Which combination of following statements are Incorrect (False) 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) Debentures cannot be converted into shares.

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

Choose the correct answer from the options given below:

Let me evaluate each statement about debentures:

(A) Debenture is a part of owned capital.

False. Debentures represent borrowed capital (debt), not owned capital. They are shown as liabilities in the balance sheet. Owned capital consists of equity shares and reserves.

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

True. Interest on debentures is treated as a finance cost and charged to the Statement of Profit and Loss. It must be paid regardless of whether the company makes profit or loss.

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

False. There is no legal restriction limiting discount on debentures to 10%. Companies can issue debentures at any discount, subject to board approval and proper disclosure requirements.

(D) Debentures cannot be converted into shares.

False. Convertible debentures can be converted into equity shares as per the terms of issue. While non-convertible debentures exist, the statement incorrectly suggests no debentures can be converted.

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

True. Redeemable debentures are those which the company agrees to repay either after a fixed period or in installments during the lifetime of the company.

The incorrect statements are (A), (C) and (D).

Correct Option: 4