MCQ Questions Chapter 2 Issue and Redemption of Debentures Class 12 Accountancy

Please refer to MCQ Questions Chapter 2 Issue and Redemption of Debentures Class 12 Accountancy with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Accountancy issued for the current academic year. We have provided MCQ Questions for Class 12 Accountancy for all chapters on our website. Students should learn the objective based questions for Chapter 2 Issue and Redemption of Debentures in Class 12 Accountancy provided below to get more marks in exams.

Chapter 2 Issue and Redemption of Debentures MCQ Questions

Please refer to the following Chapter 2 Issue and Redemption of Debentures MCQ Questions Class 12 Accountancy with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 2 Issue and Redemption of Debentures Class 12 Accountancy

Question. Excess value of net assets over purchase consideration at the time of purchase of business is credited to:
(a) General reserve
(b) Capital reserve
(c) Vendor’s account
(d) Goodwill account.

Question. Debentures issued as collateral security will be______ to debenture suspense account:
(a) debited
(b) credited
(c) sometimes debited and sometimes credited
(d) none of these.

Question. ABC took over the assets of Rs 7,60,000 and liabilities of Rs 80,000 of Y limited for purchase consideration of Rs 5,85,000 payable by the issue of 12% debentures of Rs 100 each at a discount of 10%. The number of Dentures to be issued is:
(a) 6600
(b) 6500
(c) 4500
(d) 5400.

Question. Debentures which are transferable by mere delivery are
(a) registered debentures
(b) first debentures
(c) bearer debentures
(d) second debentures.

Question. When debentures are issued at discount and redeemable at a premium which one of the followingaccount is debited at the time of issue ?
(a) debentures account
(b) premium on redemption of debentures account
(c) loss on issue of debentures account
(d) none of these.

Question. Which of the following is false?
(a) Interest on debentures is an appropriation of profits.
(b) Equity is owners stake and the debenture is a debt
(c) Rate of interest on debentures is fixed
(d) Debenture holders get preferential treatment over the equity holders at the time of liquidation

Question. Discount on issue of debentures is a
(a) Revenue loss to be charged in the year of issue
(b) Capital loss to be written off from capital reserve
(c) Capital loss to be written off over the tenure of the debentures
(d) Capital loss to be shown as goodwil 

Question. Discount or loss on issue of debentures to be written of within 12 months from the date of balance sheet or within the period of operating cycle is shown as
(a) Other Current assets
(b) Other Non current Assets
(c) Other Current Liabilities
(d) None of the options

Question. Debenture is a
(a) Long term Loan
(b) Short term loan
(c) Dividend
(d) None of the options

Question. When debentures are issues at discount , the discount should be written off
(a) During the life of the debentures
(b) In the year of the issue of debentures
(c) Within 5 years of the issue of the debentures
(d) None of the options 

Question. Debenture holder are
(a) The owners of the company
(b) The vendors of the company
(c) None of the options
(d) The creditors of the company 

Question.Debenture holders are entitled the right to receive
(a) Interest
(b) Dividend
(c) Both
(d) None of the options 

Question. Debentures of a Company can be issued :
(a) For Cash
(b) For Consideration other than Cash
(c) As a Collateral Security
(d) Any of the above

Question. On issue of debentures as a collateral security, which account is credited?
(a) Debentures Account
(b) Bank Loan Account
(c) Debenture Holdings Account
(d) Debenture Suspense Account

Question. Debentures issued as collateral security will be debited to :
(a) Bank Account
(b) Debentures Suspense Account
(c) Debentures Account
(d) Bank Loan Account

Question. Which does not have possess the voting right
(a) Debenture Holder
(b) Share Holder
(c) Both
(d) None of the options

Question. A written promise for a debt by a company under its seal which contains the terms and conditions regarding the amount of loan
(a) Debenture
(b) Share
(c) Capital
(d) None of the options

Question. Which of the following is not a characteristic of Bearer Debentures?
(a) They are treated as negotiable instruments.
(b) Their transfer requires a deed of transfer.
(c) They are transferable by mere delivery.
(d) The interest on it is paid to the holder irrespective of identity. 

