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:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (C) and (D) only
A debenture is an acknowledgement of a debt taken by the company, so each statement is tested against what a loan is: borrowed money, carrying a fixed interest, repayable on the agreed terms.
(A) Debenture is a part of owned capital. Incorrect. A share is owned capital; a debenture is borrowed capital, a loan the company must repay.
(B) The payment of interest on debentures is a charge on the profits of the company. Correct. Interest must be paid whether or not there is a profit, unlike a dividend, which is an appropriation of profit.
(C) The debentures cannot be issued at a discount of more than 10% of the face value. Incorrect. Debentures may be issued at a discount, and no such 10% ceiling applies to them; the discount is written off as a loss on issue.
(D) Debentures cannot be converted into shares. Incorrect. Convertible debentures are converted into equity shares or other securities, fully or partly.
(E) Redeemable debentures are those debentures, which are payable on the expiry of the specific period. Correct. They are repaid at the end of a fixed period, in a lump sum or in instalments.
NCERT (2026-27 edition):
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