Tag: company accounts - redemption of debentures

Questions Related to company accounts - redemption of debentures

Profit on sale of sinking fund investment is credited to ______________.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. General reserve

  2. Capital reserve

  3. Sinking fund

  4. None of these

Show answer
Correct Option: C
Explanation:

Profit or loss on sale of investments is transferred to sinking fund. After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.

Sinking fund is _________.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. always general purpose fund

  2. always for some specific purpose

  3. both purposes (A & B)

  4. none of the above

Show answer
Correct Option: B

After the redemption of debentures, any credit balance in the Sinking Fund A/c is transferred to ______ A/c.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. General reserve

  2. Capital reserve

  3. P & L

  4. None of these

Show answer
Correct Option: A
Explanation:

After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.

Which of these is not a method of redemption of debentures ?

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Purchase in open market

  2. Auction of debentures

  3. Drawing of lots

  4. Payment in lump sum

Show answer
Correct Option: B

Debentures can be redeemable at discount.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Debentures will be redeemed at a discount only when the company is able to buy the debentures in the open market at a price lower than the face value of the debentures.

Debentures can be redeemed _____________.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. At par

  2. At premium

  3. At discount

  4. Both (a) and (b)

Show answer
Correct Option: D

When a company issues debenture, it usually mentions the terms on which they will be redeemed on their maturity.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. True

  2. False

Show answer
Correct Option: A

Debentures can be issued at par and redeemable at par.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. True

  2. False

Show answer
Correct Option: A

Premium on redemption is a/an  ____________ of a company payable in future.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. liability

  2. asset

  3. income

  4. expense

Show answer
Correct Option: A

Premium on redemption of debenture A/c is a _____.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. personal A/c

  2. real A/c

  3. nominal A/c

  4. suspense A/c

Show answer
Correct Option: C