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9.2  Double Entry Book Keeping—CBSE XII

                                                  CHAPTER SUMMARY

                     •  Debenture: Debenture is a written acknowledgement of a debt by the company. It contains the terms for the
                       repayment of the principal debt on a specified date and for payment of interest at a fixed per cent until the
                       principal sum is paid.

                       •  Disclosure of Debentures in Company’s Balance Sheet: As per Schedule III of the Companies Act, 2013,
                       Debentures are shown in the Balance Sheet as Long-term Borrowings under the head Non-current Liabilities. But
                       debentures, shown as Long-term Borrowings and payable within 12 months from the date of Balance Sheet
                       or within the period of Operating Cycle is shown as Current Maturities of Long-term Debts under the main
                       head Current Liabilities and sub-head Other Current Liabilities. Interest Accrued (due and not due) is shown
                       as Other Current Liabilities under the main head Current Liabilities.
                     •  Characteristics of a Debenture
                        (i)  A debenture is a written document or certificate which acknowledges the debt by the company.
                        (ii)  The debenture certificate is issued under the common seal of the company, if the company has a
                          common seal.
                       (iii)  Mode and period of payment of principal and interest is fixed and is stated in the debenture.
                       (iv)  Rate of interest is fixed and is stated in the debenture.
                        (v)  The debt taken by issue of debentures is usually secured by a charge on the assets of the company.
                       (vi)  It is considered as an external equity or Long-term Borrowings of the company.
                     •  Types of Debentures
                        (i)  Secured Debentures are those debentures which are secured either on a particular asset or on all the assets
                          of the company in general.
                       (ii)  Unsecured Debentures are those debentures which are not secured by any charge on assets of
                          the company.
                       (iii)  Redeemable Debentures are those debentures which will be repaid by the company at the end of a
                          specified period.
                       (iv)  Irredeemable Debentures are those debentures which are not repayable during the life of the company.
                       (v)  Registered Debentures are those debentures, where the name, address and number of debentures held
                          by the debentureholders are registered with the company.
                       (vi)  Bearer Debentures are those debentures which can be transferred to any other person by mere delivery.
                          No record of such debentureholders is maintained by the company.
                       (vii)  First Debentures are those debentures which are to be repaid before the other debentures.
                       (viii)  Second Debentures are those debentures which are to be repaid after the first debentures.
                       (ix)  Specific Coupon Rate Debentures are those debentures which carry specified rate of interest.
                       (x)  Zero Coupon Debentures (Bonds)  are those debentures which do not carry any rate of interest.
                       (xi)  Convertible Debentures are those debentures which can be converted into shares after a specified period.
                       (xii)  Fully Convertible Debentures (FCD) are those debentures where the whole amount is to be converted into
                          Equity Shares.
                       (xiii)  Partly Convertible Debentures (PCD) are those debentures where only a part of the amount of debenture
                          is convertible into Equity Shares.
                       (xiv)  Non-Convertible Debentures are those debentures that are not convertible into shares of the company.
                       •  Debentures Trust Deed is a document created by the company whereby trustees are appointed to protect
                       the interest of debentureholders before they are offered for public subscription.
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