Question 1: What are debentures?
A) Equity shares
B) Short-term loans
C) Long-term loans
D) Cash reserves
Answer: C) Long-term loans
Question 2: Which type of debenture can be converted into equity shares?
A) Redeemable debentures
B) Non-convertible debentures
C) Convertible debentures
D) Secured debentures
Answer: C) Convertible debentures
Question 3: Debentures with no specific assets pledged as collateral are called:
A) Secured debentures
B) Unsecured debentures
C) Convertible debentures
D) Registered debentures
Answer: B) Unsecured debentures
Question 4: Debentures that cannot be redeemed before maturity are known as:
A) Convertible debentures
B) Irredeemable debentures
C) Secured debentures
D) Registered debentures
Answer: B) Irredeemable debentures
Question 5: The rate of interest on debentures is known as:
A) Coupon rate
B) Market rate
C) Discount rate
D) Face value rate
Answer: A) Coupon rate
Question 6: Debentures that are repayable on a fixed date are called:
A) Irredeemable debentures
B) Convertible debentures
C) Redeemable debentures
D) Non-convertible debentures
Answer: C) Redeemable debentures
Question 7: The date on which the company is legally bound to repay the debentures is known as:
A) Issue date
B) Maturity date
C) Conversion date
D) Redemption date
Answer: D) Redemption date
Question 8: Debentures that are backed by the company's assets are called:
A) Convertible debentures
B) Registered debentures
C) Secured debentures
D) Unsecured debentures
Answer: C) Secured debentures
Question 9: Which document contains the terms and conditions of the debentures?
A) Prospectus
B) Balance sheet
C) Memorandum of Association
D) Debenture deed
Answer: D) Debenture deed
Question 10: Which account is debited when debentures are issued at a premium?
A) Debenture Discount Account
B) General Reserve Account
C) Debenture Redemption Reserve Account
D) Debenture Premium Account
Answer: D) Debenture Premium Account
Question 11: Debenture holders are considered as:
A) Creditors of the company
B) Shareholders of the company
C) Directors of the company
D) Auditors of the company
Answer: A) Creditors of the company
Question 12: When debentures are issued, which account is credited?
A) Debenture Discount Account
B) Debenture Redemption Reserve Account
C) Debenture Premium Account
D) Debenture Suspense Account
Answer: B) Debenture Redemption Reserve Account
Question 13: What is the purpose of creating a Debenture Redemption Reserve (DRR)?
A) To redeem debentures
B) To pay dividends
C) To invest in stocks
D) To purchase assets
Answer: A) To redeem debentures
Question 14: Which type of debenture is listed on the stock exchange?
A) Registered debentures
B) Unsecured debentures
C) Secured debentures
D) Non-convertible debentures
Answer: A) Registered debentures
Question 15: What is the journal entry for the redemption of debentures?
A) Debit: Debenture Redemption Reserve; Credit: Debentures
B) Debit: Debentures; Credit: Debenture Redemption Reserve
C) Debit: Debentures; Credit: Bank
D) Debit: Bank; Credit: Debentures
Answer: B) Debit: Debentures; Credit: Debenture Redemption Reserve
Remember that these questions are for educational purposes, and it's always a good practice to cross-reference them with your study materials to ensure accuracy. If you need more questions or explanations, feel free to ask!
Certainly! Here are 15 more multiple-choice questions (MCQs) along with their answers related to the topic of issuing debentures in the field of accountancy:
Question 16: What is the purpose of issuing debentures by a company?
A) To increase share capital
B) To generate short-term funds
C) To provide long-term loans
D) To distribute dividends
Answer: C) To provide long-term loans
Question 17: Which type of debenture offers no interest but is issued at a discount?
A) Irredeemable debentures
B) Zero-coupon debentures
C) Convertible debentures
D) Secured debentures
Answer: B) Zero-coupon debentures
Question 18: What is the main advantage of issuing convertible debentures?
A) Higher coupon rate
B) No repayment required
C) Potential equity infusion
D) Lower interest rates
Answer: C) Potential equity infusion
Question 19: When a company fails to pay interest on debentures, it is considered:
A) Debenture redemption
B) Debenture forfeiture
C) Debenture premium
D) Debenture default
Answer: D) Debenture default
Question 20: Which financial statement reports the details of issued debentures?
A) Balance Sheet
B) Income Statement
C) Cash Flow Statement
D) Trial Balance
Answer: A) Balance Sheet
Question 21: What is the journal entry for the issue of debentures at a discount?
A) Debit: Discount on Debentures; Credit: Debentures
B) Debit: Bank; Credit: Debentures
C) Debit: Debentures; Credit: Discount on Debentures
D) Debit: Discount on Debentures; Credit: Bank
Answer: A) Debit: Discount on Debentures; Credit: Debentures
Question 22: What is the term for the amount that a company sets aside each year to redeem debentures?
A) Redemption fund
B) Debenture premium
C) Interest expense
D) Debenture discount
Answer: A) Redemption fund
Question 23: Which type of debenture can be converted into equity shares at the option of the holder?
A) Compulsory convertible debentures
B) Optional convertible debentures
C) Redeemable debentures
D) Irredeemable debentures
Answer: B) Optional convertible debentures
Question 24: What is the role of a Debenture Trustee?
A) Issue debentures on behalf of the company
B) Monitor the company's finances
C) Protect debenture holder interests
D) Redeem debentures on maturity
Answer: C) Protect debenture holder interests
Question 25: What is the effect of issuing debentures on the company's ownership?
A) Increases ownership
B) Decreases ownership
C) No effect on ownership
D) Transfers ownership to creditors
Answer: C) No effect on ownership
Question 26: Which method of debenture redemption involves repurchasing the debentures in the open market?
A) Sinking fund method
B) Redemption by conversion
C) Purchase in the open market
D) Debenture exchange
Answer: C) Purchase in the open market
Question 27: What is the purpose of a Debenture Redemption Reserve (DRR)?
A) To invest in profitable ventures
B) To pay interest on debentures
C) To redeem debentures at maturity
D) To distribute dividends to shareholders
Answer: C) To redeem debentures at maturity
Question 28: Which type of debenture is backed by the company's future earnings?
A) Convertible debentures
B) Secured debentures
C) Unsecured debentures
D) Registered debentures
Answer: C) Unsecured debentures
Question 29: What is the main difference between debentures and equity shares?
A) Debentures offer voting rights, while equity shares do not.
B) Debentures provide ownership in the company, while equity shares don't.
C) Debentures offer fixed interest, while equity shares offer dividends.
D) Debentures are issued to founders, while equity shares are sold to the public.
Answer: C) Debentures offer fixed interest, while equity shares offer dividends.
Question 30: Which financial ratio assesses the company's ability to meet its interest payments?
A) Current ratio
B) Debt-Equity ratio
C) Interest Coverage ratio
D) Return on Equity (ROE)
Answer: C) Interest Coverage ratio
Feel free to use these questions for your studies, and if you need more questions or explanations, please let me
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