Please refer to Chapter 2 Issue and Redemption of Debentures MCQ Class 12 Accountancy with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Accountancy. Students should refer to MCQ Questions for Class 12 Accountancy with Answers to score more marks in Grade 12 Accountancy exams. Students should read the chapter Issue and Redemption of Debentures and then attempt the following objective questions.

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

Issue and Redemption of Debentures MCQ Class 12 Accountancy provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

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

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 Liabilities
(b) Other Non current Assets
(c) Other Current assets
(d) None of the options

Question: In case of debenture of RS 10,000 are issued at par but redeemable at a premium of 10% , The premium payable is debited to :
(a) Debenture suspense account
(b) Premium on redemption of debentures
(c) Loss on issue of debentures
(d) A & B both

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 issue is said to be :
(a) oversubscribed
(b) under subscribe
(c) Fully subscribed
(d) none of the above

Question: Debenture holder account are :
(a) Personal
(b) Real
(c) Nominal
(d) None of the above

Question: Discount or loss of issue of debenture to be written off after 12 months from the date of balance sheet or after the period of operating cycle in shown as :
(a) Other current assets
(b) Other non current assets
(c) Other long term liability
(d) Other current liabilities

Question: TP Ltd decided to redeem 1000, 10 % debenture of Rs 100 each redeemable at 10% premium . The company will have to invest in specified securities at least :
(a) 15000
(b) 16500
(c) 25000
(d) 27500

Question: Which of the following is true with regard to 10% Debentures issued at a discount of 20%
(a) The face value and the carrying amount of debentures are equal.
(b) The carrying amount of debentures gets reduced each year at a rate of 20%
(c) Issue price and the carrying amount of debentures are equal
(d) At the time of redemption, the debenture holder will be paid the issue price

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

Question: United Ltd is to redeem 40,000 10% Debenture of Rs 100 each on 31st December 2017. How much amount should it invest in specified securities :
(a) Rs 600000
(b) Rs 1000000
(c) Rs 500000
(d) Nil

Question: A company issued 1000 7% Debentures of Rs 100 at 5% Discount and Repayable at 10 % Premium .What will be the amount of Loss on issue of Debentures.:
(a) Rs 10,000
(b) Rs 20,000
(c) Rs 15,000
(d) Rs 30,000.

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

Question: ABC limited issues 10,000 9% debentures of 100 each at a premium of 5% payable at a premium of 10%, 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: 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: Debenture holder are
(a) The creditors of the company
(b) The owners of the company
(c) The vendors of the company
(d) None of the options

Question: Debenture interest is paid
(a) 25% of Profit
(b) At variable rate
(c) At a pre determined rate
(d) None of the options

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

Question: The provision of companies act 2013 in respect of redemptions of debentures are to protect the interest of :
(a) Debenture holders
(b) Creditors
C ) shareholders
(d) Bank

Question: At the time of issue of debentures , debentures account is :
(a) Credited by the amount Received
(b) Credited by the issue price of the debentures
(c) Credited by nominal value of the debenture
(d) none of the above

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 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: 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: Perpetual debentures are also known as
(a) Unsecured Debentures
(b) Secured Debentures
(c) Irredeemable debentures
(d) None of the options

Question: Debenture premium cannot be used to
(a) Write off capital loss
(b) Write off the discount on issue of shares or debentures
(c) Write off the premium on redemption of shares or debentures
(d) Pay dividends

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: 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.

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: 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) Rs 6,60,000
(b) Rs 1,60,000
(c) Rs 5,50,000
(d) Rs 2,75,000

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
(c) Section 71(4) of Companies (Share Capital and Debentures) Rules,2014
(d) All of the above.

