FINANCIAL ACCOUNTING (BBA) 4.

Financial reporting  Going concern concept

Module I (Introduction to financial accounting)
Accounting
According to American Institute of Association “Accounting is the
process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by the users
of information”
Branches of accounting
1. Financial accounting
2. Cost accounting
3. Management accounting
Financial accounting
It is a branch of accounting mainly concerned with preparation of
financial statements and communication of business information to
various users.
Nature/ Characteristics of financial accounting
 It provides historical data.
 It deals with all commercial transactions.
 These are the accounts of whole business.
 Transactions of financial characters are recorded.
 Transactions are recorded on the basis of concepts and conventions.
 These are subject to accounting standards.
Objects/ Functions of financial accounting
 To identify financial events and transactions.
 To provide information about financial position.
 To provide information about profit or loss.
 To keep books of accounts of the business.
 To provide information to stakeholders.
Scope of financial accounting
1. Book keeping
2. Financial statements
3. Analysis and interpretation of financial statements
5. Segment reporting
6. Accounting principles
7. Accounting standards
Advantages of financial accounting
 It helps management in planning business activities.
 It helps management in controlling business activities.
 It helps management in taking timely decisions.
 It helps in the settlement of tax liability.
 It provide information about performance of the business.
 It provide information about financial position.
Limitations/ Disadvantages of financial accounting
 It provides only past data.
 It does not show profit or loss of each product, job process.
 It fails to exercise control over resources.
 It does not measure organization efficiency.
 It does not provide data for comparison cost.
 It provides limited information to management.
Accounting principles
Accounting principles are the general rules or principles adopted in
accounting.
Classification of accounting principles
1. Accounting concepts
2. Accounting conventions
3. Modifying accounting principles
Accounting principles (Basic assumptions)
 Business entity concept
According to this concept, there should be a separate legal entity
between owner and its business.
 Money measurement concept
According to this concept, only monetary transactions should be
recorded in books of accounts.
According to this concept, business will continue for an indefinite
period of time.
 Accounting period concept
According to this concept, the life of a business is divided into different
periods for preparing financial statements.
 Cost concept
According to this concept, all transactions are recorded in the books of
accounts at cost price.
 Dual aspect concept
According to this concept, every business transactions has two aspects
one debit aspect and one credit aspect.
 Realization concept
According to this concept, revenue is said to be realized when goods or
services to be sold to a customer.
 Matching concept
According to this concept, expenses of a particular period matched with
revenue of that period.
 Accrual concept
According to this concept, income earned and the total expense
incurred during the current period are taken into account.
 Objectivity concept
According to this concept, each transactions in the books of accounts
should have an adequate evidence to support.
Accounting conventions
 Convention of consistency
According to this convention, accounting policies or practices should
remain same year after year.
 Convention of conservatism (Prudence)
According to this convention, accountant should not anticipate income
but should make provision for all possible losses.

