Debentures are a type of:
a) Equity capital
b) Debt instrument
c) Current liability
d) Revenue reserve
Debenture holders are considered as:
a) Owners of the company
b) Creditors of the company
c) Directors of the company
d) Shareholders of the company
Which of the following statements is TRUE about debentures?
a) They represent ownership interest in the company
b) They provide long-term financing to the company
c) They do not carry a fixed rate of interest
d) They can only be issued at a premium
Debentures that can be converted into shares at a later date are called:
a) Secured debentures
b) Convertible debentures
c) Redeemable debentures
d) Perpetual debentures
A company issuing debentures at a price higher than their face value is issuing them at:
a) Par
b) Discount
c) Premium
d) Loss
Which type of debenture is backed by a specific asset of the company?
a) Secured debenture
b) Unsecured debenture
c) Convertible debenture
d) Perpetual debenture
Debenture interest is treated as:
a) Dividend
b) Operating expense
c) Taxable income
d) Financial expense
Debentures that do not have a fixed maturity date are called:
a) Redeemable debentures
b) Irredeemable debentures
c) Secured debentures
d) Convertible debentures
What is the journal entry for the issue of debentures at a discount?
a) Bank A/c Dr.
Discount on Debentures A/c Dr.
To Debentures A/c
b) Bank A/c Dr.
To Debentures A/c
c) Debentures A/c Dr.
To Bank A/c
d) Bank A/c Dr.
Securities Premium A/c Dr.
To Debentures A/c
Discount on Debentures A/c Dr.
To Debentures A/c
Debenture interest is paid on:
a) Market value of debentures
b) Face value of debentures
c) Book value of debentures
d) Net asset value of the company
Which account is credited when debenture interest is paid?
a) Debenture Interest A/c
b) Bank A/c
c) Debenture A/c
d) Interest Payable A/c
Premium on redemption of debentures is recorded as:
a) Revenue expenditure
b) Capital expenditure
c) Loss on redemption
d) Liability
Which account is debited when debenture interest is accrued but not paid?
a) Interest Payable A/c
b) Debenture Interest A/c
c) Debentures A/c
d) Bank A/c
Debenture holders receive interest:
a) Annually
b) Quarterly
c) Semi-annually or annually
d) Only at redemption
Which of the following is NOT a feature of debentures?
a) Fixed interest payment
b) Voting rights
c) Long-term borrowing instrument
d) Can be secured or unsecured
Which method is commonly used to redeem debentures?
a) LIFO method
b) Sinking fund method
c) FIFO method
d) Weighted average method
Which account is credited when debentures are issued at a premium?
a) Securities Premium A/c
b) Discount on Debentures A/c
c) Debenture Interest A/c
d) Bank A/c
The face value of a debenture is also called its:
a) Market value
b) Issue price
c) Nominal value
d) Fair value
Which type of debenture can be exchanged for shares at a future date?
a) Irredeemable debenture
b) Convertible debenture
c) Secured debenture
d) Redeemable debenture
When a company issues debentures at a discount, the discount is treated as:
a) Capital profit
b) Capital loss
c) Revenue income
d) Revenue expenditure
What is the main advantage of issuing debentures?
a) No repayment is required
b) No fixed interest obligation
c) Tax savings on interest expense
d) Debenture holders get voting rights
The repayment of debentures is known as:
a) Conversion
b) Redemption
c) Capitalization
d) Depreciation
If debentures are redeemed before maturity, it is called:
a) Conversion
b) Early redemption
c) Liquidation
d) Amortization
A debenture trust deed is created to protect the interest of:
a) Shareholders
b) Debenture holders
c) Employees
d) Creditors
Debentures can be issued as collateral security for loans. This means they are:
a) Unsecured
b) Secured but conditional
c) Issued to the public
d) Redeemable
Debenture holders receive their interest:
a) Only when the company makes a profit
b) Before preference shareholders
c) After equity shareholders
d) At the discretion of the company
