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

W Ltd. issued $20,000$, $8\%$ debentures of Rs. $10$ each at par, which are redeemable after $5$ years at a premium of $20\%$. The amount of loss on redemption of debentures to be written off every year will be __________.

  1. Rs. $40,000$

  2. Rs. $10,000$

  3. Rs. $20,000$

  4. Rs. $8,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total loss on redemption is 20% of 20,000 * 10 = 40,000. The debentures are redeemed after 5 years, so the annual loss to be written off is 40,000 / 5 = 8,000.

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

Debentures of a company can be issued :

  1. For cash

  2. For consideration other than cash

  3. As a collateral security

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

Debentures can be issued for cash, for consideration other than cash (like assets), or as collateral security for a loan. All these methods are valid.

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 as a collateral security, which account is creadited?

  1. Debentures Account

  2. Bank Loan Account

  3. Debenture holdings Account

  4. Debenture Suspense Account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Collateral security means security provided to the lender over and above the prime or principal security. Collateral security is to be realized only when the principal security fails to pay the amount of loan.
Debentures Suspense A/c                          Dr.
To Debentures A/c

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

Which of the following is not a characteristic of Bearer Debentures?

  1. These are treated as negotiable instruments.

  2. Their transfer requires a deed of transfer.

  3. These are transferable by mere delivery

  4. The interest on it is paid to the holder.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Bearer debentures are negotiable instruments (A true), transferable by mere delivery (C true), with interest paid to the holder (D true). Their defining feature is that no deed is needed for transfer - simple delivery suffices. Option B is false - their transfer does NOT require a deed.

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

Which debentures are secured by a charge -

  1. Debentures which are convertible on or after $18$ months

  2. Non - convertible debentures which are redeemable on or after $18$ months

  3. Debentures which are non - convertible on or after $18$ months

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

If debentures are non-convertible, they are paid at the time of redemption. Debentures which are non-convertible and redeemable after a period of more than 18 months must be secured by creating a charge against the property of the company.

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

In Balance Sheet of a Company, Interest accrued but not 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 but not due on debentures is a liability that the company must pay within the next 12 months, classifying it as a current liability in 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

X Ltd. purchased land and building for Y. Ltd for a book value of Rs$4,00,000$. The consideration was paid by issue of $12\%$ Debentures of Rs$100$ each at a discount of $20\%$. The debentures account is credited with -

  1. $Rs 5,20,000$

  2. $Rs 5,00,000$

  3. $Rs 4,80,000$

  4. $Rs 3,20,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The purchase consideration is 4,00,000. Debentures of 100 are issued at a 20% discount, so the issue price is 80. Number of debentures = 4,00,000 / 80 = 5,000. The debentures account is credited with the face value: 5,000 * 100 = 5,00,000.

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

Loss on Issue of Debentures Account is a -

  1. Personal Account

  2. Real Account

  3. Nominal Account

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

Loss on issue of debentures is an expense account. According to the rules of accounting, all expenses and losses are classified as nominal accounts.

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

In the Balance Sheet of a company Debentures account appears under the head:

  1. Share Capital

  2. Reserves & Surplus

  3. Secured Loans

  4. Miscellaneous Expenditure
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the balance sheet, debentures are long-term borrowings and are traditionally shown under the head of Secured Loans (or Long-term Borrowings in modern formats).

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

The underwriting commission in case of issue of debentures can't exceed _______.

  1. $2\%$

  2. $2.5\%$

  3. $3\%$

  4. $5\%$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the Companies Act, the underwriting commission for debentures is capped at 2.5% of the issue price.