From the following source of finance, identify the source that is not related to Owner's fund:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Debentures
Option (1) Equity Share Capital — Related to owners’ funds (Incorrect). It is a part of owners’ funds.
Option (2) Preference Share Capital — Related to owners’ funds (Incorrect). It is a part of owners’ funds.
Option (3) Retained Earning — Related to owners’ funds (Incorrect). Retained earnings (reserves and surpluses) are a part of owners’ funds.
Option (4) Debentures — Not related to owners’ funds (Correct). Debentures are money borrowed from the public, so they are borrowed funds, not owners’ funds.
NCERT (2026-27 Edition): “…On the basis of ownership, the sources of business finance can be broadly classified into two categories viz., ‘owners’ funds’ and ‘borrowed funds’. Owners’ funds consist of equity share capital, preference share capital and reserves and surpluses or retained earnings. Borrowed funds can be in the form of loans, debentures, public deposits etc. …” |