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1. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
 Learning Objective:
Upon completion of this chapter, student should be able to
:understand the meaning & characteristics of debenture.
:know the importance of debenture.
:explain the various types of debenture.
Unit 1: Accounting for Companies:
Chapter 3: Accounting for Debentures (Theoretical part only)
C0fkqsf] n]vfljlw

2. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
3.1: Concept & Meaning of Debenture C0fkqsf]] cy{
Debenture is an instrument for a specified amount bearing the seal of the
company and purporting to an acknowledgement of the debt. It refers to the borrowed
capital from the public and is popularly known in the business world as loan capital that
means loan raised by a company. It is an agreement between the company and the
creditor, by which the company agree to repay the loan after a specified date and to pay
periodical interests thereon until the repayment of the loan.
C0fkq eg]sf] Ps k|sf/sf] sDkgL¢f/f hf/L ul/Psf], sDkgLsf] lzndf]x/ nfu]sf] lnlvt
k|lt1fkq xf] h;df sDkgLn] C0fkqwf/snfO{ ;fFjf e'StfgL x'g] ldlt, Aofh e'StfgL b/ / k|ls|of,
/ k|To]s C0fkqsf] c+lst d"No klg ;f]lx kqd} pNn]v ul/Psf] x'G5 . ;f]lx sf/0f C0fkq eGgfn]
s'g} JolQm;Fu lnPsf] C0f / ;f] sf nflu lt/]sf] Aofh ;d]t bzf{O sDkgL¢f/f hf/L ul/Psf]
cflwsfl/s k|df0fkq xf] h;df sDkgLsf] lzndf]x/ nfu]sf] x'G5 .

3. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
3.2: Characteristics or Features of Debenture C0fkqsf ljz]iftfx¿
1. Written promise lnlvt k|lt1f:
It is a written promise issued to the lender that states the payment of the value of loan in a specified
period of time. C0fkq eg]sf] sDkgLn] C|0f lnPsf] / tf]lsPsf zt{x¿ kfngf ug]{ u/L C0fbftfsf] gfddf hf/L u/]sf]
Ps k|sf/sf] k|lt1fkq jf k|df0fkq xf], h;df sDkgLsf] 5fk nfu]sf] x'G5 .
2. Face / Par value c+lst d"No:
A debenture has a fixed face value. It is generally Rs.1,000. C0fkqsf] vl/b laqmL d"No hlt;'s} ePtfklg
Aofh eg] clst d"Nosf] cfwf/df lgwf{/0f ul/g] ePsf]n] k|To]s C0fkqdf c+lst d"No ;dfj]z ul/Psf] x'G5 . k|foM Pp6f
C0fkqsf] d"No ?=1,000 sfod ul/Psf] x'G5 .
3. Rate of interest / Coupon Rate Jofh b/:
The rate of interest is fixed and paid every year. So, debenture is also known as "fixed cost bearing
capital.“ C0fkqdf Jofhsf] b/ klg pNn]v ul/Psf] x'G5 . Jofhsf] b/af6 C0fkqwf/sn] k|To]s jif{ k|fKt x'g] Aofhsf]
/sd lgwf{/0f ul/G5 . C0fkqsf] gfdsf] cufl8 pNn]v ul/g] k|ltzt b/nfO{ g} Jofh b/ dflgG5 / of] Jofh b/ kl/kSj
cjlw;Dd kl/jt{g x'Fb}g .

4. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
4. Maturity period kl/kSj cjlw
Debenture is redeemable (payable) at a fixed and specified period of time which is called maturity period.
k|To]s C0fkqdf C0fkqwf/snfO{ ls6fgL;fy ;fjf‘ e'StfgL x'g] ldlt pNn]v ul/Psf] x'g'kb{5 .
5. Long term nature bL3{sfnLg k|s[lt
It is a form of long-term borrowed capital. C0fkqx¿sf] kl/kSj cjlw Ps jif{eGbf a9L x'G5 . t;y{, sDkgLx¿n]
C0fkqnfO{ bL3{sfnLg ljQLo ;|f]tsf] ¿kdf k|of]u ub{5g .
6. Collateral lwtf]
Debentures are issued against certain collateral as land, building, equipment. C0fkq lgisf;g ubf{ sDkgLsf
l:y/ ;DklQx¿ h:t}M hldg, ejg, pks/0fx¿ cflb lwtf]sf] ¿kdf /flvPsf x'g ;S5g . o:tf] cj:yfdf sDkgLn] tf]lsPsf]
cjlwdf C0f lkmtf{ ug{ g;s]df lwtf]sf] ?kdf k|of]u ul/Psf ;DklQx¿ ljqmL u/L C0fsf] /sd lkmtf{ ug{kg]{ x'G5 .
7. No Voting right dtflwsf/ gx'g'
Debenture holders have no right to cast vote in company's general meeting. C0fkqwf/sx¿nfO{ sDkgLsf]
;fwf/0f ;efdf pkl:yt eO{ ;+rfnsx¿sf] 5gf}6h:tf dxTjk"0f{ Ph]08fx¿df dtbft ug]{ clwsf/ k|fKt x'Fb}g . t;y{, C0fkq
lgisf;gaf6 sDkgLsf lgoGq0fdf s'g} c;/ kb}{g .

5. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
3.3: Importance of Debenture C0fkqsf] dxTj
 Debenture holders receive a fixed rate of return on their investment.
C0fkqwf/Lx¿n] cfˆgf] nufgLdf lglZrt b/sf] Jofh -k|ltkmn_ k|fKt ub{5g .
 Debenture is refunded before the refund of share capital at the time of winding-
up of the company. sDkgL lj36gsf] cj:yfdf C0fkqsf] ;fFjf /sd c+zsf] /sd eGbf klxn]
e'QmfgL lbOG5 .
 Debenture holder’sinvestments are secured. C0fkqwf/Lx¿sf] nufgL ;'/lIft x'G5 .
 Debentures are transferable from one person to another. C0fkqx¿ Ps JolQmaf6 csf]{
JolQmdf x:tfGt/0f of]Uo x'G5g .

6. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
3.4: Types of Debenture C0fkqsf k|sf/
a. Registered debentures kl~hs[t C0fkqx¿
A debenture that cannot be transferred by a mere physical delivery is called registered debenture. The name of the
holder of such debenture is registered with the company. kl~hs[t C0fkqx¿ o:tf C0fkqx¿sf] ljleGg JoQmLx¿ jLr x'Fbf
sDkgLdf clen]v u/]/ dfq ug{ ;lsg] C0fkqnfO{ kl~hs[t C0fkq elgG5 . o:tf C0fkqwf/Lx¿sf] gfd, 7]ufgfsf] k"0f{ clen]v /flvG5 .
b. Bearer debentures afxs C0fkqx¿
A debenture, which is transferable by a mere delivery, is called bearer debenture. The holders of such debentures are its
owners and are called debenture holders. C0fkqx¿sf] ljleGg JolQmx¿ aLr vl/b ljqmL sDkgLsf] jlxvftfdf btf{ u/fpg gkg]{
u/L lgisfl;t ul/Psf C0fkqnfO{ jfxs C0fkq elgGt o:tf] qf0fkqsf] jfxs g} wf/s x'G5 / To;sf] Jofh tyf ;fFp /sd k|fKt ub{5 .
c. Secured / Mortgage debentures ;'/lIft jf aGwsL C0fkqx¿M
A debenture, which is issued against a specific fixed asset as security is called, secured debenture. Upon default of such
debenture on due date, the debenture holder can realize their sum out of the sale realized from such fixed asset. Secured
debenture are also called mortgaged debenture. sDkgLsf] l:y/ ;DklQnfO{ ;'/If0f /fvL lgisfl;t ul/Psf] C0fkqnfO{ ;'/lIft
C0fkq elgG5 . sDkgL 6f6 kN6]df jf lj36g ePdf C0fkqwf/L?n] ;f] ;'/If0f afktsf] ;DklQ ljqmL u/L cfˆgf] /sd c;'n pk/ ug{
;Sb5g .

7. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
d. Unsecured / Naked debentures c;'/lIft C0fkqx¿
Debentures issued without any security are called unsecured debentures. The holders of such debentures are not given
any security for the issue of such debentures. The holders of such debentures are treated as the general creditors of
the company. s'g} klg l:y/ ;DklQsf] ;'/If0f g/fvL lgisfl;t ul/Psf] C0fkqnfO{ c;'/lIft C0fkq elgG5 . sDkgL 6f6 kN6]df o:tf
C0fkqwf/Lx¿ ;fdfGo ;fx'x¿n] ;/x dfq bfjL ug{ ;Sb5g .
e. First debentures klxnf] C0fkqx¿
A debenture which is issues against a specific fixed asset not currently pledge as a security for the issue is called first
debenture. Such debenture needs to be repaid fully before second debentures are issued. s'g} l:y/ ;DklQsf] ;'/If0fdf
klxnf] k6s lgisf;g ul/Psf C0fkqx¿nfO{ klxnf] C0fkq elgG5 . sDkgLsf] lj36gsf] cj:yfdf ;f] ;DklQdf klxnf] C0fkqwf/Ln]
bfjL u/L cfˆgf] ;fFjf lkmtf{ lng kfpF5 .
f. Second debentures bf];|f] C0fkqx¿
A debenture which is issued against a specific fixed asset already used as a security is known as second debenture. Such
debentures are repaid only after the first debentures have been fully settled. s'g} l:y/ ;DklQdf bf];|f] bfjL x'g] u/L lgisfl;t
C0fkqsf] ;/If0fnfO{ bf];|f] C0fkq elgG5 . sDkgL lj36gsf] cj:yfdf klxnf] C0fkqsf] e'QmfgLkl5 dfq bf];|f] C0fkqn] k|fyldstf
kfpFb5 .

8. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
g. Redeemable debentures e'QmfgLof]Uo C0fkqx¿
The debentures which are to be repaid within a specified date as per the terms of their issue are called redeemable
debentures. The company is bound to pay the principal to debenture holders after the expiry of the period specified
at the time of issue. lglZrt cjlw k'/f ePkl5 jf sDkgLn] rfx]sf] a]nfdf C0fkqsf] ;fFjf /sd -Principal amount_ nfO{
e'QmfgL ug{ ;lsg] zt{df lgisfl;t ul/Psf] C0fkqnfO{ ;f]Wo C0fkq elgG5 .
h. Irredeemable / Perpetual debentures e'QmfgL cof]Uo jf :yfoL C0fkqx¿
Those debentures for which no fixed date is specified for repayment and the are payable only when the company goes
in liquidation. C0fkqsf] ;fFjf /sd sDkgL /x];Dd r'Qmf ug{ gkg]{ zt{df lgisfl;g ul/Psf C0fkqnfO{ c;f]Wo jf :yfoL C0fkq
elgG5 .
i. Convertible debenture kl/jt{gLo C0fkqx¿
A debenture which is issued with an option to convert it into common share, preference share or a new debenture
within a specified period at a conversion ratio is called convertible debenture. lglZrt cjlwleq cGo k|lte"ltx¿ h:t}M
kjf{lwsf/ z]o/ jf ;fwf/0f z]o/df kl/jt{g ug{ ;lsg] k|fjwfg ;lxt lgisf;g ul/Psf C0fkqx¿nfO{ kl/jt{gLo C0fkq elgG5 .
j. Non-convertible debenture ckl/jt{gLo C0fkqx¿
The debentures, which have no option of being converted into equity or preference shares or new debentures, are
called non-convertible debenture. cGo k|lte"ltx¿df kl/jt{g ug{ ;lsg] k|fjwfg g/flvPsf C0fkqx¿nfO{ ckl/jt{gLo C0fkq elgG5 .

9. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
Basis Shares Debentures
1. Ownership Shares denotes the ownership capital of
company
Debentures denotes the debt or loan capital of the
company
2. Identity Person holding shares is known as
shareholders.
Person holding debentures is known as debenture
holders.
3. Certainty of
return
No certainty of return in case of loss. The rate of interest is fixed and is to be paid even if
there is loss.
4. Repayment Repayment if the company liquidates and
funds are available.
Repayments during its lifetime or at the specified
period.
5. Convertibility It cannot be converted in to debenture. It can be converted in to share.
6. Control Shareholders have the right to participate and
vote in company’s meeting.
Debenture holders do not posses any voting rights and
can’t participate in meeting.
Differences between shares and debentures

10. Class12: Account, Chapter3, Accountingfor Debentures,Prepared by PralhadSapkota, PragatiSecondarySchool Hetauda – 9, Makawanpur, Nepal
Assignment:
1. What is debentures? Mention the features of debentures.
2. State the importance of debentures.
3. Explain the various types of debentures .