Tag: introduction to debentures

Questions Related to introduction to debentures

Which of the following statement correctly describes debentures?

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. Income bonds that require interest payments only when earnings permit

  2. Income bonds that are not require interest payments only when earnings permit

  3. Subordinated debt and rank behind convertible bonds

  4. A form of lease financing similar to equipment trust certificates

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Correct Option: C

In debenture account ________ is to be mentioned.

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. Name of the debenture

  2. Rate of interest

  3. Date of issue debenture

  4. All of the above

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Correct Option: B

Which of the following items is not an appropriation of profit for a limited company_______.

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. Preference shares dividend payable

  2. Ordinary dividend payable by the company

  3. Income tax payable by the company

  4. Debenture interest payable

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Correct Option: D

Debenture is -

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. a written instrument acknowledging a debt written by its holder

  2. an oral acknowledgement of debt by a company

  3. a written instrument acknowledging a debt written by its company

  4. None of these

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Correct Option: C
Explanation:

Debenture is a written instrument acknowledging a debt under the common seal of the company. It contains a contract for repayment of principal after a specified period or at intervals or at the option of the company and for payment of interest at a fixed rate payable usually either half-yearly or yearly on fixed dates.

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

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. Both (I) and (II) above

  2. Both (I) and (III) above

  3. Both (II) and (III) above

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

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Correct Option: D

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

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning 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: A
Explanation:

Debentures can be secured in nature, it may be unsecured in nature. A secured debenture is secured by the charge on some asset or set of assets which is known as secured or mortgage debenture and another when it is issued solely on the credibility of the issuer is known as the naked or unsecured debenture. 

Debenture Trust Deed is created by -

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. The company

  2. The Trustees

  3. The SEBI

  4. The company Law Tribunal

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Correct Option: A
Explanation:

The document created by the company, whereby trustees are appointed to protect the interest of debenture-holders before they are offered for public subscription is known as Debenture Trust Deed.

Debenture Trust Deed must be executed within-

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. $1$ month of the closure of issue

  2. $3$ months of the closure of issue

  3. $6$ months of the closure of issue

  4. $1$ month before the opening of issue

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Correct Option: C
Explanation:

 A trust deed shall be executed by the issuer company in favour of the debenture trustees within six months of the closure of the issue.

Debenture contains provisions as regards -

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. the repayment of principal only

  2. the payment of interest at a fixed rate only

  3. the payment of interest at a fluctuating rate only

  4. the repayment of principal and the payment of interest at a fixed rate.

Show answer
Correct Option: D
Explanation:

Debenture is a written instrument acknowledging a debt to the Company. It contains a contract for repayment of principal after a specified period or at intervals or at the option of the company and for payment of interest at a fixed rate payable usually either half-yearly or yearly on fixed dates.

In Balance Sheet of a Company, Interest accrued and due on debentures appears under the head -

book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

  1. Share Capital

  2. Reserves & Surplus

  3. Current Liabilities

  4. Non-Current Liabilities

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Correct Option: C