MCQ Questions for Class 12 Accountancy Chapter 7 Issue and Redemption of Debentures with Answers

Check the below NCERT MCQ Questions for Class 12 Accountancy Chapter 7 Issue and Redemption of Debentures with Answers Pdf free download. MCQ Questions for Class 12 Accountancy with Answers were prepared based on the latest exam pattern. We have provided Issue and Redemption of Debentures Class 12 Accountancy MCQs Questions with Answers to help students understand the concept very well.

Issue and Redemption of Debentures Class 12 MCQs Questions with Answers

MCQ On Issue Of Debentures Class 12 Question 1.
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

Answer

Answer: (a) Capital Reserve


Issue And Redemption Of Debentures MCQ Class 12 Question 2.
According to SEBI guidelines, a Company will have to create debenture redemption reserve equivalent to the amount of the following percentage of debenture issued:
(a) 50%
(b) 25%
(c) 70%
(d) 100%

Answer

Answer: (b) 25%


Discount On Issue Of Debentures Is A MCQ Class 12  Question 3.
The balance of ‘Sinking Fund Account’ after the redemption of debentures is transferred to :
(a) Profit & Loss Account
(b) Profit & Loss Appropriation Account
(c) General Reserve Account
(d) Sinking Fund Account

Answer

Answer: (c) General Reserve Account


The Redemption Means MCQ Class 12 Question 4.
Profit on cancellation of own debentures is transferred to:
(a) Profit & Loss Account
(b) Profit & Loss Appropriation Account
(c) General Reserve Account
(d) Capital Reserve Account

Answer

Answer: (d) Capital Reserve Account


Question 5.
If debenture of ₹ 1,00,000 were issued for discount of ₹ 10,000, which are redeemable after four years. Then amount of discount to be written off from P. & L. Account each year is :
(a) ₹ 3,000
(b) ₹ 4,000
(c) ₹ 2,500
(d) ₹ 5,000

Answer

Answer: (c) ₹ 2,500


Question 6.
Debentures can be redeemed out of:
(a) Profit
(b) Capital
(c) Provision
(d) All of the above

Answer

Answer: (d) All of the above


Question 7.
Premium on redemption of debentures is a :
(a) Personal A/c
(b) Real A/c
(c) Nominal A/c
(d) Suspense A/c

Answer

Answer: (c) Nominal A/c


Question 8.
Premium on redemption of debentures is generally provided at the time of ……………
(a) Issue of debentures
(b) Redemption of debentures
(c) Writing off
(d) After 10 years

Answer

Answer: (b) Redemption of debentures


Question 9.
Debentures cannot be redeemed at:
(a) Par
(b) Premium
(c) Discount
(d) More than 10% premium

Answer

Answer: (c) Discount


Question 10.
If debentures purchased in open market are not immediately cancelled, they are treated as :
(a) Current Assets
(b) Current Liabilities
(c) Investment
(d) Capital

Answer

Answer: (c) Investment


Question 11.
Sources of finance of the redemption of debentures are:
(a) Redemption out of profits
(b) Redemption out of capital
(c) The proceeds from fresh issue of shares/debentures
(d) All the above

Answer

Answer: (d) All the above


Question 12.
A company issued 1,000, 12% debentures of ₹ 100 each at 10% premium. 12% stand for:
(a) Rate of dividend
(b) Rate of Tax
(c) Rate of interest
(d) None of these

Answer

Answer: (c) Rate of interest


Question 13.
A company should transfer to Debenture Redemption Reserve A/c at least what percent of the amount of debentures issued before the commencement of redemption of debentures-
(a) 50%
(b) 25%
(c) 15%
(d) 100%

Answer

Answer: (b) 25%


Question 14.
If redemption of debentures is made by conversion method, the amount to be transferred to ‘Debenture Redemption Reserve Account’ will be equal to…….percent of converted amounted.
(a) 40
(b) 50
(c) 60
(d) Not required

