Chapter-wise Worksheets for Class 12 Accountancy: Part 2 Chapter 2 Issue and Redemption of Debentures
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Practice Class 12 Accountancy Worksheets: Part 2 Chapter 2 Issue and Redemption of Debentures
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Question. The following journal entry appears in the books of X Co. Ltd.
Bank a/c Dr. 9,50,000
Loss on issue of debenture a/c Dr. 1,50,000
To 12 % Debentures a/c 10,00,000
To Premium on Redemption of Debenture A/c 1,00,000
Debentures have been issued at a discount of :
(a) 15 %
(b) 5 %
(c) 10 %
(d) 8 %
Answer: B
Question. When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to :
(a) Capital reserve,
(b) General reserve,
(c) Statement of profits and loss
(d) Any of these
Answer: B
Question. When debentures are issued at a discount and are redeemable at a premium, which of the following accounts is debited at the time of issue:
(a) Debentures account
(b) Premium on redemption of debentures account,
(c) Loss on issue of debentures account
(d) Securities Premium Reserve Account
Answer: C
Question. Convertible debentures cannot be issued at a discount if:
(a) They are to be immediately converted;
(b) They are not to be immediately converted,
(c) None of the above
(d) Both a and b
Answer: A
Question. Discount on issue of debentures is shown under the following head in the Balance sheet :
(a) Statement of profit and Loss,
(b) Other non-Current Assets,
(c) Debentures account
(d) None of these
Answer: D
Question. Which of the following is false with respect to debentures?
(a) They can be issued in lieu of dividends
(b) They can be issued for cash
(c) They can be issued for consideration other than cash
(d) They can be issued as collateral security
Answer: A
Question. Which of the following statements is true?
(a) A debenture holder is an owner of the company
(b) A debenture holder can get his money back only on the liquidation of the company
(c) A debenture issued at a discount can be redeemed at a premium
(d) A debenture holder receives interest only in the event of profits
Answer: C
Question. When debentures are issues at discount , the discount should be written off
(a) During the life of the debentures
(b) In the year of the issue of debentures
(c) Within 5 years of the issue of the debentures
(d) None of the options
Answer: A
Question. F Ltd. purchased machinery for a book value of ₹ 4,00,000. The consideration was paid by issue of 10% Debentures of ₹ 100 each at a discount of 20%. The Debenture Account will be credited by :
(a) ₹ 4,00,000
(b) ₹ 5,00,000
(c) ₹ 3,20,000
(d) ₹ 4,80,000
Answer: B
Question. When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to
(a) General reserve
(b) Capital reserve
(c) Capital reserve
(d) None of the options
Answer: A
Question. Convertible debentures can be
(a) Both
(b) Partly Convertible Debentures
(c) Fully convertible Debentures
(d) None of the options
Answer: A
Question. Which of the following is not true about debenture stock:
(a) It must be fully paid.
(b) Debenture Stock can be transferred in fraction.
(c) Debenture stock are identified by their distinct number
Answer: C
Question. Discount or loss on issue of debentures to be written of within 12 months from the date of balance sheet or within the period of operating cycle is shown as
(a) Other Current assets
(b) Other Non current Assets
(c) Other Current Liabilities
(d) None of the options
Answer: A
Question. Debentures of a Company can be issued :
(a) For Cash
(b) For Consideration other than Cash
(c) As a Collateral Security
(d) Any of the above
Answer: D
Question. If Vendors are issued debentures of Rs.4,40,000 in consideration of assets of Rs. 5,00,000 and liabilities of Rs. 1,00,000, the balance of Rs.40,000 will be debited to:
(a) General Reserve Account
(b) Capital Reserve Account
(c) Goodwill Account
(d) Statement of Profit & Loss
Answer: C
Question. The amount of debenture is returned to the holders at the end of
(a) Predetermined maturity period
(b) Company
(c) Current Year
(d) None of the options
Answer: A
Question. Electronics Ltd. issued 10,000, 6% Debentures of Rs. 100 each at a premium of Rs. 10. It will credit 6% Debentures Account by
(a) Rs. 11,00,000.
(b) Rs. 10,00,000.
(c) Rs. 9,00,000.
(d) Rs. 8,00,000.