Question. Which of the following statements is false?
(a) Debenture is a form of public borrowing.
(b) It is customary to prefix debentures with the agreed rate of interest.
(c) Debenture interest is a charge against profits.
(d) The issue price and redemption value of debentures cannot differ 

Question. X Ltd. acquired assets of Rs.20 lakhs and took over creditors of Rs.20 thousand from LLtd. XLtd. issued 8% debentures of Rs.200 each at a discount of 10% as purchase consideration. Number of debentures issued will be :
(a) 11,000
(b) 9,000
(c) 10,000
(d) 10,100 

Question. Globe Ltd. issues 20,000, 9% debentures of Rs. 100 each at a discount of 5% redeemable at the end of 5 years at a premium of 6%. For what amount ‘Loss on Issue of Debentures Account’ will be debited?
(a) Rs. 1,00,000
(b) Rs. 1,20,000
(c) Rs.2,80,000
(d) Rs.2,20,000 

Question. Issued 5,000, 12% debentures of Rs. 100 each at a discount of 2%, redeemable at a premium of 5%. In such case :
(a) Loss on Issue will be Credited by Rs. 10,000.
(b) Loss on Issue will be debited by Rs.35,000.
(c) Premium on Redemption will be debited by Rs.25,000.
(d) Premium on Redemption will be credited by Rs.35,000. 

Question. Issued 4,000, 12% debentures of Rs. 100 each at a premium of 4%, redeemable at a premium of 10%. In such case :
(a) Loss on Issue will be debited by Rs.24,000
(b) Loss on Issue will be debited by Rs.56,000
(c) Loss on Issue will be debited by Rs.40,000
(d) Premium on Redemption will be credited by Rs.24,000

Question. When debentures are issued at a discount, the discount is written off
(a) after debentures have been redeemed.
(b) in the year when debentures are issued,
(c) during the life of the debentures.
(d) None of these.

Question. When debentures are to be redeemed at premium an extra entry has to be made at the time of issue of debentures, which a/c should be credited in this entry?
(a) Loss on issue of debentures a/c
(b) Debenture redemption premium a/c
(c) Bank a/c
(d) Debenture holder’s a/c

Question. Premium on Redemption of Debentures Account is :
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) All of the Above

Question. A ltd took over the assets of Rs 6,60,000 and liabilities of Rs 80,000 of B Ltd for an agreed purchase consideration of Rs 6,00,000 payable 10% in cash and the balance by issue of 15% debentures of Rs 100 each at 10% discount. The number of debentures to be issued is:
(a) 6600
(b) 5400
(c) 6000
(d) 4500

Question. Collateral security means ___________security:
(a) primary
(b) secondary
(c) government
(d) valuable.

Question. Premium received on issue of debentures may be utilised for writing off:
(a) premium allowed on redemption of debentures
(b) writing off preliminary expenses
(c) writing off discount allowed on issue of shares
(d) all of the above.

Question. ABC limited issues 10,000 9% debentures of 100 each at a premium of 5% payable at a premium of10%, the loss on issue of debentures account will be debited to by:
(a) Rs10,00,000
(b) Rs1,00,000
(c) Rs10,50,000
(d) Rs1,05,000

Question. A company can issue debentures
(a) for cash
(b) as a collateral security
(c) for consideration other than cash
(d) any of the above.

Question. When debentures are issued at par and redeemable and premium the loss on such an issue is debited to:
(a) profit and loss account
(b) debenture application and allotment account
(c) loss on issue of debentures account
(d) discount on issue of debentures account.

