Copyright © Can a partner be exempted from sharing losses in a firm? These solutions for Accounting Ratios are extremely popular among Class 12 Commerce students for Accountancy Accounting Ratios Solutions come handy for quickly completing your homework and preparing for exams. What But in this case the ratio is quite high i.e. TS Grewal Solutions for Class 11 Accountancy Chapter 9: TS Grewal Solutions for Class 11 Accountancy Chapter 9 – Bank Reconciliation Statement is a concept that students should consider while preparing for their Accountancy exam. 4,00,000 and its cash sales were 80% of the total sales. Ltd. Equity or the Shareholders Fund includes Preference Share Capital, Equity Share Capital, Capital Reserve, Securities Premium, General Reserve less Accumulated Loss and Fictitious Assets. Acid test ratio is 0.75. calculate opening and closing trade receivables, The Current Ratio of a firm is 2:1, state giving reasons which of the following would improve, reduce or not change the ratio: 1) repayment of trade payables 2) purchase of@goods on credit 3) sale of motor vehicle at a loss of 20% 4) sale of goods at a profit of 10% 5) payment of final dividend already declared 6) redemption of debentures at a premium. It is calculated as: What are important profitability ratios? A low debt-equity ratio implies that the company can easily meet its long term obligations. Quick Ratio 0.75. This ratio is based on the relationship between cost of goods sold and average stock kept during the year. What is Loose tools?and why it is not included in inventory? Hence, the Cost of Revenue from Operations = Rs 100 − Rs 20 = Rs 80, If the Cost of Revenue from Operations is Rs 80, then Revenue from Operations = 100, If the Cost of Revenue from Operations is Rs 1, then Revenue from Operations =, Note: It has been assumed that all sales are credit sales. This ratio gives a percentage measure to assess the financial viability, profitability and operational efficiency of the business. It is calculated as: Generally, Current Ratio is preferable for such type of business where the stock or the inventories cannot easily be converted into cash like heavy machinery manufacturing companies, locomotive companies, etc. Debtor Turnover Ratio/Trade Receivables Turnover Ratio. Current Assets = Liquid Assets + Inventory. This may be due to the following reasons: (i) Blockage of Funds in Stock (ii) High Amount outstanding from Debtors (iii) Huge Cash and Bank Balances. Owners: The information required by owners about profit earned or loss incurred during an accounting period. All NCERT Solutions for class Class 12 Commerce Accountancy are prepared by experts and are 100% accurate. Current Assets = Liquid Assets + Inventory 10:00 AM to 7:00 PM IST all days. It is used for determining the paying capacity of the company towards its short term liabilities. Is there CBSE guidelines about the project? How would you study the solvency position of the firm? provided in the Indian Partnership Act, 1932, i.e., @ 6% p.a. A higher Price Earning Ratio definitely enables a company to enjoy favourable position in the market. Chapter 5 Cash Flow Statement. from the foll, information of Shiva Ltd. calculate total assets to debt ratio : A company's stock turnover ratio is 5 times. Solvency ratios are the measures of the long-term financial position of the firm in terms of its ability to pay its long-term liabilities. Working Capital is Rs 90,000. This college was the vision of Dr. Ray W. Howard who wanted to provide the students of Washington an opportunity of higher studies. Closing Trade Receivables were 3 times than that in the begining. c. Composite Ratios: These are those ratios whose elements belong both to the Trading and Profit and Loss Account as well as to the Balance Sheet, like Debtors Turnover Ratio, etc. Examples of profitability ratios are the contribution margin ratio, gross profit ratio, and net profit ratio. Thirdly, if the stock forms the major portion of a company’s current assets, then they would prefer Current Ratio and not Liquid Ratio. DK Goel Solutions for Class 12 . 1. DK Goel Solutions Accountancy furnishes a wide range of solutions that certainly supports the students to understand, analyse and solve them. It indicates whether a firm has sufficient funds to pay its current liabilities immediately. Calculate debt equity ratio from the following information: Long Term Debts = Total Debts − Current Liabilities. Liquid Ratio- It explains the relationship between liquid assets and current liabilities. Accounting ratios help us do just that. Raw material used by the firm is in short supply and the firm can expect a maximum supply of 350 lakh kg for next year. And company redeemed 9% debenture of Rs. Current Assets − Quick Assets = 36,000, or, 4.5 Current Liabilities − 3 Current Liabilities = 36,000. The above solution has been worked out accordingly and the answer given as per the textbook is same as per the above solution. It includes debentures, mortgage loans, bank loans, loans from other financial institutions, etc. Another beneficial use is to compare the quick ratio with the current ratio. Definition of Accounting Ratios: The term “accounting ratios” is used to describe significant relationship between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of accounting organization. DK Goel Accountancy Class 12 is contemplated to be the most helpful study resource for the students pursuing their Class 12. 