Question

Interest payable on debentures is:

• A. An appropriation of profits of the company
• B. Transfer to sinking fund
• C. A charge against the profit of the company
• D. None of these

Hint:

Dividends = appropriation of profit; Interest on debentures = charge against profit (compulsory).

Answer 1

The Correct Option is C

Step 1: Interest on debentures.
Debenture holders receive a fixed interest, irrespective of profits earned by the company.
Step 2: Nature.
This interest is treated as an expense of the company and must be paid before arriving at net profit.
Step 3: Conclude.
Therefore, interest on debentures is a charge against profit, not an appropriation of profit.
Final Answer: \[ \boxed{\text{A charge against the profit of the company}} \]