 Convention of materiality Expenditure Types of business transactions

According to this convention, only material facts should be disclosed in Money value paid or payable for acquiring an asset or service is called  Cash transactions
the financial statements. expenditure. Any business transaction which involves immediate payment or receipt
 Convention of full disclosure Revenue of cash is known as cash transactions.
According to this convention, all significant information should be It is the amount realized or receivable from the sale of goods or assets  Credit transactions
disclosed in the financial statements. or both. Any business transaction which involves settlement of payment later is
Modifying accounting principles Income known as credit transactions.
 Industry practice It is the excess of revenue over the expense.  Non cash transactions
 Substance over form Goods Any transaction which does not involve any payment or receipt of cash
 Timeliness principle These are the commodities, articles, products or things in which a either immediately or later is called non-cash transactions.
 Cost benefit principle trader deals. Double entry system
Accounting standards Purchase Every business transactions should have two aspects on receiving
Accounting standards are a set of rules and guidelines for preparing It refers to purchase of goods in which business deals. aspects called debit and one giving aspect called credit.
financial statements. Sales Debit
Accounting systems (Bases of accounting) It refers to sale of goods for cash or on credit. Receiving aspect of a transaction is called debit.
1. Cash system Turnover Credit
Transactions relating to actual cash receipts and actual cash payments It refers to speed with which goods are sold. Giving aspect of a transaction is called credit.
are recorded. Stock Advantages/ Merits of double entry system
2. Accrual system (Merchandise system) It refers to goods lying unsold on a particular date.  It provide complete record of every transactions.
All transaction relating to particular period are recorded. Debtors  It is a scientific system of accounting.
3. Hybrid system (Mixed system) Debtors are those persons who owes money to the business.  It helpful in ascertaining financial position.
Revenues and assets are recorded on cash basis and expenses and Creditors  Chances of frauds are minimized.
liabilities recorded on accrual system Creditors are those person to whom the business owes money.  It helps in preparing trail balance
Important terms in Accountancy Drawings  It is possible to judge progress of the business.
Capital It is the amount of cash or goods withdrawn by the owner from Account
The amount invested by the owner in business is called capital. business for his personal use. An account is a summary of business transactions for a particular time.
Liability Capital receipt Classification/ Types of accounts
It is the debts owing by business to others. It is the income generated from investing and financing activities of the
 Real account
Equity business.
These are the accounts of assets or properties of the business
it is the total claim against the assets of the business. Revenue receipt
Examples; Furniture a/c, Cash a/c, Machinery a/c etc.
Assets It is the income generated from the operating activities of the business.
Assets are the valuable things or property owned by the business.