2. Accountancy is a subject which requires constant practice to balance the equation and to understand concepts as well. 1. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed. Answer Accounting ratios are classified in two ways Categories as follows (i) Traditional Classification: Traditional ratios are those accounting ratios which are based on the Financial Statement like Trading and Profit and Loss Account and Balance Sheet. The ideal Liquidity Ratio is considered to be 1:1. 1. This may be due to the following reasons: (i) Blockage of Funds in Stock (ii) High Amount outstanding from Debtors (iii) Huge Cash and Bank Balances. 62,400 ; Net profit = Rs. Explain the significance Ratio Analysis is a technique of financial analysis. Liquidity ratios are calculated to determine the short-term solvency of a business, i.e. 011-40705070 or Call me PURCHASE Class 12-Commerce Chapter 4 Accounting Ratios. Rate of gross profit on cost is 1/4 . From the following information, calculate the following ratios: Cost of Revenue from Operations is Rs 1,50,000. 3. 10,000 in excess of opening stock. Here we have given TS Grewal Accountancy Class 12 Solutions Chapter 7 Company Accounts Financial Statements of Not-for-Profit Organisations. c. Interest Coverage Ratio- This ratio depicts the relationship between amount of profit utilise for paying interest and amount of interest payable. From the following information, calculate inventory turnover ratio, calculate inventory turnover ratio when gross profit ratio is given 20%. 9,00,000, Gross Profit on Revenue from Operations : 25%, Cash revenue from Operations : 20% of credit sales, Trade Receivables Turnover Ratio : 5 Times. In fact, accountants admit that interpreting financial data is the most challenging aspect of ratio analysis. Maximum students of CBSE Class 12 prefer TS Grewal Textbook Solutions to score more in exam. Operating expenses are Rs 60,000. the ability of the business to pay back its current dues. state how personal bias get reflected in ratio analysis, In ratios illustration 80 page 5.70 DK Goel. Profitability ratios are derived from a comparison of revenues to difference groupings of expenses within the income statement. Following is the Balance Sheet of Title Machine Ltd. as at March 31, 2017. stock = Rs. Thus, a higher ratio implies more security to the lenders. These solutions for Class 12 are outlined keeping in mind the current CBSE syllabus, hence possessing a great chance of appearing in the board examinations. It establishes the relationship between net credit sales and average accounts receivables.                         = 1,20,000. CBSE Important Questions for Class 12 Accountancy Chapter Wise Pdf free download was designed by expert teachers from latest edition of NCERT books to get good marks in board exams. Ratio Analysis is a technique of financial analysis. It is calculated as: Currents Assets are those assets that can be easily converted into cash within a short period of time like, cash in hand, cash at bank, marketable securities, debtors, stock, bills receivables, prepaid expenses. Ltd. All rights reserved. Please explain what are deferred tax assets and deferred tax liabilities in simple words? The debt equity ratio of a company is 1:2. Functional Classification: This classification reflects the functional need and the purpose of calculating ratio. It is calculated as: Currents Assets are those assets that are easily converted into cash within a short period of time like cash in hand, cash at bank, marketable securities, debtors, stock, bills receivables, prepaid expenses. From the following Balance Sheet and other information, calculate following ratios: (i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio, Additional Information: Revenue from Operations Rs. This means assets are generally not reported at their current value. However, the current day’s swiftly developing trade environment has compelled the accountants to amend their representation and functions, both within the establishment and the association. The various important Profitability Ratios are as follows: 5. Long term solvency of any business can be calculated on the basis of the following ratios. Meritnation.com is an online education portal that provides interactive study material for students of classes 1st to 12th for CBSE, ICSE, Maharashtra (MSBSHSE), Karnataka (KSEEB) Kerala (SCERT) and Tamil Nadu boards. For example, the inventories of a service sector company is very liquid as there are no stock kept for sale, so they prefer Liquid Ratio as a measure of overall liquidity. 8,00,000 . assuming that proprietary ratio is 0.6 :1, state giving reasons whether the ratio will increase decrease or will not change in each of the following cases : From the following information calculate gross profit ratio:-. Chapter 3 Tools of Financial Statement Analysis. Current liabilities of a company are Rs 75,000. Calculate Inventory Turnover Ratio and Trade Receivables Turnover Ratio. These ratios relate to sales or cost of goods sold. A high Interest Coverage Ratio implies that the company can easily meet all its interest obligations out of its profit. Calculate Trade Receivable Turnover Ratio from the following information. 