Gujarat Board GSEB Class 12 Commerce Accounts Important Questions Part 2 Chapter 1 Accounting for Share Capital Important Questions and Answers.
GSEB Class 12 Accounts Important Questions Part 2 Chapter 1 Accounting for Share Capital
Answer the following in one sentence only:
Question 1.
Which type of security debenture is?
Answer:
Debenture is a security that bears a fixed rate of interest.
Question 2.
What is the basic difference between share and debenture?
Answer:
Share is a capital showing ownership right while debenture is a borrowed capital.
Question 3.
In which form debenture holders get the documents of debenture in present days?
Answer:
In present days debenture holders get documents in form of dematerialization instead physical copy. Here, the purchase of debenture is directly deposited in debenture holder’s demat A/c.
Question 4.
On which rate of interest debenture can be indentified?
Answer:
The rate of interest is given on debenture. At that rate, debenture can be identified. E.g. On debenture 10% interest will be given then it is known as 10% debenture.
Question 5.
What is the charge of assets?
Answer:
The charge of assets means mortgage rights.
Question 6.
Is the debenture holders has right to vote in any matter of the company?
Answer:
No, there is no right to debenture holders to vote in any matter of the company.
Question 7.
Can company forfeited debentures of remaining instalment? why?
Answer:
No, company can not forfeited the debenture of remaining instalment because debenture is debt of the company.
Question 8.
Explain the types of debenture charge.
Answer:
There are two types of debenture charge :
- Fixed charge
- Flexible charge or Floating charge.
Question 9.
What is the first mortgage debenture?
Answer:
First mortgage (charge) debentures are those that have a first claim on the assets charged.
Question 10.
What is the second mortgage debenture?
Answer:
Second mortgage (charge) debentures are those having a second claim(after first mortgage debentures) on the assets charged.
Question 11.
Which types of debenture are purchases or sales in the stock exchange?
Answer:
Listed debentures are sold and purchased in stock exchange.
Question 12.
What kinds of debentures are risky for investors?
Answer:
Simple debenture (unsecured) are risky for investors.
Question 13.
Which kind of deb. are called unsecured creditors at the time of liquidation of company?
Answer:
Simple debenture are called unsecured creditors at the time of liquidation of company.
Question 14.
For the transfer of which debenture there is no procedure or registration necessary in the books of company?
Answer:
For the transfer of bearer debenture, there is no procedure or registration necessary in the books of company.
Question 15.
Which debentures are just like currency notes?
Answer:
Bearer debentures are just like currency notes which can be transferred by mere delivery.
Question 16.
With which type of debentures interest coupons are provided?
Answer:
The interest coupons are provided with bearer debentures certificate.
Question 17.
In which type of debentures the time of redemption of amount is shown in debenture or trust deed?
Answer:
In redeemable debenture, the time of redemption of amount is shown in debenture or trust deed.
Question 18.
In which type of debenture company is not given any type of guarantee for repayment of money to debenture holder?
Answer:
In irredeemable debenture, company is not given any type of guarantee for repayment of money to debenture holders.
Question 19.
According to the condition of conversion, state the types of debentures.
Answer:
According to the condition of conversion, there are two types of debentures :
- Convertible debenture
- Non-convertible debenture.
Question 20.
What is convertible debentures?
Answer:
Convertible debentures are those debentures which are convertible into equity shares or other securities at a stated rate of exchange either at the option of debenture holders or at the option of the company after a specified period.
Question 21.
Why the convertible debentures are more popular in present days?
Answer:
Currently, convertible debentures are more popular as they provided, liquidity, safety, capital appreciation and assured future to the investors.
Question 22.
According to the Companies Act 2013, how much is the minimum subscription required to issue a debenture?
Answer:
As per rule of the Companies Act 2013, minimum subscription should be 90% of the issued amount.
Question 23.
State the types of issuing debentures.
Answer:
There are 3 types of issuing debentures :
- At par (at cost price)
- At premium and
- At discount.
Question 24.
To which account full amount of debenture will be credited when amount called up at the time of application?
Answer:
At the time of application when company called up full amount of debenture then that amount is debited to Bank A/c and credited to Debenture application or allotment A/c.
Question 25.
According to Companies Act 2013, to which account the amount of premium is transferred?
