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Commerce Exam  >  Commerce Notes  >  Accountancy Class 12  >  Important Questions - Issue of Debentures (Accounting for Partnership Firms and Companies)

Important Questions - Issue of Debentures (Accounting for Partnership Firms and Companies) | Accountancy Class 12 - Commerce PDF Download

Chapter - Issue of Debentures

Important Questions

Q1. ABC Ltd. Purchased for cancellation its own 5,000, 9% Debentures of100 each for 95 per debenture. The brokerage charges15,000 were incurred. Calculate the amount to be transferred to capital reserve. 

(1)

Q2. Where is the debenture redemption reserve is shown in the balance sheet? 

(1)

Q3. Rule 18 (7) of Companies (Share Capital and Debentures) Rules, 2014 exempts the following types of Companies from creating DRR__________________ & ____________________. 

(6)

Q4. Explain with an imaginary example how issue of debenture as collateral security is shown in the balance sheet of a company when it is recorded in the books of accounts . 

(3)

Q5. King Ltd took over Assets of 25,00,000 and liabilities of 6,00,000 of Queen Ltd. King Ltd paid the purchase consideration by issuing 10,000 debentures of 100 each at a premium of 10% and 11,00,000 by Bank Draft. Pass necessary journal entries. 

(3)

Q6. Thandak Refrigerators Limited purchased for cancellation its own 5,000; 6% Debentures of Rs.200 each at Rs. 190 per debenture. It also purchased another lot of 600, 6% debentures of the same series at Rs.186 per debenture expenses on the purchase incurred amounted to Rs.1000. Pass the necessary Journal entries. 

(3)

Q7. Ruchi Ltd issued 42,000, 7% Debentures of 100 each on 1st April, 2011, redeemable at a premium of 8% on 31st March 2015. The Company decided to create required Debenture Redemption Reserve on 31st March 2014. The company invested the funds as required by law in a fixed deposit with State Bank of India on 1st April, 2014 earning interest @10% per annum. Tax was deducted at source by
 the bank on interest @10% per annum. Pass necessary Journal Entries regarding issue and redemption of debentures. 

(4)

Q8. X Ltd. redeemed Rs.20,00,000, 6% debentures at a premium of 5% out of profits on 31-3-2015. The company had a Debenture Redemption Reserve of Rs.2,50,000. Assuming that the Company has the required balance in Debenture Redemption Investment Account, pass necessary journal entries for the redemption of debentures.

(4)

Q9. X ltd. issued 6,000, 12% debentures of Rs.200 each on April 01, 2010 at a discount of 15% redeemable at a premium of 20%. Give journal entries relating to the issue of debentures and debentures interest for the period ending March 31, 2011 assuming that interest is paid half yearly on September 30 and March 31 and tax deducted at source is 20%. Pass necessary journal entries

(4)

Q10. X ltd. Purchased assets of Rs.6,00,000 and liabilities of Rs.1,00,000 at an agreed value of Rs.5,50,000 on 30/6/2011 from Y ltd. The company issued 6% debentures of Rs.100 each at a premium of 10% to redeemed on 30/6/15 at a premium of 5%. Pass necessary journal entries for the redemption of debentures 

(6)

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FAQs on Important Questions - Issue of Debentures (Accounting for Partnership Firms and Companies) - Accountancy Class 12 - Commerce

1. What are debentures?
Ans. Debentures are long-term debt instruments issued by companies and government organizations to raise funds from the public. These instruments carry a fixed rate of interest, which is paid to the debenture holders at regular intervals. Debentures are usually secured against the company's assets and are redeemable after a specific period, as mentioned in the debenture agreement.
2. How are debentures issued by companies?
Ans. Companies can issue debentures in two ways - through a public issue or a private placement. In a public issue, the company offers debentures to the public through a prospectus, and anyone can subscribe to it. In a private placement, the company offers debentures to a select group of investors, such as banks, financial institutions, and high-net-worth individuals.
3. What is the accounting treatment for the issue of debentures?
Ans. The issue of debentures by a company is recorded in its books of accounts through the following journal entry: Debenture A/c Dr. To Bank A/c The amount received from the issue of debentures is credited to the Bank account, and the debenture account is debited. The company also needs to record the interest paid on the debentures in its books of accounts.
4. What are the types of debentures issued by companies?
Ans. Companies can issue various types of debentures, such as convertible debentures, non-convertible debentures, secured debentures, unsecured debentures, and redeemable debentures. Convertible debentures can be converted into equity shares at a later stage, while non-convertible debentures cannot be converted into equity shares. Secured debentures are backed by the company's assets, while unsecured debentures are not secured against any assets. Redeemable debentures are redeemed by the company after a specific period, while irredeemable debentures are not redeemed by the company.
5. What is the role of a debenture trustee?
Ans. A debenture trustee is an independent entity appointed by a company to protect the interests of the debenture holders. The trustee ensures that the company complies with the debenture agreement terms and conditions, such as timely payment of interest and principal amount. The trustee also monitors the company's financial performance and takes necessary action on behalf of the debenture holders, such as filing a legal case against the company in case of default.
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