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SSC Financial and Cost Accounting P-1 QUESTION #6087
Question 1

Which statements regarding debenture interest are true?

  1. The interest rate is always higher than the dividend per share.
  2. Interest is recorded in the statement of changes in equity.
  3. Interest is paid before dividends are distributed to ordinary shareholders.
  4. Interest must be paid even if the company makes a loss.
  • 1, 2 and 3
  • 1, 3 and 4
  • 2 and 3 only
  • 3 and 4 only✔️
Correct Answer Explanation

Debenture interest is a charge against profit (expense), not an appropriation in the statement of changes in equity. It must be paid regardless of profit/loss and always before dividends. Statement 1 is not necessarily true.