Owner’s fund doesn’t comprise of:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Debentures
Option (1) Equity Share Capital — Part of owners’ funds (Incorrect). Equity shareholders are the real owners of the company.
Option (2) Preference Share Capital — Part of owners’ funds (Incorrect). Preference shareholders are also part-owners, even though they get a fixed dividend.
Option (3) Debentures — Not part of owners’ funds (Correct). A debenture is a loan taken by the company, repaid with interest. Debenture holders are creditors, so debentures are borrowed funds, not owners’ funds.
Option (4) Retained Earnings — Part of owners’ funds (Incorrect). These are profits kept back in the business, and profits belong to the owners.
NCERT (2026-27 Edition): “Capital Structure … 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. These may be borrowed from banks, other financial institutions, debentureholders and public.” |