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Debt-Equity Ratio… (Class 12 Accountancy SQP 2023-24, Q28)

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AccountancyCBSE Class 12 · Sample paper, session 2023-24 · 1 mark · MCQ

CBSE Class 12 Accountancy sample paper 2023-24: question 28

From the official CBSE sample question paper for 2023-24, section B-I, question 28, for 1 mark. Try it first; the hints and our step-by-step solution are below.

Q28 · 1 mark · MCQAccounting Ratios

Debt-Equity Ratio of Dhamaka Ltd is 3 : 1. Which of the following will result in decrease in this ratio?

  1. (A)Issue of Debentures for Cash of ₹2,00,000.
  2. (B)Issue of Debentures of ₹3,00,000 to Vendors from whom Machinery was purchased.
  3. (C)Goods purchased on Credit of ₹1,00,000.
  4. (D)Issue of Equity Shares of ₹2,00,000.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.

Hints

Open one hint at a time and try again before the next.

Hint 1

Which side of the ratio does each transaction touch?

Hint 2

Trade payables are not part of debt here.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Debt-equity ratio = long-term debt / shareholders' funds. Debentures (for cash or to vendors) raise debt and the ratio; goods bought on credit change only current liabilities, so the ratio is unchanged.

  2. Issuing equity shares raises shareholders' funds with debt unchanged, so the ratio falls. Option (D).

    1 mark

Answer: (D) Issue of Equity Shares of ₹2,00,000.

Where the marks are

  • Equity issue increases the denominator only (1 mark)

Revise the chapter

  • Chapter: Accounting Ratios (notes, formulas, where marks are lost and every past question)
Practise this chapterBoard-style questions from Accounting Ratios, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2023-24: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.