Question. Rahul, an applicant of 5,000 shares and who was allotted 4,000 shares paid application money of Rs.3 per share but failed to pay allotment money of Rs.5 per share. Though he had paid allotment arrear dues with First call of Rs.2 per share. What amount will be paid by Rahul at the time of first call being received by company to clear his dues?
(a) Rs.8,000
(b) Rs.25,000
(c) Rs.17,000
(d) Rs.28,000

Question. Azab Gazab Ltd. issued 50,000 shares of Rs.10 each issued at Rs.2 premium payable Rs.5 on application (including premium), Rs.4 on allotment and balance on call. Public had applied for 80,000 shares out of which applications for 10,000 shares were rejected. Mr.Mogambo who had applied for 3,500 shares failed to pay allotment and call money and his shares were forfeited. Out of these 2,000 shares were re-issued @Rs.8 per share as fully paid up. What amount of Share Capital will be shown in the Balance Sheet?
(a) Share Capital Rs.4,95,000
(b) Share Capital Rs.5,94,000
(c) Share Capital Rs.4,97,500
(d) Share Capital Rs.5,01,000

Question. A company invited applications for 5,00,000 shares of Rs.10 each. What minimum amount can be asked by the company on application per share?
(a) Rs.2 per share
(b) Rs.3 per share
(c) Rs.0.50 per share
(d) Rs.1 per share

Question. Assertion (A):- Maximum rate of Premium can be 10% of the face value.
Reason (R):- It is restricted by SEBI for maximum rate of Securities Premium at which shares can be issued.
(a) Both A and R are True and R is correct explanation of A
(b) Both A and R are True but R is not the correct explanation of A
(c) A is true but R is false
(d) Both A and R are False

Question. Aladdin Co. Ltd issued 80,000 shares of Rs.10 each payable Rs.3 on Application, Rs.5 on allotment and balance on call. Public had applied for 75,000 shares and all the calls were made. All the money has been duly received except allotment and call money on 6,000 shares held by Gaurav. His shares were forfeited and later on re-issued 4,000 shares @ Rs.12 per share as fully paid up. What amount will be transferred to Capital Reserve?
(a) Rs.18,000
(b) Rs.12,000
(c) Rs.20,000
(d) Rs.6,000

Question. Z Ltd. forfeited 1,000 equity shares of Rs. 10 each issued at a premium of 20% for the non-payment of the final call of Rs. 3 per share. Calculate the maximum amount of discount at which these shares can be reissued.
(a) Maximum permissible discount is Rs.9,000
(b) Maximum permissible discount is Rs.7,000
(c) Maximum permissible discount is Rs.3,000
(d) Shares can’t be re-issued at discount

Question. X Ltd forfeited 1,000 shares of Rs.10 each for non-payment of final call of Rs.4 each. After the reissue of these shares Rs.1,500 were transferred to capital reserve. Shares were reissued for Rs.____
(a) Rs.4,500
(b) Rs.6,000
(c) Rs.5,500
(d) Rs.8,500

Question. Andaaz Ltd. company took over Assets of Rs.20,00,000 and Liabilities of Rs.4,50,000 from Bebaak Ltd. and in consideration issued them 15,000, 12% Preference Shares of Rs.100 each at 20% premium. Which of the following will hold true?
(a) Capital Reserve will be created of Rs.2,50,000
(b) Goodwill will be created of Rs.2,50,000
(c) Capital Reserve will be created of Rs.6,50,000
(d) Goodwill will be created of Rs.6,50,000

Question. Securities Premium Reserve cannot be utilised for which of the following purpose?
(a) Writing off Preliminary Expenses
(b) Issuing Bonus shares to convert partly paid up shares into fully paid up shares
(c) Writing off discount/Loss on Issue of Debentures
(d) Providing for premium payable on redemption of Debentures or Preference Shares

Question. Assertion (A) :- Company may not provide for rate of Interest on calls in Arrears and Interest on calls in advance in their Articles of Association ;
Reason (R) If Articles of Association is silent then Table F of Companies Act,2013 is followed.
(a) Both A and R are True and R is correct explanation of A
(b) Both A and R are True but R is not the correct explanation of A
(c) A is incorrect but R is correct
(d) Both A and R are incorrect.

