Reason Neither the long-term debt nor the shareholders’ funds are affected by purchasing of goods on credit. Total assets include Also, if credit purchases are not given, then all purchases are deemed to be on credit. (i) Operating ratio      (ii) Inventory turnover ratio (iii) Proprietary ratio (iv)Issue of bonus shares State giving reasons whether this ratio would increase, decrease or remain unchanged in the following cases. Operating Expenses = Employees Benefits Expenses + Other Expenses (Other than non-operating expenses) + Depreciation and Amortisation Expenses If the excess of current assets over quick assets as represented by inventory is Rs 40,000, calculate current assets and current liabilities. Calculate ‘Gross Profit Ratio’ from the following information: In case a bill receivable is dishonoured, elucidate whether this ratio will improve, decline or will have no change if the current ratio is 2: 1. (Delhi 2010 c) (b)Current Assets [Current investments + Inventories (including spare parts and loose tools) + Trade Receivables + Cash and Cash Equivalents + Short-term Loans and Advances + Other Current Assets] All the solutions of Accounting Ratios - Accountancy explained in detail … The ideal coverage ratio is 6 to 7 times. Discuss the importance of current and liquid ratio. Ans. Ans.Operating Profit Ratio = 100 – Operating Ratio Accounting Ratios Class 12 Accountancy MCQs Pdf. (iii)Cash and cash equivalents. Calculate the total current assets and value of inventory. Current Ratio. Easy to print and read. Statement Analysis Tools and Accounting Ratios Class 12 Accountancy Extra Questions. Reason Neither the long-term debt nor the shareholders’ funds are affected by selling of furniture at cost. After the payment of ? Effect No change Debtors/Trade Receivables Turnover Ratio=Credit Revenue from Operations i. e. Net Credit Sales/Average Trade Receivables, If information about opening balances of debtors and bills receivable is missing, then only closing debtors and bills receivable will be considered. Question 1. The chapter gives detailed information on ratio analysis, the objective of ratio analysis, advantages of ratio analysis, limitations of ratio analysis and types of ratios. (iii) Sale of furniture at cost Ans. (ii)Purchase of goods on credit (iii) Sale of furniture at cost Average Inventory =(Opening Inventory + Closing Inventory)/2 (iii)Operating ratio Operating ratio establishes the relationship between operating cost and revenue from operations i.e. 34.From the following information, calculate any two of the following ratios State whether the long-term loan obtained by the company will improve, decrease or not change the ratio. It is computed to ascertain soundness of the long-term financial position of the firm. Repayment of long-term loan will reduce the long-term debt but the shareholders’funds will remain same. Ans. Free PDF Download - Best collection of CBSE topper Notes, Important Questions, Sample papers and NCERT Solutions for CBSE Class 12 Accounts Accounting ratios. Calculate the gross profit ratio. Equity or Shareholders’ Funds = Equity Share Capital + Preference Share Capital+ Reserves and Surplus Reason Neither the long-term debt nor the shareholders’ funds are affected by purchasing of fixed assets on a credit of two months. How are they useful? (Any four) Class 12 Accountancy notes Chapter 14 Accounting Ratios Download CBSE class 12th revision notes for chapter 14 Accounting Ratios in PDF format for free. NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12, Classification of Accounting Ratios The quick ratio of a company is 1.5 : 1. (i) Purchase of machinery for cash NOTE Since,non-operating assets are excluded while determining capital employed, income from non-operating assets should also be excluded from profit. (iv)Working capital turnover ratio This ratio shows the number of times the working capital has been rotated in generating sales. (i) Purchase of machinery for cash Stock turnover ratio will decline because increase in the value of closing stock by ?5,000 will increase the value of average Inventory and decrease the cost of goods sold. In view of the requirements of various users, the accounting ratios may be classified as under. (i)Debt to Equity ratio It establishes the relationship between long-term debt (external equities) and the equity (internal equities) i.e. Therefore, they do not provide complete information for future forecasting. In view of the requirements of various users, the accounting ratios may be classified as under. (iii)Issue of new shares for cash Reason Shareholders’ funds increase and decrease by the same amount. From the following information, calculate any two of the following ratios. (Delhi 2010; All India 