Company AccountsQ-1 | Introduction to Company AccountsQuestion 4896 of 112
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Detailed Solution & Explanation

Meaning of debentures: Debenture means "an instrument in writing issued by a company under its common seal, acknowledging its indebtedness for a certain sum of money and undertaking to repay it on or after a fixed future date." According to sec. 2(12) of the Companies Act, 1956 (now section 2(30) of Companies Act, 2013) "Debenture include debenture stock, bonds and any other securities of a company, whether constituting a charge on the assets of the company or not." Characteristic features of a debenture:  It is issued by the company and is in the form of a certificate of indebtedness.  It usually specifies the date of redemption. It also provides for the re-payment of principal and interest at specified date or dates.  It generally creates a charge on the undertaking or undertakings of the company.  Usually the words pari passu appear in the terms and conditions of debentures.  This means that all the debentures of a particular class will receive the money proportionately in case the company is unable to discharge the whole obligation.

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Debentures

Long-term debt instruments issued by a company to the public for raising loan capital, carrying a fixed rate of interest (coupon rate) payable regardless of profit. Debenture holders are creditors, not owners, of the company.

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Re-issue of forfeited shares is allotment of shares but not a sale. [May 2018, 2 Marks]

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