100 Important MCQs of Issue of Debentures class 12 CBSE Board
Looking for important MCQs of issue of debentures chapter with answers of class 12 Accountancy CBSE, ISC and other State Board.
I have compiled more than 100 Multiple Choice Questions with answers and explanations of the Issue of Debentures chapter of Class 12.
Multiple Choice Questions of Issue of Debentues chapter with Answers of Class 12 Accountnacy
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Debentures issued as collateral security will be debited to:
a) Bank Account
b) Debentures Suspense Account
c) Debentures Account
d) Bank Loan Account
Ans – b)
Debentures are part of
a) Shareholders’ funds
b) Borrowed Funds
c) Borrowings from Bank
d) None of these
Ans – b)
When debentures of ₹1,00,000 are issued as Collateral Security against a
loan of ₹1,50,000, the entry for issue of debentures will be :
a) Credit Debentures ₹1,50,000 and debit bank A/c ₹1,50,000
b) Debit Debenture Suspence A/c ₹1,00,000 and Credit Bank A/c ₹1,00,000
c) Debit Debenture Suspence A/c ₹1,00,000 and Credit Debentures A/c ₹1,00,000.
d) Debit Cash A/c ₹1,50,000 and Credit Bank A/c ₹1,50,000.
Ans – c)
Debenture holders are:
a) Owners of the Company
b) Debtors of the company
c) Creditors of the Company
d) Promotors of the Company
Ans:- c)
Interest on debentures issued as a collateral security is paid on:
a) Nominal value of debentures
b) No interest is paid
c) Face value of debentures
d) Paid up value of debentures
Ans – b)
Debentures are shown in the Balance Sheet of a company under the head of
a) Non-current Liabilities
b) Current Liabilities
c) Share Capital
d) None of these
Ans – a)
When debentures are to be redeemed at premium an extra entry has to be
made at the time of issue of debentures, which a/c should be credited in
this entry?
a) Loss on issue of debentures a/c
b) Debenture redemption premium a/c
c) Bank a/c
d) Debenture holder’s a/c
Ans – b)
Debentures represent the :
a) Long term Borrowings of a company
b) The Investment of Equity-Shareholders
c) Directors’ shares in a company
d) Short-term Borrowings of a Company
Ans – a)
Premium on Redemption of Debentures Account is:
a) Personal Account
b) Real Account
c) Nominal Account
d) All of the above
Ans:- a)
Debentures are
a) owners of the company
b) lenders of the company
c) Vendors of the company
d) customers of the company
Ans – b)
X Ltd. acquired assets of ₹20 lakhs and took over creditors of ₹20 thousand
from Y Ltd. X Ltd. issued 8% debentures of ₹200 each at a discount of 10%
as purchase consideration. Number of debentures issued will be:
a) 11,000
b) 9,000
c) 10,000
d) 10,100
Ans – a)
Zero Coupon Bonds are issued:
a) At Zero Interest rate
b) With Specified Rate of Interest
c) Without Specified Rate of Interest
d) None of these
Ans – c)
X Ltd. purchased a building for ₹60,00,000 payable as 20% in Cash and balance
by allotment of 8% debentures of ₹500 each at a premium of 20%. Number
of debentures issued will be:
a) 9,600
b) 8,000
c) 12,000
d) 10,000
Ans – b)
Debenture interest is paid
a) at a predetermined rate
b) at a variable rate
c) at a rate based on the net profit of the company.
d) at a rate as determined by the company from time to time
Ans – a)
Sunrise Ltd purchased a building for ₹5,00,000 payable as 15% in cash and
balance by allotment of 9% debentures of ₹100 each at a premium of 25%.
Number of debentures issued will be:
a) 4,250
b) 4,000
c) 5,000
d) 3,400
Ans – d)
Interest payable on debentures is:
a) an appropriation of profits of the company
b) a charge against profit of the company
c) transferred to sinking fund investment account
d) transferred to general reserve
Ans – b)
If Vendors are issued debentures of ₹80,000 in consideration of net assets
of ₹1,00,000, the balance of ₹20,000 will be credited to:
a) Statement of Profit and Loss
b) Goodwill Account
c) General Reserve Account
d) Capital Reserve Account
Ans – d)
At the time of issue of debentures, Debentures Account is
a) credited by the amount received
b) credited by the issue price of the debentures
c) credited by the nominal (face) value of the debentures
d) None of the above
Ans – c)
If Vendors are issued debentures of ₹4,40,000 in consideration of assets of
₹5,00,000 and liabilities of ₹1,00,000, the balance of ₹40,000 will be
debited to:
a) General Reserve Account
b) Capital Reserve Account
c) Goodwill Account
d) Statement of Profit and Loss
Ans – c)
A debenture holder is entitled to:
a) Fixed dividend
b) Share in profits
c) Voting rights in the company
d) Interest at the fixed rate
Ans – d)
A Ltd. issued 1,000, 10% debentures of ₹100 each at a premium of 5%. What
will be the total amount of interest for one year?
