Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

Which of the following is false with respect to debentures?

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. They can be issued for cash

  2. They can be issued for consideration other than cash

  3. They can be issued as collateral securities

  4. They can be issued in lieu of dividends

Show answer
Correct Option: D
Explanation:

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of debenture is called as issued for consideration other than cash. e.g. Purchase of assets from the company by issuing debentures as consideration,  debentures issued in lieu of dividends.

When debenture are issued as collateral security, the final entry for recording the transaction in the books is _______.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Credit debenture A/c. and Debit cash A/c.

  2. Debit debenture suspense A/c. and credit cash A/c.

  3. Debit debenture suspense A/c. and credit debenture A/c.

  4. Debit cash A/c. and credit loan A/c. for which security is given

Show answer
Correct Option: C
Explanation:

A collateral security may be defined as a subsidiary or secondary or additional security besides the primary security when a company obtains a loan or overdraft  from a bank or any other financial institutions. The final journal entry for recording this transaction is:


Debenture suspense A/c     Dr.
            To Debenture A/c

Which of the following is/are true with respect to debentures?

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. They can be issued for cash.

  2. They can be issued for consideration other than cash.

  3. They cannot be issued as collateral securities.

  4. Both (A) and (B) above.

Show answer
Correct Option: D
Explanation:

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of dentures is called as issue for consideration other than cash. Debenture can be issued for cash and collateral security.

Mohan Lai Ltd. purchased a plant for Rs. 20,000 payable Rs. 6,500 in cash and balance by issue of 9% debentures of Rs. 100 each at a primium of 10%. Find the number of debentures to be issued to the vendor.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. 125 of Rs. 100 each

  2. 123 of Rs. 100 each

  3. 112.50 of Rs. 100 each

  4. 143 of Rs. 100 each

Show answer
Correct Option: B

ABC Ltd. has issued $3,000$ fully Convertible Debentures of Rs. $100$ each. Each Debentures is convertible into $8$ shares of Rs. $10$ each. Amount of share capital credited on conversion will be.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Rs. $2,40,000$

  2. Rs. $60,000$

  3. Rs. $3,00,000$

  4. Rs. $80,000$

Show answer
Correct Option: A

The following entry appears in the books of Vikas Ltd.

Rs. Rs.
Bank Account $95,000$
Loss on issue of Debenture A/c $13,000$
To $8\%$ Debentures A/c $1,00,000$
To Premium on Redemption of Debentures A/c $8,000$

Debentures have been issued at a discount of.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. $10\%$

  2. $7\%$

  3. $6\%$

  4. $5\%$

Show answer
Correct Option: D

When debentures are issued as collateral security to a banker, which account will be debited.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Bank A/c

  2. Debenture Suspense Account

  3. Debenture Redemption A/c

  4. Debenture holders A/c

Show answer
Correct Option: B

X Co. Ltd purchased assets worth Rs. $28,80,000$. It issued debentures of Rs. $100$ each at a discount of $4\%$ in full satisfaction of the purchase consideration. The number of debentures issued to the various of asset is?

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. $30,000$

  2. $28,800$

  3. $32,000$

  4. $35,000$

Show answer
Correct Option: A

The following journal entry appears in the books of X Co. Ltd.

Bank A/c Dr. Rs. $4,75,000$
Loss on Issue of Deb. A/c Dr. Rs. $75,000$
To $12\%$ Debentures A/c $5,00,000$
To Premium on redemption of Deb. A/c $50,000$

Debentures have been issued at a discount of.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. $15\%$

  2. $5\%$

  3. $10\%$

  4. $20\%$

Show answer
Correct Option: B

When debentures of Rs. $1,00,000$ are issued as collateral security, against a loan of Rs. $1,50,000$, the entry for issue of debentures will be

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Credit Debentures Rs. $1,50,000$ and debit cash A/c. Rs. $1,50,000$

  2. Debit Debenture Suspense A/c Rs. $1,00,000$ and credit Cash A/c Rs. $1,00,000$

  3. Debit Debenture Suspense A/c Rs. $1,00,000$ and Credit Debentures A/c Rs. $1,00,000$

  4. Debit Cash A/c Rs. $1,50,000$ and credit Bank A/c Rs. $1,50,000$

Show answer
Correct Option: C