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:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (B) and (D) only
(A) “Debenture is a part of owned capital.” — False. Debentures are borrowed capital (a liability), not owners’ funds.
(B) “The payment of interest on debentures is a charge on the profits of the company.” — True. Interest on debentures is a fixed obligation and is charged to profit and loss, irrespective of profit distribution.
(C) “The debentures cannot be issued at a discount of more than 10% of the face value.” — False. There’s no universal 10% cap in company law; debentures may be issued at a discount subject to applicable provisions—but not bound by a flat 10% limit.
(D) “Redeemable debentures are those debentures, which are payable on the expiry of the specific period.” — True. They carry a fixed redemption/maturity date for repayment.