Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:

Interest on debenture is :

Options:

A direct expense

A charge against profit

An appropriation of profit

Paid only when there is profit in the company

Correct Answer:

A charge against profit

Explanation:

The correct answer is Option 2 - a charge against profit

Interest on debentures is treated as an expense for the company, and it is deducted from the company's profit to accurately represent its financial performance and to adhere to standard accounting principles. It is charge against profit so it has to be paid to debentureholders whether the company earns profit or not.