CBSE Class 12 Accountancy Issue Of Debentures MCQs

Question: Which of the following statements is true?

a) A debenture issued at a discount can be redeemed at a premium

b) A debenture holder is an owner of the company

c) A debenture holder can get his money back only on the liquidation of the company

d) A debenture holder receives interest only in the event of profits

Answer: A debenture issued at a discount can be redeemed at a premium

Question: Which of the following statements is false?

a) Debentures cannot be secured

b) A company can issue convertible debentures

c) A company can issue redeemable debentures

d) Debentures have no right to participate in profits over and above their fixed interest

Answer: Debentures cannot be secured

Question: Perpetual debentures are also known as

a) Irredeemable debentures

b) Secured Debentures

c) Unsecured Debentures

d) None of the options

Answer: Irredeemable debentures

Question: Debenture premium cannot be used to

a) Pay dividends

b) Write off the discount on issue of shares or debentures

c) Write off the premium on redemption of shares or debentures

d) Write off capital loss

Answer: Pay dividends

Question: Loss on issue of debentures is treated as

a) Miscellaneous expenditure

b) Intangible asset

c) Current asset

d) Current liability

Answer: Miscellaneous expenditure

Question: Secured Debentures is known as

a) Mortgage debentures

b) Naked debentures

c) Unsecured Debentures

d) None of the options

Answer: Mortgage debentures

Question: Unsecured Debentures is known as

a) Simple or Naked debentures

b) Mortgage debentures

c) Secured Debentures

d) None of the options

Answer: Simple or Naked debentures

Question: Which of the following is not true about debenture stock:

a) Debenture stock are identified by their distinct number

b) It must be fully paid.

c) Debenture Stock can be transferred in fraction.

d) None of the options

Answer: Debenture stock are identified by their distinct number

Question: Which is an agreement between the company and the trustees to look after the interest of debenture holders.

a) Debenture trust deed

b) Partnership deed

c) Both

d) None of the options

Answer: Debenture trust deed

Question: A company can not issue

a) Debentures with voting rights

b) Share

c) Debentures

d) None of the options

Answer: Debentures with voting rights

Question: Which of the following is not a characteristic of Bearer Debentures?

a) Their transfer requires a deed of transfer

b) They are treated as negotiable instruments

c) They are transferable by mere delivery

d) The interest on it is paid to the holder irrespective of identity

Answer: Their transfer requires a deed of transfer

Question: Which of the following is/are true with respect to debentures?

a) Both

b) They can be issued for cash

c) They can be issued for consideration other than cash

d) None of the options

Answer: Both

Question: When debentures are issued as collateral security, the final entry for recording the transaction in the books is

a) Debit debenture suspense a/c. and credit debentures a/c.

b) Credit debentures a/c. and debit cash a/c.

c) Debit debenture suspense a/c. and credit cash a/c.

d) None of the options

Answer: Debit debenture suspense a/c. and credit debentures a/c.

Question: Which of the following is false with respect to debentures?

a) They can be issued in lieu of dividends

b) They can be issued for cash

c) They can be issued for consideration other than cash

d) They can be issued as collateral security

Answer: They can be issued in lieu of dividends

Question: Which of the following is true with regard to 10% Debentures issued at a discount of 20%

a) The face value and the carrying amount of debentures are equal.

b) The carrying amount of debentures gets reduced each year at a rate of 20%

c) Issue price and the carrying amount of debentures are equal

d) At the time of redemption, the debenture holder will be paid the issue price

Answer: The face value and the carrying amount of debentures are equal.

Question: Which of the following statements is false?

a) The issue price and redemption value of debentures cannot differ.

b) Debenture is a form of public borrowing

c) It is customary to prefix debentures with the agreed rate of interest

d) Debenture interest is a charge against profits

Answer: The issue price and redemption value of debentures cannot differ.

Question: As per the Companies Act, Interest accrued and due on debentures should be shown Under

a) Debentures.

b) Capital

c) Shares

d) None of the options

Answer: Debentures.

Question: Which of the following is false?

a) Interest on debentures is an appropriation of profits.

b) Equity is owners stake and the debenture is a debt

c) Rate of interest on debentures is fixed

d) Debenture holders get preferential treatment over the equity holders at the time of liquidation

Answer: Interest on debentures is an appropriation of profits.