Answer:
As per Companies Act 2013, premium amount on debentures is transferred to Securities Premium Reserve Account.
Question 26.
For which purpose the amount of debenture premium is used?
Answer:
Debenture premium is capital gain (profit) for the company and can be used to write off fictitious assets like debenture discount, debenture redemption premium, goodwill, patent, preliminary expenses.
Question 27.
What is the maximum rate of discount for issuing debentures?
Answer:
There is no restriction for issuing debenture at discount in companies act.
Question 28.
What is the time limit for writing off the amount of discount on debenture?
Answer:
Discount or loss on issue of debentures is capital loss. It should be written off as early as possible but within the lifetime of the debentures.
Question 29.
Give the accounting effects for the debenture discount or writing off the loss for issuing debentures.
Answer:
The accounting effects for the debenture discount or writing off the loss for issuing debentures are as follows :
Securities Premium Reserve A/c Dr. …………..
OR Profit and Loss Statement A/c Dr. …………..
To Debenture discount or Loss on issue
of debentures A/c …………
Question 30.
What is meant by issue of debenture as collateral securities?
Answer:
When a company takes a loan from a bank or from some other party, the company may have to issue debentures as a subsidiary or secondary security in addition to the principal security. The debentures so issued are known as debentures issued as collateral securities.
Question 31.
Write the journal entries in the books of company for debentures issuing as collateral security.
Answer:
Debenture Suspense A/c Dr. …………………
To Debentures A/c …………………..
(Being issue of debentures as collateral security against loan)
Question 32.
What is the difference between debenture premium and debenture redemption premium?
Answer:
When the debentures are issued at more than their face value they are said to be have been issued at premium. As per Companies Act 2013, premium amount on debentures is transferred to Securities Premium Resereve Account. Debenture Premium is a capital profit and can be used to write off capital loss. While premium paid while returning the debenture is called debenture redemption premium, i.e. The debenture redemption premium is the capital loss or loss which is taken at the debenture redemption premium account.
Question 33.
In the balance sheet, where the debenture redemption premium account is shown?
Answer:
Debenture redemption premium a/c is a personal account and shows credit balance. It is a liability of the comapny. It appears under the head Non-current liabilities under the sub-head “Other long term liabilities” on the equity and liability side of the balance sheet each year, until the debentures are repaid.
Question 34.
Under which heading in balance sheet redemption reserve account will be shown?
Answer:
Debenture Redemption Reserve A/c will be shown on the equity and liabilities side of the balance sheet under the heading of Reserve and Surplus.
Question 35.
To which account the balance of debenture redemption reserve A/c is transferred after redemption of all money of the debentures?
Answer:
When company redeem all the money of debentures then after the balance of debenture redemption reserve account will be transferred to General Reserve A/c.
Question 36.
What is the provision for debenture redemption investment according to Company Act?
Answer:
As per rule 18(7) (C) of the companies Rule 2014, company required to deposit or invest, a sum which shall not be less than 15% of the total face value of the debentures to be redeemed at the end (before 30th April) of the year. The amount so deposited or invested can be utilized only for the purpose of repayment at debentures maturing during the year.
Question 37.
What is the provision of the companies act regarding the amount transferred to debenture redemption reserve account for redemption to debentures?
Answer:
According to section 71(4) of the Companies Act, 2013 and per SEBI guidelines requiring creation of Debenture Redemption Reserve Account equivalent to at least 25% of the total face value of issued debentures before redemption commence.
Question 38.
What is meant by redemption of debenture in instalment by drawing of lots?
Answer:
When the debentures are redeemed by the company, in annual instalments the serial number of debentures which should be redeemed each year are selected by lottery. This procedure is known as drawings by lots.
Question 39.
Which companies do not need to set up a debenture redemption reserve?
Answer:
According to Company Act 17(A) and rule 18(7). Banking companies do not need to set up a debenture redemption reserve.
Question 40.
When the debenture is converted into share then that share can be issued at discount? Why?
Answer:
When the debenture is converted into share, then the share can not be issued at discount, because it violates (breaks) the provisions of the companies act.
Select the correct option for each question:
Question 1.
What Is shown by debenture in company’s documents?
(A) Capital
(B) Receivables
(C) Liability (debt)
(D) Assets
Answer:
(C) Liability (debt)
Question 2.
