Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,435 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

_____are those debentures where the debenture holder have no option to convert into equity.

  1. Optional debentures

  2. Flexible debentures

  3. Convertible debentures

  4. Non-convertible
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Non-convertible debentures are those that do not offer the holder the option to convert the debt into equity shares. They remain debt instruments until maturity.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Issue of debentures as collateral securities means issue of such debentures as _________.

  1. Subsidiary security

  2. Principal security

  3. In lieu of principal security

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Issue of Debentures as Collateral. Debentures issued as collateral security is secondary or parallel security for the original loan taken by the company. The lender can realize the collateral security in case borrower fails to make the payment of the original loan.

A Collateral Security is a Subsidiary Security.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

______ are secured by either a fixed charge or a floating charge.

  1. Naked debentures

  2. Unsecured debentures

  3. Mortgaged debentures

  4. Registered debentures
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Mortgaged debentures are secured by a charge on the assets of the company. A fixed charge applies to specific assets, while a floating charge applies to current assets.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentures can be ____________.
I. Mortgage Debentures or Simple Debentures
II. Registered Debentures or Bearer Debentures
III. Redeemable Debentures or Irredeemable Debentures
IV. Convertible Debentures or Non-Convertible Debentures.

  1. Both (I) and (II)

  2. Both (I) and (III)

  3. Both (II) and (III)

  4. All of (I), (II), (III) and (IV)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debentures can be classified by security (mortgage/simple), transferability (registered/bearer), redemption (redeemable/irredeemable), and conversion (convertible/non-convertible). All listed categories are valid.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Interest payable on debentures is __________. 

  1. an appropriation of profits of the company

  2. a charge against profits of the company

  3. transferred to sinking fund interest A/c

  4. transferred to sinking fund A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on debentures is a mandatory expense for the company, regardless of profit. Therefore, it is a charge against profit, not an appropriation of profit.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

In case of debentures issued as collateral securities, the lender is entitled to ____________.

  1. interest only on the amount of loan

  2. interest on loan as well debentures issued as collateral security

  3. interest only on debentures issues as collateral security

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When debentures are issued as collateral security, they are a secondary security. The lender is only entitled to interest on the primary loan amount, not on the collateral debentures.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Which of the following statements is false?

  1. A company can issue convertible debentures

  2. Debentures cannot be secured

  3. A company can issue redeemable debentures

  4. Debenture have no right to participate in profits over and above their fixed interest.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A debenture is a type of debt instrument unsecured by collateral. Since debentures have no collateral backing, debentures must rely on the creditworthiness and reputation of the issuer for support. 

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Companies may issue the debentures as security against loans taken from banks/financial institutions as _______.

  1. Principal

  2. Primary

  3. Collateral

  4. Chargeable
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debentures can be issued as a collateral security against the loan taken from banks or financial institutions.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentures can be_____.
a. Mortgage Debenture or Simple Debenture.
b. Registered Debenture or Bearer Debenture.
c. Redeemable Debenture or Irredeemable Debenture.
d. Convertible Debenture or Non-convertible Debenture

  1. Both (a) and (b)

  2. Both (a) and (c)

  3. Both (b) and (c)

  4. All of (a), (b), (c) and (d) above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debenture is a written instrument acknowledging a debt under the common seal of the company. There are various types of debentures: Secured and unsecured debentures, redeemable and irredeemable debentures, Convertible and non-convertible debenture, registered and bearer debentures, Specific coupon rate and zero coupon rate debentures etc. 

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

Sundry creditor is the example of which liability?

  1. Non-current liability

  2. Current liability

  3. Capital

  4. Reserves
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Sundry creditors represent amounts owed to suppliers for goods or services purchased on credit, which are expected to be paid within a short period, classifying them as current liabilities.

Multiple choice accountancy accounting using data base management system (dbms) applications of dbms in generating accounting information accounting and database management system accounting and database system

Which type of liability is loan from Bank and Financial institution?

  1. Secured Loan

  2. Unsecured Loan

  3. Current Liability

  4. Capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Loans from banks and financial institutions are typically backed by collateral, classifying them as secured loans.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

___________ debentures are which create a charge on the assets of the company, thereby mortgaging the assets of the company.

  1. Registered

  2. Bearer

  3. Secured

  4. Unsecured
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Secured debentures are debentures secured by a charge on the fixed assets of the issuer company. For instance, mortgage debentures secured on land of the company. When the issuer company fails on payment of either the principal or interest amount, the assets of the company can be sold to repay the liability to the investors.

Multiple choice commercial studies sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

The debentures that are transferable by mere delivery are called as __________ debentures.

  1. Secured

  2. Unsecured

  3. Convertible

  4. Bearer
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The debentures which are payable to bearer and whose names do not appear in the register of debenture holders are known as “Bearer Debentures”. Coupons for interest are attached to the document and interest is paid to the holders as it falls due. Bearer Debentures are transferable by mere delivery.