Question: Discount on issue of debentures is a

a) Capital loss to be written off over the tenure of the debentures

b) Revenue loss to be charged in the year of issue

c) Capital loss to be written off from capital reserve

d) Capital loss to be shown as goodwill

Answer: Capital loss to be written off over the tenure of the debentures

Question: 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 the options

Answer: Non current Liabilities

Question: When debentures are issues at discount , the discount should be written off

a) During the life of the debentures

b) In the year of the issue of debentures

c) Within 5 years of the issue of the debentures

d) None of the options

Answer: During the life of the debentures

Question: Debenture holder are

a) The creditors of the company

b) The owners of the company

c) The vendors of the company

d) None of the options

Answer: The creditors of the company

Question: Debenture interest is paid

a) At a pre determined rate

b) At variable rate

c) 25% of Profit

d) None of the options

Answer: At a pre determined rate

Question: At the time of issue of debentures , debenture Account is

a) Credited by the face value of debentures

b) Credited by the Amount received

c) Credited by the issue price of debentures

d) None of the options

Answer: Credited by the face value of debentures

Question: Discount or loss on issue of debentures to be written of within after 12 months from the date of balance sheet or after the period of operating cycle is shown as

a) Other Non current Assets

b) Other Current assets

c) Other Current Liabilities

d) None of the options

Answer: Other Non current Assets

Question: Discount or loss on issue of debentures to be written of within 12 months from the date of balance sheet or within the period of operating cycle is shown as

a) Other Current assets

b) Other Non current Assets

c) Other Current Liabilities

d) None of the options

Answer: Other Current assets

Question: Debenture is a

a) Long term Loan

b) Short term loan

c) Dividend

d) None of the options

Answer: Long term Loan

Question: Which does not have possess the voting right

a) Debenture Holder

b) Share Holder

c) Both

d) None of the options

Answer: Debenture Holder

Question: A written promise for a debt by a company under its seal which contains the terms and conditions regarding the amount of loan

a) Debenture

b) Share

c) Capital

d) None of the options

Answer: Debenture

Question: Debenture holders are entitled the right to receive

a) Interest

b) Dividend

c) Both

d) None of the options

Answer: Interest

Question: 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

Answer: D

Question: 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

Answer: A

Question: Debentures issued as collateral security will be debited to :

a) Bank Account

b) Debentures Suspense Account

c) Debentures Account

d) Bank Loan Account

Answer: B

Question: 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

Answer: C

Question: 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 cannot differ.

Answer: D

Question: 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.

Answer: B

Question: 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

Answer: B

Question: Premium on Redemption of Debentures Account is :

a) Personal Account

b) Real Account

c) Nominal Account

d) All of the Above

Answer: A

Question: X Ltd. acquired assets of Rs.20 lakhs and took over creditors of Rs.20 thousand from LLtd. XLtd. issued 8% debentures of Rs.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

Answer: A

Question: Globe Ltd. issues 20,000, 9% debentures of Rs. 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) Rs. 1,00,000

b) Rs. 1,20,000

c) Rs.2,80,000

d) Rs.2,20,000

Answer: D

Question: Issued 5,000, 12% debentures of Rs. 100 each at a discount of 2%, redeemable at a premium of 5%. In such case :

a) Loss on Issue will be Credited by Rs. 10,000.

b) Loss on Issue will be debited by Rs.35,000.

c) Premium on Redemption will be debited by Rs.25,000.

d) Premium on Redemption will be credited by Rs.35,000.

Answer: B

Question: Issued 4,000, 12% debentures of Rs. 100 each at a premium of 4%, redeemable at a premium of 10%. In such case :

a) Loss on Issue will be debited by Rs.24,000

b) Loss on Issue will be debited by Rs.56,000

c) Loss on Issue will be debited by Rs.40,000

d) Premium on Redemption will be credited by Rs.24,000

Answer: C

Question: 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.

Answer: B

Question: Interest on Debentures is paid on

a) Amount received on Issue.

b) Nominal (Face) Value.

c) On Premium.

d) None of these.

Answer: B

Question: 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.

Answer: C

Question: Which of the following statements is false?

a) At maturity, debenture holders 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.

Answer: B

Question: 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.

