Tag: company accounts - redemption of debentures

Questions Related to company accounts - redemption of debentures

As per SEBI Guidelines Debenture Redemption reserve is required to be created in case the company issue debentures with a maturity of __________.

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

  1. more than 18 months

  2. 2 years

  3. 10 years

  4. 5 years

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Correct Option: A

Preference shares amounting to Rs. $2,00,000$ are redeemed at a premium of $5$% by issue of shares amounting to Rs. $1,00,000$ at a premium of $10$%. The amount to be transferred to capital redemption reserve ___________.

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

  1. Rs. $1,05,000$

  2. Rs. $1,00,000$

  3. Rs. $2,00,000$

  4. Rs. $1,11,000$

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Correct Option: B

Which of the following accounts can be transferred to capital redemption reserve account?

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

  1. General reserve account

  2. Forfeited shares account

  3. Profit prior to incorporation

  4. Share premium account

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Correct Option: A

Debentures premium cannot be used to ____________.

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

  1. write off the discount on issue of shares or debentures

  2. write off the premium on redemption of shares or debentures

  3. pay dividends

  4. write off capital loss

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Correct Option: C

Capital redemption reserve account is prepared when ___________.

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

  1. redemption is done out of issue of fresh shares

  2. redemption is done out of profits of the company

  3. redemption is done through company's capital fund

  4. All of the above

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Correct Option: B

Which of the following statements is false?

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

  1. Debenture is a form of borrowing fro public

  2. Normal rate of interest on debentures is specified on issue

  3. Debenture interest is a charge against profits

  4. The issue price and redemption value of debentures will always be equal

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Correct Option: D

Debenture Premium Account 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 Account

  2. Real Account

  3. Nominal Account

  4. None of these

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Correct Option: C

From the point of view of tenure, the debentures are classified as -

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

  1. Secured and unsecured Debentures

  2. Redeemable Debentures and Irredeemable Debentures

  3. Convertible Debentures and Non-convertible Debentures

  4. Registered Debentures and Bearer Debentures

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Correct Option: B

Convertible Debentures are those debentures which are -

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

  1. convertible into equity only at the point of debenture holders.

  2. convertible into equity shares only at the option of company only.

  3. convertible into equity shares only at the option of debenture holders or company.

  4. convertible into any securities at the option of debenture holders or company.

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Correct Option: D
Explanation:

A convertible debenture is a type of long-term debt issued by a company that can be converted into stock after a specified period. Convertible debentures are usually unsecured bonds or loans meaning that there is no underlying collateral connected to the debt.

In the Balance Sheet of a company, Debenture Premium Account appears under the head:

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

  1. Share Capital

  2. Reserves & Surplus

  3. Non-Current Liabilities

  4. Current Liabilities

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Correct Option: B