Answer

Answer: (d) Not required


Question 15.
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

Answer

Answer: (a) On Assets side of Balance Sheet


Question 16.
Profit on sale of Sinking Fund Investment is transferred to:
(a) Profit & Loss Account
(b) General Reserve
(c) Sinking Fund Account
(d) Capital Reserve

Answer

Answer: (c) Sinking Fund Account


Question 17.
Premium on Redemption of Debentures A/c is:
(a) Asset
(b) Expenses
(c) Liability
(d) Revenue

Answer

Answer: (c) Liability


Question 18.
Interest on sinking fund investment is credited to :
(a) Profit & Loss A/c
(b) Sinking Fund A/c
(c) General Reserve A/c
(d) Sinking Fund Investment A/c

Answer

Answer: (b) Sinking Fund A/c


Question 19.
Sinking fund investment is:
(a) An Income
(b) An exause
(c) An Asset
(d) A Liability

Answer

Answer: (c) An Asset


Question 20.
When debentures are issued at par and are redeemable at a premium, the loss on such an issue is debited to :
(a) Profit & Loss A/c
(b) Debenture Application and Allotment A/c
(c) Loss on Issue of Debentures A/c
(d) Premium on Redemption A/c

Answer

Answer: (c) Loss on Issue of Debentures A/c


Question 21.
Own debentures are those debentures of the company which ?
(a) The company allots to its own promotors
(b) The company allots to its directors
(c) The company purchases from the markets and hold them as investments
(d) None of these

Answer

Answer: (c) The company purchases from the markets and hold them as investments


Question 22.
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

Answer

Answer: (b) Debenture Redemption Reserve


Question 23.
Profit on sale of debentures redemption fund investment in the first instance in credited to :
(a) Debenture Redemption Fund A/c
(b) Profit & Loss Appropriation A/c
(c) General Reserve A/c
(d) Sinking Fund A/c

Answer

Answer: (a) Debenture Redemption Fund A/c


Question 24.
When debentures are issued at a discount and are redeemable at a premium, which of the following accounts is debited at the time of issue ?
(a) Debentures A/c
(b) Premium on Redemption of Debentures A/c
(c) Loss on Issue of Debentures A/c
(d) Profit & Loss A/c

Answer

Answer: (c) Loss on Issue of Debentures A/c


Question 25.
According to SEBI guidelines what percentage of the amount of debentures must be transferred to Debenture Redemption Reserve, before the commencement of redumption of debentures, in case of convertible debentures ?
(a) 25%
(b) 50%
(c) 100%
(d) zero

Answer

Answer: (d) zero


Question 26.
Profit on redemption of debentures in transferred to which account ?
(a) Capital Reserve Account
(b) Sinking Gund Account
(c) General Reserve Account
(d) Profit & Loss Account

Answer

Answer: (a) Capital Reserve Account


Question 27.
Profit on cancellation of own debentures is :
(a) Revenue Profit
(b) Capital Profit
(c) Operating Profit
(d) Trading Profit

Answer

Answer: (b) Capital Profit


Question 28.
6,000 debentures of ₹ 10 each where discharged by issuing equity shares of ₹ 10 each at 20% premium. The number of shares issued will be :
(a) 50,000
(b) 60,000
(c) 5,000
(d) 6,000

Answer

Answer: (c) 5,000


Question 29.
Every company required to create DRR shall on or before the 30th April of each year, deposit or invest, a sum which shall not be less than…………of the amount of its debentures maturing (to be redeemed) during the year ending on 31st March of the next year.)
(a) 10%
(b) 15%
(c) 25%
(d) 50%

Answer

Answer: (b) 15%


Question 30.
A Sinking Fund is a part of:
(a) Fixed Liabilities
(b) Current Liabilities
(c) Reserves and Surplus
(d) Fixed Assets

Answer

Answer: (c) Reserves and Surplus


Question 31.
A company issued 1000, 12% debentures of ₹ 100 each at 10% premium. 12% stand for :
(a) Rate of Dividend
(b) Rate of Tax
(c) Rate of Interest
(d) None of these

