Arthur Chen, a newly qualified accountant, was on his second audit job in a country area with a new client called Parson Farm Products. He was looking through the last four years of financials and doing a few ratios, when he noticed something odd. The current ratio went from 1.9 in 2009 down to 0.3 in 2010, despite the fact that 2010 had record income. He decided to sample a few transactions from December 2010. He found that many of Parsons customers had returned products to the firm because of substandard quality. Chen discovered that the business was clearing the receivables (that is, crediting accounts receivable) but hiding the debits in an obscure non-current asset account called grain reserves to keep the firms income in the black (that is, positive income).

Requirment: 1- How did the fraudulent accounting just described affect the current ratio?

Solution should be as per Australian accounting standards