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Home Questions ZRXS4Z9D6E
Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:

There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion (A): Debenture holders are the creditors of the company carrying a fixed rate of interest.
Reason (R): Debentures are short-term loan taken from the public.

Options:

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Assertion (A) is true, but Reason (R) is false.

Assertion (A) is false, but Reason (R) is true.

Correct Answer:

Assertion (A) is true, but Reason (R) is false.

Explanation:

If a company requires funds for extension and development purpose, it can borrow from the public by issuing debentures for a fixed period of time and at a fixed rate of interest. Debentures are generally long term instrument.

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