Issue of Debentures by Viram Ltd

Viram Ltd has issued 50,000 5% debentures of Rs. 100 each at a discount of 10%. The payment terms are 30% on applications and the balance on allotment. Let us understand the process of issuing debentures in detail.

What are Debentures?

Debentures are long-term debt instruments issued by companies to raise funds from the market. Debenture holders are creditors of the company and are entitled to a fixed rate of interest on their investment. The interest paid on debentures is tax-deductible for the company.

Types of Debentures

Companies can issue different types of debentures based on their features. Some common types of debentures are:

- Secured debentures: These are backed by the company's assets as collateral.
- Unsecured debentures: These are not backed by any collateral.
- Convertible debentures: These can be converted into equity shares after a certain period.
- Non-convertible debentures: These cannot be converted into equity shares.

Discount on Issue of Debentures

When a company issues debentures at a price lower than their face value, it is called a discount. The discount is treated as an expense for the company and is amortized over the life of the debenture.

Payment Terms for Debentures

Companies can choose to collect the payment for debentures in instalments. The payment terms can be:

- On application: A certain percentage of the total amount is collected at the time of application.
- On allotment: The balance amount is collected when the company allots the debentures to the investors.
- On maturity: The final payment is made when the debentures mature.

Conclusion

Viram Ltd has issued 50,000 5% debentures of Rs. 100 each at a discount of 10%. The payment terms are 30% on applications and the balance on allotment. Debentures are long-term debt instruments issued by companies to raise funds from the market. Companies can issue different types of debentures based on their features. When a company issues debentures at a price lower than their face value, it is called a discount. Companies can choose to collect the payment for debentures in instalments.