CBSE Class 12 Accountancy Issue and Redemption of Debentures Questions

Question: Perpetual debentures are also known as
a) Irredeemable debentures
b) Secured Debentures
c) Unsecured Debentures
d) None of the options

Answer: a

Question: Convertible debentures can be
a) Partly Convertible Debentures
b) Both
c) Fully convertible Debentures
d) None of the options

Answer: b

Question: When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to
a) General reserve
b) Capital reserve
c) Capital reserve
d) None of the options

Answer: a

Question: Loss on issue of debenture is written off each year in proportion to amount of debenture which reduces with every instalment paid, Called
a) Equal instalment method
b) Proportion Method
c) Both
d) None of the options

Answer: b

Question: Loss on Issue of Debenture Account is shown:
a) On Assets side of Balance Sheet
b) On Liabilities side of Balance Sheet
c) On Credit side of P & L Account
d) None of these

Answer: a

Question: Electronics Ltd. issued 10,000, 6% Debentures of Rs. 100 each at a premium of Rs. 10. It will credit 6% Debentures Account by
a) Rs. 11,00,000.
b) Rs. 10,00,000.
c) Rs. 9,00,000.
d) Rs. 8,00,000.

Answer: b

Question: Types of debentures on the basis of records
a) Both
b) Registered debentures
c) Bearer debentures
d) None of the options

Answer: a

Question: Debentures carries interest at: .
a) 12% p.a.
b) Fixed Rate
c) 20% p.a.
d) 6% p.a.

Answer: b

Question: Loss on issue of debentures is recorded as :
a) Intangible Asset
b) Current Asset
c) Current Liability
d) Miscellaneous Expenditure

Answer: d

Question: Which of the following statements is true?
a. A debenture holder is an owner of the company
b. A debenture holder can get his money back only on the liquidation of the company
c. A debenture issued at a discount can be redeemed at a premium
d. A debenture holder receives interest only in the event of profits

Answer: c

Question: The amount of debenture is returned to the holders at the end of
a) Predetermined maturity period
b) Company
c) Current Year
d) None of the options

Answer: a

Question: Premium on redemption of debentures is a :
a) Personal A/c
b) Real A/c
c) Nominal A/c
d) Suspense A/c

Answer: c

Question: X Ltd. purchased building of Y Ltd. for Rs. 4,00,000. The consideration was paid by issue of 10% Debentures of Rs. 100 each at a discount of Rs. 20.10% Debentures Account is credited with
a) Rs. 5,20,000.
b) Rs. 5,00,000.
c) Rs. 4,80,000.
d) Rs. 3,20,000.

Answer: b

Question: Debenture is acknowledgment of debt and a contract for the repayment of principal amount with
a) Interest
b) Premium
c) Dividend
d) None of the options

Answer: a

Question: William Pens Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of Rs. 4. It has a balance in Securities Premium Reserve of Rs. 25,000. It will write off Discount on Issue of Debentures
a) Rs. 40,000 from Securities Premium Reserve.
b) Rs. 40,000 from Statement of Profit and Loss.
c) Rs. 25,000 from Securities Premium Reserve and Rs. 15,000 from Statement of Profit and Loss (Finance Cost).
d) Rs. 15,000 from Securities Premium Reserve and Rs. 25,000 from Statement of Profit and Loss (Finance Cost).

Answer: c

Question: F Ltd. purchased machinery for a book value of ₹ 4,00,000. The consideration was paid by issue of 10% Debentures of ₹ 100 each at a discount of 20%. The Debenture Account will be credited by :
a) ₹ 4,00,000
b) ₹ 5,00,000
c) ₹ 3,20,000
d) ₹ 4,80,000

Answer: b

Question: Which is an agreement between the company and the trustees to look after the interest of debenture holders.
a) Debenture trust deed
b) Partnership deed
c) Both
d) None of the options

Answer: a

Question: Debentures of a Company can be issued :
a) For Cash
b) For Consideration other than Cash
c) As a Collateral Security
d) Any of the above

Answer: d

Question: Interest on Debentures is paid on
a) Amount received on Issue.
b) Nominal (Face) Value.
c) On Premium.
d) None of these.

