The Commerce Villa

Time: 1.5 Hour Marks: 40

Topic: Debentures & Financial Statements of a Company (AC – 06)

1. Savitri Ltd. issued 50,000, 8% Debentures of Rs 100 each at certain rate of premium and to be redeemed at 10%
premium. At the time of writing off Loss on Issue of Debentures, Statement of Profit and Loss was debited with Rs
2,00,000. What amount is credited in securities premium a/c at the time of issue?
a) Rs. 3,00,000 b) Rs 2,00,000 c) Rs 5,00,000 d) Rs 4,00,000 1

2. Which of the following is correct example of capital work - in - progress? 1

a) Purchase of current assets b) Conversion of raw material into final goods
c) Office building under construction d) Increase in patents

3. Perpetual debentures are known as – 1

a) Unsecured debentures b) Irredeemable debentures
c) Convertible debentures d) Bearer debentures

4. State the major headings under which ‘Discount on issue of debentures’ and ‘share application money refundable’
will be put as per schedule III part – I of companies Act, 2013. 1

5. Unimax Finance Ltd, a finance company had received interest of Rs 2,00,000 on the amount invested in Maxwell
Sports Ltd. and recorded in statement of profit & Loss under _______. 1

6. Naked debentures are known as – 1

a) Secured debentures b) Redeemable debentures
c) Unsecured debentures d) None of these

7. “Financial statements ignore qualitative factors and are also not comparable if different firms follow different
accounting policies”. Comment. 1

8. Financial statements are prepared on certain basic assumptions (pre - requisites) known as. 1
a) Provision of companies Act, 2013 b) Postulates
c) Accounting Standards d) Both (b) and (c)

9. Oxygen Ltd. issued Rs 30,000, 7% debentures of Rs 100 each to a Creditor for Rs 25,000 in full satisfaction of his
claim. Pass Journal entry. 1

10. Anupam Ltd. had published its financial statements for providing information regarding the performance of the
company in the year 2021- 22. On the analysis of these financial statements, it was found that the company was
having very good profitability position. But from some secret sources, got to know that in actual the closing stock
of company is more than what company had disclosed. Therefore, showing more sales than actual. Find out the
limitation of financial statement analysis identified here. 1

11. Durga Ltd. issued 80,000, 10% Debentures of Rs 100 each at certain rate of discount and were to be redeemed at
20% premium. Existing balance of Securities Premium before issuing of these debentures was Rs 25,00,000 and
after writing off Loss on Issue of Debentures, the balance in Securities Premium was Rs 5,00,000. At what rate of
discount, these debentures were issued? Show workings. 2
12. Show how the following items will be shown in the statement of profit and loss. 2

Particulars Amount
Finished Goods - Opening 5,00,000
Closing 4,00,000
Stock in trade - Opening 15,00,000
Closing 14,00,000
Loose tools 5,00,000

13. Give any two examples of each 3

I) Long term provision II) Non- Current Investments III) Live stock
OR
On April 1, 2019 Z Ltd. issued, 10,000, 8% Debentures of Rs 100 each at premium of 5%, to be redeemable at a
premium of 10%, after 5 years. The entire amount was payable on application. The issue was oversubscribed to
the extent of 10,000 debentures and the allotment was made proportionately to all the applicants. The securities
premium amount has not been utilised for any other purpose during the year. Give journal entries.

14. Classify the following items under Major heads and Sub- head (if any) in the Balance Sheet of a Company as per
schedule III of the Companies Act, 2013. 3
(i) Current maturities of long – term debts
(ii) Capital Advances
(iii) Advances recoverable in cash within the operating cycle.
(iv) Arrears of fixed cumulative dividends.
(v) Deposit with custom authorities.
(vi) Unclaimed dividend

15. On 1st April, 2013, Sunshine Ltd. issued Rs 10,00,000, 15% Debentures of Rs 100 each at 8% discount payable:-
Rs 40 on application, balance on allotment. These debentures were to be redeemed at a premium of 5%. All the
debentures were subscribed for by the public. Company has a balance of Rs 30,000 in its Securities Premium
reserve A/c
You are required to:
i) Prepare the 15% Debentures Account for the year ending 31st March, 2014. 4
ii) Prepare Loss on issue of debenture A/c.

16. Neeraj Ltd. took over business of Ajay enterprises on 1-04-2020. The details of the agreement regarding the assets
and liabilities to be taken over are: 4
Particulars Book Value (Rs) Agreed Value (Rs.)
Building 20,00,000 35,00,000
Plant and Machinery 12,00,000 8,00,000
Stock 4,00,000 4,00,000
Trade Receivables 5,00,000 4,00,000
Creditors 2,00,000 3,00,000
Outstanding Expenses 50,000 1,00,000
It was decided to pay for purchase consideration as Rs 7,00,000 through cheque and balance by issue of 2,00,000,
9% Debentures of Rs 20 each at a premium of 25%. Journalise.

17. The capital structure of Moon Ltd consists of 1,00,000, equity shares of Rs 10 each, Rs 9 called up and 50,000, 10%
Preference shares of Rs 50 each. In order to expand the business, company needs additional funds of Rs 30,00,000.
For this purpose; it raised the following loans in the year 2020- 21:
i) 12% Bank loan from SBI on 1st April 2020: Rs 10,00,000
ii) 20,000, 9% Debentures of Rs 100 each at 5% discount, redeemable at premium of 10% after 5 years.
 For SBI Bank Loan, Company placed 12000, 10% Debentures of Rs 100 each with bank as collateral
security.

You are required to

a) Pass journal entry for writing off loss on issue of debentures, if on April 1, 2020 company has a balance of
Rs 1,00,000 is securities Premium Reserve A/c, Rs 20,000 is General Reserve A/c and Rs. 5,00,000 in
statement of profit and loss account.
b) Which account will be debited and with what amount if company records the issue of debentures as
collateral in the books?
c) Show ‘Equity and Liabilities’ (shareholders’ funds and non-current liabilities) side of balance sheet on 31st
March, 2021 along with Notes to Accounts. 1+1+4=6

18. On 1st April, 2017 Bhawani Ltd. issued 5,000, 10% Debentures of Rs 100 each at a discount of 10%, redeemable at
5% premium after 5 years. On the same date, Bhawani Ltd. completed the following transactions also: 6
(i) It purchased business of Swami Ltd. for the purchase consideration of Rs 4,80,000. It paid the purchase
consideration by issuing 10% Debentures at 4% discount.
(ii) Bhawani Ltd. borrowed a loan of Rs 80,000 from SBI for 5 years and issued 10% Debentures of Rs 1,00,000
to Bank as a collateral security.
The interest on debentures is paid half yearly on 30th September and 31st March each year. Pass journal entries
for above transactions (including interest on debentures) in the year 17-18.