Tag: debentures redemption

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Questions Related to debentures redemption

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Which of these is not a method of redemption of debentures ?

  1. Purchase in open market

  2. Auction of debentures

  3. Drawing of lots

  4. Payment in lump sum
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Standard methods for redemption of debentures include purchase in open market, drawing of lots, and payment in lump sum. Auction is not a recognized method for debenture redemption.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Debentures can be redeemed _____________.

  1. At par

  2. At premium

  3. At discount

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

Debentures can be redeemed at par (face value), at a premium (above face value), or sometimes at a discount, depending on the terms of the issue.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

When a company issues debenture, it usually mentions the terms on which they will be redeemed on their maturity.

  1. True

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

It is a legal and accounting requirement to state the terms of redemption (maturity date, price, etc.) at the time of issuing debentures.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Premium on redemption is a/an  ____________ of a company payable in future.

  1. liability

  2. asset

  3. income

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

If a company agrees to pay a premium upon redemption, that premium represents a future obligation or debt that the company must settle, making it a liability.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

Premium on redemption of debenture A/c is a _____.

  1. personal A/c

  2. real A/c

  3. nominal A/c

  4. suspense A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Premium on redemption is treated as a loss or expense for the company, and in accounting, expenses are classified under nominal accounts.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

The Debenture Redemption Reserve account appears on the liability side of the balance sheet under the head ___________.

  1. capital

  2. reserves and surplus

  3. non-current liabilty

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

The Debenture Redemption Reserve (DRR) is a reserve created out of profits to ensure funds are available for the redemption of debentures. In the balance sheet, it is classified under the 'Reserves and Surplus' head within Shareholders' Funds.

Multiple choice book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

When the debentures are redeemed, the requisite amount of Debenture Redemption Reserve is transferred to ___________.

  1. statutory reserve

  2. general reserve

  3. revenue

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

Once the debentures are fully redeemed, the purpose of the Debenture Redemption Reserve (DRR) is fulfilled. The balance in the DRR account is then transferred to the General Reserve, as it is no longer required for its specific purpose.