Debentures as long-term debt instruments

Steps:

• Recall that debentures are bonds issued by companies to borrow money, representing debt rather than ownership.
• Identify key features: fixed interest payments, no ownership rights, and priority in repayment over equity holders.
• Evaluate each option against these features to find the matching one.
• Confirm A aligns with debentures being recorded as long-term liabilities on the balance sheet.

Why A is correct:

• Debentures represent borrowed funds repayable after a long period (typically over one year), classifying them as long-term liabilities under accounting standards like IAS 1.

Why the others are wrong:

• B: Debentures pay fixed interest, not dividends, which are for shareholders.
• C: Debenture holders have no voting rights, as they are creditors, not owners.
• D: In liquidation, debenture holders are paid before shareholders, as debt takes priority over equity.

Final answer: A