Answer: B
Question. When all debentures are redeemed, balance in the Debenture Redemption Fund Account is transferred to:
(a) Capital Reserve
(b) General Reserve
(c) Profit & Loss Appropriation A/c
(d) None of these
Answer: A
Question. Discount on issue of Debentures is in the nature of:
(a) Revenue Loss
(b) Capital Loss
(c) Deferred Revenue Expenditure
(d) None of there
Answer: B
Question. Loss on issue of debentures is recorded as :
(a) Intangible Asset
(b) Current Asset
(c) Current Liability
(d) Miscellaneous Expenditure
Answer: D
Question. Interest on Debentures is paid on
(a) Amount received on Issue.
(b) Nominal (Face) Value.
(c) On Premium.
(d) None of these.
Answer: B
Question. Premium on redemption of debentures is a :
(a) Personal A/c
(b) Real A/c
(c) Nominal A/c
(d) Suspense A/c
Answer: C
Question. Loss on issue of debenture is written off each year in proportion to amount of debenture which reduces with every instalment paid, Called
(a) Proportion Method
(b) Equal instalment method
(c) Both
(d) None of the options
Answer: A
Question. Debenture premium can be used to :
(a) Write off the discount on issue of shares or debentures
(b) Write off the premium on redemption of shares or debentures
(c) Write off capital loss
(d) All of the above
Answer: D
Question. Premium on Redemption of Debentures Account is
(a) Personal Account
(b) Real Account
(c) Capital A/c
(d) None of the options
Answer: A
Question. Debentures can be issued at :
(a) Par
(b) Discount
(c) Premium
(d) All of them
Answer: D
Question. Debenture is also named as :
(a) Share
(b) Bond
(c) Equity
(d) Reserve
Answer: B
Question. Debentures which are transferrable by mere delivery are:
(a) Registered debentures
(b) First Debentures
(c) Bearer debentures
(d) None of these
Answer: C
Question. X Co. Ltd purchased assets worth Rs 14, 40,000. It issued debentures of Rs 100 each at a discount of 4 percent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is:
(a) 15, 000
(b) 14,400
(c) 16,000
(d) 30,000
Answer: A
Question. If vendors are issued debentures of ₹1,60,000 in consideration of net assets of ₹2,00,000, the balance of ₹40,000 will be credited to
(a) Reserve Capital
(b) Goodwill A/c
(c) Capital Reserve A/c
(d) Securities Premium Reserve A/c
Answer: D
Question. X Ltd. issued ₹ 2,00,000 debentures at par but repayable at a premium of 5%, the premium payable will be debited to
(a) Premium on redemption of debentures A/c
(b) Loss on issue of debentures A/c
(c) Capital Reserve A/c
(d) Securities Premium Reserve A/c
Answer: B
Question. Debentures issued as collateral security will be debited to
(a) Bank A/c
(b) Debenture Suspense A/c
(c) Debentures A/c
(d) Collateral Security A/c
Answer: B
Question. Sunrise Ltd. issued 2,000 9% Debentures of ₹100 each at a discount of 5% redeemable at the end of 5 years at a premium of 6%. Loss on issue of debentures A/c will be debited by
(a) ₹ 20,000
(b) ₹ 28,000
(c) ₹ 22,000
(d) ₹ 25,000
Answer: C
Question. X Ltd. took over assets of ₹3,50,000 and liabilities of ₹30,000 of Y Ltd. for a purchase consideration of ₹3,30,000. What will it lead to?
(a) A goodwill of 20,000
(b) A capital reserve of ₹20,000
(c) A goodwill of ₹10,000
(d) No goodwill, no Capital Reserve
Answer: C
Fill in the blanks :
Question. ................. refers to extinguishing or discharging the liability on account of debentures in accordance with the terms of issue.
Answer: Redemption of debentures
Question. .......................... is a written instrument acknowledging a debt under the common seal of the company.
Answer: Debenture
Question. No DRR is required for debentures issued by ............... regulated by Reserve Bank of India ................. Companies for both public as well as privately placed debentures.
Answer: All India Financial Institutions (AIFIs) Banking
Question. A.................... may be defined as subsidiary or secondary or additional security beside the primary security when a company obtains a loan or overdraft from a bank or any other financial Instituiton.
