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Current Ratio

Which of the ...

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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Q. Hari maintains his books of account on Single Entry System. His books provide the following information:

		1st April, 2018 (₹)	31st March, 2019 (₹)
Furniture		2,000	2,000
Stock		28,000	30,500
Sundry Debtors		21,000	34,000
Cash		1,500	2,000
Sundry Creditors		17,500	19,000
Bills Receivable		...	3,000
Loan		...	5,000
Investments		...	10,000

His drawings during the year were ₹ 5,000 Depreciate furniture by 10% and provide a reserve for Bad and Doubtful Debts at 10% on Sundry Debtors.
Prepare the statement showing the profits for the year.

Q. Sonam keeps his books on single entry and provides you with the following information:

	31-12-2017	31-12-2018
	₹	₹
Furniture and Fitting	50,000	60,000
Stock	30,000	10,000
Sundry Debtors	60,000	70,000
Sundry Creditors	20,000	NIL
Prepaid Expenses	NIL	2,000
Outstanding Expenses	6,000	10,000
Cash in hand	11,000	3,000
Receipts and Payments in 2018:
Receipts from Debtors		2,10,000
Paid to Creditors		1,00,000
Cartage		20,000
Drawings		1,20,000
Sundry Expenses		1,60,000
Furniture Purchased for Cash		10,000

Prepare Trading and Profit & Loss Account for the year ended 31 December, 2018 after providing for bad debts at 10%.
There was a considerable amount of Cash Sales.

Q. Question : Gopal does not keep proper records in the books of account. Following information is given below.

Items	Jan 1, 2005	Dec 31, 2005
Cash in hand	$18, 000$	$12, 000$
Cash at bank	$1, 500$	$2, 000$
Stock in trade	$80, 000$	$90, 000$
Sundry Debtors	$36, 000$	$60, 000$
Sundry Creditors	$60, 000$	$40, 000$
Loan	$10, 000$	$8, 000$
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Land and Buildings	$30, 000$	$20, 000$
Furniture	$10, 000$	$10, 000$

During the year he introduced Rs

20, 000

and withdrew Rs

12, 000

from the business. Prepare the statement of profit or loss on the basis of given information.

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