsed to a Creditor.
(e) Sale of goods Costing ₹ 50,000 for ₹ 45,000.
(f) B/R drawn on a Debtor.
(g) Paid Rent ₹ 3,000 in advance.
(h) Trade receivables included a debtor Sh. Ashok who paid his entire amount due ₹ 9,700.
Solution:
(i) If Quick Ratio is 1.5 : 1
(a) Improve; (b) Not change; (c) Reduce; (d) Improve; (e) Improve; (f) Not change; (g) Reduce; (h) Not change.
(ii) If Quick Ratio is 1 : 1
(a) Not Change; (b) Not Change; (c) Reduce; (d) Not Change; (e) Improve (f) Not Change; (g) Reduce; (h) Not Change.
(iii) If Quick Ratio is 0.8 : 1
(a) Reduce; (b) Not change; (c) Reduce; (d) Reduce; (e) Improve; (f) Not change; (g) Reduce; (h) Not Change
Solution:-
