Solution for Q 11 to 20 of Chapter 4 of Book 3 - Analysis of Financial Statements of T S Grewal Class 12 Accountancy 2026-27 are given below. The Chapter name is Ratio Analysis class 12. These Solutions are based on topics calculation of current ratio and quick ratio, calculating working capital, current assets and current liabilities, analysing if any transactions results into increase or decrease in current ratios, finding the value of current assets from given information, finding the value of current liabilities from given information.
Working notes are given with each solution. These help in understanding the steps and are also important for board exams as marks are given for steps.
These solutions are also useful for CA Foundation, CS Foundation and CMA Foundation students. The solutions will be helpful for students as well as teachers teaching class 12 accounts.
Question 11
| Step 1 |
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| Working Capital |
= |
Current Assets |
- |
Current Liabilities |
| So |
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| Current Liabilities |
= |
Current Assets |
- |
Working Capital |
| |
|
2000000 |
- |
1200000 |
| Current Liabilities |
= |
800000 |
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| Note : Inventories already included in Current Assets so not considered separately |
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| Step 2 |
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| Current Ratio |
= |
Current Assets |
/ |
Current Liabilities |
| |
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2000000 |
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800000 |
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= |
2.5:1 |
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▶ Video Solution: Coming Soon
Question 12
| Current Assets |
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300000 |
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| Current Liabilities |
|
200000 |
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| Current Ratio |
|
1.5:1 |
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| Revised current ratio |
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2:1 |
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| Please note that when the CL are paid off then both the CA and CL will reduce |
| Let the amount paid be x |
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| Journal Entry |
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| Sundry Creditors A/c Dr.. |
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x |
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(by paying some creditors) |
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| To Bank A/c |
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x |
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| Revised Current Assets |
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300000 - x |
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| Revised Current Liabilities |
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200000 - x |
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| So |
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| Current Ratio |
= |
Current Assets |
/ |
Current Liabilities |
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| 2 |
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= |
300000 - x |
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/ |
200000 - x |
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| Solve this equation for x |
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| 2 (200000 - x) |
= |
300000 - x |
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| 400000 - 2x |
= |
300000 - x |
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| 2x - x |
= |
400000 - 300000 |
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| x |
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= |
100000 |
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| So |
| Current Liabilities for Rs 100000 should be paid to get the desired ratio |
▶ Video Solution: Coming Soon
Question 13
| Current Assets |
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875000 |
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| Current Liabilities |
|
350000 |
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| Current Ratio |
|
2.5:1 |
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| Revised current ratio |
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2:1 |
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| Let the amount of Goods purchased be x |
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| Journal Entry |
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| Inventory A/c Dr.. |
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x |
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(by purchasing goods) |
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| To Sundry Creditors A/c |
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x |
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| Revised Current Assets |
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875000 + x |
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| Revised Current Liabilities |
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350000 + x |
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| So |
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| Current Ratio |
= |
Current Assets |
/ |
Current Liabilities |
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| 2 |
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= |
875000 + x |
|
/ |
350000 + x |
|
| Solve this equation for x |
| |
| 2 (350000 + x) |
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= |
875000 + x |
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| 700000 + 2x |
= |
875000 + x |
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| 2x - x |
= |
875000 - 700000 |
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| x |
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= |
175000 |
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| So |
| Current Goods to be purchased on credit Rs 175000 |
▶ Video Solution: Coming Soon
Question 14
| Original Current Assets |
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500000 |
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| Original Current Liabilities |
|
x |
(Assume to be x as not given in question) |
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| After making the payment of |
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100000 |
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| Current Assets |
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400000 |
(After making payment for Rs 100000) |
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| Current Liabilities |
|
x - 100000 |
(After making payment for Rs 100000) |
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| Current ratio |
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2 : 1 |
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| Current Ratio |
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= |
Current Assets |
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/ |
Current Liabilities |
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| 2 |