2010) (i)Liquid ratio Effect Reduce (ii)Trade Receivables or Debtors turnover ratio It indicates economy and efficiency in the collection of amount due from debtors. Accounts Theory : CBSE Class 12th (Ratio Analysis) Q.1. Return on Investment/Capital Employed=Net Profit before Interest, Tax and Preference Dividend/ Capital Employed x 100 (ii)Working capital turnover ratio Revenue from operations (Net sales) Rs 4,00,000, opening inventory Rs 10,000, closing inventory Rs 3,000 less than the opening inventory, net purchase 80% of revenue from operations, direct expenses Rs 20,000, current assets Rs 1,00,000, prepaid expenses Rs 3,000, current liabilities Rs 60,000, 9% debentures Rs 4,00,000, long-term loan from bank Rs 1,50,000, equity share capital Rs 8,00,000 and 8% preference share capital Rs 3,00,000. (v)Cash received from debtors (Delhi 2011 c) If properly analysed, the ratios make us understand various problem areas as well as the (i)Debt equity ratio 24.From the following information, calculate the following ratios = 100- 83.64 = 16.36%, 3.What will be the operating profit ratio, if operating ratio is 88.94%? (b)Inventories (Excluding loose tools, stores and spares) Ans. For determining the short-term solvency of a business liquidity ratios are essential. 20.Assuming that the debt equity ratio is 2. Ans.Operating Profit Ratio = 100 – Operating Ratio = 100- 88.34 = 11.66%. (Delhi 2008; hots) Classification of Accounting Ratios. Free PDF of DK Goel Solutions Class 12 Accountancy chapterwise Solutions prepared by Subject Experts on Vedantu.com. 12th Accountancy Sample Questions for Practical Exam. 4,00,000. Two basic measures of liquidity are : (A) Inventory turnover and Current ratio (B) Current ratio and Quick ratio (… (ii)Purchase of fixed assets on long-term deferred payment basis (i)Purchase of machinery for cash 30,000, liquid assets Rs. © 2021 myCBSEguide | CBSE Papers & NCERT Solutions, {tex}= \frac{{{\rm{Net Profit before Interest \Tax}}}}{{{\rm{Interest on Long Term Debt}}}}{/tex}, {tex}\frac { R s .2,20,000 (W.N.)} Ans. Hence, Ratio analysis is the process of interpreting the accounting ratios meaningfully and taking decisions on this basis. Effect Improve share capital, reserves and surplus). (ii)Proprietary ratio Proprietors’ Funds or Shareholders’ Funds [Working Capital = Current Assets – Current Liabilities] Items Included in Current Liabilities 3,20,000; Gross Profit Ratio 25% on sales. (a)Current investments What is meant by accounting ratios? Information These are the Accounting Ratios class 12 Notes prepared by team of expert teachers. Statement Analysis Tools and Accounting Ratios Class 12 Accountancy Extra Questions. Also, if credit sales are not specified, then total sales will be deemed to be on credit. 2,00,000 payable after five years. (i)Debt equity ratio (ii) Working capital turnover ratio Effect No change NCERT Solutions, NCERT Exemplars, Revison Notes, Free Videos, CBSE Papers, MCQ Tests & more. Choose the correct answer: Question 1. 20,000 to the creditors, both the total of current assets and total of current liabilities will be reduced by the same amount. (ii)Working capital, i.e. There chapter wise Practice Questions with complete solutions are available for download in myCBSEguide website and mobile app. current assets – current liabilities. Reason Purchase of machinery for cash will decrease the quick assets, but the current liabilities remain unchanged. Ratio analysis is a vital part of the analysis of outcomes unveiled by financial statements. 33. Ratio It is an arithmetical expression of relationship between two related or interdependent items. TS Grewal Solutions for Class 12 Accountancy – Change in Profit-Sharing Ratio Among the Existing Partners (Volume I) Question 1. ■ Non-current Assets [Fixed assets (Tangible and intangible assets) + Non-current Investments + Long-term Loans and Advances (Delhi 2008; hots) (iii)Other short-term liabilities. State with reason whether the decrease in rent received by Rs 15,000 will increase, decrease or not change the ratio. Net Credit Purchases = Credit Purchases – Purchase Return. Ans. Rajasthan Board RBSE Class 12 Accountancy Chapter 11 Ratio Analysis RBSE Class 12 Accountancy Chapter 11 Textbook Questions RBSE Class 12 Accountancy Chapter 11 Multiple Choice Questions. CBSE issues sample papers every year for students for class 12 board exams. 20,000 to the creditors will increase, decrease or not change the ratio. [Average Collection Period =(Number of Days/ Weeks / Months in a Year )/Debtors Turnover Ratio] (a)Non-current Assets [Fixed assets (Tangible and intangible assets) + Non-current Investments + Long-term Loans and Advances Activity Ratio Analysis – Classification of Ratios – Question 3 Calculate the value of opening Inventory from the following information: Cost of revenue from operations is 16000 and Inventory turnover ratio is 1 Times. Is there any Free Test Series for NEET 2021? 