Q. 44 Solution of Accounting Ratios Chapter TS Grewal Book Class 12 2021-22

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Are you looking for the solution of Question number 44 of the Accounting Ratios of TS Grewal Book 2021-22 Edition for the 2021-22 session?

Question number 44 of the Accounting Ratios chapter is a practical one.

Solution of Question Number 44 of Accounting Ratios Chapter of TS Grewal Book 2021-22 Class 12

Question 44.

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 shares for cash
  2. Conversion of debentures into equity shares
  3. Sale of a fixed asset at profit
  4. Purchase of a fixed asset on long term deferred payment basis.
  5. Payment to creditors.

Solution:-

S.NSituationAffectReason
1.Issue of new shares for cashDecreaseonly equity will increase. due to increased denominator overall ratio would decrease
2.Conversion of debentures into equity sharesDecreaseThe numerator decreases and the denominator increases with the same amount. due to more increase in denominator overall ratio would decrease
3.Sale of a fixed asset at a profitDecreaseEquity would increase by profit. due to an increase in denominator overall ratio would decrease.
4.Purchase of a fixed asset on long term deferred payment basis.IncreaseDebt would increase. due to increase in numerator overall ratio would increase.
5.Payment to creditorsNo ChangeNo effect on debt and equity.
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