Tag: company accounts part - 2 (accounting for debentures)

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Questions Related to company accounts part - 2 (accounting for debentures)

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A debenture is said to be issued at par when the issue price is ________ the face price.

  1. more than

  2. less than

  3. equal to

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

A debenture is issued at par when the amount paid by the investor is exactly equal to the face value of the debenture.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Premium on issue of debentures can be utilized for writing off  _______.

  1. discount on issue of debenture/shares

  2. preliminary expenses

  3. goodwill/patent

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

Premium on issue of debentures (or securities premium) can be used for various purposes, including writing off preliminary expenses, discount on issue, or goodwill.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Discount on issue of debenture is shown in balance sheet as ___________.

  1. miscellaneous expenses

  2. goodwill

  3. claims receivable

  4. reserve capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Discount on issue of debentures is treated as a deferred revenue expenditure and is shown under miscellaneous expenses in the balance sheet until fully written off.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Discount on issue of debenture is a ______.

  1. capital loss

  2. revenue loss

  3. financial loss

  4. speculative loss
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A discount on the issue of debentures represents a cost incurred by the company to raise capital. Since this is a non-recurring loss related to the capital structure, it is classified as a capital loss.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

A debenture is said to be issued at premium when the issue price is ________ the face price.

  1. more than

  2. less than

  3. equal to

  4. double 
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A debenture is issued at a premium when the amount received from the investor is greater than the nominal or face value of the debenture.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Loss on issue of debenture A/c is a __________.

  1. personal A/c

  2. nominal A/c

  3. real A/c

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

Loss on issue of debentures is an expense or loss account. According to the rules of accounting, all expenses and losses are recorded in a nominal account.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest an Debentures will be debited to Profit and Loss Account, whether there is profit or loss.

  1. True

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

Interest on debentures is a charge against profits, meaning it must be paid regardless of whether the company earns a profit or incurs a loss.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Premium on redemption of debenture is generally provided at the time of __________.

  1. issue of debentures

  2. redemption of debentures

  3. every year

  4. after 10 years
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the principle of prudence, if a company knows it will have to pay a premium upon redemption, it must provide for that loss at the time of issuing the debentures.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Hariom Industries Ltd. purchased a plant for Rs. 100,000 payable Rs. 37,000 in cash and balance by issue of 10% debentures of Rs. 100 each at a premium of 10%. The vendor will be issued____ debentures.

  1. 630 of Rs. 100 each

  2. 572.72 of Rs. 100 each

  3. 700 of Rs. 100 each

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

The amount payable is 100,000 - 37,000 = 63,000. The issue price per debenture is 100 + 10% = 110. Number of debentures = 63,000 / 110 = 572.72.