CBSE Class 12 Accountancy Redemption Of Debentures MCQs

Question: Types of debentures on the basis of priority

a) Both

b) First debentures

c) Second debenture

d) None of the options

Answer: A

Question: Which debentures are issued with a specific rate of interest

a) Coupon rate debentures

b) First debentures

c) Second debenture

d) None of the options

Answer: A

Question: Debentures can be issued at par at premium or discount but redemption only

a) Both

b) Redeemable at par

c) Redeemable at premium

d) None of the options

Answer: A

Question: Debentures account is always credited with the

a) Nominal value

b) Premium Value

c) Discount value

d) None of the options

Answer: A

Question: Redemption of debentures means

a) Repayment of the due amount of debentures to the debenture holders

b) Repayment of the due amount of debentures to the Share holders

c) Repayment of the due amount of debentures to the Employees

d) None of the options

Answer: A

Question: When repayment is made at the date of maturity called

a) Maturity Date

b) Maturity Profit

c) Maturity Capital

d) None of the options

Answer: A

Question: Profit on sale of debenture redemption fund investments in the first instance is credited to :

a) Debenture redemption fund account

b) Profit and loss appropriation account,

c) General reserve account

d) None of the options

Answer:A

Question: When debentures are redeemed out of profits, an equal amount is transferred to

a) Debenture redemption reserve

b) General reserve

c) Capital reserve.

d) None of the options

Answer: A

Question: Profit on cancellation of own debentures is transferred to :

a) Capital reserve.

b) General reserve

c) Debenture redemption reserve

d) None of the options

Answer: A

Question: Own debentures are those debentures of the company which:

a) The company purchases from the market and keeps them as investments.

b) The company allots to its own promoters,

c) The company allots to its Director,

d) None of the options

Answer: A

Question: Which of the following statements are false if debentures redeemed out of capital:

a) DRR is not created if debentures are redeemed out of capital

b) Nominal value of debentures redeemed is not transferred to DRR or General Reserve.

c) Debentures account is debited and bank account is credited

Answer: A

Question: Debentures can be redeemed out of

a) All of the options

b) Profits

c) Capital

d) Provisions made for redemption

Answer: A

Question: Which of the following is not true about Debenture redemption reserve(DRR)

a) DRR is required in case of Fully convertible debenture.

b) DDR created @ 50% of the amount of debentures issued before commencement of redemption

c) Withdrawal from DRR can be made only after 10% of debenture liability has been redeemed.

d) None of the options

Answer: A

Question: Premium on redemption of debentures account is

a) A nominal account - expenditure

b) A real account

c) A personal account

d) A nominal account - income

Answer: A

Question: Vinod Limited has to redeem its debentures worth Rs.80,000 by paying a lump sum amount to the debenture holders. How much DRR company should create?

a) Rs. 20000

b) Rs. 30000

c) Rs. 25000

d) None of the options

Answer: A

Question: Why does a company purchase its own debentures from the open market?

a) For Cancellation OR Investment

b) For Raising Finance

c) For Investment only

d) None of the options

Answer: A

Question: In Which account the balance of DRR is transferred after the redemption of debentures?

a) General Reserve

b) Debenture Redemption Reserve

c) Capital Reserve

d) Securities Premium Reserves

Answer: A

Question: Debentures which are not repayable during the lifetime of the company are called ..

a) Perpetual or Irredeemable Debentures

b) Convertible Debentures

c) Redeemable Debentures

d) Non-convertible Debentures

Answer: A

Question: Creation of DRR is compulsory in case of

a) Non-Convertible Debentures

b) Convertible Debentures

c) Banking Companies

d) None of the options

Answer: A

Question: What journal entry will take place when a company purchases its own debentures from the open mark

a) Own Debentures A/c Dr. To Bank A/c

b) Bank A/c Dr. To Debentures A/c

c) Own Debentures A/c Dr. To Debenture A/c

d) Bank A/c Dr. To Debenture Application A/c

Answer: OA

Question: A Debenture of a company represents

a) Debt

b) Capital

c) Shareholders Fund

d) Assets

Answer: A

Question: Which of the following is not a Personal Account?

a) Assets Account

b) Debenture Account

c) Debenture Application A/c

d) Debenture Allotment A/c

Answer: A

Question: Advantage of Redemption by purchase in open market

a) Both

b) Decrease the amount of interest payable to outsiders

c) When market price of own debentures is low than the redeemable value.

d) None of the options

Answer: A

Question: Sometimes company can purchase the debentures at more than the redeemable value due to the following reasons :

a) All of the options

b) To maintain the solvency ratio.

c) To utilize the surplus money or funds which are lying idle with the company

d) When rate of interest on debentures is more than the current market rate of interest on debentures in the industry

Answer: A

Question: Sources of Redemption of debentures

a) All of the options

b) Proceeds from fresh issue of share capital or debenture holders.

c) From accumulated profits

d) Proceeds from sale of fixed assets.

Answer: A

Question: when a company not used its reserve or accumulated profit for redemption of its debentures. It is called

a) Redemption out of capital

b) Redemption by conversion

c) Redemption out of profit

d) None of the options

Answer: A

Question: Which is a reserve representing retentions out of profit made for the purpose of redemption of debentures

a) Debenture Redemption Reserve

b) Capital reserve

c) General reserve

d) None of the options

Answer: A

Question: Exception to the creation of DRR

a) All of the options

b) All infrastructure companies

c) Debentures issued by Banking Companies

d) Companies issuing privately placed debentures

Answer: A

Question: Premium payable on redemption of debentures is in nature of

a) Personal Account

b) Real Account

c) Current Account

d) None of the options

Answer: A

Question: In case debentures of Rs. 10000 are issued at par but redeemable at a premium of 10% the premium payable is debited to

a) Loss on issue of debentures A/c

b) Debentures Suspense Account

c) Both

d) None of the options

Answer: A