Class 12th Accountancy 2017 Set2 Delhi Board Paper Solution
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 â¹ 2,000.
(2) Insurance premium paid in advance â¹ 500.
(3) Sale of goods on credit â¹ 3,000.
(4) Honoured a bills payable â¹ 5,000 on maturity.
Quick ration is also known as Acid test ratio or Liquidity ratio and the formula is as below:
Or
1) Purchase of loose tools â¹ 2,000. (Cash outflow)
Imapct : Decrease
Reason: Quick assets are decreasing
2) Insurance premium paid in advance â¹ 500. (Cash outflow)
Imapct : Decrease
Reason: Quick assets are decreasing
3) Sale of goods on credit â¹ 3,000. (Debtors increasing)
Imapct : Increase
Reason: Quick assets are increasing.
4) Honoured a bills payable â¹ 5,000 on maturity. (cash outlflow)
Imapct : Decrease
Reason: Quick assets are decreasing and current liability is also decreasing.
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