Answer: B

Question: The Principal amount of debentures will be repaid by the company either at the end of a specified period or by instalments 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

Answer: A

Question: If Vendors are issued debentures of Rs.4,40,000 in consideration of assets of Rs. 5,00,000 and liabilities of Rs. 1,00,000, the balance of Rs.40,000 will be debited to:

a) General Reserve Account

b) Capital Reserve Account

c) Goodwill Account

d) Statement of Profit & Loss

Answer: C

Question: A Ltd. issued 1,000, 10% debentures of Rs. 100 each at a premium of 5%. What will be the total amount of interest for one year :

a) Rs. 10,500

b) Rs. 10,000

c) Rs. 5,250

d) Rs. 5,000

Answer: B

Question: Discount on issue of debentures account is a

• a) Fictitious Asset
• b) Current Asset
• c) Fixed Asset
• d) Current liability

Answer: Fictitious Asset

Question: Securities Premium received on debentures is a

• a) Capital Profit
• b) Current Asset
• c) Capital Loss
• d) None of the options

Answer: Capital Profit

Question: Shareholders get dividend, Debenture holders will get

• a) Interest
• b) Shares
• c) Bonus
• d) Profit

Answer: Interest

Question: Debenture is acknowledgment of debt and a contract for the repayment of principal amount with

• a) Interest
• b) Premium
• c) Dividend
• d) None of the options

Answer: Interest

Question: debentures can be issued under the ________ of company

• a) Common seal
• b) Rules & Principles
• c) Companies Act
• d) None of the options

Answer: Common seal

Question: A debenture is

• a) An external equity
• b) Owners equity
• c) An internal equity
• d) Payment of Profit

Answer: An external equity

Question: At the time of liquidation the payment to debenture holders is made on the priority bases before the

• a) Payment of Share Capital
• b) Payment of Dividend
• c) Payment of Profit
• d) Payment of Profit

Answer: Payment of Share Capital

Question: A Company can issue its debentures a

• a) All of the options
• b) At Par
• c) At Premium
• d) At Discount

Answer: All of the options

Question: Non-Convertible Debentures

• a) Cannot be converted into shares
• b) Cannot be redeemed
• c) Cannot not be issued
• d) None of the options

Answer: Cannot be converted into shares

Question: Debenture holders do not have right for

• a) All of the options
• b) Dividend
• c) Profit
• d) Voting Right

Answer: All of the options 

Question: When a company issue its debentures at discount, the amount of discount is considered as a:

• a) Capital loss
• b) Normal Loss
• c) Capital gain
• d) Reserve & Surplus

Answer: Capital loss

Question: Debenture forms part of

• a) Loan
• b) Capital
• c) Fund
• d) None of the options

Answer: Loan

Question: Is payable even if there are no profits

• a) Interest.
• b) Dividend
• c) Commission
• d) Secured

Answer: Interest.

Question: Debentures payable to a holder of certificate is called

• a) Bearer.
• b) Unregistered
• c) Secured
• d) None of the options

Answer: Bearer.

Question: Debentures payable to person whose name appears both on Debenture Certificate and companys register is called

• a) Registered.
• b) Unregistered
• c) Bearer
• d) None of the options

Answer: Registered.

Question: Debentures which have the charge on the property of the company is

• a) Secured.
• b) Unsecured
• c) Registered
• d) None of the options

Answer: Secured.

Question: Debenture which are repayable only on the happening of an event of winding up is called

• a) Both
• b) Irredeemable
• c) Perpetual
• d) None of the options

Answer: Both

Question: Types of debentures on the basis of security

• a) Both
• b) Secured debentures
• c) Unsecured debentures
• d) None of the options

Answer: Both

Question: Types of debentures on the basis of redemption

• a) Both
• b) Redeemable
• c) Non-Redeemable
• d) None of the options

Answer: Both

Question: Types of debentures on the basis of records

• a) Both
• b) Registered debentures
• c) Bearer debentures
• d) None of the options

Answer: Both

Question: This is not different types of debentures

• a) Equity Debentures
• b) Redeemable Debentures
• c) Perpetual Debentures
• d) Coupon Rate Debentures

Answer: Equity Debentures

Question: Premium on issue of debentures is considered as

• a) Capital profit
• b) Average Profit
• c) Reserve Capital
• d) Light Discount bond

Answer: Capital profit

Question: When an instrument is issued without interest rate and issue price is thereby discounted, the issue of such instrument is called ----

• a) Deep Discount Bond
• b) Fixed coupon Bond
• c) Light Discount bond
• d) None of the options

Answer: Deep Discount Bond

Question: Interest on debentures will be paid to debenture holders

• a) Whether there is profit or loss
• b) When there is profit
• c) When there is capital reserve
• d) None of the options

Answer: Whether there is profit or loss

Question : Shubham Limited invited applications for 5,000, 11% Debentures @ 100 each. The issue was oversubscribed by 5 times. What is this situation called?