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= |
400000 |
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x - 100000 |
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| Solve this equation for x |
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| 2 (x - 100000) |
= |
400000 |
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| 2x - 200000 |
= |
400000 |
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| 2x |
= |
400000 |
+ |
200000 |
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| 2x |
= |
600000 |
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| x |
= |
600000 |
/ |
2 |
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| x |
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= |
300000 |
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| So |
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| Current Liabilities (Before payment) |
300000 |
| Current Liabilities (After payment) |
200000 |
| |
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| Working Capital before payment |
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| Working Capital |
= |
Current Assets |
- |
Current Liabilities |
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| |
|
= |
500000 |
- |
300000 |
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| |
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= |
200000 |
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| Working Capital after payment |
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| Working Capital |
= |
Current Assets |
- |
Current Liabilities |
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| |
|
= |
400000 |
- |
200000 |
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= |
200000 |
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▶ Video Solution: Coming Soon
Question 15
| Original Current Liabilities |
540000 |
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| Original Current Assets |
x |
(Assume to be x as not given in question) |
| |
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| Purchased stock on credit |
60000 |
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| Journal entry : |
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| Inventory A/c Dr.. |
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|
CA |
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| To Creditors A/c |
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|
CL |
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| Current Assets |
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|
x+60000 |
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| Current Liabilities |
600000 |
(540000+60000) |
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| Current ratio |
2 : 1 |
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| Current Ratio |
= |
Current Assets |
/ |
Current Liabilities |
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| 2 |
= |
x+60000 |
600000 |
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| 1200000 |
= |
x+60000 |
|
| x |
= |
1200000 |
- |
60000 |
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| |
|
= |
1140000 |
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| Current Assets before purchase |
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= |
1140000 |
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| Current Assets after purchase |
= |
1200000 |
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| Working Capital before purchase |
= |
1140000-540000 |
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= |
600000 |
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| Working Capital after purchase |
= |
1200000-600000 |
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= |
600000 |
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▶ Video Solution: Coming Soon
Question 16
| |
Original Current Ratio |
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2:1 |
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Let us increase the ratio a little by multiplying both the numerator and denominato by 5. |
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New ratio will be 10 : 5. Assume Rs 1 impact in each case. |
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Also note that the journal entries are given only for understanding and are not required in solution. |
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| (a) |
Journal Entry |
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Trade Payables A/c Dr.. |
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1 |
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CL |
Reduce |
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To Cash |
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1 |
CA |
Reduce |
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| |
Current Ratio |
|
9 : 4 |
= |
2.25:1 |
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| |
Current ratio will increase |
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| (b) |
Journal Entry |
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Note : Bills Payables discharged means Bills Payable are paid |
| |
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Bills Payables A/c Dr.. |
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1 |
|
CL |
Reduce |
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To Cash |
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1 |
CA |
Reduce |
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| |
Current Ratio |
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9 : 4 |
= |
2.25:1 |
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| |
Current ratio will increase |
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Creditor A/c Dr.. |
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1 |
|
CL |
Reduce |
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| |
To Bills Receivable A/c |
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1 |
CA |
Reduce |
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| |
Current Ratio |
|
9 : 4 |
= |
2.25:1 |
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| |
Current ratio will increase |
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| (d) |
Journal Entry |
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Please note that dividend is already declared and hence is now a liability |
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Dividend Payable is part of Current Liabilities under Other Current Liabilities |
| |
So when dividend is paid then following journal entry is passed |
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Dividend Payable A/c Dr.. |
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|
1 |
|
CL |
Reduce |
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| |
To Bank A/c |
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|
1 |
CA |
Reduce |
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| |
Current Ratio |
|
9 : 4 |
= |
2.25:1 |
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| |
Current ratio will increase |
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| |
Stock in Trade A/c/Inventory Dr.. |
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1 |
CA |
Increase |
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To Creditors A/c |
|
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|
