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
Let’s Practice
If tenure of debentures is not given, debentures are shown in the Balance Sheet of a company under the head of
(a) Long-term Borrowings
(b) Other Long-term Liabilities
(c) Long-term Provisions
(d) Share Capital
Ans – (a)
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)
When debentures are issued at a discount, the discount on issue is written off from
(a) Investments Fluctuation Reserve
(b) General Reserve
(c) Securities Premium Account
(d) Workmen Compensation Reserve
Ans- (c)
Debentures are part of
a) Shareholders’ funds
b) Borrowed Funds
c) Borrowings from Bank
d) None of these
Ans – b)
When debentures are issued at par and redeemable at premium, the loss on issue is written off from
(a) Investments Fluctuation Reserve
(b) Workmen Compensation Reserve
(c) Securities Premium Account
(d) General Reserve
Ans – (c)
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)
Debentures’ interest or Interest on Debentures is paid
(a) at a predetermined rate of interest
(b) at variable rate of interest
(c) at the rate of interest based on net profit of the company
(d) at the rate of interest as determined by the company from time to time
Ans – (a)
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)
On issue of debentures, Debentures Account is credited by
(a) the amount received
(b) the issue price of the debentures
(c) the nominal (face) value of the debentures
(d) Nominal (Face) Value less Premium Payable on Redemption
Ans – (c)
Interest on debentures is paid on
(a) Nominal (face) value
(b) Nominal (face) value plus premium received
(c) Nominal (face) value less discount allowed
(d) Nominal (face) value less Premium Payable on Redemption
Ans – (a)
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)
Which of the following statement is not true?
(a) Interest on Debentures is not transferred to Statement of Profit & Loss
(b) Interest on Debentures is paid whether profit is earned or loss is incurred by the company
(c) There is restriction on use of premium on issue of debentures
(d) Company can buy back its own debentures
Ans – (a)
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)
Select the correct statement from the following options.
(a) A debenture holder is entitled to receive dividend on his debentures from the company even if the company has incurred losses
(b) A debenture holder is entitled to receive interest on his debentures from the company only if the company has made profits
(c) A debenture holder is entitled to receive interest on his debentures from the company only after dividend has been paid by the company to its shareholders
(d) A debenture holder is entitled to receive interest on his debentures from the company even if the company has incurred losses
Ans – (d)
Premium on Redemption of Debentures Account is:
a) Personal Account
b) Real Account
c) Nominal Account
d) All of the above
Ans:- a)
When debentures are issued at a discount but are redeemable at a premium, which of the following account is credited at the time of issue?
(a) Discount on Issue of Debentures Account
(b) Loss on Issue of Debentures Account
(c) Premium on Redemption of Debentures Account
(d) Securities Premium Account
Ans – (c)
Debentures are
a) owners of the company
b) lenders of the company
c) Vendors of the company
d) customers of the company
Ans – b)
When debentures are issued as Collateral Security, which account is debited?
(a) Bank Account
(b) Debenture Suspense Account
(c) Debenture Redemption Account
(d) Debenture holders’ Account
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)
Following Journal entries are from the books of Raj Ltd.:
Bank A/c Dr. 96,000
To Debentures Application and Allotment A/c 96,000
Debentures Application and Allotment A/c Dr. 96,000
Loss on Issue of Debentures A/c Dr. 10,000
To 8% Debentures A/c 1,00,000
To Premium on Redemption of Debentures A/c 6,000
Based on the above Journal entries, identify the rate of discount on Debentures.
(a) Discount of 4%
(b) Discount of 6%
(c) Premium of 8%
(d) Discount of 10%
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)
Srijan Ltd. issued ₹ 1,00,000, 10% Debentures at 5% discount redeemable at 5% premium after 10 years. Loss on issue of debentures is
(a) ₹ 15,000
(b) ₹ 10,000
(c) ₹ 12,000
(d) ₹ 20,000
Ans – (b)
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)
Shiv Ltd. purchased Land and Building from Ram Ltd. for ₹ 2,00,000. The consideration was paid by issue of 10% Debentures of ₹ 100 each at a discount of 20%. The debentures account is credited with
(a) ₹ 2,60,000
(b) ₹ 2,50,000
(c) ₹ 2,40,000
(d) ₹ 1,60,000
Ans – (b)
How many debentures will a company issue against purchase consideration of ₹ 28,80,000, if debentures of ₹ 100 are issued at a premium of ₹ 20 per debenture?
(a) 24,000
(b) 28,800
(c) 36,000
(d) 32,000
Ans – (a)
When debentures are issued as collateral security.
