Refer to MCQs for Accountancy Class 12 with Answers Chapter 2 Issue and Redemption of Debentures designed as per the latest syllabus issued by CBSE. All Multiple choice questions have been provided with solutions and have been prepared based on the expected pattern in upcoming board exams

Question. If debentures of Rs 50,000 are issued at par but redeemable at a premium of 10%. By what principle of accounting, the loss on issue of debentures account will be debited with ` 5,000 while passing the issue entry ?
(a) Principle of Revenue recognition
(b) Principle of Materiality
(c) Principle of Conservatism/Prudence
(d) Principle of Full Disclosure.

Question: Perpetual debentures are also known as
a) Irredeemable debentures
b) Secured Debentures
c) Unsecured Debentures
d) None of the options

Question. Debentures which are transferable by mere delivery are
a. registered debentures
b. first debentures
c. bearer debentures
d. second debentures.

Question. X Ltd. has issued 10,000 6% debentures of 100 each. The company decide to redeem half of its debentures at 10% premium. Therewas a balance of3,40,000 in Debenture redemption reserve. As per SEBI guidelines what amount still need to be transferred to Debenture redemption reserve account out of profits.
(a) Rs6,60,000
(b) Rs1,60,000
(c) Rs 5,50,000
(d) Rs 2,75,000

Question Loss on issue of debentures is recorded as :
(a) Intangible Asset
(b) Current Asset
(c) Current Liability
(d) Miscellaneous Expenditure

Question. Madhu Ltd. decides to redeem 1,000, 10% Debentures of ₹100 each redeemable at 10% Premium. The Company will have to invest in specified securities at least :
(a) ₹15,000
(b) ₹16,500
(c) ₹25,000
(d) ₹27,500 

Question. The rules regarding transfer of DRR to general reserve is mentioned in
a.Companies Ac 2013
b.Rule 18(7)(c) of Companies Rule 2014
c.Section 71(4) of Companies (Share Capital and Debentures) Rules,2014
d. All of the above.

Question. When debentures are issued at par and redeemable and premium the loss on such an issue is debited to:
a. profit and loss account
b. debenture application and allotment account
c. loss on issue of debentures account
d. discount on issue of debentures account.

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

Question. Alfa Ltd. issued 20,000, 8% debentures of Rs 10 each at par. The debentures are redeemable at a premium of 20% after 5 years. The amount of loss on redemption of debentures should be:
(a) Rs 50,000
(b) Rs 40,000
(c) Rs 30,000
(d) Rs 16,000

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

Question. Debenture redemption reserve is created
a.before redemption starts
b.at the closure of previos accounting year
c.before 30th April of the current year
d.all the above.

Question. Excess value of net assets over purchase consideration at the time of purchase of business is credited to:
a. General reserve
b. Capital reserve
c. Vendor’s account
d. Goodwill account.

Question Which of the following statements is true?
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 receives interest only in the event of profits

Question. Premium on redemption of debentures is a
(a) Liability account
(b) Asset Account
(c) Expense Account
(d) None of these.

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

Question. When debentures are issued at discount and redeemable at a premium which one of the following account is debited at the time of issue ?
a. debentures account
b. premium on redemption of debentures account
c. loss on issue of debentures account
d. none of these.

Question. Gaurav Ltd. purchased machinery costing Rs 1,71,000. It was agreed that the purchase consideration be paid by issuing 12% debentures of Rs 100 each. Assume debentures have been issued at a discount of 10%. No. of debentures issued to vendor are:
(a) 1500
(b) 1900
(c) 2000
(d) 2100

Question: Convertible debentures can be
a) Both
b) Partly Convertible Debentures
c) Fully convertible Debentures
d) None of the options

Question Which of the following is not true about debenture stock:
a. It must be fully paid.
b. Debenture Stock can be transferred in fraction.
c. Debenture stock are identified by their distinct number

Question. ABC took over the assets of Rs7,60,000 and liabilities of Rs80,000 of Y limited for purchase consideration of Rs5,85,000 payable by the issue of 12% debentures of Rs100 each at a discount of 10%. The number of debentures to be issued is:
a. 6600
b. 6500
c. 4500
d. 5400 

Question. In case the question is silent, DRR is created on the nominal value of outstanding redeemable debentures to the extent of
a.25%
b.15%
c.more than 25%
d.any of the above

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

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

Question. XYZ limited issued 4000,12% debentures of Rs100 each at a premium of 5% .the total amount of interest for one year will be:
a. 48,000
b. 58,000
c. 50,000
d. 50,400.