Answer: collateral security
Question. Debentures which are convertible into equity shares or in any other security either at the option of the company or the debenture holders are called ................
Answer: convertible debentures
Question. ................... refer to those debentures where a charge is created on the assets of the company for the purpose of payment in case of default. The charge may be fixed or floating.
Answer: Secured debentures
Question. The amount credited to the Debenture Redemption Reserve shall not be utilised by the company except for the purpose of ....................
Answer: redemption of debentures
Question. ........... can be issued at dicount but............ cannot be issued at discount except ESOP.
Answer: Debentures, Shares
Question. Yashraj Ltd. Has \(40,000\), \(9\%\) Debentures of \(\text{Rs. } 100\) each due for redemption on \(31^{\text{st}}\text{ March } 2015\). Assume that Debenture Redemption Reserve has a balance of \(\text{Rs. } 7,20,000\) on that date. It was decided to invest the required amount towards Debenture Redemption Investment. Investments were realized at \(102\%\) less \(0.25\%\) brokerage and debentures were redeemed. Record the necessary entries.
Answer:
BOOKS OF YASHRAJ LTD.
JOURNAL
| DATE | PARTICULAR | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2014 april 30 | Debenture redemption investment A/cDr. To bank A/c (investment made @ \(15\%\) of the face value of debentures to be redeemed) | \(6,00,000\) | \(6,00,000\) | |
| 2015 March 31 | bank A/cDr. To Debenture redemption investment A/c To profit on sale of investment A/c (Investment encashed at \(102\%\) less brokerage \(0.25\%\)) | \(6,10,470\) | \(6,00,000\) \(10,470\) | |
| March 31 | profit on sale of investment A/cDr. To statement of profit & loss (transfer of profit on sale of investment) | \(10,470\) | \(10,470\) | |
| March 31 | Surplus in statement of profit & lossDr. To debenture redemption reserve A/c (transfer of profits as per SEBI guidelines) | \(2,80,000\) | \(2,80,000\) | |
| March 31 | \(9\%\) debentures A/cDr. To Debenture holders A/c (amount due to redemption) | \(40,00,000\) | \(40,00,000\) | |
| March 31 | Debenture holders A/cDr. To bank A/c (Payment of amount due to debenture holders) | \(40,00,000\) | \(40,00,000\) | |
| March 31 | Debenture redemption reserve A/cDr. To general reserve A/c (transfer of Debenture redemption reserve A/c To general reserve A/c on the redemption of all the debentures) | \(10,00,000\) | \(10,00,000\) |
Working note:
(1) \(102\%\) of \(\text{Rs. } 6,00,000 = 6,12,000\)
Less: \(0.25\%\) of \(\text{Rs. } 6,12,000 = 1,530\)
\(6,10,470\)
(2) Total amount required for transfer to Debenture redemption reserve = \(25\%\) of \(40,00,000 = \text{Rs. } 10,00,000\)
Less: existing balance = \(\text{Rs. } 7,20,000\)
Amount now required to be transferred to debenture Redemption reserve = \(\text{Rs. } 2,80,000\)
Question. Suruchi Garmets Ltd. Purchased for immediate cancellation \(5,000\), \(10\%\) debentures of \(\text{Rs. } 250\) each for \(\text{Rs. } 12,00,000\). Brokerage paid @ \(0.5\%\) pass necessary journal entries.
Answer:
JOURNAL
| DATE | PARTICULARS | L.F | Dr. AMOUNT (Rs.) | Cr. AMOUNT (Rs.) |
|---|---|---|---|---|
| Own Debentures A/CDr. To Bank A/C (Purchase of \(5,000\) own debentures) | \(12,06,000\) | \(12,06,000\) | ||
| \(10\%\) debentures A/CDr. To own Debentures A/C To profit on redemption of debentures A/C (cancellation of \(5,000\) own debentures) | \(12,50,000\) | \(12,06,000\) \(44,000\) | ||
| Profit on Redemption of Debentures A/CDr. To Capital Reserve A/C (profits on cancellation of own debentures credited to capital reserves) | \(44,000\) | \(44,000\) |
Question. Z ltd. Took over assets of \(\text{Rs. } 7,00,000\) and liabilities of \(\text{Rs. } 60,000\) of X Ltd. For a purchase consideration of \(\text{Rs. } 6,60,000\). Z Ltd. Paid the purchase consideration by issuing \(12\%\) debentures of \(\text{Rs. } 100\) each at \(10\%\) premium. Give Journal entries in the books of Z Ltd.
