Match List–I with List–II : List I List II (a) (i) (b) (ii) (c) (iii) (d) (iv)Secured debentures are a form of long-term debt and can be referred as a debt security. Bonds are debentures which do not carry any charge on the assets of the company. Bearer debentures are secured by a charge on the whole or a part of assets of the company. Naked debentures are treated as negotiable instruments and are transferable by delivery alone.
Select the correct answer using the codes given below.
None of the above
Understanding Debentures and Bonds
The question asks us to match different types of debentures and bonds with their descriptions. Let's look at each item in List I and find its corresponding description in List II.
- Secured debentures: These are debt instruments where the company provides a charge or security against its assets (either specific assets or the whole undertaking) to the debenture holders. If the company fails to repay, the debenture holders can claim these assets. This description matches point (iii) in List II: "are secured by a charge on the whole or a part of assets of the company."
- Bonds: Bonds are essentially a form of long-term debt raised by companies or governments. They are a type of debt security where the issuer promises to pay back the principal amount at maturity along with periodic interest payments. This description matches point (i) in List II: "are a form of long-term debt and can be referred as a debt security."
- Bearer debentures: These debentures do not register the holder's name with the company. They are transferable simply by delivery, much like a bearer cheque. The person who holds the deb debenture is considered the owner. This characteristic is described in point (iv) in List II: "are treated as negotiable instruments and are transferable by delivery alone."
- Naked debentures: These are also known as unsecured debentures. Unlike secured debentures, they do not carry any charge on the assets of the company. The holders of naked debentures are treated as ordinary creditors of the company. This matches point (ii) in List II: "are debentures which do not carry any charge on the assets of the company."
Correct Matching of Debentures and Bonds
Based on the definitions, the correct matching between List I and List II is as follows:
| List I | List II |
|---|---|
| (a) Secured debentures | (iii) are secured by a charge on the whole or a part of assets of the company. |
| (b) Bonds | (i) are a form of long-term debt and can be referred as a debt security. |
| (c) Bearer debentures | (iv) are treated as negotiable instruments and are transferable by delivery alone. |
| (d) Naked debentures | (ii) are debentures which do not carry any charge on the assets of the company. |
So, the correct pairings are a - 3, b - 1, c - 4, d - 2.
Comparing with Given Options
Let's compare our correct matching (a - 3, b - 1, c - 4, d - 2) with the options provided:
- Option 1: a - 3, b - 1, c - 2, d - 4 (Incorrect; c and d pairings are swapped)
- Option 2: a - 3, b - 2, c - 1, d - 4 (Incorrect; b and c pairings are wrong)
- Option 3: a - 1, b - 2, c - 3, d - 4 (Incorrect; a, b, and c pairings are wrong)
Since none of the options 1, 2, or 3 match the correct pairing we derived, the correct answer must be "None of the above".
Important Questions from Debentures
- G.S. Rai company ltd. purchased assets of the book value of Rs. 98,000 from another firm. It was agreed that purchase
consideration be paid by issuing 11% debentures of Rs. 100 each. Assume debentures have been issued at discount of
20%
Identify the number of debentures issued by the company to the vendor The following journal entry appears in the books of X Co. Ltd.
Bank A/c Dr. 4,75,000 Loss on issue of debenture A/c Dr 75,000 To 12% Debentures A/c 5,00,000 To Premium on Redemption of Debenture A/c 50,000
In this case the debentures have been issued at a discount of 5%. What is the rate of premium on redemption
of debentures ?- If a company issue Rs. 1,00,000, 9% debentures of Rs. 100 each at discount of 5% but redeemable at premium of 5%
then what amount will be debited to Loss on Issue of Debentures Account? Debenture Application & Allotment A/c Dr. 95,000 Loss on Issue of Debentures A/c Dr. 10,000 To 9% Debenture A/c 1,00,000 To Premium on Redemption of Debentures A/c 5,000
On the basis of the above entry, determine the rate of discount at which Rs. 1,00,000, 9% debentures of Rs. 100 each
were issued if they were to be redeemed at a premium of 5%.
