Tag: book keeping and accountancy

Quizzes (126) Questions (1524)

Questions Related to book keeping and accountancy

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Balance of Debenture Redemption Fund Account is transferred to _____________.

  1. Capital Reserve A/c

  2. Profit and Loss A/c

  3. General Reserve A/c

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Once the debentures are fully redeemed, the balance remaining in the Debenture Redemption Fund (DRF) is no longer required for that purpose and is transferred to the General Reserve.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

When the required rate of return is equal to the coupon rate, value of the redeemable bond is equal to its _____________.

  1. Market value

  2. Face value

  3. Present value of the stream of interest inflows

  4. Average of par values and maturity value

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

When the required rate of return (market interest rate) equals the coupon rate of a bond, the bond is priced at par, meaning its value equals its face value.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

The essential features of a debenture includes __________.

  1. It is certificate of acknowledgement of debt

  2. It is issued under a common seal

  3. It is a part of long term borrowing

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

A debenture is a formal document acknowledging a debt, typically issued under a company seal, and represents a form of long-term borrowing.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning 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. Debentures 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

Debentures can indeed be secured (by assets) or unsecured. Therefore, the statement that 'Debentures cannot be secured' is false.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Which of the following is true with regard to 10% Debentures issued at a discount of 20%?

  1. The carrying amount of debentures gets reduced each year at a rate of 20%.

  2. Issue price and the carrying amount of debentures are equal.

  3. At the time of redemption, the debenture holder will be paid the issue price.

  4. The face value and the carrying amount of debentures are equal.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The face value of a debenture represents the principal amount the company is obligated to repay. The carrying amount is the book value, which remains equal to the face value regardless of the issue price, as the discount is treated as a separate deferred charge.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Which of the following statements is true?

  1. A debenture holder is an owner of the company.

  2. A debenture holder can get his money back only on the liquidation of the company.

  3. A debenture issued at a discount can be redeemed at a premium.

  4. A debenture holder receives interest only in the event of profits.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debentures are debt instruments, and there is no legal restriction preventing a company from issuing them at a discount while redeeming them at a premium. The other options are incorrect because debenture holders are creditors, not owners, and they are entitled to interest regardless of profit.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

If debentures are issued as consideration for purchase of any fixed asset, the entry is _________________.

  1. Debit asset A/c; Credit vendor A/c

  2. Debit asset A/c; Credit bank A/c

  3. Debit asset A/c; Credit debenture A/c

  4. Debit debenture A/c; Credit asset A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a fixed asset is purchased using debentures, the asset account is debited to record the increase in assets, and the debenture account is credited to record the liability created.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Discount on issue of debentures is a:

  1. revenue loss to be charged in the year of issue

  2. capital loss to be written off from capital reserve

  3. capital loss to be written off over the tenure of the debenture

  4. capital loss to be shown as goodwill
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Discount on the issue of debentures is a capital loss because it relates to the cost of raising long-term capital. It is amortized over the tenure of the debenture rather than being written off entirely in the year of issue.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Which of the following statements is false?

  1. Debentures can be issued for cash or consideration other than cash or as collateral security

  2. Debentures can not be forfeited for non-payment of call money.

  3. A company can buy its own debentures.

  4. A debentures issued at a discount can be redeemed at a premium.
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Which of the following is false?

  1. A company can issue redeemable debentures

  2. A company can issue debentures with voting rights

  3. A company can buy its own shares

  4. A company can buy its own debentures
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are debt instruments and do not carry voting rights, which are reserved for equity shareholders. The other options describe legal actions a company can perform.