Answer:
JOURNAL OF Z LTD.
| Date | Particulars | L.F. | Dr. Amount (Rs.) | Cr. Amount (Rs.) |
|---|---|---|---|---|
| Sundry Assets A/cDr. Goodwill A/cDr. To Sundry Liabilities A/c To X Ltd. (Purchase of assets and liabilities of X Ltd.) | \(7,00,000\) \(20,000\) | \(60,000\) \(6,60,000\) | ||
| X Ltd.Dr. To \(12\%\) Debentures A/c To Securities Premium A/c (Issue of \(6,000\) Debenture of \(\text{Rs. } 100\) each at \(10\%\) premium, Calculated as follows: \(\frac{6,60,000}{110} = 6,000\) Debentures) | \(6,60,000\) | \(6,00,000\) \(60,000\) |
Question. X Ltd., decided to redeem \(\text{Rs. } 5,00,000\), \(8\%\) debentures on \(31^{\text{st}}\text{ March } 2015\). On the same date in purchased \(\text{Rs. } 4,00,000\) debentures in open market at \(\text{Rs. } 98.50\) each. The expenses being \(\text{Rs. } 1,500\) and redeemed the balance of \(\text{Rs. } 1,00,000\) debentures by draw of lots. Journalise.
Answer:
X Ltd.
JOURNAL
| Date | Particular | L.F. | Dr. Amount (Rs.) | Cr. Amount (Rs.) |
|---|---|---|---|---|
| 2014 April 30 | Debenture Redemption Investment AcDr. To Bank A/c (Investment made @ \(15\%\) of the face value of debentures to be redeemed) | \(75,000\) | \(75,000\) | |
| 2015 March 31 | Bank A/cDr. To debenture Redemption Investment A/c (Investment encashed) | \(75,000\) | \(75,000\) | |
| March 31 | Own Debenture A/cDr. To Bank A/c (4,000 debentures purchased for immediate cancellation at \(\text{Rs. } 98.50\) each plus \(\text{Rs. } 1,500\) paid for expenses) | \(3,95,500\) | \(3,95,500\) | |
| March 31 | \(8\%\) Debentures A/cDr. To Own Debentures A/c To Profit on Redemption of Debenture A/c (Cancellation of \(4,000\) debentures) | \(4,00,000\) | \(3,95,500\) \(4,500\) | |
| March 31 | \(8\%\) Debentures A/cDr. To debenture holder A/c (Payment due on redemption of debentures By drawing lot) | \(1,00,000\) | \(1,00,000\) | |
| March 31 | Debenture holders A/cDr. To Bank A/c (Payment made to debetureholders) | \(1,00,000\) | \(1,00,000\) | |
| March 31 | Profit on redemption of Debentures A/cDr. To capital Reserve A/c (Profit on Redemption transferred to Capital Reserve A/c) | \(4,500\) | \(4,500\) |
Notes: Entries for debenture Redemption Investment should be passed when in addition to Purchase in the open market debentures are redeemed by draw of lots.
Question. What entry may be passed when debentures are issued as Collateral Security?
Answer:
| Particulars | Dr. Amount (Rs.) | Cr. Amount (Rs.) |
|---|---|---|
| Debentures suspense A/cDr. To debentures A/c (debentures issued as collateral security) | - | - |
Question. Madhu Ltd. issued \(5,000\), \(9\%\) Debentures of \(\text{Rs. } 1,000\) each on April 1, 2012 redeemable at a premium of \(8\%\) after \(10\) years. According to the terms of prospectus \(\text{Rs. } 400\) is payable on application and balance on allotment of debentures. Record necessary entries regarding issue of debentures.
Answer:
Books of Madhu Ltd.
