Question by CA (Dr.) G.S.GREWAL, Series – 26

Issue of Debentures

True / False

  1. Collateral Security is the main or principal security mortgaged for loan taken by the company.

Fill in the Blank

  1. Securities Premium Reserve Account is shown on __________ side of the Balance Sheet under ____________.

Multiple Choice Question

  1. Debentures issued as collateral security will be debited to:-
  2. a) Debenture Application and Allotment Account
  3. b) Debenture Suspense Account
  4. c) Bank Account
  5. d) Bank Loan Account

Answer – Question by CA (Dr.) G.S.GREWAL, Series – 26

True/False

  1. False

Reason: It is secondary or additional security besides the main security because it is a security given for the loan where the company is not in a position to give security of physical nature.

Fill in the Blank

  1. Liabilities, Reserves and Surplus

Multiple Choice Question

  1. (b)

Reason: Debenture Suspense Account will be debited at the time of issue of Debentures as Collateral Security.

Question by CA (Dr.) G.S.GREWAL, Series – 27

Redemption of Debentures                                                                                                   

True / False

  1. Redemption out of profit means the company shall set aside amount equal to 100% of the nominal (face) value of debentures to DRR.

Fill in the Blank

  1. After redemption of debentures, proportionate amount from Debenture Redemption Reserve Account may be transferred to _______________ Account.

Multiple Choice Question

  1. What is the nature of ‘Premium on Redemption of Debentures Account’?
  2. a) Real
  3. b) Nominal
  4. c) Personal
  5. d) Expense

Answer – Question by CA (Dr.) G.S.GREWAL, Series – 27

True/False

  1. True

Reason: Out of profits means source of redemption is surplus or profit of the company distributable among shareholders as dividend in the form of bonus issue. If DRR is created of amount lower than 100%, it is redemption partly out of profits.

Fill in the Blank

  1. General Reserve

Multiple Choice Question

  1. (c)

Reason: ‘Premium on Redemption of Debentures Account’ is a personal account since it is payable to Debenture holders. It can be termed as Representative Personal Accounts because of showing premium payable to each Debenture holder, it is shown as a single amount.

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