Tag: elements of accounts

Questions Related to elements of accounts

Accounting entry for making the provision for the redemption of debentures is:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures
  1. Profit and loss accountSinking fund account  Dr.  Cr.
  2. Profit and loss appropriation accountSinking fund account  Dr.  Cr.
  3. Profit and loss adjustment accountSinking fund account  Dr.  Cr.
  4. Debentures accountSinking fund account  Dr.  Cr.
Show answer
Correct Option: B

When all the debentures are redeemed the balance left in the debentures sinking fund account is transferred to:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. General Reserve account

  2. Sinking Fund Investment account

  3. Debenture account

  4. Capital Redemption Reserve account

Show answer
Correct Option: A

____________ is created to provide fund for redemption of debentures as and when they become due for redemption.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Investment fluctuation reserve.

  2. Sinking fund

  3. Dividend equalization reserve

  4. Debenture redemption reserve

Show answer
Correct Option: D

___________ is created to provide for not only depreciation on the assets but also to provide sufficient funds for replacement of the assets at the end of its life.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Plant and Machinery replacement fund.

  2. Sinking fund

  3. Dividend equalization reserve

  4. Debenture redemption reserve

Show answer
Correct Option: B
Explanation:

A sinking fund method is a technique for depreciating an asset in bookkeeping records while generating money to purchase a replacement for the assets when it reaches the end of its useful life. 

The balance of the debentures sinking fund after redemption of debentures is transferred to ___________________.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Debentures Account

  2. Profit and Loss Account

  3. General Reserve Account

  4. None of the above

Show answer
Correct Option: C

When debenture sinking fund is created ___________________.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Both the accounts involved belong to current category

  2. Both the accounts involved belong to non-current category

  3. One is current item and another is non-current category

  4. None of these

Show answer
Correct Option: B

Which is not the salient feature of sinking fund method?

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Interest is an integral part

  2. Amount released is affected by fluctuations in interest rate

  3. Investment in securities

  4. Premium is paid in advance at the beginning of year

Show answer
Correct Option: D

A check returned by bank marked "NSF" means that:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Bank can't verify your identify

  2. There are not sufficient funds in your account

  3. Check has been forged

  4. Check can't be cashed being illegal

Show answer
Correct Option: B

The following is common in sinking fund method:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. The amount received at the end of the life of an asset is fixed

  2. The amount received at the end of the life of an asset is not fixed

  3. The amount received at the beginning of the life of an asset is fixed

  4. None of the above

Show answer
Correct Option: B

Under redemption by _________, debentures can also be redeemed by converting them into shares or new debentures.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. purchase

  2. conversion

  3. payment

  4. payment in lump sum

Show answer
Correct Option: B