A firm's current ratio is 1.5:1. It wants to maintain a current ratio of 2:1 by paying off some current liabilities. Which of the following will happen? MCQ with Answer and Explanation

Question
A firm's current ratio is 1.5:1. It wants to maintain a current ratio of 2:1 by paying off some current liabilities. Which of the following will happen?
A. Working capital will decrease
B. Current assets will decrease
C. Working capital will remain unchanged
D. Working capital will increase
Answer: Option C
Solution (By JKSSB Mock Tests)
Paying current liabilities reduces both current assets (cash) and current liabilities equally, leaving working capital (CA - CL) unchanged, though ratio improves.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Question #1
The 'Advance Authorisation' scheme under Foreign Trade Policy is related to:
A. Service exports
B. Capital goods import
C. Import of goods without export obligation
D. Duty-free import of inputs required for export production
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Correct Answer: Option D

Explanation:
Advance Authorisation allows duty-free import of inputs, which are physically incorporated in the export product.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
In a BRS, bank charges recorded twice in the Cash Book will result in:
A. No difference
B. Cash Book balance being higher than Pass Book balance
C. Cash Book balance being lower than Pass Book balance
D. Pass Book balance being lower than Cash Book
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Correct Answer: Option C

Explanation:
Recording an expense twice in the Cash Book excessively reduces its balance, making it lower than the actual Pass Book balance.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
The 'Statement of Cash Flows' under Ind AS 7 classifies interest and dividend received by a financial institution as:
A. Operating activities
B. Any of these
C. Financing activities
D. Investing activities
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Correct Answer: Option A

Explanation:
For financial institutions, interest and dividend received are operating activities. For others, they are investing.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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