a) ₹10,500
b) ₹10,000
c) ₹5,250
d) ₹5,000
Ans – b)
When debentures are issued at a discount, the discount is written off
a) after debentures have been redeemed.
b) in the year when debentures are issued
c) during the life of the debentures
d) None of these
Ans – b)
On liquidation of company, principal amount of debentures is returned:
a) First of all
b) Last of All
c) Before Equity Capital
d) After Equity Capital
Ans – c)
On 1st April 2007, Sunrise Limited issued 5,000, 8% Debentures of ₹100 each
at a discount of 5%. What will be the total amount of interest for the year
ending 31st March 2008?
a) ₹38,000
b) ₹42,000
c) ₹40,000
d) ₹25,000
Ans – c)
Interest on Debentures is paid on
a) Amount received on Issue
b) Nominal (Face) Value
c) On premium
d) None of these
Ans – b)
Globe Ltd. issues 20,000, 9% debentures of ₹100 each at a discount of 5%
redeemable at the end of 5 years at a premium of 6%. For what amount ‘Loss
on Issue of Debentures Account’ will be debited?
a) ₹1,00,000
b) ₹1,20,000
c) ₹2,80,000
d) ₹2,20,000
Ans – d)
Which of the following statements is false?
a) Debenture is a form of public borrowing
b) It is customary to prefix debentures with the agreed rate of interest.
c) Debenture interest is a charge against profits
d) The issue price and redemption value of debentures can not differ.
Ans – d)
Issued 5,000, 12% debentures of ₹100 each at a discount of 2%, redeemable
at a premium of 5%. In such case:
a) Loss on Issue will be credited by ₹10,000
b) Loss on Issue will be debited by ₹35,000
c) Premium on Redemption will be debited by ₹25,000
d) Premium on Redemption will be credited by ₹35,000
Ans – b)
Debentures issued as Collateral Security
a) are recorded in the books
b) are not recorded in the books
c) may or may not be recorded in the books
d) None of these
Ans – c)
Issued 4,000, 12% debentures of ₹100 each at a premium of 4%, redeemable
at a premium of 10%. In such case:
a) Loss on Issue will be debited by ₹24,000
b) Loss on Issue will be debited by ₹56,000
c) Loss on Issue will be debited by ₹40,000
d) Premium on Redemption will be credited by ₹24,000
Ans – c)
Which of the following is not a characteristic of Bearer Debentures?
a) They are treated as negotiable instruments
b) Their transfer requires a deed of transfer
c) They are transferable by mere delivery
d) The interest on it is paid to the holder irrespective of identity.
Ans – b)
The excess value of net assets over purchase consideration at the time of purchase of a business is
a) Credited to the Capital Reserve
b) Debited to the Goodwill Account
c) Credited to the General Reserve Account
d) Credited to the Vendor’s Account
Ans – a)
When debentures are to be redeemed at premium, an extra entry has to be made
at the time of issue of debentures, which A/c should be debited in this entry?
a) Loss on issue of debentures A/c
b) Debenture Redemption Premium A/c
c) Bank A/c
d) Debenture holder’s A/c
Ans – a)
Which of the following statements is false?
a) At maturity, debenture holder get back their money.
b) Debentures can be forfeited for non-payment of call money
c) In Company’s balance Sheet, debentures are shown under the head long
term borrowings.
d) Interest on debentures is a charge against profits.
Ans – b)
X Ltd. Purchased building of Y Ltd. for ₹ 4,00,000. The consideration was paid by the issue of 10% Debentures of ₹100 each at a discount of ₹20. 10% Debentures Account is credited with
a) ₹ 5,20,000
b) ₹ 5,00,000
c) ₹ 4,80,000
d) ₹ 3,20,000
Ans – b)
Issued 10,000, 8% debentures of ₹100 each at a premium of 3%, redeemable
at a premium of 5%. In such case:
a) Loss on Issue will be debited by ₹20,000
b) Loss on Issue will be debited by ₹80,000
c) Loss on Issue will be debited by ₹50,000
d) Premium on Redemption will be credited by ₹20,000
Ans – c)
Which of the following statement is false?
a) A company can issue redeemable debentures.
