Match List I with List II Choose the correct answer from the options given below:LIST I: Basis of Debenture LIST II: Types of Debenture A. Tenure I. Zero coupon rate B. Interest rate point of view II. Irredeemable C. Security III. Registration D. Bearer IV. Secured
A-II, B-I, C-IV, D-III
Matching Debenture Basis with Types
Let's analyze the provided lists to match the basis of classifying debentures from List I with their corresponding types or characteristics from List II.
We need to carefully examine each item in List I and find its appropriate match in List II based on common financial terminology regarding debentures.
- A. Tenure: This refers to the lifespan of the debenture. Debentures can have a fixed maturity period after which they are repaid (redeemable), or they might not have a fixed maturity period and are only repaid upon the winding up of the company (irredeemable). Thus, Tenure matches with Irredeemable.
- B. Interest rate point of view: Debentures usually pay interest at a fixed rate. However, some debentures do not pay periodic interest but are issued at a discount and redeemed at face value. The difference between the redemption value and the issue price represents the interest. These are known as Zero coupon rate debentures. Thus, Interest rate point of view matches with Zero coupon rate.
- C. Security: This refers to whether the debenture is backed by specific assets of the company. Debentures can be secured, meaning they are charged against the assets of the company, providing a layer of security to the debenture holders. They can also be unsecured. Thus, Security matches with Secured.
- D. Bearer: This refers to the manner in which ownership of the debenture is recorded and transferred. Bearer debentures are transferable by mere delivery; the name of the holder is not recorded by the company. The opposite of Bearer debentures are Registered debentures, where the name and address of the holder are recorded in the company's register. Thus, Bearer relates to Registration (or Registered debentures).
Based on this analysis, the correct matches are:
- A - II (Tenure - Irredeemable)
- B - I (Interest rate point of view - Zero coupon rate)
- C - IV (Security - Secured)
- D - III (Bearer - Registration)
Let's summarize these matches in a table format for clarity.
| List I: Basis of Debenture | List II: Types of Debenture | Match |
|---|---|---|
| A. Tenure | II. Irredeemable | A - II |
| B. Interest rate point of view | I. Zero coupon rate | B - I |
| C. Security | IV. Secured | C - IV |
| D. Bearer | III. Registration | D - III |
Comparing our matches with the given options, the combination A-II, B-I, C-IV, D-III corresponds to one of the provided choices.
Revision Table: Key Debenture Bases and Types
| Basis of Classification | Type 1 | Type 2 | Description of Classification |
|---|---|---|---|
| Tenure | Redeemable | Irredeemable (Perpetual) | Based on whether they are repaid after a fixed period or on winding up. |
| Security | Secured | Unsecured (Naked) | Based on whether specific assets are charged against them. |
| Registration | Registered | Bearer | Based on whether the holder's name is recorded by the company. |
| Convertibility | Convertible | Non-convertible | Based on whether they can be converted into equity shares. |
| Interest Rate | Fixed Rate | Floating Rate / Zero Coupon | Based on the nature of interest payment. |
Additional Information: Exploring Debenture Features
Debentures are important financial instruments used by companies to borrow money. Understanding their different types is crucial in finance and business studies.
Here are some key features related to the classification of debentures:
- Irredeemable Debentures: Also known as perpetual debentures, these have no fixed maturity date and are repaid only when the company is liquidated or winds up, or when the company decides to repurchase them.
- Zero Coupon Rate Debentures: These debentures do not pay periodic interest. Instead, they are issued at a significant discount to their face value and redeemed at face value on maturity. The investor's return comes from the difference between the redemption price and the issue price.
- Secured Debentures: These debentures have a charge (either fixed or floating) on the assets of the company. If the company fails to repay the debenture holders, they have a right to recover their dues by selling the charged assets.
- Bearer Debentures: These are highly liquid instruments. Ownership is transferred by simple delivery, similar to currency notes. The company does not maintain a register of debenture holders. Interest and principal payments are made to whoever presents the relevant coupon or the debenture certificate.
- Registered Debentures: The company maintains a register containing the names, addresses, and holdings of the debenture holders. Transfer of registered debentures requires registration with the company. Interest and principal are paid directly to the registered holder.
Classifying debentures based on these different criteria helps investors and the company understand the specific rights, obligations, and characteristics of the debenture issue.
Important Questions from Accounting for Debentures
Balance of Debenture Redemption Reserve A/c after the redemption of debenture is credited to:
Calculate the number of Debentures issued by A Ltd. for consideration other than cash:
‘Discount on issue of debenture’, which is to be written off under one operating cycle is shown under:
If the consideration for issue of Debentures is less than the amount of debentures issued, then the difference is:
When Debentures are issued at par and are redeemable at a premium, the Loss on such an issue is debited to:
