Which of the following statements is false?

Debentures can be issued in lieu of dividend

The correct answer is option 1- Debentures can be issued in lieu of dividend.

Debentures can be issued in lieu of dividend is false statement. Debentures can not be issued in lieu of dividend.

OTHER OPTIONS-

* Debentures can be issued in lieu of cash- Debentures are said to be issued at par when the amount to be collected on them is equal to their nominal or face value. If the issue price is more than nominal or face value, it is said to be issued at a premium. If the issue price is less than the nominal or face value, it is said to be issued on discount. The amount received as premium is credited to ‘securities premium account’ whereas amount of discount allowed is debited to “loss/discount on issue” and is written-off over the year

* Debentures can be issued for consideration other than cash-  Sometimes a company purchased assets from vendors and instead of making payment in cash issues debentures for consideration thereof. Such issue of debentures is called debentures issued for consideration other than cash. In this case also, the debentures may be issued at par, at a premium or at a discount then entries made in such a situation are similar to those of the shares issued for consideration other than cash, 

* Debentures can be issued as collateral security- A collateral security may be defined as a subsidiary or secondary or additional security besides the primary security when a company obtains a loan or overdraft from a bank or any other financial Institution. It may pledge or mortgage some assets as a secured loan against the said loan. But the lending institutions may insist on additional assets as collateral security so that the amount of loan can be realised in full with the help of collateral security in case the amount from the sale of principal security falls short of the loan money. In such situation, the company may issue its own debentures to the lenders in addition to some other assets already pledged. Such an issue of debentures is known as ‘Debentures issued as Collateral Security’. If the company fails to repay the loan along with interest, the lender is free to receive his money from the sale of primary security and if the realisable value of the primary security falls short to cover the entire amount, the lender has the right to invoke the benefit of collateral security whereby debentures may either be presented for redemption or sold in the open market. Debentures issued as collateral security can be dealt within two ways in the books of the company.