Tag: book keeping and accountancy

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Questions Related to book keeping and accountancy

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures are issued as collateral security, the final entry for recording the transaction in the books is ______.

  1. Credit Debentures A/c and debit Cash A/c

  2. Debit Debentures Suspense A/c and credit Cash A/c

  3. Debit Debentures Suspense A/c and credit Debentures A/c

  4. Debit Cash A/c and credit the loan A/c for which security is given
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When debentures are issued as collateral security, the primary entry is recording the loan taken. The issuance of debentures is often recorded via a memorandum entry or by debiting Debenture Suspense Account, but the actual cash transaction is the loan itself.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

What is the journal entry for issuing debentures as collateral security?

  1. CashDebentures Dr.  Cr. 
  2. CashDebentures Suspense Dr.  Cr. 
  3. Debentures SuspenseDebenture Dr.  Cr. 
  4. LoanDebentures Dr.  Cr. 
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The standard journal entry for issuing debentures as collateral security is to debit Debenture Suspense Account and credit the Debentures Account.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Monika Ltd. purchased land and building worth Rs. 28,80,000 and in lieu issued debentures of Rs. 100 each at a discount of $4\%$. What is the number of debentures issued?

  1. 28,000

  2. 30,000

  3. 32,000

  4. 35,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The amount payable is 28,80,000. Debentures are issued at 4% discount, so the issue price per debenture is 100 - 4 = 96. Number of debentures = 28,80,000 / 96 = 30,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

V Kare Ltd. issued R. 1,00,000, $7%$ debentures at $5\%$ discount redeemable after 10 years at premium of $5\%$.T he journal entry is:

  1. Bank Account Discount on Debentures accountDebentures 95,000   5,000 1,00,000
  2. Bank Account Discount on Debentures accountDebentures 1,00,000    5,000 1,05,000
  3. Bank Account Discount on Debentures accountDebenturesPremium of redemption of debentures 1,00,000    5,000 1,00,000    5,000
  4. Bank Account Loss on the issue of debenturesDebenturesPremium of redemption of debentures 95,000 10,000 1,00,000    5,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The loss on issue includes both the discount on issue (5%) and the premium on redemption (5%), totaling 10%. The entry debits Bank for 95,000, Loss on Issue for 10,000, and credits Debentures for 100,000 and Premium on Redemption for 5,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Bikano Industries Ltd. purchased a plant for Rs. 100,000 payable Rs. 37,000 in cash and balance by issue of 11% debentures of Rs. 100 each at a discount of 10%. The vendor will be issued ______.

  1. 630 debentures of Rs. 100 each

  2. 700 debentures of Rs. 100 each

  3. 770 debentures of Rs. 100 each

  4. 600 debentures of Rs. 100 each
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total price is 100,000. Cash paid is 37,000. Balance to be paid in debentures is 63,000. Issue price per debenture is 100 - 10% = 90. Number of debentures = 63,000 / 90 = 700.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

On issue of Debentures, Account to be credited is?

  1. Debenture Capital

  2. Debenture

  3. Loan

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

When debentures are issued, the Debentures Account is credited to reflect the liability created.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures are issued as collateral security, no amount is received for debentures.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When loan is taken from Bank or Financial Institution, debentures may be issued as collateral security. Any cash is not received against these debenture. On default of repayment of loan, loan may be converted into debentures by Bank/Financial Institution.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Unless written off, the loss on issue of debentures is shown.

  1. On the assets side of Balance Sheet

  2. On the debit side of Profit and Loss Account

  3. By way of deduction from the amount of debentures

  4. On the liabilities side of Balance Sheet
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Loss on issue of debentures, until written off, is shown as a miscellaneous expenditure on the assets side of the balance sheet.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

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 Debentures A/c

  4. Debit Debenture A/c; Credit Asset A/c

  5. Debit Debenture A/c; Credit Vendors A/c
Reveal answer Fill a bubble to check yourself
D Correct answer