Question. Debentures cannot be redeemed at
a. Premium
b. Discount
c more than 10% premium
d.at Par

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

Question: The amount of debenture is returned to the holders at the end of
a) Predetermined maturity period
b) Company
c) Current Year
d) None of the options

Question. If debentures are issued at par and redeemed at a premium then which account will be debited by the amount of premium on debentures.
a. Discount on issue of debentures
c. Premium on redemption of debentures
c. Profit and loss account
d. Loss on issue of debentures

Question. ABC limited issues 10,000 9% debentures of 100 each at a premium of 5% payable at a premium of 10%, the loss on issue of debentures account will be debited to by:
a. Rs10,00,000
b. Rs1,00,000
c. Rs10,50,000
d. Rs1,05,000

Question: When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to :
(a) Capital Reserve
(b) General Reserve
(c) Statement of P & L
(d) None of these 

Question: When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to
a) None of the options
b) Capital reserve
c) Capital reserve
d) General reserve

Question. Premium received on issue of debentures may be utilised for writing off:
a. premium allowed on redemption of debentures
b. writing off preliminary expenses
c. writing off discount allowed on issue of shares
d. all of the above.

Question. The provisions of the Companies Act 2013 in respect of redemption of debentures are to protect the interest of
a)Debetureholders
b)Creditors
c)Shareholdres
d)Bankers

Question. When all debentures are redeemed, balance in the Debenture Redemption Fund Account is transferred to:
(a) Capital Reserve
(b) General Reserve
(c) Profit & Loss Appropriation A/c
(d) None of these

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

Question. Best Company Ltd decides to redeem 10000 ,10% debentures of Rs 100 each on 30th June 2018.The Company shall invest in specified securities on or before
a. 30th April 2017
b. 30th April 2016
c. 30th June 2017
d. 30th April 2018

Question. A company can issue debentures
a. for cash
b. as a collateral security
c. for consideration other than cash
d. any of the above.

Question: Interest on Debentures is paid on
(a) Amount received on Issue.
(b) Nominal (Face) Value.
(c) On Premium.
(d) None of these.

Question. Amount is set aside to Debenture redemption reserve (DRR) by
a. All the Companies
b. All companies except banking companies
c. All Companies except All India Financial Institutions
d. All Companies except Banking Company and all India Financial Institutions regulated by RBI.

Question Debenture interest is paid as :
(a) based on the net profit of company
(b) at a predetermined rate
(c) at variable rate
(d) None of these 

Question. What is the nature of premium on redemption of debenture account
a. Real account
b. nominal account
c. personal account
d. none of the above.

Question: Premium on redemption of debentures is a :
(a) Personal A/c
(b) Real A/c
(c) Nominal A/c
(d) Suspense A/c

Question. Amount is not set aside to Debenture redemption reserve if
a. The debentures are not convertible
b. The debentures are partly convertible
c. The debentures are fully convertible.
d None of these.

Question: Loss on issue of debenture is written off each year in proportion to amount of debenture which reduces with every instalment paid, Called
a) Proportion Method
b) Equal instalment method
c) Both
d) None of the options

Question: Debenture premium can be used to :
(a) Write off the discount on issue of shares or debentures
(b) Write off the premium on redemption of shares or debentures
(c) Write off capital loss
(d) All of the above

Question.Premium payable on redemption of debentures is in the nature of
a. Liability Account
b. Asset Account
c. Expense Account
d. None of these.

Question. When the number of debentures applied is less than number of debentures offered to public the issue is said to be :
a. oversubscribed
b. under subscribe
c. Fully subscribed
d. none of the above.

