Question

Interest on debentures is to be charged to ore incorporation period. True or False

Answer 1

The statement given above is False.

Explanation:

• An interest paid is a grant to all the debenture holders for capitalizing in the debentures of an organization.  

• Typically, interest is rewarded in a periodical systematic manner at a set rate of interest on the face worth of the debentures and is treated as a charge on the profits.

• When a business circulates debentures, it is under the responsibility to pay interest thereon at a fixed percentage (half-yearly) methodically until debentures are paid back.  

• This percentage is usually a part and parcel of the name of debentures like 7% debentures, 11% debentures, etc., and interest owed is calculated at the nominal value of debentures.