Question. The company has to get minimum subscription within ___________ from the date of the issue of the prospectus.
(a) 110 days
(b) 120 days
(c) 130 days
(d) 4 months

Question. Statement I :- Premium money received at the time of allotment can be forfeited.
Statement II :-In case of Over-subscription (Pro-rata allotment) Premium money received at the time of Application can only be utilised with premium due on allotment.
(a) Both statements are True
(b) Only Statement I is True.
(c) Both statements are False
(d) Only Statement II is True.

Question. Eena Meena Deeka Ltd. issued 60,000 shares of Rs.10 each issued at Rs.2 premium, payable Rs.2 on application, Rs.7 on allotment (including premium) and balance on call. Public had applied for 80,000 shares out of which applications for 5,000 shares were rejected. Mr.Chandermohan holding 3,000 shares failed to pay allotment money and his shares were forfeited immediately. Out of these 2,000 shares were re-issued @Rs.6 per share as Rs.7 paidup. Final call was not yet made. What will be the balance of Share Forfeited account after re-issue?
(a) Nil
(b) Rs.3,000
(c) Rs.2,500
(d) Rs.7,500

Question. A Company invited applications for 2,00,000 shares of Rs.10 each issued at Rs.10 each payable Rs.3 on application, Rs/.5 on allotment and balance whenever required. Public applied for 2,50,000 shares. Shares were not yet allotted. How will you disclose the above information in Balance Sheet of the company?
(a) Share Application money pending allotment as Rs.7,50,000
(b) Share Application money pending allotment as Rs.6,00,000 and Bank Overdraft of Rs.1,50,000
(c) Share Capital of Rs. 6,00,000 and Share Application money pending allotment of Rs.1,50,000
(d) Share Application money pending allotment as Rs.6,00,000 and Other Current Liabilities of Rs.1,50,000

Question. XYZ limited issued 4000,12% debentures of Rs100 each at a premium of 5% .the total amount ofinterest for one year will be:
(a) 48,000
(b) 58,000
(c) 50,000
(d) 50,400. 

Question. Maximum limit on premium on issue of debentures is
(a) 10%
(b) 20%
(c) 15%
(d) no limit

Question.The rules regarding transfer of DRR to general reserve is mentioned in
(a) Companies Ac 2013
(b) Rule 18(7)
(c) of Companies Rule 2014
(d) All of the above.

Question. If debentures are issued at par and redeemed at a premium then which account will be debited by the amount of premium on debentures.
(a) Discount on issue of debentures
(b Premium on redemption of debentures
(c) Profit and loss account
(d) Loss on issue of debentures

Question. H Limited has outstanding 10,000 , 8% debentures of Rs 100 each that are redeemable at a premium of Rs 10 each. Out of these 5000 debentures are to be redeemed on 31st December 2018.Denture redemption investment should be
(a) 75,000
(b) 82,500
(c) 1,50,000
(d) 1,65,000

Question. Debenture redemption reserve is created
(a) before redemption starts
(b) at the closure of previos accounting year
(c) before 30th April of the current year
(d) all the above.

Question. If debentures of Rs 50,000 are issued at par but redeemable at a premium of 10%. By what principle of accounting, the loss on issue of debentures account will be debited with ` 5,000 while passing the issue entry ?
(a) Principle of Revenue recognition
(b) Principle of Materiality
(c) Principle of Conservatism/Prudence
(d) Principle of Full Disclosure.

Question. Premium on redemption of debentures is a
(a) Liability account
(b) Asset Account
(c) Expense Account
(d) None of these.

