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Standard XII

Accountancy

Benefits of Debentures

Which of the ...

Question

Which of the following transactions results in increase in shareholders' equity and decrease in liabilities?

Issued shares for the purchase of land and building.

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Issued shares for acquisition of another company.

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Shares issued in payment of bills payable.

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Issued bonus shares.

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Solution

The correct option is C Shares issued in payment of bills payable.
Following entry will be passed if the shares are issued in payment of bills payable:

Bills Payable A/c Dr.
To Share Capital A/c

In the above case, shareholders equity increases and liabilities will decreases.

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Similar questions

Q. Bonus Shares can be issued only to equity shareholders.

The Debt Equity ratio is 3. What will be the impact on the following transactions, and find out the increase, decrease or no change in the ratio.

(i) Buy back of equity shares.

(ii) Purchase of a building on a deferred payment basis.

(iii) Issued shares in consideration of purchase of a machinery.

(iv) Debentures matured but not paid.

Assuming that the Debt-Equity Ratio is 2 : I, state, giving reasons, which of the following transactions would (I) Increase; (ii) Decrease; (ii.) Not alter the Debt-Equity Ratio :

(i) Issue of new shares (Preference/Equity) for Cash.

(ii) Issue of new shares (Preference/Equity) against purchase of fixed asset.

(iii) Buy-back of its own shares by a Company.

(iv) Issue of Debentures for Cash.

(v) Issue of Debentures against purchase of fixed asset.

(vi) Repayment of Long-term Borrowings.

(vii) Conversion of Debentures into Equity Shares/Preference Shares.

(viii) Sale of a fixed asset at par.

(ix) Sale of a fixed asset at profit.

(x) Sale of a fixed asset at loss.

(xi) Purchase of a fixed asset on a credit of 2 months.

(xii) Purchase of a fixed asset on long-term deferred payment basis.

(xiii) Issue of Bonus Shares.

Assuming that Proprietary Ratio is 0.6 : 1, state giving reasons, whether the ratio will increase, decrease or will not change in each one of the following cases:

(i) Issue of new equity shares for cash.

(ii) Issue of equity shares against purchase of machinery.

(iii) Issue of debentures against purchase of machiney.

(iv) Redemption of debentures for cash.

(v) Conversion of debentures into preference shares.

(vi) Buy-back of its own shares by a company.

(vii) Purchase of a fixed asset for cash.

(viii) Purchase of a fixed asset on long-term deferred payment basis.

(ix) Sale of a fixed asset costing Rs. 1,00,000 for Rs. 80,000.

(x) Sale of a fixed asset costing Rs. 2,00,000 for Rs. 2,50,000.

(xi) Issue of Bonus Shares.

Q. A company may issue shares for non cash consideration in the following situations:
1. Issue of shares for acquisition of assets
2. Issue of shares to vendors of business
3. Issue of shares to promotes, etc., for services rendered
Which is correct?

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Which of the following transactions results in increase in shareholders' equity and decrease in liabilities?

The correct option is C Shares issued in payment of bills payable.Following entry will be passed if the shares are issued in payment of bills payable:Bills Payable A/c Dr. To Share Capital A/c In the above case, shareholders equity increases and liabilities will decreases.

The correct option is C Shares issued in payment of bills payable.
Following entry will be passed if the shares are issued in payment of bills payable:

Bills Payable A/c Dr.
To Share Capital A/c

In the above case, shareholders equity increases and liabilities will decreases.