Chapter Exam

Chapter 6: Issue of Debentures — Online MCQ Test

Q: A debenture is generally regarded as a:

Answer: B. Certificate of debt issued by a company — A debenture is an acknowledgement of debt by a company. It represents borrowed funds and not ownership capital.

Q: In the Balance Sheet of a company, debentures are normally shown under:

Answer: B. Non-current Liabilities — Debentures are long-term borrowings of a company. Therefore, they are generally shown under Non-current Liabilities.

Q: A secured debenture is one which is:

Answer: C. Secured by a charge on assets of the company — Secured debentures carry a charge on the assets of the company. This provides security to debentureholders.

Q: Premium received on issue of debentures is credited to:

Answer: C. Securities Premium Reserve Account — Premium on issue of debentures is a capital receipt. It is credited to Securities Premium Reserve Account.

Q: A company issued 1,000 debentures of ₹100 each at par. What amount will be credited to Debentures Account?

Answer: B. ₹1,00,000 — Debentures Account is credited with the nominal value of debentures issued. Here, 1,000 × ₹100 = ₹1,00,000.

Q: A company issued 500 debentures of ₹100 each at a premium of 10%. The amount credited to Securities Premium Reserve Account will be:

Answer: A. ₹5,000 — Premium is 10% of ₹100 = ₹10 per debenture. For 500 debentures, securities premium = 500 × ₹10 = ₹5,000.

Q: A company issued 1,000 debentures of ₹100 each at 10% discount, redeemable at 10% premium. What is the total amount debited to Loss on Issue of Debentures Account?

Answer: B. ₹20,000 — Loss includes discount on issue of ₹10,000 and premium on redemption of ₹10,000. Total loss = ₹20,000.

Q: A company purchased assets of ₹8,00,000 and took over liabilities of ₹2,00,000. Purchase consideration was settled by issuing debentures of ₹100 each at 10% discount. How many debentures were issued if purchase consideration was ₹5,40,000?

Answer: B. 6,000 debentures — Issue price per debenture = ₹100 - 10% = ₹90. Number of debentures = ₹5,40,000 ÷ ₹90 = 6,000.

Q: A company purchased a business for ₹7,20,000 and discharged the purchase consideration by issuing debentures of ₹100 each at 20% premium. How many debentures were issued?

Answer: A. 6,000 debentures — Issue price per debenture = ₹100 + 20% = ₹120. Number of debentures = ₹7,20,000 ÷ ₹120 = 6,000.

ACCOUNTANCY · Grade 12 · CBSE(NCERT)

Practice Chapter 6: Issue of Debentures with a free chapter-wise online MCQ test for CBSE(NCERT) Grade 12 ACCOUNTANCY. This chapter covers: Debentures Corporate Debt Issue of Debentures Discount Premium Redemption Collateral Security Debenture Redemption Journal Entries Long Term Borrowings Consideration Other Than Cas.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 6: Issue of Debentures — Important Questions & Answers (FAQ)

Frequently asked questions from CBSE(NCERT) Grade 12 ACCOUNTANCY — Chapter 6: Issue of Debentures, with answers and explanations. These are sample questions; the exam has its own separate question set.

A debenture is generally regarded as a:

A. Certificate of ownership in a company
B. Certificate of debt issued by a company ✓
C. Part of share capital
D. Reserve created out of profit

Answer: B. Certificate of debt issued by a company
A debenture is an acknowledgement of debt by a company. It represents borrowed funds and not ownership capital.

In the Balance Sheet of a company, debentures are normally shown under:

A. Shareholders' Funds
B. Non-current Liabilities ✓
C. Current Assets
D. Reserves and Surplus

Answer: B. Non-current Liabilities
Debentures are long-term borrowings of a company. Therefore, they are generally shown under Non-current Liabilities.

A secured debenture is one which is:

A. Issued free of interest
B. Issued only to directors
C. Secured by a charge on assets of the company ✓
D. Always issued at discount

Answer: C. Secured by a charge on assets of the company
Secured debentures carry a charge on the assets of the company. This provides security to debentureholders.

Premium received on issue of debentures is credited to:

A. Statement of Profit and Loss
B. Debenture Application Account
C. Securities Premium Reserve Account ✓
D. Discount on Issue of Debentures Account

Answer: C. Securities Premium Reserve Account
Premium on issue of debentures is a capital receipt. It is credited to Securities Premium Reserve Account.

A company issued 1,000 debentures of ₹100 each at par. What amount will be credited to Debentures Account?

A. ₹90,000
B. ₹1,00,000 ✓
C. ₹1,10,000
D. ₹10,000

Answer: B. ₹1,00,000
Debentures Account is credited with the nominal value of debentures issued. Here, 1,000 × ₹100 = ₹1,00,000.

A company issued 500 debentures of ₹100 each at a premium of 10%. The amount credited to Securities Premium Reserve Account will be:

A. ₹5,000 ✓
B. ₹50,000
C. ₹55,000
D. ₹45,000

Answer: A. ₹5,000
Premium is 10% of ₹100 = ₹10 per debenture. For 500 debentures, securities premium = 500 × ₹10 = ₹5,000.

A company issued 1,000 debentures of ₹100 each at 10% discount, redeemable at 10% premium. What is the total amount debited to Loss on Issue of Debentures Account?

A. ₹10,000
B. ₹20,000 ✓
C. ₹90,000
D. ₹1,10,000

Answer: B. ₹20,000
Loss includes discount on issue of ₹10,000 and premium on redemption of ₹10,000. Total loss = ₹20,000.

A company purchased assets of ₹8,00,000 and took over liabilities of ₹2,00,000. Purchase consideration was settled by issuing debentures of ₹100 each at 10% discount. How many debentures were issued if purchase consideration was ₹5,40,000?

A. 5,400 debentures
B. 6,000 debentures ✓
C. 4,860 debentures
D. 8,000 debentures

Answer: B. 6,000 debentures
Issue price per debenture = ₹100 - 10% = ₹90. Number of debentures = ₹5,40,000 ÷ ₹90 = 6,000.

A company purchased a business for ₹7,20,000 and discharged the purchase consideration by issuing debentures of ₹100 each at 20% premium. How many debentures were issued?

A. 6,000 debentures ✓
B. 7,200 debentures
C. 8,640 debentures
D. 5,760 debentures

Answer: A. 6,000 debentures
Issue price per debenture = ₹100 + 20% = ₹120. Number of debentures = ₹7,20,000 ÷ ₹120 = 6,000.

A company issued 1,500 debentures of ₹100 each at 5% premium, redeemable at 10% premium. Which combination is correct?

A. Securities Premium Reserve ₹7,500 and Premium on Redemption ₹15,000 ✓
B. Securities Premium Reserve ₹15,000 and Premium on Redemption ₹7,500
C. Loss on Issue of Debentures ₹7,500 only
D. Bank received ₹1,35,000 and Debentures credited ₹1,50,000

Answer: A. Securities Premium Reserve ₹7,500 and Premium on Redemption ₹15,000
Issue premium = 1,500 × ₹5 = ₹7,500, credited to Securities Premium Reserve. Redemption premium = 1,500 × ₹10 = ₹15,000, credited to Premium on Redemption of Debentures.

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