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Class 9 Accountancy Chapter 7 Previous Year Questions: Issue and Redemption of Debentures (2020–2025)
Debentures are long-term debt instruments issued by companies to raise capital, and mastering their issue and redemption is critical for Class 9 Accountancy students. This comprehensive guide brings together authentic previous year questions from CBSE board exams (2020–2025), aligned with NCERT Chapter 7 principles, to help you understand how companies issue debentures, account for interest, and manage redemption. Whether you're preparing for final exams or building strong foundational knowledge, these curated problems—with detailed explanations—will sharpen your problem-solving skills and boost your confidence.
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What Are Debentures? NCERT Foundation Explained
Debentures are fixed-income securities issued by companies as a means of borrowing money. Unlike equity shares, debentures represent debt, not ownership. According to NCERT Class 9 Accountancy Chapter 7, debentures carry a fixed rate of interest and a maturity date. They are unsecured loans unless specified otherwise. Understanding the distinction between equity and debt financing is essential before solving redemption problems.
Issue of Debentures: Journal Entries & Accounting Treatment
When a company issues debentures, the entry is recorded as: Dr. Bank A/c | Cr. Debentures A/c. If debentures are issued at a premium or discount, separate accounts track the variance. CBSE previous year questions frequently test whether students record cash receipt correctly and handle any over-subscription. Key focus: always match the cash received with the nominal value adjustment.
Interest on Debentures: Calculation & Recording
Interest on debentures is calculated as (Debenture Value × Rate of Interest ÷ 100). It is recorded as an expense in the Profit & Loss Account. CBSE exam questions often ask for half-yearly or quarterly interest calculations. Remember: interest accrues even if not yet paid, so you may need to adjust for accrued interest in your year-end accounts.
Redemption of Debentures: Methods & Journal Entries
Debentures are redeemed (repaid) either at par, at a premium, or at a discount on maturity. The journal entry for redemption is: Dr. Debentures A/c | Cr. Bank A/c. If redeemed at premium, a loss arises; if at discount, a gain arises. Previous year questions test whether you can identify the gain/loss and ensure all related expenses (like debenture redemption reserve) are correctly closed.
Debenture Redemption Reserve: NCERT Requirements
Many CBSE questions require creation of a Debenture Redemption Reserve (DRR) as a statutory requirement. Each year, a portion of profits is set aside to ensure funds are available at redemption. The entry is: Dr. Profit & Loss A/c | Cr. DRR A/c. This reserve cannot be distributed as dividend. Understanding when and how much to reserve is crucial for full marks in redemption problems.
Previous Year Question Analysis: 2020–2025 CBSE Trends
CBSE exams (2020–2025) have consistently featured 3–5 mark questions on debenture issue and 5–8 mark questions on complete redemption scenarios. Common question types include: (i) issuing debentures at discount/premium; (ii) recording interest and DRR; (iii) redeeming debentures and calculating gain/loss. Analyzing these patterns reveals that examiners prioritize accurate ledger postings and understanding the conceptual link between issue, interest, and redemption.
Why CBSETUTOR.ai Is India's Trusted AI Tutor for Accountancy
CBSETUTOR.ai is the most-used 24x7 AI tutor trusted by lakh+ CBSE families across India for Class 9 Accountancy. Our platform offers instant, NCERT-aligned explanations of debenture concepts, step-by-step solutions to previous year questions, and real-time doubt resolution in both English and Hindi. Students using CBSETUTOR.ai consistently report improved grades and deeper understanding of complex topics like debenture redemption—because our AI tutors are trained exclusively on authentic CBSE syllabi.
Common Mistakes Students Make in Debenture Problems
Frequent errors include: (1) confusing debenture premium with redemption premium; (2) forgetting to record accrued interest on year-end; (3) miscalculating the gain/loss on redemption; (4) omitting DRR adjustments. CBSE examiners often penalize these mistakes heavily. Practice with genuine previous year papers and cross-check each entry to avoid losing marks on otherwise straightforward questions.