Question. Alfa Ltd. issued 20,000, 8% debentures of Rs 10 each at par. The debentures are redeemable at a premium of 20% after 5 years. The amount of loss on redemption of debentures should be:
(a) Rs 50,000
(b) Rs 40,000
(c) Rs 30,000
(d) Rs 16,000

Question. Gaurav Ltd. purchased machinery costing Rs 1,71,000. It was agreed that the purchase consideration be paid by issuing 12% debentures of Rs 100 each. Assume debentures have been issued at a discount of 10%. No. of debentures issued to vendor are:
(a) 1500
(b) 1900
(c) 2000
(d) 2100

Question. X Ltd. has issued 10,000 6% debentures of ` 100 each. The company decided to redeem half of its debentures at 10% premium. There was a balance of ` 3,40,000 in Debenture redemption reserve. As per SEBI guidelines what amount still need to be transferred to Debenture redemption reserve account out of profits.
(a) Rs6,60,000
(b) Rs1,60,000
(c) Rs 5,50,000
(d) Rs 2,75,000

Question. Once the debentures are redeemed, amount of debenture redemption reserve is transferred to
(a) Capital Reserve
(b) Balance in Profit and loss account
(c) General Reserve
(d) Capital Redemption reserve

Question. Debentures cannot be redeemed at
(a) Premium
(b) Discount
(c) more than 10% premium
(d) at Par

Question.The provisions of the Companies Act 2013 in respect of redemption of debentures are to protect the interest of
(a) Debeture holders
(b) Creditors
(c) Share holdres
(d) Bankers

Question. In case the question is silent, DRR is created on the nominal value of outstanding redeemable debentures to the extent of
(a) 25%
(b) 15%
(c) more than 25%
(d) any of the above

Question. Amount is not set aside to Debenture redemption reserve if
(a) The debentures are not convertible
(b) The debentures are partly convertible
(c) The debentures are fully convertible.
(d) None of these.

Question. Premium payable on redemption of debentures is in the nature of
(a) Liability Account
(b) Asset Account
(c) Expense Account
(d) None of these.

Question. G Limited has outstanding 10000 8% debentures of Rs 100 each that are redeemable at a premium of Rs 10.Out of these 5000 debentures are to be redeemed on 31st December 2018 Debenture redemption Investment should be
(a) 75,000
(b) 82,500
(c) 1,50,000
(d) 1,65,000

Question. Best Company Ltd decides to redeem 10000 ,10% debentures of Rs 100 each on 30th June 2018.The Company shall invest in specified securities on or before
(a) 30th April 2017
(b) 30th April 2016
(d) 30th June 2017
(d)30th April 2018

Question. Global savings Bank is to redeem 40000 10% debentures of Rs 100 each on 31st December 2018.How much amount should it invest in specified securities?
(a)6,00,000
(b)10,00,000
(c) 5,00,000
(d) Nil

Question. Amount is not invested in debenture redemption Investment if
(a) Debentures are not convertible
(b) The debentures are partly convertible
(c) The debentures are fully convertible
(d) None of the above.

Question. Amount is set aside to Debenture redemption reserve (DRR) by
(a) All the Companies
(b) All companies except banking companies
(c) All Companies except All India Financial Institutions
(d) All Companies except Banking Company and all India Financial Institutions regulated by RBI. 

Question. Debenture is:
(a) written instrument acknowledging a debt written by its holder.
(b) An oral acknowledgement of debt by a company
(c) A written instrument acknowledging a debt written by its company
(d) None of these.

Question. Interest on debenture is calculated on:
(a) its face value
(b) its issue price
(c) its book value
(d) its cost price.

Question. What is the nature of premium on redemption of debenture account
(a) Real account
(b) nominal account
(c) personal account
(d) none of the above.

Question. When the number of debentures applied is less than number of debentures offered to public the issueis said to be :
(a) oversubscribed
(b) under subscribe
(c) Fully subscribed
(d) none of the above.

Question. 10% debenture issued at Rs105 is repayable at Rs110, the face value of debenture being Rs100.Calculate the amount of loss on redemption of debentures:
(a) 10
(b) 5
(c) 15
(d) 25.

Question. Debentures that do not carry any charge or security on assets of the company are known as:
(a) secured debentures
(b) unsecured debentures
(c) convertible debentures
(d) registered debentures.