 Nominal account 7. Enter amount in debit and credit column Purchase return book- For record goods returne by trader to suppliers.
These are the accounts related to income, gain, revenue, expenses, Objects of journal Sales return book- For record goods returned to trader by customers.
losses etc.  To simplify ledger Bills receivable book- For recording all bills received by the trader.
Examples; Rent a/c, Salary a/c, Depreciation a/c etc.  To ensure observance of double entry system Bills payable book- For recording all bills given to suppliers.
 Personal account  To helps in solving misunderstanding and disputes in business Trail balance
These are the accounts relating to persons with whom business deals.  To provide adequate explanation of each entry Trail balance is a statement showing various ledger balances on a
Accounting cycle/ Process Ledger particular date.
Starting from the transaction and ending with the preparation of Ledger means a book in which various accounts are kept. Features of trail balance
balance sheet is known as accounting cycle or process. Posting  It is prepared on a specific date.
 Journalizing The process of recording transactions from journal to ledger is called  It is not a part of double entry.
 Posting posting.  It is not an account.
 Balancing Difference between journal and ledger  Total debit and credit column of trail balance must be tally.
 Trail balance Journal Ledger Objectives / Functions of trail balance
 Trading and profit and loss account It is the primary entry It is the book of final entry 1. To ascertain arithmetical accuracy of ledger accounts
 Balance sheet It is prepared on chronological It is prepared on analytical basis 2. To helps in locating errors
Journal order 3. To helps in preparation of final accounts
Journal means daily record. It is the daily record of business The process of recording The process of recording 4. To helps in comparison
transactions in a chronological order. transactions in to journal is called transactions into ledger is called 5. To serve as an aid to management in decision making
Journalizing journalizing posting Methods for preparing trail balance
The process of recording transactions in a journal is called journalizing 1. Total method
Special journals
Journal entry 2. Balance method
The journal is subdivided into many subsidiary books called special
The record of each transaction in a journal is called journal entry. 3. Total and balance method
journals.
Narration Module II (Final accounts of proprietary concern)
Advantages of special journals
A brief explanation of a transaction given in a bracket below the journal Final account
1. Division of work
entry in the particular column is called narration. Final account means accounts which are prepared at the final stage to
2. Specialization
Steps in journalizing give the financial positon of the business.
3. Save in time
1. Read transaction carefully and find out two accounts Trading account
4. Facility in checking
2. Find out category of accounts (Real, nominal or personal) Trading account are those account which is prepared to show the trade
5. Availability of information
3. Apply rule of debit and credit results of the business. It may be gross profit or gross loss.
Important special journals
4. Enter date of transaction in date column Profit and loss account
Cash book- For recording all cash transactions.
5. In particular column write debit entry and next line credit entry Profit and loss account are those account which is prepared to
Purchase book- For recording all credit purchases.
6. Give narration below the journal entry ascertain net profit or net loss of the business for an accounting period.
Sales book- For recording all credit sales.
Manufacturing account
Manufacturing account are those account which is prepared by Partnership deed 5. Buyer get ownership after paying last installment.
manufacturing concerns to ascertain cost of goods manufactured It is a written legal document that contains an agreement made Difference between hire purchase and sales
during a period. between two or more persons who have an intention of doing Hire purchase Sales
Balance sheet partnership business. Ownership is transferred only Ownership is transferred at the
Balance sheet is statement showing assets and liabilities of business on Content of a partnership deed after last instalment payment. time of purchase
a particular date. It reveal the financial position of the business. It is  Name of the firm Payment of price is always made Payment of price is generally
also called position statement.  Nature of the partnership business in instalment. made in lump sum.
Outstanding expenses  Duration of the business Buyer cannot dispose goods. Buyer can dispose goods in any
Outstanding expenses are those expenses which remain unpaid at the  Amount of capital contributed by each partners way.
end of the accounting period.  Profit sharing ratio Hire purchase instalment includes Immediate cash sales does not
Prepaid expenses  Salary given to the partners interest. include interest.
Expenses paid in advance or unexpired expenses are called prepaid  Procedure for dissolution of partnership Seller can take back in case of any In case of credit sales seller can
expenses.  Valuation of goodwill default in payment. sue buyer for the payment of the
Accrued income Profit and loss appropriation account outstanding.
Income earned but not received at the end of an accounting period is It is an account prepared by partnership firm to distribute the net profit Hirer
called accrued income. among the partners in accordance with the partnership deed. Hirer is the buyer of goods according to hire purchase agreement.
Depreciation Goodwill Hire vendor
Decrease in the value of fixed assets due to obsolescence, wear and Goodwill is the good name or reputation created by the company. Hire vendor is the owner or seller of goods according to hire purchase
tear, passage of time etc is called depreciation. Methods for goodwill valuation agreement.
Partnership  Average profit method Cash price
Partnership is an agreement between two or more people to oversee Cash price means price at which goods can be purchased by the hirer
 Super profit method
business operations and share its profit and losses. for ready cash.
 Annuity method
Features of partnership Down payment
 Capitalization method
 Association of two or more person It is the initial payment made at the time of signing the hire purchase
Module III (Hire purchase and instalment system)
 Agreement agreement.
Hire purchase
 Lawful business It is a system of purchase under which the buyer enter into an Hire purchase price
 Sharing of profits agreement with the seller to pay the price in installment. It is the total amount payable by the hirer to the hire vendor
 No separate legal existence Features of hire purchase agreement Hire purchase charges
 Unlimited liability 1. It is a credit purchase. This is the difference between Hire purchase price and cash price.
2. Payment is made in installment.
3. Each instalment is treated as hire charges.
4. Goods transferred to the buyer on agreement.

