Tag: discount/loss on issue of debenture written off

Quizzes (0) Questions (71)

Questions Related to discount/loss on issue of debenture 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

Interest payable on debenture is:

  1. an appropriation of profits of the company

  2. a charge against profits of the company

  3. transferred to sinking fund account

  4. transferred to sinking fund interest account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on debentures is a charge against profits and, therefore, its payment is not subject to the earning of profits.The amount so deducted must be paid to the Central Government on behalf of the debenture-holders.

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 debentures account is a:

  1. Personal account

  2. Real account

  3. Nominal account

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

Loss on issue of debentures represents an expense or loss to the company, which falls under the category of nominal accounts.

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

When debentures are issued at a discount it is prudent to write off the discount:

  1. in the year of the issue of debentures

  2. within 5 years of the issue of debentures

  3. during the life of debentures

  4. in the year of redemption of debetures
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

To follow the matching principle, the discount on issue should be amortized over the entire period the company benefits from the borrowed funds.

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

What journal entry is passed to write off discount on issue of debentures?

  1.  Discount on issue of debentures A/c        To Profit and Loss A/c Dr. 
  2. To Profit and Loss A/c    To Discount on issue of debenture A/c Dr. 
  3.  Bank A/c        To Profit and Loss A/c Dr. 

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

Writing off the discount involves transferring the amount from the Discount on Issue account to the Profit and Loss account (as an expense).

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

On $15$th June, $1988$ a company had $5,000$ $10\%$ Redeemable Preference Shares of Rs. $10$ each which were issued on $1$st April, $1980$ with a redemption period of $20$ years. These shares will be redeemed ____________.

  1. before $15$th June, $1998$

  2. before $15$th June, $1993$

  3. before $1$st April, $1990$

  4. before $1$st April, $2008$
Reveal answer Fill a bubble to check yourself
B Correct answer
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

For creating Capital Redemption Reserve _______________ is passed.

  1. Profit or loss a/c Dr, General Reserve Dr to Capital Redemption Reserve Cr

  2. Goodwill a/c Dr to Capital Redemption Reserve a/c Cr

  3. Capital Redemption Reserve A/c Dr. to Profit and loss A/c, General Reserve A/c Dr.

  4. Capital Reserve Dr. to Capital Redemption Reserve
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital Redemption Reserve is created by transferring profits from the Profit and Loss account or General Reserve to the reserve 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

Which of the following is odd one?

  1. Naked

  2. Redeemable at discount

  3. Issued at par

  4. Redeemable at premium
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are typically issued at par, discount, or premium, and redeemed at par or premium. 'Redeemable at discount' is not a standard or common practice 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

Kanta Ltd. issued 1,00,000 debentures of Rs. 100 each at a discount of 5% to be redeemed at the end of 10th year from the date of issue at par. The loss on issue of debenture will be written off as ___________.

  1. Rs. 10,000 every month

  2. Rs. 50,000 every year

  3. Rs. 5,00,000 at the end of 10th year

  4. Rs. 5,00,000 at the end of 1st year of issue
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total discount = 1,00,000 * 100 * 0.05 = 5,00,000. Over 10 years, the annual write-off is 5,00,000 / 10 = 50,000.

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.