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Question

Which of the following items is not taken into account when computing current ratio?

A
Sundry Creditors.
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B
Sundry Debtors.
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C
Bank Overdraft.
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D
Furniture.
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Solution

The correct option is C Furniture.

Current ratio = Current assets/ Current liabilities
Current assets include inventories, sundry debtors, cash and bank balances,receivables, loans and advances, disposable investments etc.
Current liabilities include creditors, short term loans, bank overdraft, cash credit, provisions, outstanding expenses etc.
Furniture is a fixed asset and it is not included in current assets. Hence while calculating the current ratio furniture is not taken into account.

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