Repossession Module IV (Branch accounts) d) Wholesale branch system

Under hire purchase agreement, hire vendor has the right to recover Branch a) Debtors system
goods if hire purchaser failed to pay installment. Such act is called A branch is a subdivision of a large business. It is a chain of shops in Under this method the head office prepares branch accounts for each
repossession. different localities under the control of head office. branches. Its purposes is to ascertain profit or loss made by each
Complete repossession Branch accounting branch.
In this case hire vendor has the right to get back all the goods sold. It is an accounting system in which separate accounts are kept for each b) Stock and debtors system
Partial repossession branch or operating location of an organisation. Under stock and debtors system instead of only one branch account,
In this case hire vendor does not repossess all the goods sold but take a Need or objectives of branch accounts several accounts relating to the transaction of a branch maintained in
part of the goods with the hire purchaser.  To ascertain profit or loss the books of head office. It is also called analytical system.
Installment system  To ascertain financial position 2. Independent branches
It is a system of sale in which the price of the article is paid installment  To help in control branches Under this system of branch accounting branches are treated as
along with interest on unpaid balances.  To assess progress of each branches separate independent units. An independent branch receive goods
Features of instalment payment system  To ascertain requirement of stock for each branches from head office.
1. It is a contract of sale.  To ascertain requirement of cash for each branches Features of independent branches
2. Payment is made on instalment.  To ascertain quantity of stock held by each branch  It maintains complete records under double entry system
3. The buyer cannot return the goods. Types of branches  It prepare its own trail balance, P&L account and balance sheet
4. Ownership is transferred to the buyer very beginning of the contract. 1. Dependent branches  It has its own bank accounts
5. Buyer can transfer the goods. 2. Independent branches  It receive goods from head office
6. Parties to the contract are called buyers and sellers 3. Foreign branches  It does not transfer cash to head office
Difference between hire purchase and installment system 1. Dependent branches Goods in transit
Hire purchase Instalment The branch which does not maintain a complete record of its Goods in transit is the difference between goods sent by the head
It is an agreement of hiring. It is an agreement of sale. transaction is said to be dependent branches. office and received by the branch.
Buyer is like a bailee. Buyer is not like a bailee. Characteristics of dependent branches Inter branch transfer
Risk of bad debt is less. Risk of bad debt is more.  They mainly sell goods supplied by the head office Goods or cash maybe sent by one branch on behalf of another or
Buyer gets only possession of Buyer get both possession and  They sell goods for cash expenses maybe incurred by one branch on behalf of another is called
goods immediately. ownership of goods immediately.  They do not maintain accounts. Maintain memorandum records. inter branch transfer.
Goods sold can be returned by Goods once sold cannot be  All major expenses are paid by the head office Invoice price
the buyer. returned by the buyer.  Cash collected transfer daily to the head office Invoice price is the initial price that the manufacturer charges the
Buyer cannot hire out or sell Buyer can hire out or sell goods Methods of maintaining accounts of dependent branches dealer.
goods before last instalment. before last instalment. a) Debtors system Branch stock account
b) Stock and debtors system Branch stock account are those account, which is prepared to have a
c) Final account system strict control over branch stock. It is always prepared at invoice price.

