Tag: discount/loss on issue of debenture written off

Questions Related to discount/loss on issue of debenture written off

Interest payable on debenture is:

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. an appropriation of profits of the company

  2. a charge against profits of the company

  3. transferred to sinking fund account

  4. transferred to sinking fund interest account

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Correct Option: B
Explanation:

Interest on debentures is a charge against profits and, therefore, its payment is not subject to the earning of profits.The amount so deducted must be paid to the Central Government on behalf of the debenture-holders.

Loss on issue of debentures account is a:

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. Personal account

  2. Real account

  3. Nominal account

  4. None of the above

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Correct Option: C

When debentures are issued at a discount it is prudent to write off the discount:

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. in the year of the issue of debentures

  2. within 5 years of the issue of debentures

  3. during the life of debentures

  4. in the year of redemption of debetures

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Correct Option: C

What journal entry is passed to write off discount on issue of debentures?

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures
  1.  Discount on issue of debentures A/c        To Profit and Loss A/c Dr. 
  2. To Profit and Loss A/c    To Discount on issue of debenture A/c Dr. 
  3.  Bank A/c        To Profit and Loss A/c Dr. 

  4. None of the above

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Correct Option: B

On $15$th June, $1988$ a company had $5,000$ $10\%$ Redeemable Preference Shares of Rs. $10$ each which were issued on $1$st April, $1980$ with a redemption period of $20$ years. These shares will be redeemed ____________.

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. before $15$th June, $1998$

  2. before $15$th June, $1993$

  3. before $1$st April, $1990$

  4. before $1$st April, $2008$

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Correct Option: B

For creating Capital Redemption Reserve _______________ is passed.

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. Profit or loss a/c Dr, General Reserve Dr to Capital Redemption Reserve Cr

  2. Goodwill a/c Dr to Capital Redemption Reserve a/c Cr

  3. Capital Redemption Reserve A/c Dr. to Profit and loss A/c, General Reserve A/c Dr.

  4. Capital Reserve Dr. to Capital Redemption Reserve

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Correct Option: A

Which of the following is odd one?

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. Naked

  2. Redeemable at discount

  3. Issued at par

  4. Redeemable at premium

Show answer
Correct Option: B

The maximum discount at which debenture can be issued is _________.

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. 10%

  2. 20%

  3. no such limit exist

  4. 50%

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Correct Option: C

Kanta Ltd. issued 1,00,000 debentures of Rs. 100 each at a discount of 5% to be redeemed at the end of 10th year from the date of issue at par. The loss on issue of debenture will be written off as ___________.

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. Rs. 10,000 every month

  2. Rs. 50,000 every year

  3. Rs. 5,00,000 at the end of 10th year

  4. Rs. 5,00,000 at the end of 1st year of issue

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Correct Option: B

A debenture is said to be issued at par when the issue price is ________ the face price.

book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

  1. more than

  2. less than

  3. equal to

  4. double 

Show answer
Correct Option: C