Answer

Answer: (c) Rate of Interest


Question 32.
BST Ltd. want to redeem its 900, 10% debentures at 105% by converting them into shares of ₹ 10 each at ₹ 9 each. The number of shares to be issued will be :
(a) 9,000 Shares
(b) 10,500 Shares
(c) 10,000 Shares
(d) 8,500 Shares

Answer

Answer: (b) 10,500 Shares


Question 33.
‘Premium on Redemption of Debentures A/c is in the nature of:
(a) Personal A/c
(b) Real A/c
(c) Nominal A/c
(d) None of these

Answer

Answer: (c) Nominal A/c


Question 34.
Deep Ltd. issue 10,00,000, 7 % debentures of 100 Rs. each at a discount of 4%, redeemable after 5 years at a premium of 6%. Loss issue of debentures is :
(a) ₹ 10,00,000
(b) ₹ 6,00,000
(c) ₹ 16,00,000
(d) ₹ 4,00,000

Answer

Answer: (a) ₹ 10,00,000


Question 35.
Debenture is a :
(a) Loan certificate
(b) Cash certificate
(c) Credit certificate
(d) None of these

Answer

Answer: (a) Loan certificate


Question 36.
Debenture holders are the :
(a) Customers of the Company
(b) Owners of the Company
(c) Creditors of the Company
(d) None of these

Answer

Answer: (c) Creditors of the Company


Question 37.
In case of issue of debentures as a collateral security for loan from the bank which account will be debited :
(a) Bank Account
(b) Bank Loan Account
(c) Debentures Account
(d) Debentures Suspense Account

Answer

Answer: (d) Debentures Suspense Account


Question 38.
If debentures of ₹ 4,50,000 are issued for the consideration of net assets of ₹ 5,00,000 balance ₹ 50,000 will be credited to:
(a) Profit & Loss A/c
(b) Goodwill A/c
(c) General Reserve A/c
(d) Capital Reserve A/c

Answer

Answer: (d) Capital Reserve A/c


Question 39.
Debentures which are transferred by mere delivery are called:
(a) Registered Debentures
(b) First Debentures
(c) Bearer Debentures
(d) None of these

Answer

Answer: (c) Bearer Debentures


Question 40.
In the Balance Sheet of a Company, Debentures are shown under the head :
(a) Unsecured Loans
(b) Long-term Loans
(c) Current Liabilities
(d) Reserve and Surplus

Answer

Answer: (b) Long-term Loans


Question 41.
Discount on issue of Debentures is in the nature of:
(a) Revenue Loss
(b) Capital Loss
(c) Deferred Revenue Expenditure
(d) None of there

Answer

Answer: (b) Capital Loss


Question 42.
On liquidation of a company, principal amount of debentures is returned:
(a) First of all
(b) Last of all
(c) Before Equity Capital
(d) None of those

Answer

Answer: (a) First of all


Question 43.
Interest payable on debentures is :
(a) An appropriation of profits of the company
(b) A charge against profits of the company
(c) Transfer to Sinking Fund
(d) None of the above

Answer

Answer: (b) A charge against profits of the company


Question 44.
Debentures cannot be redeemed at:
(a) Premium
(b) Discount
(c) Par
(d) None of these

Answer

Answer: (b) Discount


Question 45.
Debentures represent:
(a) Director’s Share in a Company
(b) Investments by Equity Shareholders
(c) Long-term Debt of the Business
(d) None of these

Answer

Answer: (c) Long-term Debt of the Business


Question 46.
Debentures carries interest at: .
(a) 12% p.a.
(b) Fixed Rate
(c) 20% p.a.
(d) 6% p.a.

