# MCQ Questions Chapter 5 Accounting Ratios Class 12 Accountancy

Please refer to MCQ Questions Chapter 5 Accounting Ratios Class 12 Accountancy with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Accountancy issued for the current academic year. We have provided MCQ Questions for Class 12 Accountancy for all chapters on our website. Students should learn the objective based questions for Chapter 5 Accounting Ratios in Class 12 Accountancy provided below to get more marks in exams.

## Chapter 5 Accounting Ratios MCQ Questions

Please refer to the following Chapter 5 Accounting Ratios MCQ Questions Class 12 Accountancy with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 5 Accounting Ratios Class 12 Accountancy

Question: Current ratio is:
(a) Solvency Ratio
(b) Liquidity ratio
(c) Activity Ratio
(d) Profitability Ratio

B

Question: Current Ratio is :
(a) Liquid Assets/Current Assets
(b) Fixed Assets/Current Assets
(c) Current Assets/Current Liabilities
(d) Liquid assets/Current Liabilities

C

Question: A Company’s liquid assets are Rs.5,00,000 and its current liabilities are Rs.3,00,000.Thereafter, it paid Rs.1,00,000 to its trade payables. Quick ratio will be:
(a) 1.33:1
(b) 2.5:1
(c) 1.67:1
(d) 2:1

D

Question: Two basic measures of liquidity are:
(a) Inventory turnover and Current ratio
(b) Current ratio and Quick ratio
(c) Gross Profit ratio and Operating ratio
(d) Current ratio and average Collection period

B

Question: The ratio in which a partner receives a rise in his share of profits is knownas:
(a) New Ratio
(b) Sacrificing Ratio
(c) Capital Ratio
(d) Gaining Ratio

D

Question: Reserves and accumulated profits are transferred to partners ‘ capitalaccounts at the time of reconstitution in:
(a) Old profit-sharing ratio
(b) Sacrificing Ratio
(c) Gaining ratio
(d) New profit-sharing ratio

A

Question: In which of the following cases, revaluation account is credited?
(a) Decrease in value of liability
(b) Increase in value of liability
(c) Decrease in value of asset
(d) No change in value of liability

A

Question: The ratio in which a partner surrenders his share in favour of a partner isknown as:
(a) New profit-sharing ratio
(b) Sacrificing Ratio
(c) Gaining Ratio
(d) Capital Ratio

B

Question: Increase and decrease in the value of assets and liabilities are recordedthrough:
(a) Partners’ Capital Account
(b) Revaluation Account
(c) Profit and Loss Appropriation Ne
(d) Balance Sheet

B

Question: In which of the following case, revaluation accou nt is debited:
(a) Increase in value of asset
(b) Decrease in value of asset
(c) Decrease in value of liability
(d) No change in value of assets

B

Question: X,Y and Z are partners sharing profits and losses in the ratio of 5:3:2.Theydecide to share the future profits in the ratio of 3:2:1. Workmen compensationreserve appearing in the balance sheet on the date if no information isavailable for the same will be:
(a) Distributed among the partners in old profit sharing ratio
(b) Distributed among the partners in new profit sharing ratio
(c) Distributed among the partners in capital ratio
(d)Carried forward to new balance sheet without any adjustment

A

Question: Partner’s capital account is credited when there is
(a) Profit on revaluation
(b) transfer of general reserve
(c) transfer of accumulated profits
(d) All of the above

D

Question: Sacrificing ratio is the difference between :
(a) New ratio and old ratio
(b) Old ratio and new ratio
(c) New ratio and gaining ratio
(d) Old ratio and gaining ratio

B

Question: In case of change in profit-sharing ratio, the gaining partner mustcompensate the sacrificing partners by paying the proportionalamount of
(a) capital
(b) cash
(c) goodwill
(d) none of the above

C

Question: Any change in the relationship of existing partners which results in anend of the existing agreement and enforces making of new· agreement iscalled:
(a) Revaluation of partnership
(b) Reconstitution of partnership
(c) Realisation of partnership
(d) None of the above

D

Question: A and B are partners in a firm sharing profits in the ratio of 3 : 2. Theydecided to share future profits equally. Calculate A’s gain or sacrifice
(a) 2/10 (sacrifice)
(b) 5/10 (gain)
(c) 1/10 (Gain)
(d) 1/10 (sacrifice)

