Company Accounts

Debentures

Medium

common

The following are the features of Debentures:

(A) The payment of interest is a charge on profits and is to be paid even if there is no profit.

(B) The debentures, which are issued for a specified period are repayable on the expiry of that period.

(C) If the debentures are generally secured, they carry a fixed or floating charge over the assets of the company.

(D) Debentures can not be converted into shares in any case.

Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 2

Analyzing each feature of debentures:

Statement (A): Interest on debentures is a charge against profit and must be paid regardless of profit or loss. This is a contractual obligation between the company and debenture holders.

✓ Correct

Statement (B): Redeemable debentures issued for a specified period must be repaid when that period expires. The company is obligated to redeem them at maturity.

✓ Correct

Statement (C): Secured debentures carry either a fixed charge (on specific assets like land, building) or floating charge (on current assets like inventory, debtors) on the company's assets. This gives debenture holders security against their investment.

✓ Correct

Statement (D): This statement claims debentures cannot be converted into shares in any case. However, companies can issue convertible debentures which allow debenture holders to convert their debentures into equity shares after a specified period, as per the terms of issue.

✗ Incorrect

The correct features are (A), (B) and (C) only.

Correct Option: 2

2025: 22 May Shift 2

Match List-I with List-II

List-I	List-II
(Particulars)	(Treatment)
(A) Issue of debentures as collateral security	(I) Vendor Account will be credited
(B) Issue of debenture to Public	(II) Debenture Suspense Account will be debited
(C) Issue of debentures to vendor for purchase of an Asset	(III) Statement of Profit and Loss will be debited
(D) Writting off Discount/Loss on Issue of Debentures	(IV) Bank Account will be debited

Choose the correct answer from the options given below:

2022: 15 July Shift 2

When the number of Debentures applied for is more than the number of debentures offered to public, the issue is said to be:

2025: 13 May Shift 2

ABC Ltd., Issued 3,000, 14% Debentures of Rs. 100 each at a discount of 5% on April 1, 2023. Interest on these debentures is payable annually on March 31 each year. The debentures are redeemable at par in three equal instalments at the end of the third, fourth and fifth year. Discount on issue of debentures is-

2023: 29 May Shift 2

On 1st July/22, Centaur Ltd. issued Rs. 25,00,000 8% debentures of Rs. 100 each as collateral security to first Level Bank against loan dues of Rs. 20,00,000. How much amount will be shown in the Balance sheet?

2026: 12 May Shift 1

On May 01, 2025, Kaur Ltd. issued 10,000, 8% debentures of Rs. 100 each at a discount of 10% redeemable at a premium of 10%. The issue was fully subscribed and the amount was duly received. Calculate the amount of loss on issue of debentures.

2022: 20 Aug Shift 2

Blue Prints Ltd. purchased a building worth Rs. 1,50,000, Machinery worth Rs. 1,40,000 and Furniture worth Rs. 10,000 from XYZ Co. and took over its liabilities of Rs. 20,000 for a purchase consideration of Rs. 3,15,000.

Calculate the Goodwill/Capital Reserve to be recorded by Blue Print Ltd.

Solution

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