1 |
CL |
Increase |
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| |
Current Ratio |
|
11 : 6 |
= |
1.83:1 |
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| |
Current ratio will decrease |
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| (f) |
Journal Entry |
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BR endorsed to a creditor dishonoured |
| |
Debtors A/c Dr.. |
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|
1 |
|
CA |
Increase |
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| |
To Creditors A/c |
|
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|
1 |
CL |
Increase |
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| |
Current Ratio |
|
11 : 6 |
= |
1.83:1 |
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| |
Current ratio will decrease |
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| |
Stock in Trade/Inventory A/c Dr.. |
|
|
1 |
|
CA |
Increase |
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To Cash A/c |
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|
1 |
CA |
Decrease |
|
| Current Assets increase and decrease by the same amount. There is no impact on CL. |
| |
No Change in Current Ratio |
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| (h) |
Journal Entry |
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| |
Bank A/c Dr.. |
|
|
45000 |
|
|
CA |
Increase |
| |
Profit and Loss A/c Dr.. |
5000 |
R & S |
Decrease |
| |
To Fixed Assets A/c |
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|
50000 |
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NCA |
Decrease |
| |
Here, only current asset is impacted |
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Assume CA =200000 and CL = 100000 |
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Revised CA =245000 and revised CL = 100000 |
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Current ratio = 245000/100000 = 2.45 : 1 |
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| |
Current ratio will increase |
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| |
Bank A/c Dr.. |
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60000 |
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CA |
Increase |
| |
To Fixed Assets A/c |
50000 |
FA |
Decrease |
| |
To Profit and Loss A/c |
|
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|
10000 |
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| Here, only current asset is impacted |
| |
| |
Current Ratio |
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11 : 5 |
= |
2.2:1 |
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| |
Current ratio will increase |
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▶ Video Solution: Coming Soon
Question 17
| Liquid Assets or |
= |
Current Assets |
- |
Inventories |
- |
Prepaid Expenses |
| Quick Assets |
400000 |
- |
100000 |
- |
20000 |
| |
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|
| |
= |
280000 |
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| |
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| Current Liabilities |
= |
140000 |
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| Liquid Ratio |
= |
Liquid Assets |
/ |
Current Liabilities |
| |
= |
280000 |
|
140000 |
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= |
2:1 |
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| Note : |
Trade receivabls is already included in Current Assets so not considered separately |
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▶ Video Solution: Coming Soon
Question 18
| Current Assets |
= |
Total |
- |
PPE |
- |
Non Current |
- |
Long term |
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|
Assets |
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Investments |
|
Loans & Advances |
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| |
= |
1600000 |
- |
600000 |
- |
100000 |
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- |
100000 |
| |
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| |
= |
800000 |
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| Current Liabilities |
= |
Total |
- |
Long term |
- |
Long Term |
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Debt |
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Borrowings |
Provisions |
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= |
1200000 |
- |
400000 |
- |
400000 |
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| |
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| |
= |
400000 |
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| |
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| Quick Assets |
= |
Current Assets |
- |
Inventories |
- |
Prepaid Expenses |
| |
= |
800000 |
|
- |
190000 |
|
- |
10000 |
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| |
= |
600000 |
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| |
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| Quick Ratio |
= |
Quick Assets |
/ |
Current Liabilities |
|
|
| |
= |
600000 |
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|
400000 |
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| |
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| |
= |
1.5:1 |
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▶ Video Solution: Coming Soon
Question 19
| Quick Assets |
= |
Current Assets |
- |
Inventories |
- |
Prepaid Expenses |
| |
|
600000 |
- |
120000 |
- |
0 |
| |
|
|
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|
|
|
| |
= |
480000 |
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| |
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| Working Capital |
= |
Current Assets |
- |
Current Liabilities |
| So |
|
|
|
|
|
|
| Current Liabilities |
= |
Current Assets |
- |
Working Capital |
|
| |
|
600000 |
- |
504000 |
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| |
|
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|
|
|
| Current Liabilities |
= |
96000 |
|
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| |
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| Quick Ratio |
= |
Quick Assets |
/ |
Current Liabilities |
| |
|
480000 |
|
96000 |
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|
| |
|
5:1 |
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|
|
|
▶ Video Solution: Coming Soon
Question 20
| Quick Assets |
= |
Current Assets |
- |
Inventories |
- |
Prepaid Expenses |
| So |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Current Assets |
= |
Quick Assets |
+ |
Inventories |
+ |
Prepaid Expenses |
| |
|
300000 |
+ |
80000 |
+ |
20000 |
| |
|
|
|
|
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|
| |
= |
400000 |
|
|
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|
| |
|
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|
|
|
|
| Working Capital |
= |
Current Assets |
- |
Current Liabilities |
| So |
|
|
|
|
|
|
| Current Liabilities |
= |
Current Assets |
- |
Working Capital |
|
| |
|
400000 |
- |
240000 |
|
|
| |
|
|
|
|
|
|
| Current Liabilities |
= |
160000 |
|
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|
| |
|
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|
|
|
|
| Current Ratio |
Current Assets |
/ |
Current Liabilities |
| |
|
400000 |
|
160000 |
|
|
| |
|
2.5:1 |
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|
|
▶ Video Solution: Coming Soon
