Published on August 20, 2014
87 6) Explain deep discount Bond When debentures are issued without interest rate and issue price is thereby discounted, the issue of debenture is said to have been made as deep discount bond. 7) Differentiate between shareholders and debenture holder, Point of Difference Share holder Debenture holder 1) Status There are the owners of the company They are the creditors of the company 2) Return They are paid Dividend They are paid interest 3) Security Shares are not secured Debentures are ordinarily secured 8) What is the nature of interest on debentures? Interest on debentures is a charge against profits. 9) State in brief, the SEBI Guidelines regarding Debenture Redemption Reserve Ans. At per SEBI Guidelines, an amount equal to 50% of the debenture issue must be transferred to DRR before the redemption begins. In other words, before redemption, at least an amount equal to 50% of the debenture issue must stand to the credit of DRR 10) Name the head under which discount on issue of debentures appears in the Balance Sheet of "C" Company. Ans. Discount on issue of debentures will appear under the heading Miscellaneous Expenditure. 11) What are the exceptions for creating debenture Redemption Reserve? (i) An infrastructure company, (ii) Debentures are issued for less than 18 months maturity period (iii) if debentures issued by private placement. 12) What do you mean by debentures issued as collateral security? The issue of debentures as a collateral security means the issue of debentures as an additional security against the loan in addition to principal security that may be offered. 13) A Ltd issued 5,000 13% debentures of Rs.100 each at par and raised a loan of Rs.80, 000 from Bank. Collaterally secured by Rs. 100,000 13% debentures. How will You show the debenture in the Balance Sheet of the Company assuming that the company has recorded the issue of Debentures as collateral security in the books.