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 - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Which of the following is false with respect to debentures?

  1. They can be issued for cash

  2. They can be issued for consideration other than cash

  3. They can be issued as collateral securities

  4. They can be issued in lieu of dividends
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of debenture is called as issued for consideration other than cash. e.g. Purchase of assets from the company by issuing debentures as consideration,  debentures issued in lieu of dividends.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Which of the following is/are true with respect to debentures?

  1. They can be issued for cash.

  2. They can be issued for consideration other than cash.

  3. They cannot be issued as collateral securities.

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

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of dentures is called as issue for consideration other than cash. Debenture can be issued for cash and collateral security.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures are issued as collateral security to a banker, which account will be debited.

  1. Bank A/c

  2. Debenture Suspense Account

  3. Debenture Redemption A/c

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

When debentures are issued as collateral security, the Debenture Suspense Account is debited to record the issuance of the debentures as a contingent liability.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

It is uncommon is case of debentures issued as collateral security that______.

  1. Interest be given on debentures

  2. Accounting entry is not made

  3. Existence of debenture given as a note in balance sheet

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

It is standard practice to disclose the existence of debentures issued as collateral security in the notes to the balance sheet, and interest is generally not paid on collateral debentures unless the loan defaults. Since the options provided do not describe an 'uncommon' event, 'None of the above' is the correct choice.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Features of debentures issued as collateral securities. Select from the given options______.

  1. Only interest on loan to be paid

  2. Interest on loan as well debenture to be paid

  3. Debenture issued as a security towards the loan taken

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

Which of the following is/are the demerits of OTCEI?

  1. Poor liquidity of Scrips

  2. Delay in Settlement

  3. Lack of Transparency

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The OTCEI is a company incorporated under the Companies Act 1956. OTCEI was set up to provide small and medium companies an access to capital market for raising finance.  OCTCEI is advantageous to the company because it provides methods of raising funds through capital market instruments which are priced fairly. Following are the demerits of OTCEI:A) Poor liquidity of ScripsB) Delay in Settlement

C) Lack of Transparency.

Multiple choice economics public debt public debt main feature of tax arbitration, tribunal adjudication and alternate dispute resolution

External debt represents a claim of __________ against the real income (GNP) of the country.

  1. countrymen

  2. foreigners

  3. both A and B

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

Public borrowings from other countries, are referred to as External Debt. External debt permits import of real resources. It enables the country to consume more than it produces. The sources of external debts are loans from foreign government, IMF, World Bank etc.

Multiple choice economics public debt public debt main feature of tax arbitration, tribunal adjudication and alternate dispute resolution

Which of the followings is/are the source/s of external debt?

  1. Loans and advances from foreign government

  2. From IMF, World Bank and International Financial Institutions

  3. From foreigners

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

External debt is sourced from international entities, foreign governments, and foreign individuals.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Loan Account is __________.

  1. Real

  2. Personal

  3. Nominal

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Personal accounts are related to individuals, firms, companies, etc. A few examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, drawings, capital, etc.

Representative personal accounts represent a certain person or group directly or indirectly. E.g. Let's say that wages are paid in advance to an employee - a wage prepaid account will be opened in the books of accounts. This wages prepaid account is a representative personal account indirectly linked to the person. 
Loan Account is  a representative personal account, as it represents the person from whom the loan is obtained or to whom the loan is given. Hence, it is classified as a personal account.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Short-term financial instruments in the descending order if their liquidity
(i) Call loans 
(ii) Cash loans 
(iii) Treasury bills 
(iv) Commercial bills   

  1. i, iii, iv ,ii

  2. ii, i, iii, iv

  3. iv, i iii, ii

  4. iii, ii, iv, iii

  5. ii, i, iv, iii
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cash loans are most liquid as they represent actual cash. Call loans are next as they can be recalled on demand. Treasury bills are highly liquid government securities. Commercial bills are least liquid among these short-term instruments.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

"Finance may be defined as that administrative area or set of administrative functions in an organization which relates with the arrangement of each and credit so that the organisation may have the means of carrying out its objectives as satisfactorily as possible."

  1. B.O Wheeler

  2. J.F. Brandley

  3. Howard and Upton

  4. William J. Stanton
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
According to Howard and Upton, “finance may be defined as that administrative area or set of administrative functions in an organization which relates with the arrangement of each and credit so that the organization may have the means to carry out the objectives as satisfactorily as possible".
Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

On due when Drawee Fails to make the payment of the bill _____________.

  1. Bill is Honored

  2. Bill is Dishonored

  3. Bill is cancelled

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

Dishonour of a bill of exchange occurs when the drawee fails to settle the payment on the date of maturity. When the bill of exchange is dishonoured, the liability of the acceptor is restored (he/she becomes the debtor again).