D

Question: A,B and C were are partners in a firm sharing profits in the ratio of 3:4:1 .Theydecided to share profits equally w.e.f from 1 .4.2019. On that date the profitand loss account showed the credit balance of 96,000.instead of closing theprofit and loss account ,it was decided to record an adjustment entry reflectingthe change in profit sharing ratio .In the journal entry:
(a) Dr. A by 4,000; Dr. B by 16,000; Cr C by 20,000
(b) Cr. A by 4,000; Cr. B by 16,000; Dr C by 20,000
(c) Cr. A by 16,000; Cr. B by 4,000; Dr C by 20,000
(d) Dr. A by 16,000; Dr. B by 4,000; Cr C by 20,000

B

Question: U V and W are partners sharing profits in the ration of 2:3:5. They alsodecide to record the effect of the following revaluations andreassessments without affecting the book values of assets and liabilitiesby passing a single adjustment entry:

(a) Dr. W and Cr. U by 10,500
(b) Dr. U and Cr. W by Rs. 10,500
(c) Dr. V and Cr. U by Rs. 10,500
(d) Dr. W and Cr. V by Rs. 10,500

B

Question: In case of change in profit-sharing ratio, the accumulated profits aredistributed to the partners in
(a) new ratio
(b) old ratio
(c) sacrificing ratio
(d) equal ratio

B

Question: R; S and T sharing profits and losses in the ratio of 1:2:3, decided toshare future profit and losses equally. They also decided to adjust thefollowing accumulated profits, losses and reserves without affecing theirbook figures, by passing a single adjustment entry:
General Reserve 40000
Profit and Loss A/c 30000
Share .Issue expenses 10000
The necessary .adjustment entry will be:
(a) Dr. R and Cr. T by < I 0,000
(b) Dr. T and Cr. R by < 10,000
(c) Dr. S and Cr. R by < 10,000
(d) Dr.R and Cr. S by < 10,000

A

Question. Liquid Assets do not include:
(a) Bills Receivable
(b) Debtors
(c) Inventory
(d) Bank Balance

C

(a) Comparative analysis of the performance and Budgeting and forecasting
(b) Comparative analysis of the performance
(c) Budgeting and forecasting
(d) None of the options

A

Question: Ratio Analysis provide analysis of the
(a) Liquidity
(b) Solvency
(c) Profitability
(d) None of the options

A

Question: An accounting ratio is a
(a) Logical expression
(b) Mathematical expression and Logical expression
(c) Mathematical expression
(d) None of the options

C

Question: Accounting ratios classified as under
(a) All of the options
(b) Liquidity Ratios
(c) Current ratio
(d) Solvency Ratios

A

Question: Current ratio is also known as
(a) Working capital ratio
(b) Profit Sharing Ratio
(c) Working capital ratio and Profit Sharing Ratio
(d) None of the options

A

Question: Which Ratio establishes relationship between current assets and current liabilities

(a) Liquidity Ratios
(b Solvency Ratios
(c) Current ratio
(d) None of the options

C

Question: Ratio Analysis ignored
(a) Qualitative factors
(b) Quantity Factors
(c) Qualitative factors and Quantity Factors
(d) None of the options

AAAAA

Question: Ratio Analysis affected by

(a) Window-dressing
(b) Personal bias
(c) Ability of the analyst
(d) All of the options

D

Question: Current Ratio is
(a) Current Assets/Current Liabilities
(b) Current Assets-Current Liabilities
(c) Current Assets x Current Liabilities
(d) None of the options

A

Question: Liquid Ratio is
(a) Liquid Assets or Quick Assets+Current Liabilities
(b) Liquid Assets or Quick Assets/Current Liabilities
(c) Liquid Assets or Quick Assets-Current Liabilities
(d) None of the options

B

Question: Items Included in Liquid/Quick Assets
(a) Items Included in Liquid/Quick Assets
(b) All of the options
(d) Cash and cash equivalents

B

Question: A Company’s Quick Ratio is 1.8 : 1; Liquid Assets are Rs.5,40,000 and Inventory is Rs. 1,50,000. Its Current Ratio will be :
(a) 2 : 1
(b) 2.3 : 1
(c) 1.8:1
(d) 1.3:1

B

Question: Current Assets Rs.4,00,000; Current Liabilities Rs.2,00,000 and Inventory is Rs.50,000. Liquid Ratio will be :
(a) 2 : 1
(b) 2.25 : 1
(c) 4 : 7
(d) 1.75 : 1

D

Question: What will be the amount of Gross Profit, if revenue from operations are Rs.6,00,000 and Gross Profit Ratio 20% of revenue from operations?
(a) Rs. 1,50,000
(b) Rs. 1,00,000
(c) Rs. 1,20,000
(d) Rs. 5,00,000

C

Question: Revenue from operations is Rs. 1,80,000; Rate of Gross Profit is 25% on cost. What will be the Gross Profit?
(a) Rs.45,000
(b) Rs.36,000
(c) Rs.40,000
(d) Rs.60,000

