Issue of Debentures

Questions Bank

  • Debenture is derived from the latin word 'debere' which means 'to owed'. It is an instrument acknowledging debt, issued under common seal of the company.
    2018-02-12 16:30:35
  • Section 2(30), states debentures include stock, bonds, and any other instrument of a company evidencing a debt whether constituting a charge on the asset of the company or not.
    2018-02-12 16:30:21
  • Features of Debentures are (i) Certificate acknowledging  the debts, (ii) Mode and Period of repayment, (iii) Issued under common seal, (iv) May or May not be secured, (v) Considered as external equity, (vi) Rate of Interest on Debenture is fixed.
    2018-02-12 16:30:04
  • Nature of Accounts of (i) Debentures is a Personal Account, (ii) Debenture Application is Personal Account in nature.
    2018-02-12 16:29:32
  • Disclosure of Debenture in Balance Sheet, debentures may be either non-current liability or a current liability.
    If stated as "Non-Current Liability" it is shown under long term borrowing, If stated as "Current Liability" it is shown under short term borrowings.
    2018-02-12 16:28:56
  • Types of Debentures are (i) Security, (ii) Redemption /Tenure, (iii) Registration, (iv) Priority, (v) Convertibility, (vi) Coupon Rate.
    2018-02-12 16:28:23
  • Issue of Debentures for Consideration other than Cash means when debentures are issued to vendors against purchase of assets or against purchase of business.
    2018-02-12 16:27:56
  • Premium on Redemption of Debentures is a ‘Personal A/c’ in nature and would continue to be shown in Balance Sheet until Debentures are redeemed.
    2018-02-12 16:27:35
    2018-02-12 16:27:12

Questions Bank -

Ans. A bond is an acknowledgement of debt where the rate of interest is not pre-determined.

Ans. A debenture holder is entitled to interest which is fixed while an equity shareholder is entitled to dividend which is fluctuating.

Ans. As the debenture holder is a creditor of the company and does not share risks of the business.

Ans. Interest, is the return recieved by debenture holder from the company in debentures

Ans. Yes, the company can issue debentures at a discount

Ans. The account credited if debentures are issued at premium is securities premium account.

Ans. The debentures which are payable only to the debenture holders registered with the company.

Ans. Redeemable debentures are the debentures which are repayable after a specified period.

Ans. Irredeemable debentures are the debentures which are not repayable during the lifetime of the company.

Ans. It means a debenture which carries a specific rate of interest.

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