JOURNAL
| Date | Particular | L.F | Dr. amount (Rs.) | Cr. amount (Rs.) |
|---|---|---|---|---|
| 2012 April 1 | Bank A/cDr. To \(9\%\)debenture application A/c (application money received on \(5,000\) debentures @ \(\text{Rs. } 400\) each) | \(20,00,000\) | \(20,00,000\) | |
| \(9\%\) Debenture Application A/cDr. To \(9\%\) Debentures A/c (application money transferred to \(9\%\) Debentures A/c Consequent to allotment) | \(20,00,000\) | \(20,00,000\) | ||
| \(9\%\) Debenture allotment A/cDr. Loss on issue of Debentures A/cDr. To \(9\%\) Debentures A/c To premium on redemption A/c (allotment due @ \(\text{Rs. } 600\) each on \(5,000\) debentures issued at par, redeemable at \(8\%\) premium) | \(30,00,000\) \(4,00,00\) | \(30,00,000\) \(4,00,00\) | ||
| Bank A/cDr. To \(9\%\) Debenture allotment A/c (allotment money received) | \(30,00,000\) | \(30,00,000\) |
Question. Dhariwal Ltd. had issued \(40,000\), \(11\%\) Debentures of \(\text{Rs. } 100\) each which are due for redemption on March \(31^{\text{st}}\) 2015. It was decided to invest the required amount Redemption Reserve Account a balance of \(\text{Rs. } 3,10,000\). Record the necessary journal entries at the time of Redemption of Debentures.
Answer:
Books of Dhariwal Ltd.
JOURNAL
| Date | Particulars | L.F | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2014 April 30 | Debenture redemption investment A/cDr. To bank A/c (investment made @ \(15\%\) of the face value of Debentures to be redeemed i.e. \(15\%\) of \(\text{Rs. } 40,00,000\)) | \(6,00,000\) | \(6,00,000\) | |
| 2015 March 31 | Bank A/cDr. To debenture redemption investment A/c (investment encashed) | \(6,00,000\) | \(6,00,000\) | |
| March 31 | Surplus in statement of profit and lossDr. To debenture redemption reserve A/c (transfer of profit to Debenture redemption reserve) | \(6,90,000\) | \(6,90,000\) | |
| March 31 | \(11\%\) Debenture holders A/cDr. To debentureholders A/c (amount due to debenture holders on redemption of debentures) | \(40,00,000\) | \(40,00,000\) | |
| March 31 | Debentureholders A/cDr. To bank A/c (payment of amount due to debentureholders) | \(40,00,000\) | \(40,00,000\) |
Notes:
(1) Total amount required for transfer to debenture redemption Reserve = \(25\%\) of \(\text{Rs. } 40,00,000\) = \(10,00,000\)
Less: Existing Balance = \(3,10,000\)
Amount now required to be transferred to Debenture Redemption reserve = \(6,90,000\)
(2) Debenture redemption reserve will be transferred to General Reserve when all debentures are redeemed.
Question. Pass the necessary journal entries form the following cases for issue of debentures.
(i) \(10000\), \(10\%\) debentures of \(\text{Rs. } 120\) each issued at \(5\%\) premium, repayable at par.
(ii) \(20,000\), \(9\%\) Debentures of \(\text{Rs. } 200\) Each issued at \(20\%\) premium, repayable at \(30\%\) premium.
Answer:
| Date | Particular | L.F. | Dr. Rs. | Cr. Rs. |
|---|---|---|---|---|
| (i)1. | Bank A/cDr. To \(10\%\)debentures app and allot ac | \(1260000\) | \(1260000\) | |
| 2. | \(10\%\)debentures app and allot acDr. To \(10\%\) Debentures ac To security prem res ac | \(1260000\) | \(1200000\) \(60000\) | |
| (ii)1. | Bank A/cDr. To \(9\%\) Debentures app and allot ac | \(4800000\) | \(4800000\) | |
| 2. | \(9\%\) Debentures app and allot acDr. Loss on issue of debentures acDr. To \(9\%\) Debentures Ac To Security prem res. Ac To Prem on red on debentures ac | \(4800000\) \(1200000\) | \(4000000\) \(800000\) \(1200000\) |
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Part 2 Chapter 2 Issue and Redemption of Debentures Printable Worksheets and Exercises for Class 12 Accountancy
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