B

Question: Current Ratio is :
(a) Solvency Ratio
(b) Liquidity Ratio
(c) Activity Ratio
(d) Profitability Ratio

B

Question: Items excluded in liquid assets are
(a) Inventories and prepaid expenses
(b) Inventories
(c) Prepaid expenses
(d) None of the options

A

Question: Which ratios judge the long-term financial position of an enterprise
(a) Quick Ratio
(b) Test Ratio
(c) None of the options
(d) Solvency Ratios

D

Question: Establishes the relationship between long-term debt (external equities) and the equity (internal equities)
(a) Quick Ratio
(b) Test Ratio
(c) Debt to Equity ratio
(d) None of the options

C

Question: Debt to Equity ratio establishes the relationship between
(a) long-term debt (external equities) and the equity (internal equities)
(b) long-term debt (external equities) and the current Assets(internal equities)
(c) long-term debt (external equities) and the equity (internal equities) and long-term debt (external equities) and the current Assets(internal equities)
(d) None of the options

A

Question: Current assets include only those assets which are expected to be realized within……
(a) 3 months
(b) 6 months
(c) 1 year
(d) 2 years

C

Question: A Company’s Quick Ratio is 1.5:1; Current Liabilities are Rs.2,00,000 and Inventory is Rs.1,80,000.Current Ratiowill be:
(a) 0.9:1
(b) 1.9:1
(c) 1.4:1
(d) 2.4:1

D

Question: Ideal Current Ratio is:
(a) 1:1
(b) 1:2
(c) 1:3
(d) 2:1

D

Question: Debt to Equity Ratio is
(a) Debt (Long-term external equities)+Equity (Shareholders funds)
(b) Debt (Long-term external equities)-Equity (Shareholders funds)
(c) Debt (Long-term external equities)+Equity (Shareholders funds) and Debt (Long-term external equities)-Equity (Shareholders funds)
(d) None of the options

A

Question: Cash Balance Rs.5,000; Trade Payables Rs.40,000; Inventory Rs.50,000; Trade Receivables Rs.65,000 and Prepaid Expenses are Rs. 10,000. Liquid Ratio will be
(a 2 : 1
(b) 3.25 : 1
(c) 1.75 : 1
(d) 3 : 1

C

Question: Which of the following transactions will improve the Current Ratio :
(a) Cash Collected from Trade Receivables
(b) Purchase of goods for cash
(d) Credit purchase of Goods

C

Question: Current Assets Rs.85,000; Inventory Rs.22,000; Prepaid Expenses Rs.3,000. Then liquid assets will be :
(a) Rs.63,000
(b) 60,000
(c) X 82,000
(d) X 1,10,000

B

Question: A Company’s Quick Ratio is 1.5 : 1; Current Liabilities are Rs.2,00,000 and Inventory is X 1,80,000. Current Ratio will be :
(a) 0.9:1
(b) 1.9:1
(c) 1.4:1
(d) 2.4:1

D

Question: Working Capital is the :
(a) Cash and Bank Balance
(b) Capital borrowed from Banks
(c) Difference between Current Assets and Current Liabilities
(d) Difference between Current Assets and Fixed assets

C

Question: Equity Share Capital Rs.20,00,000; Reserves Rs.5,00,000; Debentures Rs.10,00,000; Current LiabilitiesRs.8,00,000. Debt-equity ratio will be:
(a) 0.4 : 1
(b) 0.32 : 1
(c) 0.72 : 1
(d) 0.5 : 1

A

Question: On the basis of the following information received from a firm, its Proprietory Ratio will be:Fixed Assets Rs.3,30,000; Current Assets Rs.1,90,000; Preliminary Expenses Rs.30,000; Equity share Capital Rs.2,44,000; Preference Share capital Rs.1,70,000; Reserve Fund Rs.58,000.
(a) 70%
(b) 80%
(c) 85%
(d) 90%

C

Question: A firm’s credit revenue from operations is Rs.3,60,000, cash revenue from operations is Rs.70,000. Cost ofrevenue from operations is Rs.3,61,200. Its gross profit ratio will be:
(a) 11%
(b) 15%
(c) 18%
(d) 16%

D

Question: Revenue from Operations Rs.2,00,000; Inventory Turnover ratio 5; Gross Profit 25%. Find out the value ofClosing Inventory, if Closing Inventory is Rs.8,000 more than the Opening Inventory.
(a) Rs.38,000
(b) Rs.22,000
(c) Rs.34,000
(d) Rs.26,000

