Select the pair which is true about debentures-

(A) Debenture is a part of owned capital.

(B) The payment of interest on debentures is a charge on the profits of the company.

(C) The debentures cannot be issued at a discount of more than 10% of the face value.

(D) Redeemable debentures are those debentures, which are payable on the expiry of the specific period.

Choose the correct answer from the options given below:

1. (B) and (D) only
2. (A) and (D) only
3. (C) and (D) only
4. (A) and (B) only

Let me evaluate each statement about debentures:

(A) Debenture is a part of owned capital.

This is incorrect. Debentures represent borrowed capital (loan capital), not owned capital. They are debt instruments issued by the company to raise long-term funds. Owned capital consists of equity share capital and reserves.

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(B) The payment of interest on debentures is a charge on the profits of the company.

This is correct. Interest on debentures is a contractual obligation and must be paid irrespective of whether the company earns profit or not. It is treated as a charge against profits and appears as an expense in the Statement of Profit and Loss before arriving at net profit.

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(C) The debentures cannot be issued at a discount of more than 10% of the face value.

This is incorrect. There is no such restriction on the discount at which debentures can be issued. Companies can issue debentures at any rate of discount. This restriction (10% limit) applies to the issue of shares at a discount under special circumstances, not to debentures.

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(D) Redeemable debentures are those debentures, which are payable on the expiry of the specific period.

This is correct. Redeemable debentures have a fixed maturity date on which they are repaid by the company. These debentures are issued for a specified period and must be redeemed at the end of that period.

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Statements (B) and (D) are true.

Correct Answer: Option 1