State whether each of the following statements is True (T) or False (F):

| # | Statement |
| :---: | :--- |
| (a) | Debenture is a part of owned capital. |
| (b) | The payment of interest on debentures is a charge on the profits of the company. |
| (c) | The debentures cannot be

Question

State whether each of the following statements is True (T) or False (F):

| # | Statement |
| :---: | :--- |
| (a) | Debenture is a part of owned capital. |
| (b) | The payment of interest on debentures is a charge on the profits of the company. |
| (c) | The debentures cannot be issued at a discount of more than 10% of the face value. |
| (d) | Redeemable debentures are those debentures, which are payable on the expiry of the specific period. |
| (e) | Perpetual debentures are also known as irredeemable debentures. |
| (f) | Debentures cannot be converted into shares. |
| (g) | Debentures cannot be issued at a premium. |
| (h) | A collateral security is a subsidiary security. |
| (i) | Debentures cannot be issued at a premium and redeemable at par. |
| (j) | Loss on issue of debentures account is a revenue loss. |
| (k) | Premium on redemption of debentures account is shown under the 'Securities Premium' in the balance sheet. |

Accepted Answer

> [!TLDR]
> (a) False · (b) True · (c) False · (d) True · (e) True · (f) False · (g) False · (h) True · (i) False · (j) False · (k) False

## Statement-by-statement

**(a) Debenture is a part of owned capital. — False.** A debenture is borrowed (loan) capital — an acknowledgement of debt. Owned capital belongs to the shareholders; debenture holders are creditors, not owners.

**(b) The payment of interest on debentures is a charge on the profits of the company. — True.** Debenture interest is a charge against profit (a business expense), payable whether or not the company earns a profit — unlike a dividend, which is an appropriation of profit.

**(c) The debentures cannot be issued at a discount of more than 10% of the face value. — False.** There is no statutory ceiling on the rate of discount on debentures. (The old 10% limit related to the issue of shares at a discount, not debentures.)

**(d) Redeemable debentures are those debentures, which are payable on the expiry of the specific period. — True.** They are repaid — in lump sum or in instalments — on maturity, i.e., after a fixed period.

**(e) Perpetual debentures are also known as irredeemable debentures. — True.** They carry no fixed date of repayment and are repaid only on winding up or after a very long period.

**(f) Debentures cannot be converted into shares. — False.** Convertible debentures can be converted into equity shares — fully or partly — as per the terms of issue.

**(g) Debentures cannot be issued at a premium. — False.** Debentures may be issued at par, at a discount, or at a premium; the premium is credited to the Securities Premium Reserve. …

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	40,000
	To Share Application A/c		40,000
(Being application money received on 10,000 shares @ ₹4 each)

Date	Particulars	Debit (₹)	Credit (₹)
	Share Application A/c Dr.	40,000
	To Share Capital A/c		40,000
(Being application money transferred to Share Capital)

Date	Particulars	Debit (₹)	Credit (₹)
	Share Allotment A/c Dr.	60,000
	To Share Capital A/c		60,000
(Being allotment money due on 10,000 shares @ ₹6 each)

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	60,000
	To Share Allotment A/c		60,000
(Being allotment money received)

Particulars	Note No.	Amount (₹)
1. Shareholders’ Funds
(a) Share Capital	1	1,00,000
(b) Reserves and Surplus	2	20,000
2. Non-Current Liabilities	...	...
3. Current Liabilities	...	...

Concept understanding — Share Capital Accounting

Why does share capital matter in accounting?

The precise meaning (NCERT Class 12)

Accounting treatment — the journal entries

Step 1: Application money received

Step 2: Transfer application money to Share Capital

Step 3: Allotment money due

Step 4: Allotment money received

The Balance Sheet format (as per NCERT)

Statement-by-statement

#	Statement
(a)	Debenture is a part of owned capital.
(b)	The payment of interest on debentures is a charge on the profits of the company.
(c)	The debentures cannot be issued at a discount of more than 10% of the face value.
(d)	Redeemable debentures are those debentures, which are payable on the expiry of the specific period.
(e)	Perpetual debentures are also known as irredeemable debentures.
(f)	Debentures cannot be converted into shares.
(g)	Debentures cannot be issued at a premium.
(h)	A collateral security is a subsidiary security.
(i)	Debentures cannot be issued at a premium and redeemable at par.
(j)	Loss on issue of debentures account is a revenue loss.
(k)	Premium on redemption of debentures account is shown under the 'Securities Premium' in the balance sheet.

Particulars	Amount (₹)
Authorised Capital
1,00,000 Equity Shares of ₹10 each	10,00,000
Issued Capital
80,000 Equity Shares of ₹10 each	8,00,000
Subscribed and Paid-up Capital
80,000 Equity Shares of ₹10 each fully paid	8,00,000

Statement	Verdict
(a) Debenture is a part of owned capital	False
(b) Interest on debentures is a charge on profits	True
(c) Discount on debentures cannot exceed 10% of face value	False
(d) Redeemable debentures are payable after a specific period	True
(e) Perpetual debentures = irredeemable debentures	True
(f) Debentures cannot be converted into shares	False
(g) Debentures cannot be issued at a premium	False

Statement-by-statement

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