This article will help you to differentiate between Shares and Debentures.
1. A share is a part of owned capital.
2. Shareholders are paid dividend on the shares held by them.
3. The rate of dividend depends upon the amount of divisible profits and policy of the Board of Directors.
4. Dividend on shares is a charge against Profit and Loss Appropriation account.
5. Shareholders have voting rights. They have control over the management of the company. They are the owners of the company.
6. Shares are not redeemable (with the exception of redeemable preference shares) during the life of the company.
7. At the time of liquidation of the company, share capital is payable after meeting all outside liabilities.
Difference # Debentures:
1. A debenture is an acknowledgement of a debt.
2. Debenture-holders are paid interest on debentures.
3. A fixed rate of interest is paid on debentures irrespective of profit or loss.
4. Interest on debentures is a charge against Profit and Loss account.
5. Debenture-holders are only creditors of the company. They have no say in the company.
6. Debentures can be redeemed after a certain period.
7. Debentures are payable in priority over share capital.