(a) interest is paid on Nominal Value of Debentures
(b) interest is paid on Face Value of Debentures
(c) interest is paid on Discounted Value of Debentures
(d) interest is not paid
Ans – (d)
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)
Premium on redemption of debentures is provided at the time of
(a) Allotment of Debentures
(b) Redemption of Debentures
(c) Every year
(d) Issue of Debentures
Ans – (a)
Star Ltd. issued 5,000, 10% Debentures of ₹ 100 each at a premium of ₹ 10 each. These debentures are to be redeemed at a premium of ₹ 4 each after 5 years. The amount credited to Securities Premium Account will be
(a) ₹ 25,000
(b) ₹ 50,000
(c) ₹ 40,000
(d) ₹ 60,000
Ans – (b)
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)
Eastern Ltd. issued ₹ 50,00,000, 10% Debentures at par and redeemable at the end of 5 years at 105%. ‘Premium on Redemption of Debentures Account’ will be
(a) Debited with ₹ 2,50,000
(b) Credited with ₹ 2,00,000
(c) Credited with ₹ 2,50,000
(d) Debited with ₹ 20,000
Ans – (c)
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)
Which of the following can be used by a company to write off Loss on Issue of Debentures?
(a) Investment Fluctuation Fund
(b) Machinery Replacement Fund
(c) Workmen Compensation Reserve
(d) General Reserve
Ans – (d)
Ayush Ltd. issued 50,000, 8% Debentures of ₹ 100 each at par redeemable at a premium. Loss on issue of Debentures was written off ₹ 5,00,000 from Securities Premium Account and Statement of Profit & Loss each. At what rate, these debentures will be redeemed?
(a) ₹ 105
(b) ₹ 110
(c) ₹ 115
(d) ₹ 120
Ans – (d)
Hari Aggarbatti Ltd. issued 50,000, 8% Debentures of ₹ 100 each at a discount of 5% and redeemable at a premium. Loss on Issue of Debentures was written off ₹ 5,00,000 from Securities Premium and Statement of Profit & Loss. What is the premium payable per debenture on redemption?
(a) ₹ 10
(b) ₹ 15
(c) ₹ 5
(d) ₹ 20
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)
Cyrus Ltd. had issued 10,000, 8% Debentures of ₹ 100 each at a premium of 20% on 1st July, 2023. Interest on debentures for the year ended 31st March, 2024 will be
(a) ₹ 96,000
(b) ₹ 72,000
(c) ₹ 80,000
(d) ₹ 60,000
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)
‘A’ Limited purchased the assets from ‘B’ Limited for ₹ 5,40,000. ‘A’ Limited issued 10% debentures of ₹ 10 each at 10% discount against the payment. The number of debentures received by ‘B’ Limited will be:
(a) 54,000
(b) 5,400
(c) 60,000
(d) None of the above
Ans – (d)
Jio Ltd. purchased business of Disney-Hotstar Ltd. for ₹ 58,40,000 to be paid by issue of cheque for ₹ 50,00,000 and balance by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Debentures were issued on 1st September, 2023. Interest payable for the year ended 31st March, 2024 will be
(a) ₹ 44,100
(b) ₹ 36,750
(c) ₹ 35,280
(d) ₹ 40,005
Ans – (b)
Star Ltd. purchased business of Hira Ltd. for ₹ 8,40,000 to be paid by issue of 9% Debentures of ₹ 100 each at a discount of 20%. Number of Debentures that will be issued are
(a) 8,400 Debentures
(b) 7,000 Debenture
(c) 10,500 Debentures
(d) 15,000 Debentures
Ans – (c)
Blackrock Ltd. took over business of Whiterock Ltd. for ₹ 2,00,000. Assets taken over were of ₹ 3,50,000 and liabilities assumed were of ₹ 4,00,000, ₹ 2,50,000 will be
(a) Debited to Goodwill Account
(b) Credited to Capital Reserve Account
(c) Debited to Capital Reserve Account
(d) Credited to Goodwill Account
Ans – (a)
Amrit Ltd. had outstanding 10,000, 7% Debentures of ₹ 100 each as on 31st March, 2024. Out of these, 1,000 debentures are due for redemption on 31st October, 2024. ₹ 1,00,000 will be shown in the Balance Sheet as at 31st March, 2024 as
(a) Current Maturities of Long-term Debts under Other Current Liabilities
(b) Current Maturities of Long-term Debts as Short-term Borrowings
(c) Current Maturities of Long-term Debts as Long-term Borrowings
(d) Current Maturities of Long-term Debts under Other Long-term Liabilities.
Ans – (b)
On 1st April, 2022, Halogen Ltd. issued 4,000, 8% Debentures of ₹ 100 each, to be redeemed in four equal annual instalments beginning from 31st March, 2024. The interest on these debentures was payable half yearly, on 30th September and 31st March every year.
What is the journal entry to close the Interest on Debentures A/c on 31st March, 2025?
