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12th Accountancy 2017 Set1 Delhi Board Paper Solution

Question 21

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 :

(1) Purchase of loose tools ₹ 2,000.

(2) Insurance premium paid in advance ₹ 500.

(3) Sale of goods on credit ₹ 3,000.

(4) Honoured a bills payable ₹ 5,000 on maturity.

Answer

Quick ration is also known as Acid test ratio or Liquidity ratio and the formula is as below:

                                               

                                                                           Or

 

 

1) Purchase of loose tools ₹ 2,000. (Cash outflow)

    Imapct : Decrease

    Reason: Quick assets are decreasing

2) Insurance premium paid in advance ₹ 500.  (Cash outflow)

    Imapct : Decrease

    Reason: Quick assets are decreasing

3) Sale of goods on credit ₹ 3,000. (Debtors increasing)

    Imapct : Increase

    Reason: Quick assets are increasing.

4) Honoured a bills payable ₹ 5,000 on maturity. (cash outlflow) 

    Imapct : Decrease

    Reason: Quick assets are decreasing and current liability is also decreasing.