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CBSE · Class 12 · Accountancy

Issue and Redemption of Debentures

Standard difficulty · 20 questions · 40 marks · Time: 44 minutes

Name: Date: Score: ____ / 40

Show your working for Sections B and C. Answers are on the last page — try every question first!

Section A — Choose the correct answer8 × 1 = 8 marks
1.
A debentureholder is a(n):
  1. partner
  2. employee
  3. owner of the company
  4. creditor of the company
2.
What are “irredeemable (perpetual) debentures”?
  1. debentures repaid only on winding up of the company
  2. debentures given as extra security for a loan, in addition to the main security
  3. debentures transferable by mere delivery
  4. debentures with no stated interest, issued at a deep discount
3.
Which of these is true of debentures (and not of shares)?
  1. the return varies with profit
  2. the return is paid only out of profits
  3. holders are owners of the company
  4. they are repaid after a fixed period
4.
Maple Ltd issued 13,500 10% Debentures of ₹100 each at a premium of 5%, redeemable at a premium of 5%. What is the loss on issue of debentures?
  1. ₹67,500
  2. ₹66,500
  3. ₹1,35,000
  4. ₹68,500
5.
Riverstone Ltd has 20,000 12% Debentures of ₹100 each. What is the interest for one full year?
  1. ₹4,80,000
  2. ₹1,20,000
  3. ₹2,40,000
  4. ₹20,00,000
6.
Silverline Ltd pays a year’s interest on 12,700 9% Debentures of ₹100 each, after deducting tax at source at 10%. How much is paid to the debentureholders?
  1. ₹91,440
  2. ₹1,14,300
  3. ₹11,430
  4. ₹1,02,870
7.
Meadow Ltd bought machinery for ₹3,36,000 and paid the vendor by issuing debentures of ₹100 each at a premium of 5%. How many debentures were issued?
  1. 3,300 debentures
  2. 3,537 debentures
  3. 3,360 debentures
  4. 3,200 debentures
8.
Bluebell Ltd issued 11,800 12% Debentures of ₹100 each at a discount of 10%, redeemable at a premium of 5%. What amount is credited to Premium on Redemption of Debentures Account?
  1. ₹59,000
  2. ₹11,80,000
  3. ₹1,18,000
  4. ₹1,77,000
Section B — Short answer8 × 2 = 16 marks
9.
What is a debenture?
10.
Explain each kind of debenture: (a) zero coupon rate debentures (b) debentures as collateral security
11.
Sunrise Ltd issued 15,700 9% Debentures of ₹100 each at a premium of 5%, redeemable at par. Find the loss on issue of debentures.
12.
Skylark Ltd issued 14,300 8% Debentures of ₹100 each at a discount of 10%, redeemable at a premium of 5%. The whole amount was received with the application and the debentures were allotted. Pass the journal entry for the allotment.
13.
Brightway Ltd bought a building for ₹3,32,500 from a vendor and paid by issuing 10% debentures of ₹100 each at a discount of 5%. Pass the journal entries.
14.
Greenleaf Ltd has 4,100 11% Debentures of ₹100 each. Pass the journal entries for a year’s interest due, with tax deducted at source at 10%, and its payment.
15.
A company has a loss on issue of debentures of ₹39,000, and its Securities Premium balance is ₹9,000. The loss is written off in the year of issue. How much is written off from (a) Securities Premium (b) the Statement of Profit and Loss?
16.
Hilltop Ltd offered 6,100 debentures of ₹100 each, with ₹100 payable on application. Applications for 8,200 debentures were received; the extra applications were rejected. How much application money is refunded?
Section C — Word problems4 × 4 = 16 marks
17.
Explain the different types of debentures.
18.
Maple Ltd issued 13,800 11% Debentures of ₹100 each at a discount of 5%, redeemable at a premium of 5%. The full amount was payable on application. All the debentures were applied for and allotted. Pass the journal entries for receiving the application money, the allotment, and writing off the loss on issue from the Statement of Profit and Loss.
19.
Greenleaf Ltd took over assets of ₹3,50,000 and liabilities of ₹54,000 from another firm for a purchase consideration of ₹3,06,000. It paid ₹16,000 in cash and the rest by issuing 9% debentures of ₹100 each at par. Pass the journal entries.
20.
Northstar Ltd has 17,700 12% Debentures of ₹100 each. Interest is paid half-yearly on 30 September and 31 March, with tax deducted at source at 10%. (a) How much is paid to debentureholders each half-year? (b) How much TDS is deducted in the year? (c) What amount of debenture interest is transferred to the Statement of Profit and Loss for the year?
AmbifulWorksheets
Practice that never repeats
CBSE · Class 12 · Accountancy