Branch adjustment account Shareholder Kinds / Types of shares

Branch adjustment account are those account, which is prepared to A person who buys a share is called shareholder or member of the 1. Equity Share capital
ascertain the gross profit of the branch. company. 2. Preference Share capital
Branch debtors account Types of share capital Equity Share
Branch debtors account are those account, which is maintained when 1. Registered Capital Shares which are not preference shares are called equity shares. These
the branch is allowed to sell goods on credit. This account is prepared The capital with which a company is registered is called registered are ordinary shares.
to ascertain closing balance of debtors or credit sales. capital. It is also known as nominal or authorized capital. Preference shares
Branch profit and loss account 2. Issued Capital Preference shares are those shares which carries preferential right with
Branch profit and loss account are those account which is prepared to It is a part of authorized capital which is issued to the public for respect to payment of dividend and repayment of capital.
find out net profit or net loss of the branch. subscription. Types of preference shares
Goods sent to branch account 3. Subscribed Capital 1. Cumulative preference share.
This account is credited with value of goods sent load on goods It is a part of issued capital which is subscribed by the public. 2. Non-cumulative preference shares.
returned and debited with goods returned to H.O and load on goods 4. Called up Capital 3. Participating preference shares.
sent to branch. It is a part of subscribed capital which the directors have called from 4. Non-participating preference shares.
Module V (Issue of shares and debentures) the shareholders. 5. Convertible preference shares.
Company 5. Paid up capital 6. Non-convertible preference shares.
According to Lord Justice “Company is an artificial person created by It is a part of called up capital which is actually paid up by the 7. Redeemable preference shares.
law with a perpetual success and a common seal.” shareholders. 8. Irredeemable preference shares.
Characteristics of a company 6. Reserve capital Difference between equity shares and preference shares
1. It is a voluntary association of persons. It is the amount of the capital which is not called by the company Equity Shares Preference Shares
2. It has a separate legal entity. except in the event of winding up. It is an ownership security. It is a hybrid security.
3. It has perpetual succession. Difference between reserve capital and capital reserve Dividend rate is not fixed. Dividend rate is fixed.
4. It is an artificial person created by law. Reserve capital Capital Reserve Nominal value is lower. Nominal value is higher.
5. It has a common seal. It is created out of uncalled capital. It is created out of capital Expenses on issue are lower. Expenses on issue are higher.
6. It is managed by board of directors. profit. Dividend is paid last. Dividend is before paying equity
7. Shares are freely transferable. It is not compulsory. It is compulsory. dividend.
Share capital It is used only at the time of It is used at any time during Sweat equity shares
The capital of a company is called share capital. winding up. the life of the company. Sweat equity shares are those shares issued by the company to its
Share It is not disclosed in the balance It is disclosed in the balance directors and employees at a discount or for consideration other than
The share capital of a company is divided in to small and equal units. sheet. sheet. cash for providing know how or making available rights in the nature of
Each unit is called a share. Special resolution is required. No special resolution is intellectual property rights or value additions.
required.
 Employees Stock Option Scheme (ESOS) Types of public issue Calls in arrears
Under this scheme, the company grands an option to the employees to a) Initial public offer (IPO) Some shareholders may fail to pay allotment money or call money. The
acquire shares at a future date with predetermined price. This is a method of raising securities in which a company sells shares or unpaid allotment or call money is called calls in arrears.
Objectives of ESOS stocks to general public for first time. Calls in advance
1. To develop the feeling of participation among employees. b) Offer for sales Amount received by a company before calls are made is called calls in
2. To attract efficient and skilled employees of the company. In this method shares are offered to public through the intermediaries. advance
3. To motivate efficient and skilled employees of the company. Procedure for issuing new shares Difference between calls in arrears and calls in advance
4. To encourage to serve the company. 1. Approval and filing of prospectus. Calls in arrears Calls in advance
5. To provide long term resources to the employees. 2. Issue of prospectus. It is the amount called up by the It is the amount not called up by
Stock 3. Receiving of application. company. the company.
A set of shares put together in a bundle is called stock. 4. Scrutiny of application. It shows a debit balance. It shows a credit balance.
Difference between Shares and Stock 5. Sorting of application. It is the amount due to the It is the amount due from the
Shares Stock 6. Closure of application list. company from the shareholders. company to the shareholders.
It has nominal value It has no nominal value 7. Record of application. The maximum rate of interest is The maximum rate of interest is
It has distinctive numbers It has no such number Terms of issue of shares 10% p.a. 12% p.a.
It is partly or fully paid up It is always fully paid up 1. Issue of shares at par It is the liability of the It is the liability of the company.
It can be issued directly It cannot be issued directly When shares are issued at a price equal to their face value is called shareholders.
It transferred in multiple of one It transferred in fractions issue of shares at par. Forfeiture of shares
Raising of capital/ Issue of shares 2. Issue of shares at premium It means cancellation of shares due to non-payment of allotment
1. Private placement When shares are issued at a price higher than their face value is called money or call money within a specified period.
2. Right issue issue of shares at premium. Procedure of forfeiture of shares
3. Public offer 3. Issue of shares at discount 1. Memorandum to each defaulter.
1. Private placement When shares are issued at a price lower than their face value is called 2. List of defaulters.
Private placement is the issue of securities of a company direct to one issue of shares at discount. 3. Notice to the defaulters.
investor or small group of investors. Minimum subscription 4. Resolution for forfeitures.
2. Right issue It is the minimum amount of capital fixed by the directors to be raised 5. Information of forfeitures.
It is an issue of shares to the existing shareholders in proportion to their from the members by way of subscription. 6. Removal of names.
existing shareholding. Under subscription 7. Transfer of forfeited amount.
3. Public issue Sometimes, the application for shares will be less than the number of Pro rata allotment
Public issue means selling of shares or securities to public by issue of shares issued. This is called under subscription of shares. It refers to the allotment of shares in proportion of the shares applied
prospectus. Over subscription for.
Sometimes, the application for shares will be more than the number of
shares issued, this is called over subscription of shares.

