Question

Which of the following items is not taken into consideration while computing current ratio?

• A. Creditors
• B. Debtors
• C. Furniture
• D. Bank overdraft

Hint:

Only current assets and current liabilities are used in Current Ratio; fixed assets like furniture are excluded.

Answer 1

The Correct Option is C

Step 1: Current ratio formula.
\[ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} \]
Step 2: Classify each item.
- Creditors = Current liability (included).
- Debtors = Current asset (included).
- Bank overdraft = Current liability (included).
- Furniture = Fixed asset (not included).
Step 3: Conclude.
Since Furniture is a fixed asset, it is not considered in current ratio calculation.
Final Answer: \[ \boxed{\text{Furniture}} \]