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Which of the… (Class 12 Accountancy SQP 2023-24, Q6b)

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AccountancyCBSE Class 12 · Sample paper, session 2023-24 · 1 mark · MCQ

CBSE Class 12 Accountancy sample paper 2023-24: question 6(b)

From the official CBSE sample question paper for 2023-24, section A, question 6(b), for 1 mark. Try it first; the hints and our step-by-step solution are below.

Q6(b) · 1 mark · MCQIssue and Redemption of Debentures

Which of the following statements is incorrect about debentures?

  1. (A)Interest on debentures is an appropriation of profits.
  2. (B)Debenture holders are the creditors of a company.
  3. (C)Debentures can be issued to vendors at discount.
  4. (D)Interest is not paid on Debentures issued as Collateral Security.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.

Hints

Open one hint at a time and try again before the next.

Hint 1

Do debenture holders get interest even in a year of loss?

Hint 2

Debenture holders are creditors, not owners.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Interest on debentures must be paid whether or not there is profit, so it is a charge against profit (a finance cost).

  2. The statement "Interest on debentures is an appropriation of profits" is therefore the incorrect one. Option (A).

    1 mark

Answer: (A) Interest on debentures is an appropriation of profits.

Where the marks are

  • Interest on debentures is a charge, not an appropriation (1 mark)

Revise the chapter

Practise this chapterBoard-style questions from Issue and Redemption of Debentures, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2023-24: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.