Identify those debentures on which no interest will be paid/provided.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Debentures issued as collateral security
Debentures issued as collateral security are only an extra security for a loan. No liability is created by them, and interest is paid on the loan itself, so no interest is paid or provided on these debentures. They come into force only if the company fails to repay the loan.
Why the other options are incorrect
Option (1) Debentures issued to underwriters — Incorrect. They are issued in payment of underwriting commission and are a real liability carrying interest.
Option (2) Debentures issued for cash — Incorrect. The company has borrowed the money, so interest is payable at the stated rate.
Option (3) Debentures issued to vendor — Incorrect. They are issued as purchase consideration for assets and carry interest like any other debenture.
NCERT (2026-27 edition): |