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

Which of the following is false with respect to 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 securities

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

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of debenture is called as issued for consideration other than cash. e.g. Purchase of assets from the company by issuing debentures as consideration,  debentures issued in lieu of dividends.

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 debenture are issued as collateral security, the final entry for recording the transaction in the books is _______.

  1. Credit debenture A/c. and Debit cash A/c.

  2. Debit debenture suspense A/c. and credit cash A/c.

  3. Debit debenture suspense A/c. and credit debenture A/c.

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

A collateral security may be defined as a subsidiary or secondary or additional security besides the primary security when a company obtains a loan or overdraft  from a bank or any other financial institutions. The final journal entry for recording this transaction is:


Debenture suspense A/c     Dr.
            To Debenture 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/are true with respect to debentures?

  1. They can be issued for cash.

  2. They can be issued for consideration other than cash.

  3. They cannot be issued as collateral securities.

  4. Both (A) and (B) above.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of dentures is called as issue for consideration other than cash. Debenture can be issued for cash and collateral security.

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

Mohan Lai Ltd. purchased a plant for Rs. 20,000 payable Rs. 6,500 in cash and balance by issue of 9% debentures of Rs. 100 each at a primium of 10%. Find the number of debentures to be issued to the vendor.

  1. 125 of Rs. 100 each

  2. 123 of Rs. 100 each

  3. 112.50 of Rs. 100 each

  4. 143 of Rs. 100 each
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The amount payable is 20,000 - 6,500 = 13,500. The debentures are issued at a 10% premium, so the issue price is 110. Number of debentures = 13,500 / 110 = 122.72. Since you cannot issue a fraction of a debenture, the question likely implies 123 debentures (rounding up).

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

ABC Ltd. has issued $3,000$ fully Convertible Debentures of Rs. $100$ each. Each Debentures is convertible into $8$ shares of Rs. $10$ each. Amount of share capital credited on conversion will be.

  1. Rs. $2,40,000$

  2. Rs. $60,000$

  3. Rs. $3,00,000$

  4. Rs. $80,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

3,000 debentures * 8 shares per debenture = 24,000 shares. 24,000 shares * 10 face value = 2,40,000 credited to share capital.

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 following entry appears in the books of Vikas Ltd.

Rs. Rs.
Bank Account $95,000$
Loss on issue of Debenture A/c $13,000$
To $8\%$ Debentures A/c $1,00,000$
To Premium on Redemption of Debentures A/c $8,000$

Debentures have been issued at a discount of.

  1. $10\%$

  2. $7\%$

  3. $6\%$

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

The debentures are 1,00,000. The bank received 95,000. The difference of 5,000 is the discount. 5,000 / 1,00,000 = 5%.

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 to a banker, which account will be debited.

  1. Bank A/c

  2. Debenture Suspense Account

  3. Debenture Redemption A/c

  4. Debenture holders A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When debentures are issued as collateral security, the Debenture Suspense Account is debited to record the issuance of the debentures as a contingent liability.

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 Co. Ltd purchased assets worth Rs. $28,80,000$. It issued debentures of Rs. $100$ each at a discount of $4\%$ in full satisfaction of the purchase consideration. The number of debentures issued to the various of asset is?

  1. $30,000$

  2. $28,800$

  3. $32,000$

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

The purchase consideration is Rs. 28,80,000. The issue price per debenture is Rs. 100 minus 4% discount (Rs. 4), which equals Rs. 96. Dividing 28,80,000 by 96 gives 30,000 debentures.

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 following journal entry appears in the books of X Co. Ltd.

Bank A/c Dr. Rs. $4,75,000$
Loss on Issue of Deb. A/c Dr. Rs. $75,000$
To $12\%$ Debentures A/c $5,00,000$
To Premium on redemption of Deb. A/c $50,000$

Debentures have been issued at a discount of.

  1. $15\%$

  2. $5\%$

  3. $10\%$

  4. $20\%$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The total face value of debentures is Rs. 5,00,000. The bank received Rs. 4,75,000. The difference of Rs. 25,000 represents the discount on issue. Discount percentage = (25,000 / 5,00,000) * 100 = 5%.

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 of Rs. $1,00,000$ are issued as collateral security, against a loan of Rs. $1,50,000$, the entry for issue of debentures will be

  1. Credit Debentures Rs. $1,50,000$ and debit cash A/c. Rs. $1,50,000$

  2. Debit Debenture Suspense A/c Rs. $1,00,000$ and credit Cash A/c Rs. $1,00,000$

  3. Debit Debenture Suspense A/c Rs. $1,00,000$ and Credit Debentures A/c Rs. $1,00,000$

  4. Debit Cash A/c Rs. $1,50,000$ and credit Bank A/c Rs. $1,50,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When debentures are issued as collateral security, the standard accounting entry is to debit Debenture Suspense A/c and credit Debentures A/c with the face value of the debentures issued.