Question. When debentures are redeemed out of profits, an equal amount is transferred to :
(a) General Reserve
(b) Debenture Redemption Reserve
(c) Capital Reserve
(d) None of these 

Question: Premium on Redemption of Debentures Account is
a) Personal Account
b) Real Account
c) Capital A/c
d) None of the options

Question. Once the debentures are redeemed, amount of debenture redemption reserve is transferred to
a. Capital Reserve
b. Balance in Profit and loss account
c. General Reserve
d. Capital Redemption reserve

Question. Maximum limit on premium on issue of debentures is
a. 10%
b. 20%
c. 15%
d. no limit.

Question. Which of the following statement is Correct?
(a) A debentureholder is an owner of the company.
(b) A debentureholder 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 debentureholder receives interest only in the event of profits.

Question: Premium on redemption of debentures account is _.
a. A real account
b. A nominal account – income
c. A personal account
d. A nominal account – expenditure

Question. G Limited has outstanding 10000 8% debentures of Rs 100 each that are redeemable at a premium of Rs 10.Out of these 5000 debentures are to be redeemed on 31st December 2018 Debenture redemption Investment should be
a.75,000
b.82,500
c.1,50,000
d.1,65,000

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 these 

Question. Debentures that do not carry any charge or security on assets of the company are known as:
a. secured debentures
b. unsecured debentures
c. convertible debentures
d. registered debentures.

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.

Question Loss on Issue of Debenture Account is shown:
(a) On Assets side of Balance Sheet
(b) On Liabilities side of Balance Sheet
(c) On Credit side of P & L Account
(d) None of these

Question. Debenture is:
a. written instrument acknowledging a debt written by its holder.
b. An oral acknowledgement of debt by a company
c. A written instrument acknowledging a debt written by its company
d. None of these.

Question. Global savings Bank is to redeem 40000 10% debentures of Rs 100 each on 31st December 2018.How much amount should it invest in specified securities?
a.6,00,000
b.10,00,000
c. 5,00,000
d. Nil

Question. Sunrise Ltd purchased a building for Rs.5,00,000 payable as 15% in cash and balance by allotment of 9% debentures of Rs. 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

Question: Debenture holders are :
(a) Owners of the Company
(b) Lenders of the Company
(c) Vendors of the Company
(d) Customers of the Company 

Question. Interest on debenture is calculated on:
a. its face value
b. its issue price
c. its book value
d. its cost price.

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 these.

Question. H Limited has outstanding 10,000 , 8% debentures of Rs 100 each that are redeemable at a premium of Rs 10 each. Out of these 5000 debentures are to be redeemed on 31st December 2018.Denture redemption investment should be
a.75,000
b. 82,500
c. 1,50,000
d.1,65,000

Question: 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 cannot be issued as collateral security.
(d) They can be issued partly on credit and partly in cash.

Question. Debentures issued as collateral security will be______ to debenture suspense account:
a. debited
b. credited
c. sometimes debited and sometimes credited
d. none of these.

Question: When debentures are redeemed out of profits, an equivalent amount is transferred to :
(a) General Reserve
(b) Debenture Redemption Reserve
(c) Capital Reserve
(d) Profit & Loss A/c

Question. Amount is not invested in debenture redemption Investment if
a. Debentures are not convertible
b. The debentures are partly convertible
c. The debentures are fully convertible
d. None of the above.

Question: Premium on Redemption of Debentures Account is a __ Account.
(a) Real Account
(b) Nominal Account
(c) Personal Account
(d) None of these 

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

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.

Question. Collateral security means ___________security:
a. primary
b. secondary
c. government
d. valuable

Question. At the time of issue of Debentures, Debentures Account is :
(a) Credited by the amount received
(b) Credited by issues price of debentures
(c) Credited by the nominal (face) value of the debentures
(d) None of these 

Question: A Sinking Fund is a part of:
(a) Fixed Liabilities
(b) Current Liabilities
(c) Reserves and Surplus
(d) Fixed Assets

Question. 10% debenture issued at Rs105 is repayable at Rs110, the face value of debenture being Rs100. Calculate the amount of loss on redemption of debentures:
a. 10
b. 5
c. 15
d. 25

Question: Interest on Debentures is _ against profit.
(a) Charge
(b) Appropriation
(c) Provision
(d) None of these 

Question: Non-Convertible Debentures
a) Cannot be converted into shares
b) Cannot be redeemed
c) Cannot not be issued
d) None of the options