Question. Debenture interest:
(a) is payable only in case of profits
(b) accumulates in case of losses are inadequate profits
(c) is payable irrespective of profit or loss
(d) none of the above.

FILL IN THE BLANKS:

Question. Amount to be set aside to ____________before redemption of debentures. 

Question. Debenture Redemption Investment should be made _____________30th April of the year in which debentures re redeemed. 

Question. Once the debentures re redeemed ,amount of DRR is transferred to .___

Question. Debentures are redeemed setting aside 25% of the nominal value of debentures to Debenture Redemption Reserve .It is redemption out of ._________

Question. Discount or loss on issue of debentures is a .___ 

State True of False

Question. General Reserve can be transferred to Debenture Redemption Reserve. 

Question. Surplus cannot be transferred to Debenture Redemption Reserve.  

Question. Debenture Redemption Investment can be used by the Company for any purpose after the debentures have been redeemed

Question. Debenture Redemption Investment is made by companies required to set aside amount to Debenture redemption Reserve. 

Question. Debenture redemption reserve may be set aside by a company out of any reserve.

Question. If X ltd purchased plant worth Rs5 lakh from Y ltd but agreed to issue 5250 10% Debentures ofRs100 each to Vendor. The difference in the amount will be adjusted in ____________

Question. If X ltd issued 1,000; 10% Debentures of Rs100 each at a discount of 5% but redeemable after 4years at a premium of 6%, loss on issue of Debentures a/c will be debited by   Rs11,000

Question. __________________Debentures are not secured with a specific asset rather they are secured on allthe assets of the company in general. 

Question. _____________is the rate at which interest is payable on Debentures.  

Question. Interest on debentures is paid on the _____________of Debentures. 

Question. Debenture Redemption Reserve is being made/created by _________A/c.

Question. Discount on issue of debenture is ________loss of the company.

Question. Security premium reserve A/c is shown _______side of the balance sheet under the head______

Question. A company can issue debenture with voting rights 

Question. Debenture issued at a discount can be redeemed at premium   

Question. Only redeemable debentures are compulsory redeemed   

Question. Debenture premium cannot be used to pay dividend 

Question. When debentures are redeemed liability on account of debentures is increased 

Question. Security premium reserve account will be debited at the time of debenture redeemed on premium   

 Question. Issue of 10000, 9% debenture of Rs. 100 each as collateral security for bank loan Rs. 100000. In this case debenture suspense a/c will be debited by debenture a/c   

Question. A ltd purchased machinery worth rs.198000. the payment made by issue of debenture of Rs 100 each at 10% discount. In this case no. of debenture will be 2200   

Question. A company redeemed 100, 7% debentures of Rs.100 each on premium of 5%. Premium for redemption a/c will be debited by 700   

Question. A company redeemed 10000, 7% debenture of Rs. 100 each at par. The DRR amount will be transfer to general reserve Rs. 25000   

1.Debentures are transferable by Mere Delivery	a. Registered Debentures
2.Debentures redeemable either in Lump Sum or Installments.	b. Bearer Debentures
	c. Convertible Debentures
	d. Redeemable Debentures

1.Excess Value of Net Assest consideration.	a. General Reserve
2.Excess of Purchase consideration over Value of net assest	b. Capital Reserve
	c. Vendor’s Account
	d. Goodwill Account

1.Company issued 4000 12% Debentures of Rs.100/- each at 5%Premium.Calculate Interest.	a.Nominal value of Debentures
2.Company issued 10000 12% debenture of Rs.100/- each at 5% premium and redeemable at 10% premium. Calculate loss on Issue of Debentures	b.Paid up value of Debentures
	c.No interest is paid.
	d.Called value of debenture

1. As per SEBI Guidelines: Amount transferred to Debentures Redemption Reserve:	a.50%
a. Redemtion out of Profit	b.25%
b. Redemption other than profit	c.80%
	d.100%

1.Premium on Redemption of Debentures Account is a:	a.Real Account
2.Loss on issue of Debenture is a :	b.Nominal Account
	c.Personal Account

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