8. Net Profit Ratio- It shows the relationship between net profit and sales. […] The liquidity of a business firm is measured by its ability to pay its long term obligations. Chapter 4 Accounting Ratios. Quick Assets = Current Assets - Inventory = Current Assets - 36,000 TS Grewal Accountancy Solutions for Class 11. Absorption accounting is a method of accounting where all the costs of manufacturing, (including fixed, variable and mixed costs) are allocated to the produced units. Closing Stock Rs 10,000 in excess of opening stock, Based on the above information, Calculate. 1. etc. Handa Ltd.has inventory of Rs 20,000. Note: The solution given in the book is incorrect as it from the given figures Current Assets is ascertained to be Rs 1,08,000 and Current Liabilities Rs 24,000. que2: 1) 3,00,000 is the cost of goods soid.inventory turnover ratio 8 times; stock in the beginning is 2 times more than the stock at the end.calculate the value of opening and closing stock.? Ideal Current Ratio for a business is considered to be 2:1. cannot be easily sold off. CBSE Class 12 solutions are outlined and solved by … Accounting ratios are classified in the following two ways. But in this question operating ratio = 83 % where cost = 125000 and other operating expense 41000 . It is given in the TSGrewal Part II book that loose tools are excluded from the current. When ratios are calculated on the basis of accounting information, they are called accounting ratios. What are the ratios used for this purpose? 38,400 less than current assets; fixed assets = Rs. 15,000 ; stock turnover ratio = 5 times ; selling price = 125% of the cost. Should the company drop this division? 4. The lower the debt-equity ratio higher will be the degree of security to the lenders. Stock Turnover Ratio/Inventory Turnover Ratio. A and B are sharing profits and losses equally. Accounting Ratios class 12 Notes Accountancy in PDF are available for free download in myCBSEguide mobile app. Calculate the amount of Current Assets and Current Liabilities. 5:1. The Traditional Classification further bifurcates accounting ratios on the basis of the accounts to which the elements of a ratio belong. This ratio reflects the expectation of the shareholders regarding the rise in the future prices of the company’s shares. 3. Purchase of fixed asset on long term deferred payment basis. 2021 Applect Learning Systems Pvt. Current Ratio is used to compare the current assets to current liabilities of the business. DK Goel Solutions for 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 cost accountant has supplied the following data. Who TS Grewal solutions for Class 12 Accountancy - Analysis of Financial Statements chapter 3 (Accounting Ratios) include all questions with solution and detail explanation. GREWAL. In current ratio why loose tools are not excluded during calculating working capital. Need assistance? This is one of the most crucial chapters in the Class 12 accountancy syllabus. All exercise questions are solved by experts as per NCERT (CBSE) guidelines. Ratio analysis involves comparing information taken from the financial statements to gain a general understanding of the results, financial position, and cash flows of a business. A high Dividend Payout Ratio implies a better position and goodwill of the business for the shareholders. Current Ratio is 3.5:1. We are always in the look out on how to improve our apps. Sales are Rs. This ratio depicts the amount of earnings that is distributed in the form of dividend among the shareholders. For more practice related to the subject, study materials such as sample papers, previous years' papers and NCERT solutions are required. From the following information calculate: (i) Gross Profit Ratio (ii) Inventory Turnover Ratio (iii) Current Ratio (iv) Liquid Ratio (v) Net Profit Ratio (vi) Working capital Ratio: Note: There is a misprint in the question given in the textbook. Debtors Turnover Ratio or Trade Receivables Turnover Ratio: This ratio is computed to determine the rate at which the amount is collected from the debtors. GP Ratio 25%. Accounting ratios, an important sub-set of financial ratios, are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports. sales; (2). It is an important yardstick to assess the profit earning capacity of the business. Calculate current assets, Share Capital                                                                             Rs. I. Examples of Accounting Ratios In addition to the inventory turnover ratio and the current ratio, here are some additional accounting/financial ratios: This ratio indicates whether the c… Calculate Current Ratio. They are calculated after calculating working capital from current assets as per illustration no.8 In ts grewal 2015, Grsso Profit ratio of a company was 25%. The ideal ratio of current assets over current liabilities is 2:1. TS Grewal Solutions for Class 12 Accountancy – Change in Profit-Sharing Ratio Among the Existing Partners (Volume I) Question 1. 2. 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