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Vidaara.orgClass 12 · Mathematics
CodeVID-M12-WS
Company Accounts: Issue of Debentures — Practice Worksheet
Chapter: Company Accounts: Issue of Debentures
Topic: Company Accounts: Issue of Debentures
Maximum Marks: 35
Time: 30 minutes
Name: ____________________ Roll No.: __________ Date: ____________

General Instructions

  • All questions are compulsory.
  • Choose the correct option (A, B, C or D) for each question.
  • The answer key is at the end — try the paper first!
Section A — Multiple Choice (1 mark each) 15 × 1 = 15 marks
1.
A debenture is an acknowledgement of:
  • A.Ownership
  • B.A debt
  • C.A dividend
  • D.A reserve
2.
A debenture-holder is a:
  • A.Owner
  • B.Creditor
  • C.Director
  • D.Member
3.
The return on a debenture is:
  • A.A variable dividend
  • B.Fixed interest
  • C.Bonus
  • D.Nothing
4.
Debenture interest is:
  • A.An appropriation of profit
  • B.A charge against profit
  • C.Paid only if profit
  • D.A dividend
5.
Do debenture-holders have voting rights?
  • A.Yes
  • B.No
  • C.Only equity ones
  • D.Always
6.
Issue at par: Bank A/c Dr; To ____.
  • A.Securities Premium
  • B.Debentures A/c
  • C.Discount A/c
  • D.Capital A/c
7.
Premium on issue of debentures is credited to:
  • A.Debentures A/c
  • B.Securities Premium Reserve A/c
  • C.Bank A/c
  • D.Discount A/c
8.
Unlike shares, debentures may be issued at a:
  • A.Premium only
  • B.Discount
  • C.Par only
  • D.Loss only
9.
Discount on issue of debentures is a:
  • A.Gain
  • B.Capital loss to be written off
  • C.Liability
  • D.Income
10.
A Rs 100 debenture issued at Rs 95 has a discount of:
  • A.Rs 5
  • B.Rs 95
  • C.Rs 100
  • D.Rs 0
11.
When redeemable at a premium, the company provides for it at issue via:
  • A.Loss on Issue / Premium on Redemption
  • B.Securities Premium only
  • C.Bank A/c
  • D.Capital A/c
12.
Debentures issued to settle a vendor for assets are issued for:
  • A.Cash
  • B.Consideration other than cash
  • C.Collateral
  • D.Bonus
13.
If consideration exceeds the net assets acquired, the excess is:
  • A.Capital reserve
  • B.Goodwill
  • C.A loss
  • D.Premium
14.
Debentures given as secondary security for a loan are issued as:
  • A.Bonus
  • B.Collateral security
  • C.Sweat equity
  • D.A dividend
15.
Debenture interest is charged in the Statement of Profit and Loss as:
  • A.Finance cost
  • B.Revenue
  • C.Dividend
  • D.Reserve
Section B — Challenge / Olympiad (2 marks each) 10 × 2 = 20 marks
16.
Debentures of face value Rs 2,00,000 are issued at a 5% discount but redeemable at a 10% premium. The total capital loss provided at issue is:
  • A.Rs 30,000
  • B.Rs 10,000
  • C.Rs 20,000
  • D.Rs 15,000
17.
Why must a company provide for the redemption premium AT ISSUE rather than at redemption?
  • A.Prudence — a known future loss is recognised as soon as it is certain
  • B.It increases profit
  • C.It is optional
  • D.To avoid interest
18.
A firm buys a running business: assets Rs 9,00,000, liabilities Rs 2,00,000, for Rs 6,50,000 paid in debentures. The difference is:
  • A.Capital reserve Rs 50,000
  • B.Goodwill Rs 50,000
  • C.Goodwill Rs 6,50,000
  • D.Loss Rs 50,000
19.
Interest on debentures differs from a dividend because it is:
  • A.Payable even when the company makes a loss
  • B.Variable
  • C.Paid only out of profit
  • D.Voted by shareholders
20.
1,000 debentures of Rs 100 are issued at par, redeemable at a 5% premium. At issue, 'Premium on Redemption of Debentures A/c' is credited with:
  • A.Rs 5,000
  • B.Rs 50,000
  • C.Rs 1,000
  • D.Nil
21.
Debentures issued as collateral security, if recorded, use which account?
  • A.Debenture Suspense A/c Dr; To Debentures A/c
  • B.Bank A/c Dr; To Debentures A/c
  • C.Loss on Issue A/c
  • D.Securities Premium A/c
22.
When the purchase consideration EXCEEDS the net assets taken over, the company records:
  • A.Goodwill
  • B.Capital reserve
  • C.Discount
  • D.A premium
23.
A Rs 100 debenture is issued at Rs 110 and is redeemable at par. The Rs 10 is:
  • A.Securities premium (a capital reserve)
  • B.Discount on issue
  • C.Loss on issue
  • D.Interest
24.
Compared with equity, debentures are 'cheaper but riskier' chiefly because:
  • A.Interest is a fixed obligation that must be paid even in bad years
  • B.They give voting control
  • C.They never need repaying
  • D.They earn dividends
25.
Discount on issue of debentures appears in the balance sheet until written off as:
  • A.Other non-current/current asset (to be amortised)
  • B.A liability
  • C.Share capital
  • D.Revenue

Answer Key

Section A — Multiple Choice (1 mark each)
  1. (B) A debt
  2. (B) Creditor
  3. (B) Fixed interest
  4. (B) A charge against profit
  5. (B) No
  6. (B) Debentures A/c
  7. (B) Securities Premium Reserve A/c
  8. (B) Discount
  9. (B) Capital loss to be written off
  10. (A) Rs 5
  11. (A) Loss on Issue / Premium on Redemption
  12. (B) Consideration other than cash
  13. (B) Goodwill
  14. (B) Collateral security
  15. (A) Finance cost
Section B — Challenge / Olympiad (2 marks each)
  1. (A) Rs 30,000
  2. (A) Prudence — a known future loss is recognised as soon as it is certain
  3. (A) Capital reserve Rs 50,000
  4. (A) Payable even when the company makes a loss
  5. (A) Rs 5,000
  6. (A) Debenture Suspense A/c Dr; To Debentures A/c
  7. (A) Goodwill
  8. (A) Securities premium (a capital reserve)
  9. (A) Interest is a fixed obligation that must be paid even in bad years
  10. (A) Other non-current/current asset (to be amortised)
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