Day: October 6, 2025

Accounting Multiple Choice Question – 6 October 2025

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex Ltd’s Liquid Capital ratio (sometimes known as the Acid Test or Quick ratio) has fallen from 2:1 to 1.5:1.

Which one of the following might help to explain this decline?

Select ONE answer:

  1. The provision for doubtful debts (or allowance for receivables) has been reduced
  2. Credit control of receivables has been poor
  3. The entity has purchased a property for cash
  4. Inventory or stock levels have fallen

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

  1. Not correct
  2. Not correct
  3. Correct => If the entity has purchased a property for cash, this would reduce current assets without any corresponding reduction in current liabilities (i.e. Dr Non-Current Assets Cr Cash)
  4. Not correct

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