Annulment of forfeiture more profit. Dividend equalisation reserve. Security premium reserve.
The cancellation of forfeited shares is known as annulment of B) To the company Capital redemption reserve.
forfeiture. 1. It does not affect working capital of the company. Stock split
Surrender of shares 2. The cost of issue of bonus shares are less. Stock split is the process of reducing the face value of shares of a
The voluntary return of shares to the company by the shareholder is 3. It increases goodwill of the company. Company by dividing one share into two or more parts.
called surrender of shares. 4. No tax payment related to bonus shares. Difference between Bonus shares and Stock Split
Difference between and forfeiture and surrender of shares Disadvantages of Bonus shares Bonus shares Stock split
Forfeiture of shares Surrender of shares A) To the share holders Face value of shares does not The face value of shares is
It is made by the company. It is made by the shareholders. 1. It encourages speculation. change reduced.
It is carried out by directors. It is depend on the shareholders will. 2. Market value of shares sometimes fall It reduces reserves. Reserves remain as before.
When the shareholders fail to pay Not compulsory. 3. Sometimes dividend per shares reduced. It increases total number of Paid up capital does not change
allotment or call money, then 4. EPS will fall. shares. with stock split.
forfeiture compulsory. B) To the company It is issued when the company has It is generally split when it has a
The directors forfeit the share of The shares are returned to the 1. It encourages undesirable speculation. large accumulated reserves. high price.
shareholders. company by the shareholders. 2. It reduces accumulated profits earned in past years. Right shares/ Right issue
Forfeiture rules are mentioned in No rules are mentioned in table A. 3. Company's reputation may suffer. When a company offer additional shares to the existing shareholders
table A. 4. Some expenses like stamp duty, printing etc. will incurred. for a reduced price is called right issue.
Lien on shares SEBI guidelines for issue of bonus shares Advantages of right issue
Lien on shares means that the member would not be permitted to 1. Reserves created by revaluation of fixed assets are not capitalized 1. Issue cost is lower.
transfer his shares unless he pays debt to the company. 2. Company has not defaulted in payment of interest or principle of 2. It improves the image of the company.
Security premium reserve fixed deposits. 3. Issue made at the directions of directors.
It is the additional amount charged on the face value of any shares 3. Approval of board of directors is must. 4. Existing shareholders get additional shares.
when the shares are issued, redeemed, and forfeited. 4. The bonus shares shall not be issued in lieu of dividend. Value of right
Bonus shares 5. Once bonus issue announced, it cannot be withdrawn It is a gain an existing shareholders makes while exercising his rights.
Bonus shares are those shares which are issued by a company free of Conditions for issue of bonus shares Distinction between Bonus Shares and Right Shares
Cost to the existing shareholders of a company. 1. It should be authorized by articles. Bonus shares Right shares
Advantages of Bonus shares 2. Approval of Board of directors. Bonus shares are issued existing Right shares are issue against
A) To the shareholders 3. Company should have sufficient profit and reserves. members free of cost. payment.
1. Shareholders get additional shares for free 4. It must follow SEBI guidelines. Bonus shares are always fully Right shares may be fully paid or
2. Not required to pay income tax on bonus shares Sources of bonus shares paid. partly paid.
3. Shareholders will get increased dividend in future Revenue reserve/Profit Capital Reserve/profit There is no requirement of Right is subject to minimum
4. When market price of shares increases shareholders can earn Credit balance in P&L A/c. Profit on sale of fixed asset. minimum subscription. subscription.
General Reserve. Profit prior to incorporation.