350000 (4) Reserve and Surplus: Rs. (All India 2012; hots) Ans. (ii) Purchase of fixed assets on a long-term deferred payment basis 2 times c. 6 times d. 8 times. long-term borrowings and long-term provisions). CBSE Class 12 Accountancy Ratio Analysis. (revenue from operations) net sales. 27.From the following information, calculate any two of the following ratios (i) Net profit ratio (ii) Debt equity ratio (ii) Opening inventory Rs 60,000, closing inventory Rs 1,00,000, inventory turnover ratio 8 times and selling price 25% above cost. Information Equity share capital Rs 10,00,000, general reserve Rs 1,00,000, balance of statement of profit and loss after interest and tax Rs 3,00,000, 12% debentures Rs 4,00,000, creditors Rs 3,00,000, land and buildings Rs 13,00,000, furniture Rs 3,00,000, debtors 12,90,000, cash Rs 1,10,000.Revenue from operations i.e. When Liabilities Approach is Followed It is computed by adding (A) Liquidity Ratios 1. (All India 2012) Proprietory ratio establishes the relationship between proprietors funds and total assets. Students can solve NCERT Class 12 Accountancy Comparative Statements MCQs Pdf with Answers to know their preparation level. or How much must be the decline in current assets to bring the ratio to 2 : 1? (a)Short-term borrowings (i)For Current Ratio first there is a need to find the value of current assets than calculated as follows:-Current Ratio. Debt to Equity Ratio=Debt (Long-term external equities)/Equity (Shareholders funds) The numerical relationships throw light on many latent aspects of the business. (iv) … T. S. Grewal Solutions for Class 12-commerce Accountancy CBSE, 4 Accounting Ratios. Cost of Revenue from Operations i.e. (ii)Debt equity ratio 7.The current ratio of a company is 3 : 1. 31,000; Sales Rs. This expression of the ratio is : (a) Pure ratio (b) Rate ratio (c) In the form of the percentage (i)A business has a current ratio of 3 : 1 and quick ratio of 1.2 : 1. Ans. 1.Liquidity Ratios Liquidity ratios measure the firm’s ability to fulfil its short-term financial obligations. (v)Redemption of debentures at a premium 4,000 more than the opening inventory, net purchase Rs. Its liquid ratio is 1.5 : 1 and current ratio is 2.5 : 1. Multiple Choice Questions Select the best alternate and check your answer with the answers given at the end of the book. (b) Not change the ratio NCERT Book for Class 12 Accountancy-II Chapter 5 Accounting Ratios is available for reading or download on this page. Stock or Inventory Turnover Ratio=Cost of Revenue from Operations i. e. Cost of Goods Sold/Average Inventory 4 Marks Questions Ans. 2,00,000. Average Payables=Opening Payables (Creditors + Bills Payable) + Closing Payables (Creditors + Bills Payable)/2 30.The quick ratio of a company is 1.5 : 1. 10,00,000 and 8% preference share capital Rs. (i)Purchase of fixed assets on a credit of two months 13.From the following information, calculate any two of the following ratios (i)From the following information, compute ‘debt equity ratio’ 17.The quick ratio of a company is 2 : 1. (ii)Net profit ratio Net profit ratio shows the relationship between net profit and revenue from operations i.e. The current ratio is 2.5 : 1. It indicates the ability of a business firm to meet its long term liabilities. Operating Ratio =Operating Cost/ Revenue from Operations (Net sales) x 100 (a)Included in the trade payables was a bills payable of Rs 9,000 which was met on maturity. (e)Short-term loans and advances = Cost of Materials Consumed + Purchases of Stock-in-trade + Changes in Stock turnover ratio of a concern is 6 times. Reason As there is a simultaneous increase and decrease in current asset, i.e. Generally, the ratio of 2 : 1 is considered as an ideal. (Delhi 2009; HOTS) The students will not miss any concept in these Chapter wise question that are specially designed to tackle Exam. ■ Current Assets [Current investments + Inventories (including spare parts and loose tools) + Trade Receivables + Cash and Cash Equivalents + Short-term Loans and Advances + Other Current Assets] (ii) Liquid ratio/Quick ratio/Acid test ratio This ratio establishes relationship between liquid assets and current liabilities and is used to measure the firm’s ability to pay the claims of creditors immediately. (i) Current ratio/Working capital ratio This ratio establishes … (d)Cash and cash equivalents (cash in hand, cash at bank, cheques/drafts in hand) Inventories of Finished Goods, Work-in-progress and Stock-in-trade + Direct Expenses There are around 4-5 set of solved Accountancy Extra questions from each and every chapter. Because bills receivable decreases and debtors increase by the same amount. myCBSEguide | CBSE Papers & NCERT Solutions. 