<p>Can we have the database and transaction logs on the same drive? What will be its consequences if it is not recommended?</p>

The only downside is that it causes more thrashing on the disk, so worse performance.
A single write will require 2 seeks (between: write transaction log, write data, commit log). Having the transaction log on a separate disk means as few as zero seeks, because the drive heads can remain on the transaction log and the data.