S1: The Current Ratio measures long-term solvency. S2: The Debt-Equity Ratio measures short-term liquidity. Which statement(s) is/are correct? MCQ with Answer and Explanation

S1: The Current Ratio measures long-term solvency. S2: The Debt-Equity Ratio measures short-term liquidity. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S2 only
C. S1 only
D. Both S1 and S2
Answer: Option A
Solution (By JKSSB Mock Tests)
The Current Ratio measures short-term liquidity, not long-term solvency. The Debt-Equity Ratio measures long-term solvency, not short-term liquidity. Both statements have swapped the definitions. Both are incorrect.

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Practice More Accountancy and Book Keeping Questions

Question #1
Which of the following is a type of audit risk?
A. Inherent Risk
B. Control Risk
C. All of the above
D. Detection Risk

Correct Answer: Option C


Explanation:
Audit risk comprises Inherent Risk, Control Risk, and Detection Risk, which together determine the overall risk of an incorrect audit opinion.

Question #2
Assertion (A): Capital Expenditure is shown in the Balance Sheet. Reason (R): Its benefit is exhausted within the current accounting period.
A. A is true but R is false
B. Both A and R are true but R is not the correct explanation of A
C. Both A and R are true and R is the correct explanation of A
D. A is false but R is true

Correct Answer: Option A


Explanation:
Capital expenditure yields benefits over multiple future periods (hence an asset), making Reason R false. R describes revenue expenditure.

Question #3
The 'Derecognition of Financial Assets' under Ind AS 109 is based on:
A. Transfer of risks and rewards of ownership
B. Title
C. Legal ownership
D. Possession

Correct Answer: Option A


Explanation:
Derecognition occurs when risks and rewards are substantially transferred.