DK Goel Solutions for Class 12 Accountancy Vol 2 Chapter 5 Accounting Ratios

DK Goel Accountancy Class 12 Solutions Chapter 5 Accounting Ratios which is outlined by expert Accountancy teachers from the latest version of DK Goel Accountancy Class 12 textbook solutions. We at BYJU’S provide DK Goel Solutions to assist students to comprehend all the theories in particular. Click here to learn more concepts in Accountancy, however, the concepts of Admission of a partner, Accounting Ratios and Cash Flow Statement (As per AS – 3 Revised) is required.

DK Goel Solutions Class 12 – Chapter 5 – Part B

Question 1

From the following, compute the current ratio.

Non-Current Investments 1,00,000
Current Investments 40,000
Inventories (including loose tools of ₹ 50,000/-) 2,80,000
Trade Receivables:
Sundry Debtors 1,60,000
Bills Receivables 20,000
Trade Payables:
Sundry Creditors 1,20,000
Bills Payables 10,000
Long-term Borrowings 2,00,000
Short-term Borrowings 50,000
Short-term Provision (Provision for Tax) 20,000
Cash and Bank Balance 30,000

Solution:

\(Current\, Ratio=\: \frac{Current\: Assets}{Current\: Liabilities}\)

Current Assets = Current Investments + Inventories (Excluding Loose Tools) + Trade Receivables (Sundry Debtors + Bills Receivables) + Cash and Bank Balance

= 40,000 + 2,30,000 + 1,60,000 + 20,000 + 30,000

= ₹. 4,80,000/-

Current Liabilities = Trade Payables (Sundry Creditors + Bills Payables) + Short term Borrowings + Short term Provision (Provision for Tax)

= 1,20,000 + 10,000 + 50,000 + 20,000

= ₹. 2,00,000/-

\(Current\, Ratio=\: \frac{4,80,000}{2,00,000} = 2:4:1\)

Question 2

Following particulars are given to you:

Trade Investmests 2,50,000
Marketeable Secuities 40,000
Tangible Fixed Assets 6,00,000
Intangible Assets (Goodwill) 1,00,000
Trade Receivables 2,00,000 1,80,000
Less: Provision for Doubtful Debts 20,000
Cash and Bank Balance 80,000
Trade Payables 1,20,000
Rent Payables 10,000
Dividend Payable 30,000
Inventories 3,90,000
Long term Borrowings (8% Debentures) 2,80,000
Short term Borrowings (Bank Overdraft) 25,000
Short term Provisions:
Provisions for Tax 55,000
Income Tax paid in Advance 30,000

Calculate the Liquidity Ratios.

Solution:

Liquidity Ratios include the following 2 ratios. Namely,

  • Current ratio
  • Quick ratio
\(Current\, Ratio\, =\, \frac{Current\, Assets}{Current\, Liabilities}\)

Current Assets = Marketable Securities + Trade Receivables + Cash and Bank Balance + Inventories + Income Tax paid in advance

= 40,000 + 1,80,000 + 80,000 + 3,90,000 + 30,000

= ₹. 7,20,000/-

Current Liabilities = Trade Payables + Rent Payable + Dividend Payable + Bank Overdraft + Provisions for Tax

= 1,20,000 + 10,000 + 30,000 + 25,000 + 55,000

= ₹. 2,40,000/-

\(Current \, Ratio\, =\, \frac{7,20,000}{2,40,000}\, =\, 3:1\)

 

\(Quick\, Ratio\, =\, \frac{Liquid\, Assets\, or\, Quick\, Assets}{Current\, Liabilities}\)

Liquid Assets = Current Assets – Inventories – Income Tax Paid in Advance

= 7,20,000 – 3,90,000 – 30,000

= 3,00,000

\(Quick\, Ratio\, =\, \frac{3,00,000}{2,40,000}\, =\, 1.25:1\)

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