other imp- debentures Flashcards
Debenture is a written instrument issued by a company acknowledging the borrowing.
The terms of repayment of principal and payment of interest at a specified rate are stated in the document.
Debentures are normally secured by way of charge on the assets of the company
Interest on debentures is a charge against profit
Bond
Bond, like de adventure, is an acknowledgement of debt issued by the company and signed by an authorised signatory.
The rate of interest is not stated rather the amount payable on maturity is stated .
Examples of bond are discount bond and zero coupon bond .
types of debentures from security point of view
secured : de adventures which are secured by either a fixed or floating charge on the assets of the company.
(the charge is registered with registrar of companies)
Unsecured : debentures which are not secured by a charge on the assets of the company
review meaning of charge on page number 9.3.
A floating charge holder has a preference over an unsecured creditor for settling his claims, in the event of winding up of the company.
from the point of view of redemption
Redeemable: re-payable by company on maturity as per the terms of issue
irredeemable : debentures that are not repayable during the lifetime of the company and hence are repaid only when the company is wound up
Types of debentures from registration point view
Registered: debentures that are registered in company’s records in the name of the holder.
The transfer in case of registered debentures requires execution of a transfer deed.
bearer debentures: not registered in the records of the company in the name of the holder.
They are transferable by mere delivery.
interest is paid to the person who produces coupons attached to the de adventure .
types of debentures from convertibility point of view
convertible: convertible into shares
(partly convertible or fully convertible)
non-convertible : debentures that are not convertible into shares
discount on the issue of debentures is debited when a lot of de adventures is made.
It is a capital loss of the company .
It is written off from securities premium if it exists or statement of profit and loss
loss on issue of debentures account is a loss(expense) account
Premium on redemption of the debentures account is a liability account