Debenture holder is ……………….. for company.
(A) Creditor
(B) Owner
(C) Employee
(D) Liquidator
Answer:
(A) Creditor
Question 3.
Company makes a profit or loss, debenture holders are to paid Interest ……………………… .
(A) Voluntary
(B) Desirable
(C) Necessary
(D) Not necessary
Answer:
(C) Necessary
Question 4.
When are the debenture holders paid in compare to shareholders at the time of the dissolution of the company?
(A) Before
(B) After
(C) With
(D) Not payable
Answer:
(A) Before
Question 5.
How many voting rights of debenture holder in the election of Board of Directors?
(A) 1 debenture = 1 vote
(B) Per person
(C) 100 debentures = 1 vote
(D) Do not have right
Answer:
(D) Do not have right
Question 6.
As per Companies Act 2013, what is the maximum maturity date of debenture from the date of issue?
(A) 3 years
(B) 5 years
(C) 10 years
(D) 20 years
Answer:
(C) 10 years
Question 7.
How long can the debenture be issued by a company which is working in an infrastructure project?
(A) 5 years
(B) 10 years
(C) 30 years
(D) 50 years
Answer:
(B) 10 years
Question 8.
What is the maximum number of term of debentures for in the company working in an infrastructure project?
(A) 10 years
(B) 20 years
(C) 30 years
(D) 50 years
Answer:
(C) 30 years
Question 9.
Which debentures are risky for investors?
(A) Simple debenture
(B) Bearer debenture
(C) Registered debenture
(D)Convertible debenture
Answer:
(A) Simple debenture
Question 10.
Which debenture is like a currency note?
(A) Registered debenture
(B) Redeemable debenture
(C) Bearer debenture
(D) Mortgage debenture
Answer:
(C) Bearer debenture
Question 11.
On which debentures interest coupons are given with debenture certificate?
(A) Registered debenture
(B) Bearer debenture
(C) Convertible debenture
(D) Permanent (fixed) debenture
Answer:
(B) Bearer debenture
Question 12.
Debentures which are guaranteed to be returned on the maturity date by the company are …………………… .
(A) Mortgage debenture
(B) Redeemable debenture
(C) Simple debenture
(D) Registered debenture
Answer:
(B) Redeemable debenture
Question 13.
When the irredeemable debentures are repayable?
(A) At the time of liquidation of company
(B) When the company decided
(C) After fixed period
(D)After 10 years
Answer:
(A) At the time of liquidation of company
Question 14.
The debentures which are easily converted into equity shares are known as …………. .
(A) Convertible debenture
(B) Non-convertible debenture
(C) Redeemable debenture
(D) Irredeemable debenture
Answer:
(A) Convertible debenture
Question 15.
What is debenture premium for company?
(A) Expense
(B) Debt
(C) Loss
(D) Capital gain
Answer:
(D) Capital gain
Question 16.
For a company, discount given at the time of issuing debenture is ………………… .
(A) Assets
(B) Income
(C) Capital loss
(D) liabilities
Answer:
(C) Capital loss
Question 17.
At what maximum rate debentures would be issued at discount?
(A) 5%
(B) 10%
(C) 20%
(D) Unlimited
Answer:
(D) Unlimited
Question 18.
What is debenture redemption premium for company?
(A) Income
(B) Debt
(C) Assets
(D) Capital loss
Answer:
(D) Capital loss
Question 19.
What is Debenture Redemption Premium A/c. for company?
(A) Assets
(B) Capital loss
(C) Capital income
(D) Liabilities
Answer:
(B) Capital loss
Question 20.
Which account is to be debited when debentures are issued for consideration other than cash?
(A) Cash
(B) Debenture
(C) Vendor’s
(D) Assets
Answer:
(C) Vendor’s
Question 21.
What is debenture redemption loss account for company?
(A) Revenue loss
(B) Capital loss
(C) Income
(D) Receivable
Answer:
(B) Capital loss
Question 22.
According to Company Act, 2013- Section -17(4) and Rule 18(7) which type of companies debenture redemption reserve setup and 15% debenture redemption investment is not necessary?
(A) Banking companies
(B) Insurance companies
(C) Electricity companies
(D) Communication companies
Answer:
(A) Banking companies