Question : Which of the following statements is true?
Option 1: If the amount of interest accrued and due is not paid, it is known as Interest Accrued and Due or Interest Outstanding
Option 2: If the date of payment of interest and accounting date are different, Interest Accrued and Not Due Account is credited at the end of the year to maintain accounting records on accrual basis
Option 3: Interest Accrued or Outstanding (whether due or not) on Debentures is shown under the main head 'Current Liabilities' and sub-head 'Other Current Liabilities'
Option 4: All of the above
Correct Answer: All of the above
Solution : Answer = All of the above
1. Interest on debentures is a Charge against profit and is payable whether the company earns a profit or incurs a loss. Interest on debentures is calculated at a fixed rate of interest.
2. Interest is not payable on debentures issued as collateral security.
Debentures' Interest Account is transferred to the Statement of Profit and Loss Account.
3. If the amount of interest accrued and due is not paid, it is known as Interest Accrued and Due. If the date of payment of interest and accounting date is different, the Interest Accrued and Not Due Account is credited at the end of the year to maintain accounting records on an accrual basis.
Hence, the correct option is 4.