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

The formula of earning per share is ___________.

  1. $\dfrac {\text {Market price per equity share}}{\text {Number of shares}}$

  2. $\dfrac {\text {Gross profit}}{\text {Net sales}}\times 100$

  3. $\dfrac {\text {Operating costs}}{\text {Net sales}}\times 100$

  4. $\dfrac {\text {Net profit after tax and preference dividend}}{\text {Number of Equity shares}}$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Earning per share is the portion of a company's profit allocated to each outstanding share of the common stock. It serves as an indicator of the company's profitability. It is calculated by dividing the market price per equity share by no. of shares.

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 business is sold to company, shares and debentures received are distributed in:

  1. The profit sharing ratio

  2. Equal ratio

  3. The ratio of their capitals standing before profit or loss on realization has been transferred

  4. The ratio of their capitals standing after profit or loss on realization has been transferred
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Whatever the company pays as consideration will be credited to the Realisation Account. If expenses are incurred by the firm, the amount will be debited to the Realisation Account. If the creditors are taken over by the company, no further treatment is necessary beyond transferring them to the credit of Realisation Account; but if creditors are to be paid by the firm, the actual amount paid to them will be debited to liability account concerned; the difference between the book figure and the amount actually paid will be transferred to Realisation Account. The profit or’ loss on realisation will be transferred to the capital accounts in the profit-sharing ratio.

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

'Premium on Redemption of Debentures Account' is a:

  1. Personal Account

  2. Real Account

  3. Nominal Account

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

Premium on redemption of debentures is a personal account and it is a liability of the company which is payable on redemption.

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

Given following data calculate cost of capital under Net Income (NI) Approach 
(1) EBIT is Rs. 20 Lakhs.
(2) 4,00,000 shares of Rs. 10 each & market capitalisation is $16\%$ 
(3) 25,000, $14\%$ debentures of Rs. 150 each.

  1. $16\%$

  2. $14\%$

  3. $15\%$

  4. $15.42\%$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

First calculate net earnings available to equity shareholders deducting interest on debt i.e. NI then calculate market value of equity i.e. $\frac{NI}{K _e}$ where $k _e$ = market capitalization rate then value of firm V = S + B lastly $K _e$ = $\frac{EBIT}{V}$.

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

Non-convertible debentures are ________________.

  1. debt instruments which acquire equity status at the issuers option

  2. debt instruments which retain their debt character and cannot acquire equity status

  3. debt instruments which acquire equity status with the permission of Registrar of Companies

  4. debt instruments which acquire equity status on maturity
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Non-convertible debentures are debt instruments that do not have the option to be converted into equity shares; they remain debt until maturity.

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 the odd one?

  1. Net worth

  2. Owners equity

  3. Fixed interest liability

  4. Non-redeemable shares
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Net worth, owners' equity, and non-redeemable shares are all components of equity or capital. Fixed interest liability is a debt obligation, making it the odd one out.

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

A debenture holder is not entitled to _________.

  1. voting right

  2. claim dividend

  3. claim bonus shares

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

Debenture holders are lenders, not owners. Therefore, they do not have voting rights, nor are they entitled to dividends or bonus shares, which are reserved for equity shareholders.

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 incorrect with respect of 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 security

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

Dividends are distributions of profit to shareholders. Debentures are debt, and interest is paid on them; they cannot be issued in lieu of dividends.