Question

Debentures issued as consideration other than cash are generally issued to:

• A. Employees
• B. Promoters
• C. Vendors
• D. Government

Hint:

The journal entry for this transaction is:
1. Asset A/c Dr. to Vendor A/c
2. Vendor A/c Dr. to Debentures A/c

Answer 1

The Correct Option is C

Step 1: Understanding the Question:
Companies often acquire assets or businesses from external sellers and pay them by issuing debentures instead of paying cash. We need to identify the term for these sellers.

Step 2: Detailed Explanation:
When a company purchases machinery, land, or a whole business, the seller of these assets is known as a "Vendor". If the company does not pay in cash and instead issues its own securities (like debentures or shares), it is called "Issue of Debentures for Consideration other than Cash".

Step 3: Final Answer:
The debentures are issued to Vendors.