Step-by-Step Approach to Solve Redemption Questions
Step 1: Identify the issue price, number of debentures, and rate of interest. Step 2: Record the issuance entry. Step 3: Calculate and post interest for each period. Step 4: Set aside DRR as required. Step 5: On redemption date, calculate gain/loss (Redemption Price − Book Value). Step 6: Close DRR and post the redemption entry. This systematic method ensures accuracy and aligns with NCERT expectations.
Final Exam Strategy: Maximum Marks on Debenture Questions
Allocate 15–20 minutes per 5-mark debenture question. Draw a timeline showing issue, interest periods, and redemption. Use T-accounts or ledger format for clarity. Always show calculations for interest and gain/loss separately. In multi-part questions, attempt the issue entry first; it builds momentum. Revise DRR rules and redemption methods one week before your board exam to lock in concepts.
Frequently asked questions
What is the difference between debentures issued at par and at a discount?+
Debentures issued at par are sold at face value (nominal value). Debentures issued at discount are sold below face value. The discount is recorded as a separate account and amortized over the life of the debenture or at redemption.
How is Debenture Redemption Reserve (DRR) calculated?+
DRR is set aside annually as per company policy or statutory requirement. The typical formula is: (Debenture Value − Accumulated Sinking Fund) ÷ Remaining Years. Each year, the required amount is transferred from Profit & Loss A/c to DRR A/c to ensure redemption funds are available.
Can I access previous year CBSE question solutions in Hindi medium on CBSETUTOR.ai?+
Yes, CBSETUTOR.ai provides complete support in both English and Hindi. Our AI tutors explain debenture concepts, solve previous year questions, and provide doubt resolution in your preferred language 24x7 at no extra cost.
Is there a free trial to explore debenture solutions on CBSETUTOR.ai before committing?+
Yes, CBSETUTOR.ai offers a free trial period so you can explore our AI tutor's solutions to debenture problems, previous year papers, and interactive lessons. Sign up on our platform to access sample questions and see how our system works.
What journal entry is passed when debentures are redeemed at a premium?+
Dr. Debentures A/c (at nominal value) | Dr. Loss on Redemption A/c | Cr. Bank A/c (cash paid). The loss on redemption (premium paid over nominal value) is transferred to P&L A/c at year-end as a loss.
How are accrued interest on debentures handled at year-end accounts?+
Accrued interest (interest earned but not yet paid) is recorded as: Dr. Interest on Debentures A/c | Cr. Debenture Interest Payable A/c. This ensures the Profit & Loss A/c reflects the true interest expense for the period, aligning with the accrual concept.
Why do previous year CBSE questions emphasize Debenture Redemption Reserve?+
DRR is a statutory or policy requirement to ensure companies have funds available for redemption. CBSE questions test whether students understand the obligation to set aside reserves and the legal restrictions on distributing DRR as dividend, demonstrating prudent financial management.
What is the most common debenture question pattern in CBSE exams (2020–2025)?+
The most frequent pattern is a 5–8 mark question combining: (i) issue of debentures at premium/discount, (ii) recording interest and DRR, (iii) redemption and gain/loss calculation. Practice these integrated scenarios to score full marks on board exams.
Related resources
Class 9 Accountancy Chapter 1: Introduction to Accounting Previous Year Questions (2020–2025) with SolutionsClass 9 Accountancy Chapter 2: Theory Base of Accounting Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 3: Recording of Transactions — I Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 4: Recording of Transactions — II Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 5: Bank Reconciliation Statement Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 6: Trial Balance & Rectification of Errors — Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 7 Depreciation, Provisions and Reserves — Previous Year Questions (2020–2025)Class 9 Mathematics Chapter 1 Orienting Yourself: The Use of Coordinates – Previous Year Questions (2020–2025)
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