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Answer Of True Or False Question Current Ratio is calculated as Current Assets divided by Current Liabilities for the period. If the current assets are more than then the company can easily meet its short-term debts. If current ratio is equal to 1, then it means that the company all the current assets are used to offset current liabilities. If the current ratio is more than 1, then the company has more current assets to meet current liabilities. If the company has current ratio less than 1 then the company has not enough current assets to meet current liabilities. It is “False” as proved from below calculation: We know Current Ratio is equal to the following formula: Current Ratio  =   Current Assets / Current Liabilities) Here: Current Assets = Cash + Marketable Securities + Accounts Receivable + Inventories By putting the value, we have: Current Assets = $75,000 + $11,000 + $90,000 + $225,000 = $500000 Current Liabilities  =  $200,000 Now, putting the value o

The Correct Answer Of Short Question Is  T-Account The most convenient and fastest way of transferring Journal Entries to the  Ledger is by using T-Account as it is easy to record accounts (Assets, Liabilities, Equity, Revenues and Expenses) on t-account having a title of a particular account and having a left side (or debit side) and a right side (credit side). For example, if salary t account is prepared, then it is shown below: Salary T Account For The Month Of July, 2023   Date            Particulars             Amount             Date           Particulars          Amount July 2023                                          $               July 2023      Particulars                  $  5th July          Cash a./c             3000                                                                                     31st July      Balance c/d          3000 The entry recorded on 5th July, 2023, is transferred from journal. The balance carried down (Balance c/d) shows the balance whi

Is Double Entry System Better Than Single Entry System And Why? Yes , it is “True” that Double Entry System is more popular as it completes scientific method i.e., it follows a complete Accounting Cycle Process or follows Steps Of Accounting Cycle . It provides both aspects of a Business Transaction i.e., For every Debit, there must be a credit with an equal amount but in the opposite side. It provides more reliable information of accounting data as compared to Single Entry System because under Double Entry Of Bookkeeping, proper Books Of Accounts are maintained and updated supported by evidence documents. A proper accounting cycle is followed. Accounting transactions are journalized, posted through Journal and Ledger. A Trial Balance is prepared to show the list of total debits and credits. Financial Statements such as Income Statement, Balance Sheet,  Cash Flow Statements and Statement of Retained Earnings are  prepared. So, large and medium size businesses adopt Double Ent

Bad Debts Written Off are actual bad debts which is an actual loss to the company / corporation as you could not recover the amount of Credit Sales from those customers who failed to pay for goods sold or services rendered on account. So, the journal entry to record is to debit Bad Debts Account and credit Accounts Receivable Account . Treatment Of Bad Debts Written Off In Profit And Loss Account / Income Statement And Balance Sheet So, the effect of Bad Debts Written Off is on Profit And Loss Account is that we record it as an expense or loss in Profit and Loss Account and deducted the amount from Accounts Receivable or Sundry Debtors on Balance Sheet / Statement Of Financial Position.

Solution To The True & False Question The correct answer is “ False” , as Working Capital (Net Working Capital) is the excess of Current Assets over Current Liabilities to run the daily operations of the business smoothly. If the current liabilities are more than current assets, then it means that the business is not working smoothly i.e., the business may not be able to meet its short-term obligations in future and it is running on short-term debt. So, it may face difficulties to operate daily business’s operations and utilize cash and cash equivalents for the business growth. Positive Working Capital = Current Asset - Current Liabilities So, working capital equals Current Assets minus Current Liabilities and it is called positive working capital when Current Assets are greater than Current Liabilities and Negative Working capital shows that current liabilities are more than current assets during the Accounting Cycle.

Solution To The True And False Question The answer is “True” . Explanation: Yes, it is true that a Contra Asset Account , such as Allowance for Doubtful Accounts , Accumulated Depreciation, Sales Returns & Allowances, Purchases Returns And Allowances, etc., when increased, then these types of accounts decrease the values of related Assets i.e., Accounts Receivable , Fixed Assets such as Furniture & Fixtures, Plant & Machinery, etc., in the Books of Accounts and on Balance Sheet. For example, if we make more allowance for doubtful accounts i.e., from 3% to 5% on Accounts Receivable, then the more value of allowance for doubtful accounts are deducted from Accounts Receivable on Balance Sheet.

Calculation Of Ending Capital Or Capital For The Current Accounting Period The answer of this true & false question is “True” , as in the case of Sole Proprietorship, the current capital or c apital for the current accounting period is calculated by adding Net Income / Net Profit for the accounting period to Beginning Capital and deducted Drawings During the period from Beginning Capital.