(a) Debit Statement of P/L ₹ 32,000; Credit Interest on Debentures A/c ₹ 32,000
(b) Debit Statement of P/L ₹ 16,000; Credit Interest on Debentures A/c ₹ 16,000
(c) Debit Statement of P/L ₹ 24,000; Credit Interest on Debentures A/c ₹ 24,000.
(d) Debit Statement of P/L ₹ 8,000; Credit Interest on Debentures A/c ₹ 8,000.
Ans – (c)
Xylo Ltd. issued 9,000, 7% Debentures of ₹ 100 each at a certain rate of discount. After writing off Discount on issue of Debentures, the company was left with a balance of ₹ 35,000 on its Securities Premium Account out of the original amount of ₹ 71,000. Rate of discount at which the company issued these debentures was
(a) 4%
(b) 5%
(c) 6%
(d) 7%
Ans – (a)
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)
Star Ltd. purchased business of Hira Ltd. for ₹ 8,40,000 to be paid by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Number of Debentures that will be issued are
(a) 8,400 Debentures
(b) 7,000 Debentures
(c) 6,720 Debentures
(d) 7,620 Debentures
Ans – (b)
Subha Ltd. issued 20,000, 9% Debentures of ₹ 100 each at a premium to be redeemed at 10% premium. Loss on issue of Debentures was written off from Statement of Profit & Loss debiting it by ₹ 80,000. Premium at which debentures were issued is
(a) 5%
(b) 6%
(c) 8%
(d) 10%
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 October, 2023, ABC Ltd. issued 2,00,000, 8% Debentures of ₹ 100 each at 10% Discount to be redeemed at 5% premium at the end of 4 years. Balance in Securities Premium Account is ₹ 10,00,000 and Capital Reserve is ₹ 5,00,000. Profit for the year before Finance cost is ₹ 15,00,000. Net profit or Net Loss for the year is ₹ _.
(a) ₹ 5,00,000
(b) Nil
(c) ₹ 8,00,000
(d) ₹ 13,00,000
Ans – (c)
Sky Ltd. took a loan of ₹ 4,00,000 from Next Bank for which the company placed 10% Debentures of ₹ 4,50,000 as collateral security with the bank. It also purchased a machine worth ₹ 2,70,000 and made payment to the vendors by issuing 3,000, 8% Debentures of ₹ 100 each. What will be total amount of Long-term borrowings in the company’s Balance Sheet?
(a) ₹ 7,50,000
(b) ₹ 7,00,000
(c) ₹ 8,50,000
(d) ₹ 11,50,000
Ans – (b)
On 1st April 2024, 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)
Mars Ltd. issued 30,000, 10% Debentures of ₹ 100 each at par on 1st April, 2018. The terms of redemption were: On 31st March, 2021 – 10,000 Debentures, on 31st March, 2022 – 8,000 on 31st March, 2023 – 6,000 and on 31st March, 2024 – balance debentures.
What will be the amount of interest on debentures for the financial year 2022-23?
(a) ₹ 3,00,000
(b) ₹ 2,40,000
(c) ₹ 1,20,000
(d) ₹ 60,000
Ans – (c)
Praxier Ltd. issued ₹ 25,00,000 debentures to the public, of ₹ 100 each. The company appointed Axel as their underwriter for the issue. Commission can be paid to underwriters as per Companies Act 2013, for the purpose of issue of debentures is:
(a) 2.5%
(b) 5%
(c) 7.5%
(d) 10%
Ans – (a)
Those debentures where a charge is created on the assets of the company for the purpose of payment in case of default are known as:
(a) Redeemable Debentures
(b) Registered Debentures
(c) Specific Coupon Rate Debentures
(d) Secured Debentures
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)
The debentures which do not carry a specific rate of interest are called:
(a) Specific Coupon Rate Debentures
(b) Unsecured Debentures
(c) Zero Coupon Rate Debentures
(d) Secured Debentures
Ans – (c)
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)
Which of the following statements is/are True in case of Debentures?
I. The Debenture Holder is entitled to a fixed rate of Intterest.
II. Debenture Holder is entitled to a fixed rate of dividend
III. Debenture Holder is entitled to voting rights
IV. Interest on Debentures is a charge against profits.
V. Interest on Debentures is an appropriation of profits
Choose the most appropriate answer from the options given below:
(a) I only
(b) I and IV Only
(c) IV Only
(d) I and V Only
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)
While issuing _________ type of Debentures, company doesn’t give any undertaking for the repayment of money borrowed by issuing such debentures.
(a) Zero Coupon Rate Debentures
(b) Non-Convertible Debentures
(c) Secured Debentures
(d) Non-Redeemable Debentures
Ans – (d)
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)
Savitri Ltd. issued 50,000, 8% Debentures of ₹ 100 each at certain rate of premium and to be redeemed at 10% premium. At the time of writing off Loss on issue of Debentures, Statement of Profit and Loss was debited with ₹ 2,00,000. At what rate of premium, these debentures were issued?
