Question : Assertion (A): Current Ratio is calculated by dividing liquid assets by current liabilities and current assets include loose tools, stores, and spares, and provision for doubtful debts.
Reason (R): The formula for the Current Ratio is Current Assets/Current Liabilities. Loose Tools, Stores and Spares, and Provision for Doubtful Debts are included in Current Assets.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Both Assertions (A) and Reason (R) are False
Correct Answer: Both Assertions (A) and Reason (R) are False
Solution :
Current Assets/Current Liabilities is the formula for the current ratio.
Loose tools, stores, spare parts, and provision for doubtful debts are not considered current assets.
Hence option 4 is the correct answer.
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