Answer

Answer: (b) Fixed Rate


Question 47.
Generally debentures are :
(a) Secured
(b) Unsecured
(c) Partly Secured
(d) None of these

Answer

Answer: (a) Secured


Question 48.
Premium on issue of debentures is a for Company :
(a) Revenue Receipt
(b) Profit
(c) Capital Receipt
(d) All of these

Answer

Answer: (c) Capital Receipt


Question 49.
For a company discount on issue of debentures is :
(a) Capital Loss
(b) Revenue Loss
(c) General Loss
(d) None of these

Answer

Answer: (a) Capital Loss


Question 50.
‘Premium on issue of debentures’ is shown in the Balance Sheet on:
(a) Assets side
(b) Liabilities side
(c) None of these
(d) All of these

Answer

Answer: (b) Liabilities side


Question 51.
The balance of discount on debentures is shown in the Balance Sheet on:
(a) Assets side
(b) Liabilities side
(c) None of these
(d) All of these

Answer

Answer: (a) Assets side


Question 52.
Rate of interest on debentures is :
(a) 12% p.a.
(b) 20% p.a.
(c) Fixed Rate
(d) 15% p.a.

Answer

Answer: (c) Fixed Rate


Question 53.
Discount on issue of Debentures should be written off:
(a) Out of Securities Premium Account
(b) Out of Capital Profits
(c) Out of Statements of Profit and Loss
(d) In the above order over the period of debentures

Answer

Answer: (d) In the above order over the period of debentures


Question 54.
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

Answer

Answer: (b) ₹ 5,00,000


Question 55.
Debenture holder gets:
(a) Di vidend
(b) Profit
(c) Interest
(d) Interest at fixed rate

Answer

Answer: (c) Interest


Question 56.
Loss on issue of debentures is generally written off in :
(a) 5 years
(b) 10 years
(c) 15 years
(d) Over the period of redemption

Answer

Answer: (d) Over the period of redemption


Question 57.
When debentures are issued as collateral security, which entry has to be passed ?
(a) Debenture Suspense A/c Dr.
To Debentures
(b) No entry has to be made
(c) (a) or (b)
(d) None of these

Answer

Answer: (c) (a) or (b)


Question 58.
Debenture holder receives:
(a) Dividend
(b) Interest
(c) Both Dividend and Interest
(d) Bonus

Answer

Answer: (b) Interest


Question 59.
Debenture holders are called of the company.
(a) Creditors
(b) Debtors
(c) Owners
(d) Bankers

Answer

Answer: (a) Creditors


Question 60.
A company issued ₹ 1,00,000 12% debentures of ₹ 100 each. The amount of interest on debentures will be:
(a) ₹ 12,000
(b) ₹ 1,20,000
(c) ₹ 12,00,000
(d) None of these

Answer

Answer: (c) ₹ 12,00,000


Question 61.
Premium on redemption of debentures account is :
(a) A real account
(b) A nominal account
(c) A personal account
(d) None of these

Answer

Answer: (c) A personal account


Question 62.
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

Answer

Answer: (d) All of the above


Question 63.
Which of the following is false ?
(a) A company can issue redeemable debentures
(b) A company can issue debentures with voting rights
(c) A company can buy its own shares
(d) A company can buy its own debentures

Answer

Answer: (b) A company can issue debentures with voting rights


Question 64.
Debenture is the part of:
(a) Share Capital
(b) Long-term Borrowings
(c) Owned Capital
(d) None, of these

Answer

Answer: (b) Long-term Borrowings


Question 65.
Consideration of Debenture is:
(a) Profit
(b) Dividend
(c) Interest
(d) None of these

Answer

Answer: (c) Interest


Question 66.
Premium on Redemption of Debenture A/c is.:
(a) Asset
(b) Liability
(c) Expense
(d) Revenue

Answer

Answer: (b) Liability


Question 67.
Debenture is a :
(a) Loan Certificate
(b) Cash Certificate
(c) Credit Certificate
(d) None of these

Answer

Answer: (a) Loan Certificate


Question 68.
Loss on issue of debentures is recorded as :
(a) Intangible Asset
(b) Current Asset
(c) Current Liability
(d) Miscellaneous Expenditure

Answer

Answer: (d) Miscellaneous Expenditure


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