Question
Distinguish between shares and debentures $[$Three points$].$
✓
Answer
| Shares | Debentures |
| $(1)$ Share is owner's capital. Shareholder is the owner of the company. | $(1)$ Debenture is borrowed capital. Debenture holder is creditor of the Company. |
| $(2)$ Shares cannot be issued at discount. | $(2)$ Debentures can be issued at discount. |
| $(3)$ If the company cannot earn a profit, Dividend may not be paid to shareholders. Thus, return on share capital is not certain. | $(3)$ Company has to pay interest on debentures at the rate specified in the agreement. |
| $(4)$ As the share is owner's capital, there is no need to mortgage the company's assets. | $(4)$ As the debenture is the borrowed capital, the company creates the fixed or floating mortgage on its assets. |
| $(5)$ Shareholders have right to participate and to vote in the management of the company. | $(5)$ Debenture holders do not have any right to participate or to vote in the management of the company. |
| $(6)$ A company cannot issue shares which are convertible into debentures. | $(6)$ A company can issue such debentures which can be converted into shares. |
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$2.$ A partner has accepted to pay loan of his Smt. $Rs. 40,000,$ which was given to the firm.
$3.$ Goodwill is not disclosed in the book. But $Rs. 50,000$ are realised during dissolution.
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