Its Current Ratio is 2.5 : 1 and Quick Ratio is 1 : 1. The entire NCERT textbook questions have been solved by best teachers for you. We have provided Accounting Ratios Class 12 Accountancy MCQs Questions with Answers to help students understand the concept very well. (a) Liquidity Ratio: These ratios are calculated to determine short term solvency. State with reason whether the following transactions will increase, decrease or not change the 'Return on Investment' Ratio:(i) Purchase of machinery worth ₹10,00,000 by issue of equity shares. In other words, generally the expenses charged to profit and loss account or operating expenses are excluded from the calculation of cost of goods sold. Answer (b) Liquidity, (iv) ……………….ratios are a measure of the speed with which various (iii) Gross Profit is 25% of the Revenue from Operations. The formula for calculating the operating ratio is as follows. Management is always interested in future growth of the organisation. (c) Goods purchased for ₹ 80,000. (d) Purchases Return ₹ 20,000. Inventory in the beginning of the year ₹ 60,000. A grocery store is a trading concern involved in trading i.e., buying and selling of goods and in this regards it is obvious to maintain some inventory in stores. (iv) Credit Purchase ₹1,60,000. Here is a compilation of top thirteen accounting problems on ratio analysis with its relevant solutions. Calculate Debt to Equity Ratio. The formula for calculating this ratio is as follows. ‘ Gross Profit Ratio of a company is 25%. NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12, NCERT Solutions CBSE Sample Papers AccountancyClass 12 Accountancy, • State which of the following statements are True or False. Chapter 4 Accounting Ratios. (c) liquid ratio (d) current ratio Question 8. We hope the NCERT Solutions for Class 12 Accountancy Part II Chapter 5 Accounting Ratios, help you. Calculate Net Profit Ratio. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. According to Kennedy and McMullan, the relationship of one term to another expressed in simple mathematical form is … (c) solvency (d) profitability Accountancy MCQs for Class 12 Chapter Wise with Answers PDF Download was Prepared Based on Latest Exam Pattern. This ratio represents the number of times the working capital is turned over in a year and is calculated as follows. Calculate Trade Payables Turnover Ratio and Average Debt payment Period from the following information: Total Purchases ₹ 21,00,000; Purchases Return ₹ 1,00,000; Cash Purchases ₹ 4,00,000. (ii) Charging depreciation of ₹25,000 on machinery. I 2019 Solutions for Class 12 Accountancy Chapter 2 - Accounting for Partnership Firms-Fundamentals From the following information calculate The entire NCERT textbook questions have been solved by best teachers for you. Hence operating profit ratio will be helpful in that case. Check the below NCERT MCQ Questions for Class 12 Accountancy Chapter 10 Accounting Ratios with Answers Pdf free download. Stock turnover ratio/inventory turnover ratio indicates the number of time the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. Determine Current Liabilities and Working Capital before and after the payment was made. Cost of Revenue from Operations or Cost of Goods Sold ₹8,00,000. It is a well known fact that the security of the funds is directly related to the profitability and operational efficiency of the business. (ii) Credit Revenue from Operations, i.e., Credit Sales ₹80,000. NCERT solutions Class 12 Accountancy Part 2 Chapter 5 deals with users of a financial ratio, current and liquidity ratio, solvency position of the firm, important profitability ratios, managers, investors, long term creditors, solving balance sheets, proprietary ratio, and much more related to company accounts. The formula for calculating inventory turnover ratio is as follows The second one is considered the more refine form of measuring the liquidity of the firm. Calculate the value of current liabilities, liquid assets and stock. Answer Liquidity ratios are calculated to determine the short-term solvency of the business. Calculate Operating Ratio from the following information:Operating Cost ₹ 6,80,000; Gross Profit 25%; Operating Expenses ₹ 80,000. (iv) Short Term Creditors :Short term creditors are those creditors who provide financial assistance through short term credit (Generally less than one year). In this context there are four categories of users who are interested in financial ratios. A very high current ratio is not a good sign as it reflects under utilisation or improper utilisation of resources. From the fotlowing information calcutate Gross Profit Ratio, Stock Turnover Ratio and Debtors Turnover Ratio. Answer (d) Liquid ratio, inventory, Question 1. Total Debt ₹15,00,000; Current Liablities ₹5,00,000; Capital Employed ₹15,00,000. From the following, Current Ratio is 3:5 Working Capital is Rs. (ii) Average Inventory ₹1,60,000; Inventory Turnover Ratio is 6 Times; Selling Price 25% above cost. (i) Quick Ratio These ratios relate to sales or cost of goods sold. Calculate individual partner’s gain or sacrifice due to change in ratio. Answer (b) Inventory turnover, (iii) The………..ratio may indicate the firm is experiencing stock outs and lost sales. Calculate Opening Inventory and Closing Inventory if Inventory at the end is 2.5 times more than that in the beginning. Afterwards it purchased goods for ₹30,000 on credit. Total Assets ₹12,50,000; Total Debts ₹10,00,000; Current Liabilities ₹5,00,000.Calculate Debt to Equity Ratio. Calculate Trade Receivables Turnover Ratio, [Hint: 1. Working Capital ₹ 1,80,000; Total Debts ₹ 3,90,000; Long-Term Debts ₹ 3,00,000.Calculate Current Ratio. Net Profit before Interest and Tax ₹4,00,000; 15% Long-term Debt ₹8,00,000; Shareholders' Funds ₹4,00,000. Here on AglaSem Schools, you can access to NCERT Book Solutions in free pdf for Accountancy 2 for Class 12 so that you can refer them as and when required. CBSE Class 12 Biology Sometimes quick ratio is calculated on the basis of quick liability instead of current liabilities. Calculate Debt to Equity Ratio. Calculate value of Inventory. Operating Profit Ratio :Operating Profit Ratio is the ratio of operating profit to net sales. The detailed, step-by-step solutions will help you understand the concepts better and clear your confusions, if any. The following Balance Sheet and other information, calculate following ratios Gopal Ltd. was registered with an authorised capital of Rs.50,00,000 divided into Equity Shares of Rs.10 each. (ii) Students mostly get confused in operating ratio and operating profit ratio, so be careful while doing these ratios. ... On this page you can access free TS Grewal Accountancy Class 12 Solutions for 2020 2021 edition book for Volume 1, 2 and 3. The standard for this ratio is 2 : 1. Calculate Working Capital Turnover Ratio. Gross profit would be the difference between net sales and cost of goods sold. (g) Purchases of Stock-in-Trade for cash. Calculate Inventory Turnover Ratio from the following: From the following information, calculate Inventory Turnover Ratio: Revenue from Operations ₹4,00,000; Gross Profit ₹1,00,000; Closing Inventory ₹1,20,000; Excess of Closing Inventory over Opening Inventory ₹40,000. All solutions have been prepared by Class 12 Accountancy teachers at Studiestoday.com. Management wish to know how effectively the resources are being utilised conseguently, they are interested in Activity Ratios and Profitability Ratios like Net Profit Ratio, Debtors Turnover Ratio, Fixed Assets Turnover Ratios, etc. The Quick Ratio of a company is 0.8:1. Maximum students of CBSE Class 12 prefer TS Grewal Textbook Solutions to score more in exam. Helpful in Forecasting: Accounting ratios are very helpful in forecasting and preparing the plans for the future. Formula of Proprietary/Equity Ratio I 2019 Solutions for class 12 . Discuss the importance of current and liquid ratio. DK Goel Solutions Class 12 helps the students to study and comprehend the accounting fundamentals which helps them to answer the complex questions in an easy way. The primary emphasis of each of these groups in evaluating these ratios are as follows Current Assets = Stock + Cash + … (v) Stock-in-Trade costing ₹15,000 distributed as free sample. (g) Bills Receivable endorsed to a Creditor dishonoured. Question 9. NCERT Solutions for Class 12th Maths Management wish to know how effectively the resources are being utilised Consequently, they are interested in Activity Ratios and Profitability Ratios like Net Profit Ratio, Debtors Turnover Ratio, Fixed Assets Turnover Ratios, etc. The liquidity of a business firm is measured by its ability to satisfy its long term obligations as they become due? (d) current ratio and average collection period Double Entry Book Keeping- TS Grewal Vol. TS Grewal Accountancy Class 12 Solutions Chapter 8 Accounting for Share Capital. That’s why short-term creditors are interested in timely payment of their debts in short run. Case 2: Revenue from Operations (Net Sales) ₹30,00,000; Cash Revenue from Operations, i.e., Cash Sales ₹6,00,000; Opening Trade Receivables ₹2,00,000; Closing Trade Receivables ₹6,00,000. Total Assets ₹ 2,60,000; Total Debts ₹ 1,80,000; Current Liabilities ₹ 20,000. Accounting Ratios Class 12 DK Goel Solutions: An Outline of Chapter 5. Calculate the amount of Current Assets and Current Liabilities. From the following compute Current Ratio: Calculate Current Ratio from the following information: Current Ratio is 2.5, Working Capital is ₹ 1,50,000. Answer (a) Inventory Turnover Ratio: This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. Answer The solvency position of any firm is determined and measured with the help of solvency ratios. Ratios show how one number is related to another. Fixed Assets to Proprietor’s Fund Ratio: Fixed Assets to Proprietor’s Fund Ratio establish a relationship between fixed assets and shareholders’ funds. These are the management, investors, long term creditors and short term creditors. Calculate Total Assets to Debt Ratio. (c) average collection period (d) quick (iv) Stock Turnover Ratio (v) Fixed Assets Turnover Ratio. Calculate values of Current Assets, Liquid Assets and Inventory. Question 3. Question 6. 