Types, Issue, and Redemption of Debentures MCQ
MCQ on Debentures is an essential topic in class 12 Accountancy and competitive exam preparation. Understanding multiple-choice questions (MCQs) on debentures helps students master concepts like types, issue, redemption, and accounting treatment. These questions are commonly asked in board exams and serve as a strong foundation for future business knowledge and practice.
| Type of Debenture | Key Feature | Example |
|---|---|---|
| Bearer Debenture | Transferable by delivery | Interest paid to holder regardless of identity |
| Registered Debenture | Transfer needs registration | Interest paid to registered owner |
| Convertible Debenture | Can convert into shares | Option after lock-in period |
| Non-convertible Debenture | Cannot convert to shares | Redeemed in cash only |
| Secured Debenture | Backed by company assets | Mortgage debentures |
| Unsecured Debenture | No security attached | Simple debentures |
Debentures MCQ Questions and Answers
Practicing MCQ on Debentures ensures students can quickly grasp important differences, features, and accounting entries. At Vedantu, our experts design conceptual and application-based MCQs for real exam scenarios.
- Debenture holders are: Creditors of the company
- Debentures indicate: Long-term borrowings of the company
- Interest payable on debentures is: A charge against profits
- A debenture holder receives: Fixed-rate interest
- On liquidation, debenture holders have priority for: Principal and interest
Types of MCQ on Debentures
Debenture MCQs test various aspects like classification, legal rights, accounting entries, and practical application. Below are some sample categories:
- Types and features of debentures
- Issue and redemption process
- Accounting treatment for discounts and premiums
- Difference between shares and debentures
- Interest calculation and rights of holders
Issue and Redemption of Debentures: MCQ Focus
MCQs commonly cover the processes of debenture issue, such as at par, at a discount, or premium, as well as the methods of redemption. Students should recognize account names, entries, and when to use which process. For example, issue of debentures may be linked to application, allotment, and payment terms, while redemption of debentures questions focus on due dates, payment methods, and legal requirements.
Accounting for Debentures: Important MCQs
MCQs also assess the accounting entries related to debentures. These include interest payments, discount amortization, and the distinction between capital and revenue losses. For a deeper understanding, students can refer to Interest on Debenture and Non-Current Liabilities pages on Vedantu.
Practice Set: Debenture MCQs with Solutions
Below are ten practice MCQs on debentures. Attempt them to assess your preparation:
- Debenture holders are (A) Debtors, (B) Creditors, (C) Owners, (D) Shareholders — Answer: B
- Debentures indicate (A) Short-term loan, (B) Reserves, (C) Long-term borrowing, (D) Equity investment — Answer: C
- Interest on debenture is (A) Appropriation of profits, (B) Charge against profits, (C) Profit, (D) None — Answer: B
- Bearer debentures are (A) Transferable by deed, (B) Not negotiable, (C) Transferable by delivery, (D) Registered — Answer: C
- Debentures can be shown in the balance sheet under (A) Current liabilities, (B) Capital, (C) Non-current liabilities, (D) Fixed assets — Answer: C
- Convertible debentures can be (A) Redeemed for cash only, (B) Converted into shares, (C) Issued at premium only, (D) Issued to promoters only — Answer: B
- When a debenture is issued at discount, the loss is called (A) Revenue loss, (B) Deferred revenue expenditure, (C) Capital loss, (D) Trading loss — Answer: B
- Interest on debenture is paid (A) If there is profit, (B) If there are reserves, (C) Regardless of profit, (D) Only after dividends — Answer: C
- Debenture Application A/c is a (A) Personal account, (B) Real account, (C) Nominal account, (D) Suspense account — Answer: A
- Debentures with fixed security are called (A) Secured debentures, (B) Unsecured debentures, (C) Shared debentures, (D) Bearer debentures — Answer: A
Download Debenture MCQ PDF
For offline study or quick revisions, students can download a compiled PDF of MCQ on Debentures with answer keys. Get access to expertly designed practice sets from Vedantu that support class 12 board, CA Foundation, and competitive exams.
Further Learning on Debentures
Make your learning comprehensive by exploring more related Commerce topics on Vedantu:
- Types of Debentures – Learn detailed feature-wise classification.
- Issue of Debentures – Step-by-step guide to journal entries and issue procedure.
- Redemption of Debentures – In-depth explanation of redemption methods.
- Difference Between Convertible and Non-Convertible Debentures – Clear out typical exam confusion.
- Issue of Debentures as Collateral Security – Understand security aspects in borrowing.
- TS Grewal Solutions Chapter: Debentures – Solved textbook MCQs and comprehensive solutions.
In summary, MCQ on Debentures is a vital topic for Commerce students aiming to excel in school and competitive exams. By understanding the concept, types, issue, redemption, and accounting treatments of debentures, students build a strong foundation for advanced accounting and finance studies. Practice and proper conceptual clarity are keys to success, supported by resources from Vedantu.
FAQs on Debentures MCQ Practice Questions with Answers
1. What is a debenture?
A debenture is a long-term debt instrument issued by a company to raise capital. It represents a loan the company receives, with a promise to repay the principal amount plus interest at a specified rate and time.
2. What are the different types of debentures?
Debentures are categorized in several ways. Key types include:
- Registered debentures: The company maintains a register of debenture holders.
- Bearer debentures: Ownership is established through possession of the certificate.
- Convertible debentures: Can be converted into equity shares after a certain period.
- Non-convertible debentures: Cannot be converted into shares.
- Secured debentures: Backed by collateral security.
- Unsecured debentures: Do not have any collateral security.
3. What is a debenture example?
A company issuing bonds to raise funds for expansion is a common debenture example. These bonds represent the company's promise to repay the borrowed money.
4. What is redemption of debenture?
Debenture redemption is the process of repaying the principal amount borrowed from debenture holders at the maturity date or as per the terms agreed upon in the debenture agreement.
5. How are debentures different from shares?
Debentures represent a debt, while shares represent ownership. Debenture holders are creditors; shareholders are owners. Debenture interest is a charge against profit; dividends depend on profits.
6. What is the redemption of debentures?
Debenture redemption is the repayment of the principal amount borrowed by the company to debenture holders. It happens at maturity or as per the terms in the debenture agreement. Methods include sinking funds, serial redemption, and outright purchase.
7. How are debentures shown in the balance sheet?
Debentures are classified as non-current liabilities on a company's balance sheet, reflecting their long-term nature.
8. Can a company issue debentures as collateral security?
Yes, a company can use debentures as collateral security when seeking further loans or financing. This offers additional security to lenders.
9. Is it possible for debenture holders to get voting rights?
Generally, no. Debenture holders are creditors, not owners, and typically do not have voting rights in company affairs unless specifically stated in the debenture agreement.
10. What is the difference between convertible and non-convertible debentures?
Convertible debentures can be converted into equity shares after a specified period, while non-convertible debentures remain debt instruments and cannot be exchanged for shares.
11. Why is interest on debentures a charge against profit and not an appropriation?
Interest on debentures is a charge against profits because it's a mandatory expense, regardless of profitability. Unlike dividends, which are discretionary, it must be paid.
12. What are the accounting entries for issue of debentures at a premium?
When debentures are issued at a premium, the premium amount is credited to a separate premium account. The entry includes debiting cash and crediting the debenture account (at face value) and the debenture premium account.
13. Where can I find MCQs on debentures for practice?
You can find numerous MCQs on debentures online through educational websites and platforms. These often include practice sets with answers and downloadable PDFs.
