XYZ Company would be relatively good short-term financial standing. Computationof ratio FromthefollowingbalancesheetofM/s.RamLtd. calculatecurrent ratioason31.03.2010 iabilities Rs. Assets Rs. apital 21,000 Fixed Assets 17,000 eserves 1,500 Stock rofit and Loss Account 2,500 Debtors 3,200 ank Overdraft 2,000 Cash 6,600 undryCreditors 6,000 33,000 33,000 Solution : Current Ratio = Current Assets/ Current Liabilities Stock+Debtors+Cash/Bank Overdraft+ Sundry Creditors Rs.6,200+Rs.3,200+Rs.6,600 Rs.16,000/Rs.8,000= 2:1 Alternatively current assets can be calculated as CurrentAssets = Working Capital + Current Liabilities Current Assets = Total Assets Fixed Assets Current Liabilities = Employed Indirect question On payment of current liablity Current Assets and Current Liability reduce to same extent, insuchcasesratiochangee.g. If currentassets areRs.40,000 andcurrent liabilities areRs.20,000 onpayment of Rs.10,000 tocreditors thecash(current asset) willdecrease to Rs.30,000 (Rs.40,000 Rs.10,000) & current liabilities will decrease to Rs.10,000 In first case current ratio is 2:1 Rs.40,000/Rs.20,000 And is second case it is 3:1 Rs.30,000/Rs.10,000
XYZ Company would be relatively good short-term financial standing. Computationof ratio FromthefollowingbalancesheetofM/s.RamLtd. calculatecurrent ratioason31.03.2010 iabilities Rs. Assets Rs. apital 21,000 Fixed Assets 17,000 eserves 1,500 Stock rofit and Loss Account 2,500 Debtors 3,200 ank Overdraft 2,000 Cash 6,600 undryCreditors 6,000 33,000 Solution : 33,000 Current Ratio = Current Assets/ Current Liabilities Stock+Debtors+Cash/Bank Overdraft+ Sundry Creditors Rs.6,200+Rs.3,200+Rs.6,600 Rs.16,000/Rs.8,000= 2:1 Alternatively current assets can be calculated as CurrentAssets = Working Capital + Current Liabilities Current Assets = Total Assets Fixed Assets Current Liabilities = Employed Indirect question On payment of current liablity Current Assets and Current Liability reduce to same extent, insuchcasesratiochangee.g. If currentassets areRs.40,000 andcurrent liabilities areRs.20,000 onpayment of Rs.10,000 tocreditors thecash(current asset) willdecrease to Rs.30,000 (Rs.40,000 Rs.10,000) & current liabilities will decrease to Rs.10,000 In first case current ratio is 2:1 Rs.40,000/Rs.20,000 And is second case it is 3:1 Rs.30,000/Rs.10,000
12%20Accountancy%20Study%20Mat.docx