Class 12 Accountancy - KERALA
Accounting Ratios
The chapter 'Accounting Ratios' in Class 12 Accountancy under the Kerala SCERT syllabus introduces students to the mathematical analysis of financial statements. It focuses on expressing the relationship between various accounting figures to assess the liquidity, solvency, profitability, and overall operational efficiency of a business enterprise. Mastering these ratios is crucial for board exams as it tests both theoretical understanding and practical problem-solving skills. Questions often involve calculating specific ratios from given balance sheets and statement of profit and loss, making it a high-scoring and vital area for commerce students.
Start Learning FreeKey Concepts
Accounting Ratio
An arithmetic expression of the relationship between two interdependent accounting variables, used to simplify and understand financial statements.
Liquidity Ratios
Measures the short-term solvency of a business, indicating its ability to pay short-term obligations as they become due.
Solvency Ratios
Assesses the long-term financial stability and long-term debt-paying capacity of a firm.
Activity Ratios (Turnover Ratios)
Evaluates how efficiently a company uses its assets to generate revenue and manage its working capital.
Profitability Ratios
Measures the overall efficiency and financial performance of a business in terms of generating profit relative to sales, assets, or equity.
Important Formulas
Board Exam Info
In the Kerala (SCERT) Class 12 Accountancy board examination, Accounting Ratios typically carries around 8 to 12 marks. Questions usually include direct formula applications, practical numerical problems requiring the calculation of 2 to 3 specific ratios from a given trial balance or financial statement, and analytical questions on the improvement or reduction of a ratio based on specific business transactions.
Frequently Asked Questions
The ideal Current Ratio is 2:1, and the ideal Quick Ratio is 1:1, ensuring the firm has enough short-term assets to cover its short-term debts.
Are the formula names required to be written in examinations?
Yes, writing the formula before solving numerical problems is mandatory to score full marks in the Kerala Board exams.
How do I calculate Quick Assets from Current Assets?
Quick Assets are calculated by subtracting Inventory (Stock) and Prepaid Expenses from Total Current Assets.
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