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

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

Question: Which is an agreement between the company and the trustees to look after the interest of debenture holders.
(a) Debenture trust deed
(b) Partnership deed
(c) Both
(d) None of the options

Question: A company can not issue
(a) Share
(b) Debentures with voting rights
(c) Debentures
(d) None of the options

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: 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: 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: Which of the following is/are true with respect to debentures?
(a) They can be issued for consideration other than cash
(b) They can be issued for cash
(c) Both
(d) None of the options

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

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: 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: 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: As per the Companies Act, Interest accrued and due on debentures should be shown Under
(a) Capital
(b) Debentures
(c) Shares
(d) None of the options

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

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

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: 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: Which of the following statements is true?
(a) A debenture issued at a discount can be redeemed at a premium
(b) A debenture holder is an owner of the company
(c) A debenture holder can get his money back only on the liquidation of the company
(d) A debenture holder receives interest only in the event of profits

Question: Which of the following statements is false?
(a) A company can issue convertible debentures
(b) Debentures cannot be secured
(c) A company can issue redeemable debentures
(d) Debentures have no right to participate in profits over and above their fixed interest

Question: Loss on issue of debentures is treated as
(a) Miscellaneous expenditure
(b) Intangible asset
(c) Current asset
(d) Current liability

Question: A Company issued 5,000 12% Debentures of Rs 100 each at 10 % Discount and Repayable at 10 % Premium . Interest on Debentures are payable half yearly on which Tax deducted at source of 10% p.a. what will the amount of tax deduction of a year :
(a) Rs 3,000
(b) Rs4,000
(c) Rs 5,000
(d) Rs 6,000

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) Shareholdres
(d) Bankers

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

Question: Secured Debentures is known as
(a) Unsecured Debentures
(b) Naked debentures
(c) Mortgage debentures
(d) None of the options

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

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: Unsecured Debentures is known as
(a) Secured Debentures
(b) Mortgage debentures
(c) Simple or Naked debentures
(d) None of the options

Question: Debentures are shown in the balance sheet of a company under the head of
(a) Non current Liabilities
(b) Current Liabilities
(c) Share Capital
(d) None of the options

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
(c) 30th June 2017
(d) 30th April 2018

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

Question: When debentures are issued at discount and redeemable at a premium which one of the following account 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 not true about debenture stock:
(a) It must be fully paid.
(b) Debenture stock are identified by their distinct number
(c) Debenture Stock can be transferred in fraction.
(d) None of the options

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

Question: ABC took over the assets of Rs7,60,000 and liabilities of Rs80,000 of Y limited for purchase consideration of Rs5,85,000 payable by the issue of 12% debentures of Rs100 each at a discount of 10%. The number of debentures to be issued is:
(a) 6600
(b) 6500
(c) 4500
(d) 5400

Question: When debentures are issued as collateral security, the final entry for recording the transaction in the books is
(a) Debit debenture suspense a/c. and credit debentures a/c.
(b) Credit debentures a/c. and debit cash a/c.
(c) Debit debenture suspense a/c. and credit cash a/c.
(d) None of the options

Question: Which of the following is false with respect to debentures?
(a) They can be issued as collateral security
(b) They can be issued for cash
(c) They can be issued for consideration other than cash
(d) They can be issued in lieu of dividends

1. Over – subscription	a) Number of shares applied less than offered
2. Under – subscription	b) Number of shares applied equal than offered
	c) Number of shares applied more than offered

1. Capital Reserve	a) Created out of uncalled capital
2. Reserve Capital	b) Created out of revenue profits
	c) Created out of capital profits

1.shares issued to promoters	a) Issue expenses
2.Shares issued to underwriters	b) Incorporation cost
	c) Underwriting commission
	d) Call in arrears

1.when shares are reissued at value less than face value	a) Securities premium Reserves
2. When shares are reissued at value more than face value	b) Discount on issue of shares
	c) Share forfeiture
	d) Call in advance

1.At the time of forfeiture of shares share capital is debited with	a) Amount received
2.At the time of forfeiture of shares share Forfeiture is Credited with	b) Amount not received
	c) Amount demanded
	d) Calls in advance

1.Maximum amount of discount at the time of reissue of shares	a) Amount Received
2.Minimum amount at which shares can be reissued	b) Amount not received
	c) Amount demanded
	d) Calls in advance

1.Purchase consideration is more than net worth	a) Capital Reserve
2.Purchase consideration is less than net worth	b) Assets
	c) Goodwill
	d) vendor

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