LIABILITIES

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Debentures
 A written promise to
 Pay a principal amount
 At a specified time
 + interest on the principal @ a specified rate per period
Debentures
 Debenture issue : a large no of debentures of small
denominations rather than 1 large bond.

 Underwriter: agrees to subscribe to non-subscribed

portion of a debenture issue

 Debenture Trustee: - represents the large number of

deb holders
Types of Debentures
 Secured v Unsecured

 Registered v Unregistered

 Convertible v Non-convertible

 Callable Debentures

 Zero coupon bonds – aka Deep Discount Bonds

 No periodic interest
 Issued at a deep discount to their face value
Debentures : misc aspects
 Debenture ratings
 Retirement of debs
 Conversion of debentures
 Debenture redemption fund aka Sinking Fund
Mortgages payable
 Conditional mortgage
 Equitable mortgage
 EMI – equated monthly instalment
Lease
 Lessor (owner) conveys to the lessee (renter) the right to use
an asset for an agreed period of time.

 Operating Lease : short term rental arrangement

 Finance Lease
 Lessor transfers all/most risks and rewards of ownership of an
asset to the lessee
 Non-cancellable lease contract
 Legally lessee acquires no legal title
 Per AS 19 , a finance lease must be capitalized i.e. identified
both as an asset and liability in the fin stmts