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 organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

_______ issued by a company is an acknowledgment that the company has borrowed a certain amount of money,which it promises to repay at a future date.

  1. Interest Certificate

  2. Share Certificate

  3. Debenture

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

Debenture issued by a company is an acknowledgment that the company has borrowed a certain amount of money,which it promises to repay at a future date. It is a long term security. Fixed interest is earned by issuing the debentures.

Multiple choice organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

Debentures are an important instrument for raising _______ term debt capital.

  1. short

  2. long

  3. medium

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are an important instrument for raising long term debt capital. a debenture issued by a company represents that the company has borrowed some amount of capital and the company promises to return them on a fixed rate of interest.

Multiple choice organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

Debenture holders are paid _________ stated amount of interest at specified intervals.

  1. fixed

  2. fluctuating

  3. higher

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

 Debenture holders are paid a fixed stated amount of interest at specified intervals. Public issue of debentures requires that the issue be rated by a credit rating agency.

Multiple choice elements of accounts introduction of financial statement of company general instructions for preparation of balance sheet tools of financial statements uses, importance, and limitation of financial statements

Credit granting institutions take decisions based on the________ performance of the undertakings.

  1. managarial

  2. financial

  3. social

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

Credit gaining institutions take decisions based on the financial performance of the undertakings. They refer the financial statements to analyse the performance of the business. Credit gaining institutions need to check whether the company is capable of repaying the credit they are taking or not. 

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

A promissory note read like i promise to pay B $Rs. 1000$ plus interest and other sundry charges after three months. This promissory note is invalid due to __________.

  1. uncertainty of amount

  2. amount being not significant

  3. insufficiency of time

  4. all of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A promissory note must be for a definite, certain sum of money. Including 'sundry charges' makes the total amount uncertain, rendering the note invalid.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

A promissory note cannot be made payable to _________.

  1. Bearer

  2. Owner

  3. Creditor

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

The sum should be payable to a certain person. There are only two parties to a Promissory Note, one is the maker or the payer and another one is the payee. It is not transferable and thus, the amount is not payable to the bearer. The liability of the maker is primary and absolute.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

Drawee or payee in whose favor the promissory note is drawn is also called as________.

  1. Promisee

  2. Promisor

  3. Creditor

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

The person to whom the promise to pay a sum of amount is made is called promisee. He is the person in whose favor the promissory note is drawn.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

In a promissory note, the amount of money payable ____________________.

  1. Must be certain

  2. May be certain or uncertain

  3. Is usually uncertain

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

A promissory note must be for a definite sum of money. Certainty of the amount is a fundamental legal requirement.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is classified under ________. 

  1. Operating activities, Financing activities

  2. Financing activities, Investing activities

  3. Investing activities, Operating activities

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

The fixed asset is bought as hire purchase is the cost of obtaining financial resources or returns on investments. Hence, interest element is classified under financing activities and loan element is classified under investing activities.

Multiple choice accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

An example of cash flow from a financing activity is ___________________.

  1. Receipt of cash from sale of land.

  2. Receipt of cash from collection of accounts receivable.

  3. Payment of cash for acquisition of treasury stock.

  4. Payment of cash for new machinery.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As per AS-3, financing activities are activities are activities that result in change in the size and composition of the owners' capital and borrowings of the enterprises.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

When a bill is discharged, the acceptor debits ________________.

  1. Cash Account.

  2. Creditor's Account.

  3. Debtor's Account.

  4. Bills Payable Account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a bill is discharged (paid), the acceptor settles their liability. This requires debiting the Bills Payable account to reduce the liability and crediting Cash or Bank.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

Which of the following is a correct statement ?

  1. Bills Receivable Account is a Real Account.

  2. In order to renew a bill, the original bill need not be cancelled.

  3. At the time of endorsement of a bill, the drawee debts Bills Payable Account.

  4. When noting charges are paid by the bank at the time of dishonour of the bill, the drawee Credits Bank Account.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bills Receivable is considered a real account in many accounting contexts as it represents a legal instrument or asset. Option B is wrong because renewal requires cancellation; C is wrong because the drawee does not record endorsement; D is wrong because the drawee would credit the creditor, not the bank.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

Bill Payable is _________.

  1. Real A/c

  2. Personal A/c

  3. Nominal A/c

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

The accounts which are related to individuals, persons and firms are called personal accounts. Personal accounts are further classified into Natural Personal account, Artificial Personal Account and Representative Personal account. Bills Payable represents creditors for purchases. And every creditor is a person whether artificial or personal. Therefore, bills payable is a personal account.