Question 57 Chapter 4 of +2-B
Table of Contents
57. State with reason, whether the Proprietary Ratio will improve, the decline will not change because of the following transactions if the proprietary ratio is 0.8: 1.
- Obtained a loan of Rs. 5,00,000 from State bank of India payable after five years.
- Purchased machinery of Rs. 2,00,000 by cheque.
- Redeemed 7% Redeemable Preference Shares Rs. 3,00,000.
- Issued equity shares to the vendor of building purchased for Rs. 7,00,000.
- Redeemed 10% Redeemable debentures of Rs. 6,00,000.
The solution of Question 57 Chapter 4 of +2-B: –
| Transactions |
Impact on Proprietary Ratio | Reason | |
| (i) Obtained a loan of Rs. 5,00,000 from State bank of India payable after five years. | Decline | The amount of Shareholders’ Fund is not changes and Total Assets Increased. | |
| (ii) Purchased machinery of Rs. 2,00,000 by cheque. | No change | There will be no Change in Total Assets and Shareholders’ Funds because of Machinery account increased due to Decreased in Bank account. | |
|
(iii) Redeemed 7% Redeemable Preference Shares Rs. 3,00,000.
|
Decline | In Total Assets, Cash or bank account will be decreased and in Shareholders’ Funds, Share capital will be decreased. | |
| (iv) Issued equity shares to the vendor of building purchased for Rs. 7,00,000. |
Improve | Shareholders’ Funds and Total Assets of the Company both is Increased. | |
| (v) Redeemed 10% Redeemable debentures of Rs. 6,00,000. | Improve | The amount of total assets is decreased, but no change in Shareholders’ funds. | |
Please Like and share with your friends
Comment if you have any question.
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)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
