Tag: meaning and kinds of debentures

Questions Related to meaning and kinds of debentures

Issue of debentures as collateral securities means issue of such debentures as _________.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. Subsidiary security

  2. Principal security

  3. In lieu of principal security

  4. None of the above

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Correct Option: A
Explanation:

Issue of Debentures as Collateral. Debentures issued as collateral security is secondary or parallel security for the original loan taken by the company. The lender can realize the collateral security in case borrower fails to make the payment of the original loan.

A Collateral Security is a Subsidiary Security.

Which of the following statement is not true?

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. Interest on debenture holders is to be paid whether there is profit or loss to the company

  2. There is restriction on utilization of premium on issue of shares

  3. Company can buy back its debentures

  4. Interest on debenture is not shown in Profit and Loss A/c

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Correct Option: D

______ are secured by either a fixed charge or a floating charge.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. Naked debentures

  2. Unsecured debentures

  3. Mortgaged debentures

  4. Registered debentures

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Correct Option: C

Debentures which are not secured by any charge upon any assets of the company are called __________.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. secured debenture

  2. naked debenture

  3. bearer debenture

  4. floating debenture

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Correct Option: B

_______debentures are those which can be transferred by mere delivery.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. Naked

  2. Registered

  3. Bearer

  4. Floating

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Correct Option: C

Non-convertible debentures refer to.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. Owner's capital

  2. Loan capital

  3. Short-term fund

  4. None of these

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Correct Option: B

Debentures can be ____________.
I. Mortgage Debentures or Simple Debentures
II. Registered Debentures or Bearer Debentures
III. Redeemable Debentures or Irredeemable Debentures
IV. Convertible Debentures or Non-Convertible Debentures.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. Both (I) and (II)

  2. Both (I) and (III)

  3. Both (II) and (III)

  4. All of (I), (II), (III) and (IV)

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Correct Option: D

Interest payable on debentures is __________. 

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. an appropriation of profits of the company

  2. a charge against profits of the company

  3. transferred to sinking fund interest A/c

  4. transferred to sinking fund A/c

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Correct Option: B

In case of debentures issued as collateral securities, the lender is entitled to ____________.

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. interest only on the amount of loan

  2. interest on loan as well debentures issued as collateral security

  3. interest only on debentures issues as collateral security

  4. None of the above

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Correct Option: A

Which of the following statements is false?

book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

  1. A company can issue convertible debentures

  2. Debentures cannot be secured

  3. A company can issue redeemable debentures

  4. Debenture have no right to participate in profits over and above their fixed interest.

Show answer
Correct Option: B
Explanation:

A debenture is a type of debt instrument unsecured by collateral. Since debentures have no collateral backing, debentures must rely on the creditworthiness and reputation of the issuer for support.