Bonus issue must be authorised For the right issue, specific 5. It is a long-term finance. These debentures are convertible These debentures do not give any
by the Articles. provision in the Articles is not 6. It is generally secured. into shares within or after a options to convert into shares.
required. 7. It is issued under a common seal of the company. certain period.
Bonus issue increases share Right issue increases share Difference between shares and debentures Debentures with Pari passu clause
capital but reduces accumulated capital with simultaneous Shares Debentures This means all debentures of a particular series to be paid ratably and
profits without any increase in increase in cash (no effect on Owned capital Borrowed capital proportionately in case of short fall.
cash. accumulated profits). Dividend is paid on shares. Interest is paid on debentures. Issue of debentures
It is regulated by Section 63 of It is regulated by Section 62 of The rate of dividend varies The rate of dividend is fixed. From consideration point of view
the Companies Act, 2013. the Companies Act, 2013. Unsecured Secured  Issued for cash
Debenture Shareholder enjoy voting rights Debenture holder has no voting  Issued for consideration other than cash
Debenture is an acknowledgement of debt issued by a company under right  Issued as collateral security
its common seal. Shareholder is proprietor. Debenture holder is creditor. From price point of view
Bond Shares cannot be issued at discount. Debentures can be issued at  Issued at par
It is a fixed obligation to pay that is issued by a corporation or discount.  Issued at premium
government entity to investors. Kinds of debentures (Classification)  Issued at discount
Difference between bond and debenture A. On the basis of registration Terms of issue of debentures
Bond Debenture Registered Debenture Bearer Debenture 1. Issue of debentures at par
It is issued without predetermined It is issued at predetermined rate When the name of debenture These debentures do not have When debentures are issued at a price equal to their face value is called
rate of interest. of interest. holder is mentioned on the any name on the certificate and issue of debentures at par.
It is issued at maximum discount. It is issued at lesser discount. debenture certificate is called are negotiable instrument. 2. Issue of debentures at premium
Bonds are less risky. Debentures are at high risk. registered debenture. When debentures are issued at a price higher than their face value is
It is secured by collateral. It is not secured by collateral. B. On the basis of security called issue of debentures at premium.
It is mostly issued by government. It is mostly issued by private Secured Debenture Unsecured Debenture 3. Issue of debentures at discount
companies. These debentures are secured by These debentures are not secured When debentures are issued at a price lower than their face value is
Charge the assets of the company. Also on any assets. Also known as called issue of debentures at discount.
It simply refers to mortgage. There are two types of charge- fixed called mortgage debenture. naked debentures. Collateral security
charge and floating charge. C. On the basis of redemption It means additional or secondary security in addition to the main or
Nature of debentures Redeemable Debenture Irredeemable Debenture principal security.
1. It is a debt instrument These debentures are repayable These are not redeemable during Redemption of debentures
2. It represents loan capital after a fixed period. the lifetime of the company. It simply refers to repayment of debentures to the debenture holders.
3. It carries fixed rate of interest. D. On the basis of convertibility Issue of debentures and conditions of redemption
4. It carries no voting right. Convertible Debenture Non-convertible Debenture 1. Issued at par and redeemable at par
2. Issued at premium and redeemable at par
3. Issued at discount and redeemable at par
4. Issued at premium and redeemable at premium
5. Issued at premium and redeemable at premium
6. Issued at discount and redeemable at premium

PREPARED BY
JUBAIR MAJEED

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