For calculating the Current Ratio, which of the following is excluded from Current Assets?
A. Cash at Bank
B. Loose Tools
C. Prepaid Expenses
D. Sundry Debtors
Answer: Option B
Solution (By JKSSB Mock Tests)
Loose tools and spares are generally excluded from current assets while calculating liquidity ratios because they cannot be easily converted into cash to pay off liabilities.
Explanation:
Cheques issued but not presented reduce the bank balance, so they are added to the overdraft balance as per the cash book to reconcile with the pass book.
No comments yet. Be the first to start the discussion!