Answer key

Issue and Redemption of Debentures · AW-12AC-DEB-2026-V1 · For parents — fold back or tear off before handing the sheet to your child.

QAnswerWorking
1(d) creditor of the company—
2(a) debentures repaid only on winding up of the company—
3(d) they are repaid after a fixed period—
4(a) ₹67,500discount ₹0 + premium on redemption ₹67,500
5(c) ₹2,40,000₹20,00,000 × 12/100
6(d) ₹1,02,870interest ₹1,14,300 − TDS ₹11,430
7(d) 3,200 debentures₹3,36,000 ÷ ₹105
8(a) ₹59,00011,800 × ₹5
9A written acknowledgement of a debt by a company, under its seal, promising interest and repayment on stated terms.—
10(a) debentures with no stated interest, issued at a deep discount (b) debentures given as extra security for a loan, in addition to the main security—
11₹0discount ₹0 + premium on redemption ₹0
12Debenture Application and Allotment A/c Dr. ₹12,87,000
Loss on Issue of Debentures A/c Dr. ₹2,14,500
To 8% Debentures A/c ₹14,30,000
To Premium on Redemption of Debentures A/c ₹71,500		issue price ₹90; loss on issue ₹2,14,500
13(i) Building A/c Dr. ₹3,32,500
To Vendor A/c ₹3,32,500
(ii) Vendor A/c Dr. ₹3,32,500
Discount on Issue of Debentures A/c Dr. ₹17,500
To 10% Debentures A/c ₹3,50,000		₹3,32,500 ÷ ₹95 = 3,500 debentures
14(i) Debenture Interest A/c Dr. ₹45,100
To Debentureholders A/c ₹40,590
To TDS Payable A/c ₹4,510
(ii) Debentureholders A/c Dr. ₹40,590
To Bank A/c ₹40,590		interest ₹4,10,000 × 11/100 = ₹45,100
15(a) ₹9,000; (b) ₹30,000securities premium is used first, the rest from profit
16₹2,10,000(8,200 − 6,100) × ₹100
17By security: secured and unsecured; by tenure: redeemable and irredeemable; by convertibility: convertible and non-convertible; by coupon: specific rate and zero coupon; by registration: registered and bearer.—
18(i) Bank A/c Dr. ₹13,11,000
To Debenture Application and Allotment A/c ₹13,11,000
(ii) Debenture Application and Allotment A/c Dr. ₹13,11,000
Loss on Issue of Debentures A/c Dr. ₹1,38,000
To 11% Debentures A/c ₹13,80,000
To Premium on Redemption of Debentures A/c ₹69,000
(iii) Statement of Profit and Loss A/c Dr. ₹1,38,000
To Loss on Issue of Debentures A/c ₹1,38,000		issue price ₹95; loss on issue ₹1,38,000
19(i) Sundry Assets A/c Dr. ₹3,50,000
Goodwill A/c Dr. ₹10,000
To Sundry Liabilities A/c ₹54,000
To Vendor A/c ₹3,06,000
(ii) Vendor A/c Dr. ₹3,06,000
To Bank A/c ₹16,000
To 9% Debentures A/c ₹2,90,000		goodwill ₹3,06,000 − (₹3,50,000 − ₹54,000) = ₹10,000; debentures ₹2,90,000 ÷ ₹100 = 2,900
20(a) ₹95,580; (b) ₹21,240; (c) ₹2,12,400half-year interest ₹17,70,000 × 12/100 × 6/12 = ₹1,06,200