b) A company can issue debentures with voting rights
c) A company can issue convertible debentures
d) A company can buy its own debentures and shares
Ans – b)
Which of the following can not be used for writing off Discount or Loss on Issue of Debentures?
a) Securities Premium Reserve
b) Debenture Redemption Reserve
c) Capital Reserve
d) Statement of Profit and Loss
Ans – b)
The principla amount of debentures will be repaid by the company either at
the end of a specified period or by installments during the life time of the
company. Such types of debentures are called:
a) Redeemable Debentures
b) Irredeemable Debentures
c) Convertible Debentures
d) Bearer Debentures
Ans – a)
Discount on Issue of Debentures is restricted to
a) 10%
b) 20%
c) 25%
d) None of these
Ans – d)
The debentures whose principal amount is not repayable by the company during
its life time, but the payment is made only at the time of Liquidation
of the company, such debentures are called:
a) Bearer Debentures
b) Redeemable Debentures
c) Irredeemable Debentures
d) Non-Convertible Debentures
Ans – c)
Electronics Ltd. issued 10,000, 6% Debentures of ₹ 100 each at a premium of ₹ 10. It will credit 6% Debentures Account by
a) ₹ 11,00,000
b) ₹ 10,00,000
c) ₹ 9,00,000
d) ₹ 8,00,000
Ans – b)
Debenture Application Account is in the nature of
a) Real Account
b) Personal Account
c) Nominal Account
d) None of the above
Ans – b)
HP Ltd. issued 5,000, 8% Debentures of ₹100 each at ₹95. It will credit 8% Debentures Account by
a) ₹5,00,000
b) ₹4,75,000
c) Either a) or b) as it decides
d) ₹5,25,000
Ans – a)
Discount on issue of Debentures is in the nature of
a) Revenue loss
b) Capital loss
c) Deferred Revenue Expenditure
d) None of the above
Ans – b)
Which of the following is correct with respect to debentures?
a) They can be issued on credit
b) They can be issued for consideration other than cash
c) They can not be issued as collateral security
d) They can be issued partly on credit and partly in cash
Ans – b)
Premium received on issue of debentures may be utilised for
a) For writing off discount allowed may be utilised for
b) For writing off premium allowed on redemption of debentures
c) For writing off preliminary expenses
d) All of the above
Ans – d)
Willian Pens Ltd. issued 10,000, 7% Debentures of ₹100 each at a discount of ₹4. It has a balance in Securities Premium Reserve of ₹25,000. It will write off Discount on Issue of Debentures.
a) ₹40,000 from, Securities Premium Reserve
b) ₹40,000 from Statement of Profit and Loss
c) ₹25,000 from Securities Premium Reserve and ₹15,000 from Statement of
Profit and Loss (Finance Cost)
d) ₹15,000 from Securities Premium Reserve and ₹25,000 from Statement
of Profit and Loss (Finance Cost)
Ans – c)
‘A’ Limited purchased the assets from ‘B’ Limited for ₹5,40,000. ‘A’ Limited
issued 10% debentures of ₹100 each at 20% premium against the payment. The
number of debentures received by ‘B’ Limited will be:
a) 4,500
b) 5,400
c) 45,000
d) 6,000
Ans – a)
Luxor Pens Ltd. issued 10,000, 7% Debentures of ₹100 each at a discount of ₹4 redeemable at a premium of ₹6. It will write off Loss on Issue of Debentures.
a) from Securities Premium Reserve
b) from Statement of Profit and Loss
c) from General Reserve
d) None of these
Ans – b)
‘A’ Limited purchased the assets from ‘B’ Limited for ₹8,10,000. ‘A’ Limited
issued 10% debentures of ₹100 each at 10% discount against the payment. The
number of debentures received by ‘B’ Limited will be:
a) 8,100
b) 9,000
c) 90,000
d) None of the above
Ans – b)
Which of the following statement is correct?
a) A debenture holder is an owner of the company
b) A debenture holder can get his money back only on the liquidation of the
company.
c) A debenture issued at a discount can be redeemed at a premium
d) A debenture holder received interest only in the event of profits.
Ans – c)
Debentures of a Company can be issed:
a) for cash
b) for consideration other than cash
c) As a Collateral Security
d) Any of the above
Ans – d)
In the Balance Sheet of a company, interest accrued and due on debentures is shown under the main head.
a) Share Capital
b) Reserves and Surplus
c) Current Liabilities
d) Non-Current Liabilities
Ans – c)
On issue of debentures as a collateral security, which account is credited?
a) Debentures Account
b) Bank Loan Account
c) Debenture Holdings Account
d) Debenture Suspense Account
Ans – a)
