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Question 42 Chapter 4 of +2-B – T.S. Grewal 12 Class

Question 42 Chapter 4 of +2-B
Question No. 42- Chapter No.4 - T.S. Grewal +2 Book Part B

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Question 42 Chapter 4 of +2-B

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42. Assuming that the Debt to Equity Ratio is 2: 1, state giving reasons, which
of the following transactions would (i) Increase; (ii) Decrease; (iii) Not alter Debt to Equity Ratio:

  1. Issue of new Equity Shares for cash.
  2. Conversion of debentures into equity shares.
  3. Sale of fixed assets at profit.
  4. Purchase of fixed assets on long-term deferred payment basis.
  5. Payment to creditors.

 

 

The solution of Question 42 Chapter 4 of +2-B: –

 
Transactions
Impact on Debt to Equity RatioReason
(i) Issue of new Equity Shares for cash.DecreaseThe amount of Shareholders’ Fund is Increase and no change in Debts of Company.
(ii) Conversion of debentures into equity
shares.
DecreaseThere is an amount of Equity increase and Debt of Company is decrease.
(iii) Sale of fixed assets at profit.DecreaseDebt is not changed but, Equity of Company is increased by adding profit in surplus.
(iv) Purchase of fixed assets on long-term
deferred payment basis.
IncreaseDebts of the Company is Increase and Equity of Company not Changed.
(v)Payment to creditors.No changeDebts and Equity of Company not Changed. This effect on the Assets of the Company.



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Balance Sheet: Meaning, Format & Examples

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Also, Check out the solved question of previous Chapters: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

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Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

Question 1 Chapter 1 of +2-B
T.S. Grewal’s Analysis of Financial Statements

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