C

Question: Fixed Assets Rs.5,00,000; Current Assets Rs.3,00,000; Equity Share Capital Rs.4,00,000; ReserveRs.2,00,000;Long –term debts Rs.40,000.Proprietory Ratio will be:
(a) 75%
(b) 80%
(c) 125%
(d) 133%

A

Question: On the basis of following data, the Debt-Equity Ratio of a Company will be: Equity Share Capital Rs.5,00,000;General Reserve Rs.3,20,000; Preliminary Expenses Rs.20,000; Debentures Rs.3,20,000; Preliminary Expenses Rs.20,000; Debentures Rs.3,20,000; Current Liabilities Rs.80,000.
(a) 1:2
(b) 0.52:1
(c) 0.4:1
(d) 0.37:1

C

Question: On the basis of the following information received from a firm, its Total Assets-Debt ratio will be:
(a) 40%
(b) 60%
(c) 30%
(d) 70%

A

Question: Opening Inventory Rs.1,00,000; Closing Inventory Rs.1,50,000; Purchases Rs.6,00,000; Carriage Rs.25,000;wages Rs.2,00,000. Inventory Turnover Ratio will be:
(a) 6.6 Times
(b) 7.4 Times
(c) 7 Times
(d) 6.2 Times

D

Question: Total revenue from operations Rs.9,00,000; Cash revenue from operations Rs.3,00,000; Debtors Rs.1,00,000; Debtors Rs.1,00,000; B/R Rs.20,000. Trade Receivables Turnover Ratio will be:
(a) 5 Times
(b) 6 Times
(c) 7.5 Times
(d) 9 Times

A

Question: Revenue from Operations Rs.6,00,000; Gross Profit 20%; Office Expenses Rs.30,000;Selling ExpensesRs.48,000.Calculate operating ratio.
(a) 80%
(b) 85%
(c) 96.33%
(d) 93%

D

Question: When comparative statement of financial statements of an enterprise for two or more accounting periods is prepared, it is known as……..comparisons.

intra firm comparisons

Question: Increase in the value of assets and decrease in the value of liabilities result in……..for the existing partners and should be ……….to P/L Adjustment a/c.

Gain,credited

Question: ……..should compensate …………..in the case of reconstitution of the firm.

Gaining partner, Sacrificing

Question: Proposed dividend will be shown in……. heading in balance sheet.

Contingent liability

Question: In case of common size balance sheet, each assets is expressed as percentage to …………..and each liability is expressed as percentage tototal liability.

Total assets

Fill in the blanks:

Question: with appropriate word: An ideal Quick Ratio is ……………

1:1

Question: Matured debentures will be shown in ……… main head in the balance sheet.

Current liability

Question: with appropriate word:……………is the process of determining and interpreting numerical relationship
between figures of the financial statements.

Ratio Analysis

True or False:-

Question: A,B and C are sharing profits in the ratio of 3:2:1. They decided to share equallyin future .B’s has neither sacrificed nor gained .

True

Question: A partnership is reconstituted due to change in profit sharing ratio.

True

Question: Interest accrued but not due on debentures will be shown under main head of……….. in the balance sheet.

Non-current liabilities

Question: Public deposits will be shown under the main head……………in the balance sheet.

Non current liabilities

Question: Arrears of fixed Cumulative preference dividend will be shown under the main heading of ………….

Contingent liabilities.

Question: If in 2018-2019,inventories appears in the balance sheet at Rs 18 lakhs- 20 lakhs. The percentage change in inventory ………

11.11%

Question: Provisions for employees benefit will be shown under the main head of ……… in the balance sheet.

Non-current liabilities

Question: If in 2017 share capital is 25 lakh and in 2016 share capital is 20 lakhs. The percentage change in share capital……   is

25%

Question: Financial strength of a business enterprise is judged by its profitability.

True

Question: The four classification of ratio analysis are liquidity ratio, fixed asset ratio, Profitability ratio andefficiency ratio.

True

Question: Should a business have no interest income in 1 year, and Rs. 1,000 of interest income in the
followingyear,the percentage of change in the interest income between two years is 100%.

True

True or False:

Question: Solvency refers to the ability of the enterprise to meet its current obligations.

True

Question: Lower the Gross Profit Ratio, higher will be the profitability of a company.

False

Question: Comparative statement ignores the price level changes.

True

Question: case of common size statement, figures of previous year are taken as base for comparison.

False

Question: Two popular techniques of comparative analysis are year to year change analysis and index numbertrend analysis.

True

Question: Working capital is shown on the assets side of balance sheet under the heading non-current assets

False

Question: Comparisons of company data with industry averages can provide some insight into the
company’srelative position in the industry.

True

Question: Shareholders ‘funds are also known as net worth.

True

Question: Liquid ratio is also known as acid test ratio.