Question

Which of the following is a written instrument acknowledging a debt under the common seal of the company?

• A. Debenture
• B. Equity Share
• C. Preference share
• D. Bank Draft

Hint:

A debenture is a company's written acknowledgement of debt under its common seal.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
When a company borrows money from the public, it gives the lender a document as proof of the loan. This document is issued under the seal of the company.

Step 2: Key Definition:
A debenture is a written instrument that acknowledges a debt of the company. It is issued under the common seal and carries a fixed rate of interest. The holder is a creditor of the company.

Step 3: Check option (1).:
A debenture matches the definition exactly. So (1) is correct.

Step 4: Check option (2).:
An equity share shows ownership in the company, not a debt. So (2) is wrong.

Step 5: Check option (3).:
A preference share also shows ownership, with a right to a fixed dividend. It is not a debt. So (3) is wrong.

Step 6: Check option (4).:
A bank draft is an instrument used to make payment through a bank. It is not issued by the company as acknowledgement of debt. So (4) is wrong.

Final Answer:
The instrument is a debenture, option (1). \[ \boxed{1} \]