Tag: meaning and kinds of debentures

Quizzes (0) Questions (22)

Questions Related to meaning and kinds of debentures

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentures which are convertible into shares at the option of the shareholders according to the terms of the issue are known as ____________.

  1. optional debenture

  2. convertible debenture

  3. convertible shares

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

Convertible debentures are debt instruments that provide the holder with the option to convert the debt into equity shares of the issuing company after a specified period.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Which of these statement is not true about debenture holders?

  1. Debenture holders are like the lenders of the company

  2. Debenture holders have priority of payment of interest and amount

  3. In case of loss the debenture holders are not entitled to interest on the debenture

  4. Interest on debenture is an allowable expenses
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debenture holders are creditors of the company. They are entitled to interest regardless of whether the company makes a profit or a loss, as interest is a fixed financial obligation.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Which of the following is incorrect?

  1. A company can issue irredeemable debentures

  2. A company can issue debentures with voting rights

  3. A company can buy its own shares

  4. A company can buy its own debentures
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the Companies Act, a company cannot issue debentures with voting rights. Debenture holders are creditors, not owners, and therefore do not have voting power in company affairs.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Use the following information for questions given below:
Consider the following data pertaining to A Ltd. as on March $31, 2006$:
Share Capital
Issued, subscribed and called-up $(20,000$ shares of $Rs. 100$ each) $Rs. 20,00,000$
Calls-in-arrear $Rs. 10,000$
Profit and loss account (Cr.) as on April $01, 2005\ Rs. 1,20,000$
Profit for the year $Rs. 2,60,000$
The company wants to create a Debenture Redemption Reserve and to transfer $Rs. 50,000$ every year out of profits to redeem the debentures.
The company declared $10$% dividends.
The amount of dividend declared will be _______________.

  1. $Rs. 33,000$

  2. $Rs. 21,000$

  3. $Rs. 1,99,000$

  4. $Rs. 2,00,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The dividend is calculated on the paid-up capital. Issued capital is 20,00,000, but calls-in-arrear are 10,000, so paid-up capital is 19,90,000. 10% of 19,90,000 is 1,99,000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

In case of an Issue of a debenture of Rs$100$ at $Rs110$, Rs$10$ is to be credited to:

  1. Securities Premium A/c

  2. Debenture Premium A/c

  3. Capital Redemption Reserve A/c

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

If debentures are issued at a price more than its nominal value (face value) such an issue is called issue at a premium.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Redeemable debentures are those which are payable on the expiry of the ______ period either in lump sum or in installments during the life time of the company. 

  1. Specific

  2. Actual

  3. Indefinite

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

There are two type of debenture which are classified from the point of view of tenure i.e. 1. Redeemable debentures and 2. Irredeemable debentures.

Redeemable dentures are those which are payable on the expiry of the specific period either in lump sum or in installments during the life time of the company. Debentures can be redeemed either at par or at premium .

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentureholders having a floating charge have priority in payment over _________________.

  1. Sundry Creditors

  2. Secured Creditors

  3. Unsecured Creditors

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

 A debenture is a document that lays down the terms and conditions of a loan, and provides clarity and security to lenders if the borrowing company becomes insolvent. Attaching a floating charge to the debenture offers further benefits, enabling the holder to rank above unsecured creditors when it comes to repayment.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

The term debenture includes _________.

  1. debenture stock

  2. bonds

  3. any other securities of a company whether constituting a charge on the assets of the company or not

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

The legal definition of a debenture is broad and includes debenture stock, bonds, and any other securities of a company, regardless of whether they are secured by a charge on assets.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentures entails payment of fixed rate of interest until ____________.

  1. the company is not declared insolvent

  2. the principal sum is repaid

  3. the company desires not to pay

  4. the debenture holders resolves not to claim so
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are debt instruments. The company is obligated to pay interest at a fixed rate until the principal amount is repaid to the debenture holder at the time of maturity.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

_____are those debentures where the debenture holder have no option to convert into equity.

  1. Optional debentures

  2. Flexible debentures

  3. Convertible debentures

  4. Non-convertible
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Non-convertible debentures are those that do not offer the holder the option to convert the debt into equity shares. They remain debt instruments until maturity.