Tag: book keeping and accountancy

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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

In the event of liquidation of the company the debenture holders have prior right for __________.

  1. interest

  2. principal amount

  3. b<span>oth (a) &amp; (b)</span>

  4. <span>none of the above</span>
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In the event of liquidation, debenture holders have a prior claim over shareholders, but they are not the only ones with priority. Other creditors and statutory dues often rank higher or equal, so 'none of the above' is the most accurate choice given the options.

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 a company is not earning profits, then which of the following securities proves a burden on the finances of the company?

  1. Equity Shares

  2. Preference Shares

  3. Redeemable Preference Shares

  4. Debentures
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on debentures is a mandatory expense that must be paid regardless of whether the company earns a profit. Equity and preference dividends are typically paid out of profits.

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. Equity is owners' stake and the debentures is a debt

  2. Rate of interest on debentures is fixed

  3. Debenture holders get preferential treatment over the equity holders at the time of liquidation

  4. Interest on debentures is an appropriation of profits
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on debentures is a charge against profits, not an appropriation of profits. An appropriation of profits is a distribution of earnings, whereas interest is an expense incurred to earn those profits.

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 securities put a burden on the finance of a company, when there are no profits?

  1. Equity shares

  2. Preference shares

  3. Debentures&nbsp;

  4. All of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest on debentures is a fixed financial obligation that the company must pay regardless of its profit status, making it a burden during periods of no 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

Which of the following statement correctly describes debentures?

  1. Income bonds that require interest payments only when earnings permit.

  2. Income bonds that are not require interest payments&nbsp; when earnings permit.

  3. Subordinated debt and rank behind convertible bonds.

  4. A form of lease financing similar to equipment trust certificates.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debentures are debt instruments issued by companies. They are generally unsecured or secured by assets, and they are considered liabilities that rank ahead of equity. Option C correctly identifies that debentures are a form of debt, though the specific ranking can vary by contract.

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 statement correctly describes debentures?

  1. Income bonds that require interest payments only when earnings permit

  2. Income bonds that are not require interest payments only when earnings permit

  3. Subordinated debt and rank behind convertible bonds

  4. A form of lease financing similar to equipment trust certificates
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debentures are debt instruments representing a loan to a company. They are distinct from income bonds, which only pay interest if earnings are sufficient. Option C is the standard textbook definition provided in this context.

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 items is not an appropriation of profit for a limited company_______.

  1. Preference shares dividend payable

  2. Ordinary dividend payable by the company

  3. Income tax payable by the company

  4. Debenture interest payable
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Appropriation of profit refers to the distribution of net profit after tax. Debenture interest is a charge against profit, meaning it must be paid regardless of whether the company makes a profit or a loss, unlike dividends.

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

Debenture is -

  1. a written instrument acknowledging a debt written by its holder

  2. an oral acknowledgement of debt by a company

  3. a written instrument acknowledging a debt written by its company

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

Debenture is a written instrument acknowledging a debt under the common seal of the company. It contains a contract for repayment of principal after a specified period or at intervals or at the option of the company and for payment of interest at a fixed rate payable usually either half-yearly or yearly on fixed dates.

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

Debentures can be ________.
I. Mortgage Debentures or Simple Debentures.
II. Registered Debentures or Bearer Debentures.
III. Redeemable Debentures or Non- Convertible Debentures.
IV. Convertible Debentures or Non- Convertible Debentures.

  1. Both (I) and (II) above

  2. Both (I) and (III) above

  3. Both (II) and (III) above

  4. All of (I), (II), (III) and (IV) above.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debentures can be classified by security (mortgage vs. simple), ownership (registered vs. bearer), and convertibility (convertible vs. non-convertible). All listed categories are valid ways to classify debentures.