Company accounts - II
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is a debenture in the context of company accounts?
A debenture is a long-term debt instrument issued by a company to borrow money at a fixed rate of interest, and debenture holders are creditors of the company, not owners.
What is the nominal value of a debenture also known as?
Face value or par value of the debenture certificate.
What is the difference between redeemable and irredeemable debentures?
Redeemable debentures are repaid by the company after a specified period, whereas irredeemable (perpetual) debentures have no fixed repayment date and remain outstanding indefinitely.
What does 'issue of debentures at a premium' mean in company accounts?
Debentures issued above their face value to investors.
What is meant by issue of debentures at a discount?
When debentures are issued at a price lower than their face value, they are said to be issued at a discount; the discount is treated as a capital loss and written off over the life of the debenture.
What is a 'debenture redemption fund' used for in company accounts?
Accumulated fund specifically to repay debentures at maturity.
How is a Debenture Redemption Reserve (DRR) created?
Companies are required under the Companies Act to transfer a specified percentage of the debenture value to a Debenture Redemption Reserve out of profits before redeeming debentures, to protect debenture holders.
What is meant by 'own debentures' held by a company?
Debentures purchased by the company from open market for cancellation.
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