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

From the point of view of security, the debentures are classified as -

  1. Secured and unsecured Debentures

  2. Redeemable Debentures and Irredeemable Debentures

  3. Convertible Debentures and Non-convertible Debentures

  4. Registered Debentures and Bearer Debentures
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Debentures can be secured in nature, it may be unsecured in nature. A secured debenture is secured by the charge on some asset or set of assets which is known as secured or mortgage debenture and another when it is issued solely on the credibility of the issuer is known as the naked or unsecured debenture. 

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 Trust Deed is created by -

  1. The company

  2. The Trustees

  3. The SEBI

  4. The company Law Tribunal
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The document created by the company, whereby trustees are appointed to protect the interest of debenture-holders before they are offered for public subscription is known as Debenture Trust Deed.

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 Trust Deed must be executed within-

  1. $1$ month of the closure of issue

  2. $3$ months of the closure of issue

  3. $6$ months of the closure of issue

  4. $1$ month before the opening of issue
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 A trust deed shall be executed by the issuer company in favour of the debenture trustees within six months of the closure of the 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

Debenture contains provisions as regards -

  1. the repayment of principal only

  2. the payment of interest at a fixed rate only

  3. the payment of interest at a fluctuating rate only

  4. the repayment of principal and the payment of interest at a fixed rate.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debenture is a written instrument acknowledging a debt to 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

In Balance Sheet of a Company, Interest accrued and due on debentures appears under the head -

  1. Share Capital

  2. Reserves & Surplus

  3. Current Liabilities

  4. Non-Current Liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest accrued and due on debentures represents a short-term obligation that the company must pay within the next accounting period. Therefore, it is classified as a current liability on the balance sheet.

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

Who is not eligible to be appointed as Debenture Trustee:

  1. A Scheduled Bank

  2. A Public Financial Institution

  3. An Insurance Company

  4. A partnership firm carrying on banking Business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Legal regulations typically prohibit a partnership firm from acting as a debenture trustee, as the trustee must be an independent corporate entity or institution capable of holding assets in trust, such as a bank or financial institution.

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 Trustess are to be appointed in case of issue of:

  1. All Debentures

  2. Debentures with maturity of more than $18$ months

  3. Debentures with maturity of lessthan $18$ months

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

No Public Issue/Rights Issue of Debentures shall be made by a company unless it has appointed one or more Debenture Trustees for such debentures whereas under SEBI guidelines, appointment of Debenture Trustees is compulsory only in case of debentures with maturity of 18 months or more.

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

Consider the following items.
1. Debentures  2. Prepaid rent
3. Accrued interest   4. Bank overdraft
Liabilities would include

  1. 2, 3 and 4

  2. 1, 2 and 3

  3. 1 and 4

  4. 1, 2, 3 and 4
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Liabilities include debentures (debt obligations) and bank overdraft (short-term borrowing). Prepaid rent is a prepaid expense (current asset), not a liability. Accrued interest can be either an asset (interest receivable) or liability (interest payable), but without context, we assume it's interest receivable. Therefore, only debentures and bank overdraft are clearly liabilities.

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 issued as collateral security for Rs 10,000 will be debited to ________________.

  1. Debentures suspense A/c

  2. Bank A/c

  3. Debentures A/c

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

When debentures are issued as collateral security, the entry is made in a 'Debenture Suspense Account' to reflect the contingent nature of the liability until the loan is defaulted or repaid.

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

First debentures and second debentures would denote a classification of debentures on the basis of ______________.

  1. Security

  2. Redemption

  3. Record

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

The classification into first and second debentures refers to the order of repayment or the priority of claims against the company's assets in the event of liquidation.