Test: Company Accounts Issue Of Debentures - 2


20 Questions MCQ Test Accountancy Class 12 | Test: Company Accounts Issue Of Debentures - 2


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QUESTION: 1

What is the nature of rent paid to a partner?

Solution:

Rent paid to a partner is an expense for the business. All expenses and losses are considered as Nominal account. Rent paid to partner is a charge against the profit and it will be paid whether there is profit or loss in the business.

QUESTION: 2

Payment of debentures is made before the ________

Solution:

At the time of liquidation the payment to debenture holders is made on the priority bases and then to the shareholders.

QUESTION: 3

A debenture holder has no________

Solution:

In a company only those people are shareholder can vote but debenture holders are not allowed to vote. The simple reason is debenture holders are treated as outsiders and shareholders are treated as insiders.

QUESTION: 4

Debentures are generally secured by __________

Solution:

Debentures are generally secured by a charge on assets. It shows that debentures are not issued for cash or kind but have been issued as a security for the loan obtained.

QUESTION: 5

A company can issue its debentures at _________

Solution:

A company can issue its shares at par, premium and discount. But shares cannot be issued at discount.

QUESTION: 6

Non-Convertible Debentures -----

Solution:

Nonconvertible debentures are those which cannot be converted into shares. These debentures are entitled for interest and can be redeemed normally at the time of maturity.

QUESTION: 7

Debenture holders do not have right for ____

Solution:

Debenture holders do not have dividend right. They can’t claim for dividend because dividend is only for the shareholders. Debenture holders get a fixed interest annually.

QUESTION: 8

The following are the types of debentures except

Solution:

There are different types of debentures except Equity Debentures.
(i) Redeemable Debentures
(ii) Perpetual Debentures
(iii) Convertible Debentures
(iv) Coupon Rate Debentures

QUESTION: 9

Which of the following statement is not correct?

Solution:

Debentures are safe in comparison of shares. Debentures are almost risk free because most of the time they are secured by a charge on the assets of the company.

QUESTION: 10

Match the following types of debentures

Options are

Solution:

(i) Security debentures are those which are secured by a fixed charge.
(ii) Priority Debentures are repaid before the other debentures.
(iii) Convertible debentures are those which can be converted into shares.

QUESTION: 11

Why is premium on the issue of debentures considered as a capital profit

Solution:

Premium on issue of debentures is considered as capital profit because it is not earned by the normal course of business operations. Any profit or gain earned by the company which is not part of the normal operating business is termed as capital profit.

QUESTION: 12

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

Solution:

Sometimes a company issue an instrument on which rate of interest is not pre-determined. Such instruments are called Bond.

QUESTION: 13

Vinod Limited has 5,000, 11% Debentures which are to be redeemed within the 8 Months from the date of previous balance sheet. How will you show these debentures in the balance sheet?

Solution:

When debentures become due for the redemption they are shown under the heading of Current Liabilities and sub heading Other Current Liabilities.

QUESTION: 14

Interest on debentures will be paid to debenture holders _________

Solution:

Interest on debentures is a charge against the profit. It means it will be paid whether the firm is in profit or loss. It will reduce the profit of the firm or it will increase the loss of the firm.

QUESTION: 15

Vinod Limited issued 12%, 1,000 Debentures @ 100 each at a premium of 10%. What will be the first journal entry?

Solution:

Following journal entry will be recorded for the issue of debentures:
Bank A/c Dr.    1,10,000
To Debentures App. & Allot. A/c   1,10,000
Note: In this entry there is no need to show premium separately.

QUESTION: 16

Debentures cannot be issued by_________

Solution:

A sole proprietor firm cannot issue debentures. Only those firms which are registered under the Companies Act, 2013 or before can issue debentures with the permission of SEBI.

QUESTION: 17

Vinod Limited invited applications for 2,000, 11% Debentures @ 100 each. The issue was oversubscribed by 5 times. What is this situation called?

Solution:

When a company receives more applications for the debentures than the actual debentures offered for the subscription, it is known as over subscription.

QUESTION: 18

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

Solution:

When a company reject excess debenture applications received and paid back their money, in such a case bank account should be credited with the amount to be refunded to the applicants.

QUESTION: 19

Vinod Limited invited applications for 2,000, 11% Debentures @ 100 each. The company received application only for 1900 debentures. What is this situation called?

Solution:

When a company receives less applications for the debentures than the actual debentures offered for the subscription, it is known as under subscription.

QUESTION: 20

A debenture of Rs. 100 is issued at Rs. 110.It is an example of

Solution:

When a company issue its debentures at a price more than its actual price, it is known as debentures issued at premium.

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