(a) 10%
(b) 16%
(c) 6%
(d) 4%
Ans – (c)
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)
Durga Ltd. issued 80,000, 10% Debentures of ₹ 100 each at certain rate of discount and were to be redeemed at 20% premium. Existing balance of Securities Premium before issuing of these debentures was ₹ 25,00,000 and after writing off Loss on Issue of Debentures, the balance in Securities Premium was ₹ 5,00,000. At what rate of discount, these debentures were issued?
(a) 10%
(b) 5%
(c) 25%
(d) 15%
Ans – (b)
Which of the following statements 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 principal 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)
Select the correct statement from the following options.
(a) A debenture holder is entitled to receive dividend on his debentures from the company even if the company has incurred losses.
(b) A debenture holder is, entitled to receive interest on his debentures from the company only if the company has made profits.
(c) A debenture holder is entitled to receive interest on his debentures from the company only after dividend has been paid by the company to its shareholders.
(d) A debenture holder is entitled to receive interest on his debentures from the company even if the company has incurred losses.
Ans – (d)
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)
Which of the following statements is incorrect about debentures?
(a) Interest on debentures is an appropriation of profits
(b) Debenture holders are the creditors of a company
(c) Debentures can be issued to vendors at discount
(d) Interest is not paid on Debentures issued as Collateral Security.
Ans – (a)
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 statements is incorrect?
(a) Interest on debentures is a charge and not an appropriation
(b) Debentures can be issued at discount.
(c) Debentureholders do not have voting rights
(d) Debentures cannot be converted into shares
Ans – (d)
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)
Diksha Ltd. issued 4,000, 9% Debentures of ₹ 100 each at a discount of 10%, redeemable at a premium. If the amount of ‘Loss on Issue of Debentures Account’ was ₹ 60,000, then the amount of premium on redemption was:
(a) ₹ 60,000
(b) ₹ 40,000
(c) ₹ 20,000
(d) ₹ 80,000
Ans – (c)
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)
Sujata Ltd. issued 5,000, 7% Debentures of ₹ 100 each at a premium of 10%. According to the terms of issue, 40% of the amount was payable on application and the balance on allotment. The issue was fully subscribed and all amounts were duly received. The amounts received on application and allotment respectively were:
(a) ₹ 2,50,000 and ₹ 3,00,000
(b) ₹ 2,00,000 and ₹ 3,00,000
(c) ₹ 2,00,000 and ₹ 3,50,000
(d) ₹ 2,00,000 and ₹ 2,50,000
Ans – (c)
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 issued:
a) for cash
b) for consideration other than cash
c) As a Collateral Security
d) Any of the above
Ans – d)
Which one of the following can be used by a company to write off any loss on issue of debentures?
(a) Investment Fluctuation Fund
(b) Machinery Replacement Fund
(c) Workmen Compensation Reserve
(d) General Reserve
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)
Orange Ltd. took over assets of ₹ 7,00,000 and liabilities of ₹ 60,000 of Purple Ltd. for a purchase consideration of ₹ 6,30,000 payable by the issue of 10% Debentures of ₹ 100 each at a premium of 10% and if need be, a part of the purchase consideration in cash.
How will the company meet the purchase consideration?
(a) By the issue of ₹ 5,72,727, 10% Debentures at a premium of ₹ 57,272 with no cash.
(b) By the issue of ₹ 5,72,000, 10% Debentures at a premium of ₹ 57,200 and cash of ₹ 800.
(c) By the issue of ₹ 5,72,720, 10% Debentures at a premium of ₹ 57,272 and cash of ₹ 8.
(d) By the issue of ₹ 5,72,700, 10% Debentures at a premium of ₹ 57,270 and cash of ₹ 30.
Ans – (d)
A company issued 5,000, 10% Debentures of ₹ 100 each at a discount of 5%. To write off the capital loss, it has to be use its profits in a certain order.
Choose the correct order in which the profits are used by the company to write off the capital loss:
(i) Statement of Profit & Loss
(ii) Capital Reserve
(iii) Securities Premium
(a) (i), (ii), (iii)
(b) (iii), (i), (ii)
(c) (iii), (ii), (i)
(d) (ii), (i), (iii)
Ans – (c)
Given below is a fictitious scenario. Read the information and answer the question that follows:
Bhim International Ltd., in order to raise additional funds for expansion purpose, took a loan of ₹ 10,00,000 at a rate of 12% per annum from NZ Bank on 1st July, 2023, against which if offered ₹ 15,00,000, 8% Debentures of ₹ 100 each as a collateral security.
Calculate the finance cost to the company for the year 2023-24.
(a) ₹ 1,20,000
(b) ₹ 2,40,000
(c) ₹ 90,000
(d) ₹ 1,80,000
Ans – (c)