18.The debt equity ratio of a company is 1:1 state giving reasons, (any four) which of the following would improve, reduce or not change the ratio Reason Shareholders’ funds are increased by the amount of profit on sale of goods, but the long-term debts remain unchanged. (iv)Short-term provisions. (iii)Proprietary ratio Ratio analysis is a method which includes regrouping of information by utilisation of arithmetical associations, though its interpretation is a complicated concern. Ratios give false result, if they are calculated from incorrect accounting data. (i) (a) Not change the ratio Proprietary Ratio=Proprietors’ Funds or Shareholders’ Funds/Total Assets Items Included in Equity or Shareholders’ Funds Students should solve the CBSE issued sample papers to understand the pattern of the question paper which will come in class 12 board exams this year. Download revision notes for Accounting Ratios class 12 Notes and score high in exams. (c)Long-term loans and advances. (ii) From the following information compute ‘proprietary ratio’ it measures how fast the stock is moving through the firm and generating sales. (ii)Working capital turnover ratio (Delhi2012) (c)Other current liabilities (current maturities of long-term debts, interest, accrued but not due on borrowings, interest accrued and due on borrowings, outstanding expenses, unclaimed dividend, calls-in-advance, etc) Reason As there is a simultaneous increase and decrease it will not affect the value of current asset. (All India 2009; HOTS) Calculate individual partner’s gain or sacrifice due to change in ratio. CBSE Class 12 Accountancy Extra Questions, Ch-10 Statement Analysis Tools and Accounting Ratios, Calculate Interest Coverage Ratio from the following information, Fixed interest charges on long term borrowing = Rs. Office expenses, administrative expenses, selling and distribution expenses, employees benefit expenses, depreciation and amortisation expenses. (v)Return on investment/Capital employed It establishes the relationship between net profit before interest, tax and preference dividend and capital employed (equity + debts). With effect from 1st April, 2016, they agree to share profits in the ratio of 4:3. (f)Other current assets (prepaid expenses, interest receivable, etc.) (Delhi 2009) (a)Long-term borrowings Items Included in Long-term Debts It includes long-term borrowings and long-term provisions. (b)Trade payables (bills payable and sundry creditors) Items Included in Current Liabilities Students can solve NCERT Class 12 Accountancy Accounting Ratios MCQs Pdf with Answers to know their preparation level. Ratio will increase as both the current assets and current liabilities will decrease on the payment of dividend. Save my name, email, and website in this browser for the next time I comment. (i)Non-current assets, i.e. Items Included in Total Assets (a)Shareholders’ funds (i.e. or Total Assets No change. (iii)Sale of furniture at cost Debt equity ratio will improve as the long-term debts will decrease, but total shareholders’ funds remain unchanged. Answer: A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios. (iv)Operating profit ratio Operating profit ratio establishes the relationship between the operating profit and i.e. Non-current Assets (Tangible assets + Intangible assets + Non-current trade English Shaalaa provides solutions for TS Grewal Class 12 and has all the answers for the questions given in Class 12 Accountancy - Analysis Of Financial Statements.Shaalaa is surely a site that most of your classmates are using to perform well in exams. transactions would (a) increase (b) decrease or (c) not change the ratio 28.From the following calculate the ‘gross profit ratio’ and ‘working capital turnover ratio’: (i) Gross profit ratio Gross profit ratio shows the relationship between the gross profit to net sales (revenue from operations) 15.On the basis of the following information, calculate Items excluded in liquid assets are inventories, prepaid expenses. 31.From the following calculate: (b)Non-current trade investments. (Delhi 2013) Ans. 10.The debt-equity ratio of a company is 0.8:1. (iii)Total assets to debt ratio It establishes a relationship between total assets and total long-term debts. To calculate the ratio, analysts compare a company’s current assets to its current liabilities. 5.What will be the operating profit ratio, if operating ratio is 88.34%? Revenue from operations (Net sales) Rs. Previous Years’Examinations Questions 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. 2. 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