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The formula for the quick ratio is as follows, Importance of Current Ratio: Current Ratio Provides a measure of degree to which current assets cover current liabilities. (c) current ratio, inventory Current Liabilities of a company are ₹ 1,50,000. Accounting Ratios class 12 Notes Accountancy in PDF are available for free download in myCBSEguide mobile app. Calculate Stock Turnover Ratio if Opening Stock is Rs. (c) 47 days (d) 57 days Stock turnover ratio = 6 times Shaalaa.com has the CBSE Class 12 Accountancy - Analysis of Financial Statements solutions in a manner that help students grasp basic concepts better and faster. Debt Equity Ratio :Debt Equity Ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. In this way they are interested in calculating Long term Solvency Ratios like, Debt-Equity Ratio, Proprietory Ratio, Total Assets to Debt Ratio, Interest Coverage Ratio, etc. Trade Payables ₹ 50,000, Working Capital ₹ 9,00,000, Current Liabilities ₹ 3,00,000. Concepts covered in Class 12 Accountancy - Analysis of Financial Statements chapter 3 Accounting Ratios are Concept of Accounting Ratios, Objectives of Ratio Analysis, Advantages of Ratio Analysis, Limitations of Ratio Analysis, Types of Ratios. (ii) Purchased machinery of ₹ 2,00,000 by cheque. But here generally one question arises there are certain assets which cannot be converted into cash quickly such as stock and prepaid expenses. Question 13. Current Assets : Current Liabilities Non-operating Expenses ₹2,000; Non-operating Income ₹22,000. For calculating the security of debt we calculate Debt-Equity Ratio, Proprietory Ratio, Fixed Assets – Proprietory Fund Ratio, etc. In this way, they are always interested in Liquidity Ratios like, Current Ratio, Quick Ratios etc. Study Materials > > > Career Class 10 Class 12 > Medical Engineering MBA NCERT Solutions for Class 12 Accountancy Part II Chapter 5 Accounting Ratios. The rate of tax was 20%. The two basic components for the calculation of operating ratio are operating cost (cost of goods sold plus operating expenses) and net sales. It means if quick assets are just equal to the current liabilities they will be considered favourable with the view point of company’s credibility. State with reason, whether the Proprietary Ratio will improve, decline or will not change because of the following transactions if Proprietary Ratio is 0.8 : 1: (i) Obtained a loan of ₹ 5,00,000 from State Bank of India payable after five years. (a) The only purpose of financial reporting is to keep the managers informed about the progress of operations. It is also known as equity ratio or net worth to total assets ratio. (c) debt (d) profitability It is a well known fact that the security of the funds is directly related to the profitability and operational efficiency of the business. Calculate Net Profit Ratio. Calculate Trade Receivables Turnover Ratio in each of the following alternative cases:Case 1: Net Credit Sales ₹4,00,000; Average Trade Receivables ₹1,00,000. Answer False, (e) Ratios help in comparisons of a firm’s results over a number of accounting periods as well as with other business enterprises. However, it must be interpreted carefully because window-dressing is possible by manipulating the components of current assets and current liabilities, e.g., it can be manipulated by making payment to creditors. In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials, wages, direct expenses and all manufacturing expenses. Calculate Return on Investment. Question 7. To match the figures and answer of the question current ratio is taken as 3.5 : 1 and working capital ? 2,00,000. 20,000 (cost). DK Goel Solutions Class 12 Vol 2 Chapter 5 Accounting Ratios is considered to be the most helpful study material for the students pursuing their class 12. State giving reason, which of the following transactions will (a) increase or (b) decrease or (c) not alter the Gross Profit Ratio. Calculate Operating Ratio. Balance Sheet had the following amounts as at 31st March, 2019: Calculate ratios indicating the Long-term and the Short-term financial position of the company. Public applied for 45,000 shares and allotment was made to all the applicants. From the following, calculate Gross Profit Ratio:Gross Profit:₹50,000; Revenue from Operations ₹5,00,000; Sales Return: ₹50,000. Calculate Operating Ratio. From the following data, calculate Inventory Turnover Ratio:Total Sales ₹5,00,000; Sales Return ₹50,000; Gross Profit ₹90,000; Closing Inventory ₹1,00,000; Excess of Closing Inventory over Opening Inventory ₹20,000. Explain. NCERT Solutions for Class 12 Accountancy Part 2 Chapter 5 Accounting Ratios. It is also known as external internal equity ratio. 12% Debentures 50,000 Debtors 55,000. (i) Current ratio (ii) Acid test ratio Question 3. The NCERT Solutions to the questions after every unit of NCERT textbooks aimed at helping students solving difficult questions.. For a better understanding of this … You are required to calculate Return on Investment for the year 2018-19 with reference to Opening Capital Employed. 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