The 'Quick Ratio' excludes inventory because: MCQ with Answer and Explanation

Question Report Error

The 'Quick Ratio' excludes inventory because:

A. Inventory is not an asset

B. Inventory is never sold

C. Inventory may not be easily convertible into cash

D. Inventory is a fixed asset

Answer: Option C

Solution (By JKExamLibrary)

Quick ratio considers only quick assets (liquid), inventory is less liquid, so excluded.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1 Report Error

A: The Matching Concept requires expenses to be matched with revenues. R: This concept is the basis for the accrual system of accounting. Choose the correct option.

A. Both A and R are true and R is the correct explanation of A

B. A is false but R is true

C. Both A and R are true but R is NOT the correct explanation of A

D. A is true but R is false

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Correct Answer: Option A

Explanation:
The Matching Concept dictates that expenses incurred to earn revenue must be recognized in the same period as the revenue. This necessitates the accrual system, where transactions are recorded when they occur, not when cash changes hands. R correctly explains A.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping