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 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

________________ account representing the liability of the acceptor in respect of bills accepted by him and will always show a credit balance.

  1. creditor

  2. Bill Payable

  3. Loan

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

Bills Payable represents a liability for the acceptor, as they are obligated to pay the amount upon maturity. Liabilities naturally carry a credit balance.

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

A bill given to a creditor is called bill payable.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bill payable is a document which shows the amount owed for goods or services received on credit (meaning not paid at the time that the goods or services were received).

Hence, a bill payable is also known as an unpaid vendor invoice.

Multiple choice business organisation stock exchange meaning and functions of capital market capital markets listing of securities, stock market players

Long-term borrowing is undertaken in.

  1. Money market

  2. Capital market

  3. Bullion market

  4. Foreign exchange market
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The capital market is designed for long-term financing, where companies and governments raise capital for extended periods, unlike the money market which focuses on short-term liquidity.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Payment received from debtor _______________.

  1. decreases the total assets

  2. increases the total assets

  3. results in no change in the total assets

  4. increases the total liabilities

  5. decreases the total liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a debtor pays, the company receives cash (an asset) and decreases accounts receivable (an asset). Since one asset increases and another decreases by the same amount, the total assets remain unchanged.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Accrued interest will be ________ to interest account.

  1. Debited

  2. Credited

  3. No effect

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

The amount of accrued interest for the recipient of the payment is a debit to the interest receivable (asset) account and a credit to the interest revenue account. The debit is rolled into the balance sheet (as a short-term asset) and the credit into the income statement.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Which of these is not a method of redemption of debentures ?

  1. Purchase in open market

  2. Auction of debentures

  3. Drawing of lots

  4. Payment in lump sum
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Standard methods for redemption of debentures include purchase in open market, drawing of lots, and payment in lump sum. Auction is not a recognized method for debenture redemption.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Debentures can be redeemed _____________.

  1. At par

  2. At premium

  3. At discount

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debentures can be redeemed at par (face value), at a premium (above face value), or sometimes at a discount, depending on the terms of the issue.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

When a company issues debenture, it usually mentions the terms on which they will be redeemed on their maturity.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is a legal and accounting requirement to state the terms of redemption (maturity date, price, etc.) at the time of issuing debentures.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Premium on redemption of debenture A/c is a _____.

  1. personal A/c

  2. real A/c

  3. nominal A/c

  4. suspense A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Premium on redemption is treated as a loss or expense for the company, and in accounting, expenses are classified under nominal accounts.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

When the debentures are redeemed, the requisite amount of Debenture Redemption Reserve is transferred to ___________.

  1. statutory reserve

  2. general reserve

  3. revenue

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

Once the debentures are fully redeemed, the purpose of the Debenture Redemption Reserve (DRR) is fulfilled. The balance in the DRR account is then transferred to the General Reserve, as it is no longer required for its specific purpose.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

A price exclusive of the interest for the period for which the seller held the debentures is called _________________.

  1. Ex-interest price

  2. Cum-interest price

  3. Plus-interest price

  4. Additional-interest price
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An 'Ex-interest' price means the price of the debenture excludes the interest accrued since the last interest payment date. Conversely, a 'Cum-interest' price includes the accrued interest.