Current Account: From accounting point of view, there are two type of current account: - ⮚ Current Asset: - Any asset expected to last or be in use for less than one year or within the normal operating cycle is considered as current asset. Example: - Receivables, Inventory and Work in process. ⮚ Current Liabilities: - Any liability that a company is required to settle within the next 12 months or which it expects to settle within its normal operating cycle. Example: Account Payable, Salary Payable. Current Ratio : - It is a type of financial ratio that displays the proportion of current assets and current liabilities. It is an indicator of the company’s liquidity status. In other words, it implies that a large amount of current assets which is in relationship with a small amount of current liabilities provides some assurance that obligations that are due will be paid for. Formula of Current ratio= C u r r e n t A s s e t C u r r e n t L i a b i l i t i e s To calculate:- a) Identify Current Accounts, i.e. current asset or current liabilities from the given accounts in question b) Current Ratio

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Chapter 4, Problem 11QS

To determine

Introduction:

Current Account: From accounting point of view, there are two type of current account: -

⮚ Current Asset: - Any asset expected to last or be in use for less than one year or within the normal operating cycle is considered as current asset. Example: - Receivables, Inventory and Work in process.

⮚ Current Liabilities: - Any liability that a company is required to settle within the next 12 months or which it expects to settle within its normal operating cycle. Example: Account Payable, Salary Payable.

Current Ratio: - It is a type of financial ratio that displays the proportion of current assets and current liabilities. It is an indicator of the company’s liquidity status. In other words, it implies that a large amount of current assets which is in relationship with a small amount of current liabilities provides some assurance that obligations that are due will be paid for.

Formula of Current ratio= $\frac{C u r r e n t A s s e t}{C u r r e n t L i a b i l i t i e s}$

To calculate:-

a) Identify Current Accounts, i.e. current asset or current liabilities from the given accounts in question

b) Current Ratio

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