A debenture is a debt tool used by a company that supports long term loans. Here, the fund is a borrowed capital, which makes the holder of debenture a creditor of the business. The debentures are both redeemable and unredeemable, freely transferable with a fixed interest rate. It is unsecured and sustained only by the issuer’s credibility.
Given below are important MCQs on Debentures to analyse your understanding of the topic. The answers are also given for your reference.
Debentures MCQs
Question 1
Debenture holders are
A) Debtors of the Company
B) Creditors of the Company
C) External users
D) Owners of the Company
Answer B
Question 2
Debentures indicate the
A) Short-term Borrowings of a Company
B) Directors’ shares in a company
C) The Investment of Equity-Shareholders
D) Long-term Borrowings of a Company
Answer D
Question 3
In debenture, interest payable is
A) Transferred to general reserve
B) Transferred to falling fund investment account
C) Charged against the firm’s profits
D) Appropriation of the company’s profits
Answer C
Question 4
The owner of the debenture is qualified for
A) Fixed-rate interest
B) Company’s voting rights
C) Firm’s Profits share
D) Fixed dividend
Answer A
Question 5
When a company is liquidated, the debenture holders have a prior right for :
A) principal amount
B) interest
C) both (a)and (b)
D) none of these
Answer C
Question 6
Which of the below-mentioned statement is not true?
A) The issue price and redemption value of debentures cannot differ
B) Interest on debenture is a charge against profits
C) It is common to prefix debentures with the agreed interest rate
D) A debenture is a kind of public borrowing
Answer A
Question 7
Point out the false statements
A) A firm can buy its own debentures and shares.
B) A Company can issue convertible debentures.
C) A business can issue debentures with voting rights.
D) An organisation can issue redeemable debentures.
Answer C
Question 8
Of the following which one is not a characteristic of Bearer Debentures
A) They are transferable by mere delivery.
B) The interest on it is paid to the holder irrespective of identity.
C) They are treated as negotiable instruments.
D) Their transfer requires a deed of transfer
Answer D
Question 9
Debenture Application A/c is in the form of
A) Current Account
B) Nominal Account
C) Personal Account
D) Real Account
Answer C
Question 10
The form of a discount on issue of Debentures is in the nature of
A) Deferred Revenue Expenditure
B) Capital loss
C) Revenue loss
D) None of the above
Answer B
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