• a) Over Subscription
• b) Full Subscription
• c) Under Subscription
• d) Pro-rata Allotment

Answer: Over Subscription

Question: While passing the entry for refund of money if the applications are rejected. Which account should be credited

• a) Bank A/c
• b) Debenture Application A/c
• c) Debenture Allotment A/c
• d) None of the options

Answer: Bank A/c

Question: A debenture of Rs. 100 is issued at Rs. 105.It is an example of

• a) Debenture issued at premium
• b) Debenture issued at par
• c) Debenture issued at discount
• d) None of the options

Answer: Debenture issued at premium

Question: When a company purchases some assets and issues debentures as a payment for the purchase, to the vendors it is known as issue of

• a) Debentures issued for consideration other than cash
• b) Debentures issued for cash
• c) Debentures issued as collateral security
• d) None of the options

Answer: Debentures issued for consideration other than cash

Question: Name the security which is issued in addition to the principal security

• a) Collateral security
• b) Principal security
• c) Security Premium

Answer: Collateral security

Question: When does a company issue debentures as collateral security

• a) When lender demands additional security
• b) When lender gives additional security
• c) When lender does not gives additional security
• d) When lender does not demands additional security

Answer: When lender demands additional security

Question: Apple Computers Ltd. issued 10,000,7% Debentures of Rs. 100 each at a discount of Rs. 6 on 1st October, 2019. Interest for the year ended 31 st March, 2020 will be

a) Rs. 65,800.

b) Rs. 32,900.

c) Rs. 70,000.

d) Rs. 35,000.

Answer: D

Question: William Pens Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of Rs. 4. It has a balance in Securities Premium Reserve of Rs. 25,000. It will write off Discount on Issue of Debentures

a) Rs. 40,000 from Securities Premium Reserve.

b) Rs. 40,000 from Statement of Profit and Loss.

c) Rs. 25,000 from Securities Premium Reserve and Rs. 15,000 from Statement of Profit and Loss (Finance Cost).

d) Rs. 15,000 from Securities Premium Reserve and Rs. 25,000 from Statement of Profit and Loss (Finance Cost).

Answer: C

Question: Premium received on issue of debentures may be utilised for

a) For writing off discount allowed on issue of shares

b) For writing off premium allowed on redemption of debentures

c) For writing off preliminary expenses

d) For All of the Above

Answer: D

Question: ‘A’ Limited purchased the assets from ‘B’ Limited for Rs.5,40,000. ‘A’ Limited issued 10% debentures of Rs. 100 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

Answer: D

Question: ‘A’ Limited purchased the assets from ‘B’ Limited for Rs.5,40,000. ‘A’ Limited issued 10% debentures of Rs. 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

Answer: A

Question: Discount on Issue of Debentures is restricted to

a) 10%.

b) 20%.

c) 25%.

d) None of these.

Answer: D

Question: Electronics Ltd. issued 10,000, 6% Debentures of Rs. 100 each at a premium of Rs. 10. It will credit 6% Debentures Account by

a) Rs. 11,00,000.

b) Rs. 10,00,000.

c) Rs. 9,00,000.

d) Rs. 8,00,000.

Answer: B

Question: HP Ltd. issued 5,000,8% Debentures of Rs. 100 each at Rs. 95. It will credit 8% Debentures Account by

a) Rs. 5,00,000.

b) Rs. 4,75,000.

c) Either a) or b) as it decides.

d) Rs. 5,25,000.

Answer: A

Question: Interest payable on debentures is :

a) an appropriation of profits of the company

b) a charge against profits of the company

c) transferred to sinking fund investment account

d) transferred to general reserve

Answer: B

Question: 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

Answer: D

Question: Discount or Loss on Issue of Debentures is written off from

a) Securities Premium Reserve.

b) Securities Premium Reserve (if it exists) and thereafter from Statement of Profit and Loss.

c) Statement of Profit and Loss.

d) General Reserve.

Answer: B

Question: Debenture interest is paid

a) at a predetermined rate.

b) at variable rate.

c) at a rate based on net profit of the company.

d) at a rate as determined by the company from time to time.

Answer: A

Question: 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.

Answer: C

Question: X Ltd. purchased building of Y Ltd. for Rs. 4,00,000. The consideration was paid by issue of 10% Debentures of Rs. 100 each at a discount of Rs. 20.10% Debentures Account is credited with

a) Rs. 5,20,000.

b) Rs. 5,00,000.

c) Rs. 4,80,000.

d) Rs. 3,20,000.

Answer: B