Question. A ltd took over the assets of Rs6,60,000 and liabilities of Rs80,000 of B Ltd for an agreed purchase consideration of Rs6,00,000 payable 10% in cash and the balance by issue of 15% debentures of Rs100 each at 10% discount. The number of debentures to be issued is:
a. 6600
b. 5400
c. 6000
d. 4500

Question: Debentures payable to a holder of certificate is called
a) Bearer.
b) Unregistered
c) Secured
d) None of the options

Q. 4. The loss on issue of Debentures is written off from :
(a) Capital Reserve
(b) Secret Reserve
(c) Reserve Capital
(d) Share Premium Reserve Account 

Question: Debenture holders are the :
(a) Customers of the Company
(b) Owners of the Company
(c) Creditors of the Company
(d) None of these

Question. Debenture interest:
a. is payable only in case of profits
b. accumulates in case of losses are inadequate profits
c. is payable irrespective of profit or loss
d. none of the above.

Question: Types of debentures on the basis of records
a) Both
b) Registered debentures
c) Bearer debentures
d) None of the options

Question: Mayank Ltd. is to redeem 10,000, 10% Debentures of ₹100 each on 30th June, 2016. How much amount should be transferred to DDR by it :
(a) ₹2,50,000
(b) ₹1,00,000
(c) ₹5,00,000
(d) Nil 

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).

Question: Discount on issue of Debentures is in the nature of:
(a) Revenue Loss
(b) Capital Loss
(c) Deferred Revenue Expenditure
(d) None of there

Question: Premium Payable on redemption of debentures is in the nature of :
(a) Liability Account
(b) Asset Account
(c) Expenses Account
(d) None of these 

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

Question: Himanshu Ltd. is to redeem 40,000, 10% Debentures of ₹10 each on 31st Dec., 2015. How much amount should it invest in specified securities ?
(a) ₹6,00,000
(b) ₹10,00,000
(c) ₹5,00,000
(d) Nil A

Question: Debentures carries interest at: .
(a) 12% p.a.
(b) Fixed Rate
(c) 20% p.a.
(d) 6% p.a.

Question: F Ltd. purchased machinery for a book value of ₹ 4,00,000. The consideration was paid by issue of 10% Debentures of ₹ 100 each at a discount of 20%. The Debenture Account will be credited by :
(a) ₹ 4,00,000
(b) ₹ 5,00,000
(c) ₹ 3,20,000
(d) ₹ 4,80,000

Question. Discount or loss on issue of debentures is a ______________

Question. Interest on debentures is paid on the _____________of Debentures.

Question. Debentures are redeemed setting aside 25% of the nominal value of debentures to Debenture Redemption Reserve .It is redemption out of ___

Question. If X ltd purchased plant worth Rs5 lakh from Y ltd but agreed to issue 5250 10% Debentures of Rs100 each to Vendor. The difference in the amount will be adjusted in ____________account.

Question. Once the debentures re redeemed ,amount of DRR is transferred to _

Question._____________is the rate at which interest is payable on Debentures.

Question. Amount to be set aside to ____________before redemption of debentures.

Question.__________________Debentures are not secured with a specific asset rather they are secured on all the assets of the company in general.

Question. Debenture Redemption Investment should be made _____________30th April of the year in which debentures re redeemed.

Question. If X ltd issued 1,000; 10% Debentures of Rs100 each at a discount of 5% but redeemable after 4 years at a premium of 6%, loss on issue of Debentures a/c will be debited by _______________________.

Question.When does a company create ‘Debenture Redemption Reserve’ ?

Question Name the account to which the ‘Balance of Debenture Redemption Reserve’ is transferred after all the debentures have been redeemed.

Question. What is the nature of Interest on Debentures ?

Question. Debenture Redemption Investment is made by companies required to set aside amount to Debenture redemption Reserve.

Question. Debenture redemption reserve may be set aside by a company out of any reserve.

Question. Surplus cannot be transferred to Debenture Redemption Reserve.

Question. Debenture Redemption Investment can be used by the Company for any purpose after the debentures have been redeemed.

Question. .General Reserve can be transferred to Debenture Redemption Reserve.