Credit, Debt, and Finance

Charge can be a hypothecation where the possession of the security is with the borrower.

The provision of bad debts is made out of the current year's profits based on the convention of conservatism. This convention means that all the risks inherent in a business must be taken into account. If there is a possibility of loss, it should be taken into account at the earliest. So, there is a possibility that some amount may not be paid by debtors, therefore a provision is made for it to cover that loss.

A debenture is a bond issued by a company under its seal, acknowledging a debt and containing provisions as regards repayment of the principal and interest. Debentures can be issued for cash, or for considerations other than cash or as a colleteral security.Dividends are paid out of profits to the owners (equity or preference shareholders) of the company and the issue od debentures is not to replace dividend paid by the company.

Debentures is a type of secured loan taken by the company and the debentures are issued at par, or at discount or on premium and the amount is to be paid back on maturity.Generally, a debentureholer will be paying the call money due to receive interest for the same. Debentures are not forefeited due to non payment of calls.

The borrowing policy in an offer document must disclose the purpose, circumstances, regulatory limits, and potential risks to AMC and unit holders. However, it does not need to disclose the specific names of lenders, as this is commercially sensitive information and not relevant for investors' decision-making.

SEBI regulations mandate that AMCs must dispatch redemption proceeds within 10 working days. If this deadline is not met, investors are entitled to receive interest for the delay period. This protects investors from undue delays in receiving their money.

CDSC stands for Contingent Deferred Sales Charge, a type of back-end load fee charged by some mutual funds when shares are sold within a specified time period. The charge decreases over time and eventually disappears, designed to encourage long-term investment and discourage early redemption.

Deep discount bonds are issued at a significant discount to their face value and make no interest payments during their term. At maturity, the bondholder receives the full face value, with the difference between issue price and redemption value representing the investor's return.

IRDA (Insurance Regulatory and Development Authority) is an autonomous apex statutory body which regulates and develops the insurance industry in India.

A soft loan is a loan with a below-market rate of interest.

Micro Credit is a small financial loan given to poverty-stricken individuals seeking to start their own business.

Del-credere commission is an additional commission paid to the consignee for guaranteeing the collection of debts from customers. When bad debts occur despite this guarantee, the consignee bears the loss and must debit the Commission Earned account to reduce the commission receivable. The consignor account is not affected as the consignee has assumed the credit risk.

When cash discount is allowed to a debtor, the debtor's personal account is CREDITED to reduce the amount they owe. The discount is a concession for early payment. The discount account is debited (recording the expense), and the customer's account is credited (reducing the receivable). This is part of recording the discount transaction.

Treasury Bills (T-Bills) are short-term debt instruments issued by the government to finance its operations. They mature in less than one year (typically 91, 182, or 364 days) and are sold at a discount to face value, serving as key money market instruments.

Abatement is an equal reduction of recovery of debts by all creditors when there are not enough funds or assets to pay the full amount and the removal of a problem which is against public or private policy or endangers others, including nuisances such as weeds that might catch fire on an otherwise empty lot.