Answer: b

Question: Sunrise Ltd purchased a building for Rs.5,00,000 payable as 15% in cash and balance by allotment of 9% debentures of Rs. 100 each at a premium of 25%. Number of debentures issued will be :
a) 4,250
b) 4,000
c) 5,000
d) 3,400

Answer: d

Question: Non-Convertible Debentures
a) Cannot be redeemed
b) Cannot be converted into shares
c) Cannot not be issued
d) None of the options

Answer: b

Question: Shubham Limited invited applications for 5,000, 11% Debentures @ 100 each. The issue was oversubscribed by 5 times. What is this situation called?
a) Over Subscription
b) Full Subscription
c) Under Subscription
d) Pro-rata Allotment

Answer: a

Question: Which of the following is false with respect to debentures?
a) They can be issued for cash
b) They can be issued in lieu of dividends
c) They can be issued for consideration other than cash
d) They can be issued as collateral security

Answer: b

Question: When all debentures are redeemed, balance in the Debenture Redemption Fund Account is transferred to:
a) Capital Reserve
b) General Reserve
c) Profit & Loss Appropriation A/c
d) None of these

Answer: a

Question: Which of the following statement is Correct?
a) A debentureholder is an owner of the company.
b) A debentureholder can get his money back only on the liquidation of the company.
c) A debenture issued at a discount can be redeemed at a premium.
d) A debentureholder receives interest only in the event of profits.

Answer: c

Question: When debentures are redeemed out of profits, an equivalent amount is transferred to :
a) General Reserve
b) Debenture Redemption Reserve
c) Capital Reserve
d) Profit & Loss A/c

Answer: b

Question: Discount on issue of Debentures is in the nature of:
a) Revenue Loss
b) Capital Loss
c) Deferred Revenue Expenditure
d) None of there

Answer: b

Question: When debentures are issues at discount , the discount should be written off
a) During the life of the debentures
b) In the year of the issue of debentures
c) Within 5 years of the issue of the debentures
d) None of the options

Answer: a

Question: When debentures are to be redeemed at premium an extra entry has to be made at the time of issue of debentures, which a/c should be credited in this entry?
a) Loss on issue of debentures a/c
b) Debenture redemption premium a/c
c) Bank a/c
d) Debenture holder’s a/c

Answer: b

Question: A Sinking Fund is a part of:
a) Fixed Liabilities
b) Current Liabilities
c) Reserves and Surplus
d) Fixed Assets

Answer: c

Question: Debenture holders are the :
a) Customers of the Company
b) Owners of the Company
c) Creditors of the Company
d) None of these

Answer: c

Question: Which of the following is not true about debenture stock:
a. It must be fully paid.
b. Debenture Stock can be transferred in fraction.
c. Debenture stock are identified by their distinct number

Answer: c

Question: Debenture premium can be used to :
a) Write off the discount on issue of shares or debentures
b) Write off the premium on redemption of shares or debentures
c) Write off capital loss
d) All of the above

Answer: d

Question: Debentures are shown in the Balance Sheet of a company under the head of
a) Non-current Liabilities.
b) Current Liabilities.
c) Share Capital.
d) None of these.

Answer: a

Question: Discount or loss on issue of debentures to be written of within 12 months from the date of balance sheet or within the period of operating cycle is shown as
a) Other Non current Assets
b) Other Current assets
c) Other Current Liabilities
d) None of the options

Answer: b

Question: Premium on redemption of debentures account is _______.
a. A real account
b. A nominal account - income
c. A personal account
d. A nominal account – expenditure

Answer: d

Question: Debentures payable to a holder of certificate is called
a) Bearer.
b) Unregistered
c) Secured
d) None of the options

Answer: a

Question: If Vendors are issued debentures of Rs.4,40,000 in consideration of assets of Rs. 5,00,000 and liabilities of Rs. 1,00,000, the balance of Rs.40,000 will be debited to:
a) General Reserve Account
b) Capital Reserve Account
c) Goodwill Account
d) Statement of Profit & Loss

Answer: c

Question: Premium on Redemption of Debentures Account is
a) Personal Account
b) Real Account
c) Capital A/c
d) None of the options

Answer: a

Question: Which of the following is Correct with respect to debentures?
a) They can be issued on credit.
b) They can be issued for consideration other than cash.
c) They cannot be issued as collateral security.
d) They can be issued partly on credit and partly in cash.

Answer: b