Q. 4 DK Goel Accounting Ratios Solutions Class 12 CBSE (2024-25)

the solutions of Question number 4 of Accounting Ratios chapter 5 of DK Goel Class 12 CBSE (2024-25)

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) B/R dishonoured
(4) Sale of goods at par
(5) Sale of goods at profit
(6) Sale of goods at loss
(7) Purchase of goods for cash
(8) Purchase of goods on credit of 3 months
(9) Sale of furniture for cash
(10) Sale of machinery on a credit of 5 months
(11) Sale of land on long-term deferred payment basis
(12) Purchase of motor car for cash.
(13) Purchase of a building on a credit of 4 months.
(14) Purchase of a plot of land on long-term deferred payment basis.
(15) Repayment of long-term loan which was availed from a bank.
(16) Issue of shares for cash.

[Ans. (1) Not alter; (2) Improve; (3) Not alter; (4) Not alter; (5) Improve; (6) Reduce; (7) Not alter; (8) Reduce; (9) Improve; (10) Improve; (11) Not alter; (12) Reduce; (13) Reduce; (14) Not alter; (15) Reduce; (16) Improve.]

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 the Debtors (Current Assets) and decrease the Bills Receivable (Current Assets) with the same amount.
4	Not Alter	It will increase (Cash) Current Assets and decrease (Inventory) Current Assets with the same amount.
5	Improve	It will increase Cash (Current Assets) more as compared to decrease in Inventory (Current Assets)
6	Reduce	It will increase (Cash) Current Assets less as compared to a decrease in Inventory (Current Assets)
7	Not Alter	It will increase inventory (Current Assets) and decrease cash (Current Assets) with the same amount.
8	Reduce	It will increase Inventory (Current Assets) and Increase (Creditors) with the same amount.
9	Improve	It will increase cash (Current Assets) and Current Liabilities will remain the same.
10	Improve	It will increase Cash (Current Assets) and Current Liabilities remain unchanged.
11	Not Alter	It will change neither Current Assets nor Current Liabilities
12	Reduce	It will increase Cash (Current Assets) and Current Liabilities remain unchanged.
13	Reduce	It will reduce cash (Current Assets) and Current Liabilities remain unchanged.
14	Not Alter	It will change neither Current Assets nor Current Liabilities
15	Reduce	It will reduce cash (Current Assets) and Current Liabilities remain unchanged.
16	Improve	It will increase (Current Assets) and Current Liabilities will remain unchanged.

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