AIOU SOLVED ASSIGNMENT 1 CODE 444 ADVANCED ACCOUNTING

AIOU SOLVED ASSIGNMENT 1 CODE 444 AUTUMN 2015

Q 02:

Ans:-

DEPENTURE – DEFINITION:-

Debenture is a type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

DIFFERENCE BETWEEN DEBENTURES AND SHARES OF JOINT STOCK COMPANY

The following are the major differences between shares of joint stock company and debentures:-

1.       The holder of shares is known as shareholder while the holder of debentures is known as debenture holder.

2.       Share is the capital of the company but debenture is the debt of the company.

3.       The shares represent ownership of the shareholders in the company. On the other hand, debentures represent indebtedness of the company.

4.       The income earned on shares is dividend, but the income earned on debentures is interest.

5.       In the event of winding up debentures get priority of repayment over shares.

6.       Shares cannot be converted as opposed to debentures are convertible.

7.       There is no security charge created for payment of shares. Conversely, security charge is created for the payment of debentures.

8.       Trust deed is not executed in case of shares whereas trust deed is executed when the debentures are issued to public.

9.       Unlike debenture holders, shareholders have voting rights.

10.   Shares are issued at discount subject to some legal compliance. Debentures can be issued at discount without any legal compliance. 

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