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Accounting Ratios                                                             3.51
                     Notes to Accounts
                       Particulars                                                  31st March,    31st March,
                                                                                     2024 (`)   2023 (`)
                       1.  Other Current Liabilities
                          Expenses Payable                                             1,50,000    1,25,000
                          Current Maturities of Long-term Debt                          50,000    50,000
                                                                                       2,00,000    1,75,000
                       2.  Inventories
                          Raw Materials                                                3,00,000    2,00,000
                          WIP                                                          1,00,000    50,000
                          Loose Tools                                                  1,00,000    ...
                                                                                       5,00,000    2,50,000
                       3.  Other Current Assets
                          Prepaid Expenses                                              25,000    50,000
                          Other Advances                                                75,000    50,000
                                                                                       1,00,000    1,00,000
                                   [Ans.: Current Ratio: 2024—1.87 : 1;  2023—2.3 : 1; Liquid Ratio: 2024—1.3 : 1; 2023—1.7 : 1.]
                                                                                               1
                       22.  Current Ratio 4.5, Quick Ratio 3 : 1, Inventory  ` 72,000. Cash  ` 4,000, Gross Profit @ 33 % on cost
                                                                                               3
                                                                     1
                          was ` 1,00,000, Cash Revenue from Operations being 33 % of Credit Revenue from Operations; Trade
                                                                     3
                          Receivables Turnover Ratio is 3 Times. In current assets, there was no asset other than Inventory, Trade Receivables
                          and Cash. Calculate the Opening Trade Receivables.      [Ans.: Opening Trade Receivables = ` 60,000.]
                          [Hint:  Current Assets =  ` 2,16,000; Quick Assets =  ` 1,44,000; Closing Trade Receivables = Quick Assets
                              – Cash = ` 1,40,000. Credit Revenue from Operations = ` 3,00,000.]
                          Calculation of Current Assets and Quick Assets:
                                                      Quick Assets (QA)  Current Assets – Inventory
                                         Quick Ratio  =               
                                                    Current Liabilities (CL)    CL
                                                        `
                                                    CA –  72,000
                                                 3  =
                                                         CL
                                       CA – ` 72,000  =  3CL
                                           CA – 3CL  =  ` 72,000                                     ...(1)
                                         CA – 4.5CL  =  0                      [As per Current Ratio]      ...(2)
                          Substracting Equation (2) from (1), we get
                                                                  `  72,000
                                             1.5CL  =  ` 72,000 or CL =    = ` 48,000.
                                                                    1.5
                                       Current Assets  =  Current Liabilities (CL) × Current Ratio
                                                    =  ` 48,000 × 4.5 = ` 2,16,000.
                                        Quick Assets  =  ` 48,000 (CL) × 3 = ` 1,44,000.
                       23.  The Current Ratio of a company is 3 : 1. State giving reason, which of the following would  improve,
                          reduce or not change the ratio:
                          (i)   Repayment of a Current Liability;
                         (ii)   Purchase of goods on cash;
                         (iii)   Sale of office equipment for ` 4,000 (Book value ` 5,000);
                         (iv)  Sale of goods for ` 11,000 (cost ` 10,000);
                         (v)  Payment of dividend.                                              (Delhi 1999)
                                                  [Ans.: (i) Improve; (ii) No change; (iii) Improve; (iv) Improve; (v) Improve.]
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