A company cannot accept deposits for a period:

Less than 6 months or more than 36 months. Deposits are accepted only for a period between 6 months and 36 months.

Company deposits are mainly used to meet the company's:

Short term working capital needs. A deposit is a short term source of finance for working capital.

Depositors are ........ of the company.

Creditors. They lend money to the company, so they are creditors.

Depositors do not vote at company meetings because they:

Are creditors and not owners. Depositors are creditors, so they have no management or voting rights.

The return on a fixed deposit is:

Interest at a fixed rate. Depositors get regular interest at a fixed rate.

Maharashtra State Board · HSC Commerce · Class 12 (Std XII)

Class 12 Secretarial Practice Chapter 8: Correspondence with Depositors

Short notes, key concepts, quick revision and practice MCQs with answers

Deposits are a short term source of finance and depositors are creditors who earn fixed interest. The chapter covers the precautions in writing to depositors and the letters of thanks, interest, renewal and repayment.

Key concepts: Correspondence with Depositors

Deposit: A short term source of finance used to meet working capital needs. A company cannot accept deposits for less than 6 months or more than 36 months.
Depositor: A creditor of the company and a short term financer. He earns interest at a fixed rate, and has no management rights or voting rights.
Deposit receipt: The proof of receipt of deposit, sent to the depositor along with the letter of thanks within 21 days of accepting the deposit.
Payment of interest: Interest is sent when it falls due, either by interest warrant or electronically through ECS or NEFT, showing gross interest, TDS and net interest.
Renewal of deposit: Continuing the deposit for an additional period, same or different, after the first period ends. Renewal forms go out at least one month before maturity.
Repayment of deposit: The company must repay on maturity; default leads to penalty. The letter gives tenure, receipt number, maturity amount, TDS, net amount and due date.
Precautions in letters: Legal provisions, courtesy, prompt response, accuracy, goodwill, you attitude, conciseness and maximum secrecy.

Quick revision: important points

Deposits: minimum period 6 months, maximum 36 months; short term finance.
Deposit receipt is sent within 21 days from acceptance of the deposit.
Renewal application forms are sent at least one month before maturity.
Four occasions: thanks, interest (warrant or electronic), renewal, repayment.
Depositors are creditors: they get interest, not dividend, and have no voting rights.

Practice MCQs with answers

A company cannot accept deposits for a period:
1. More than 6 months
2. Less than 3 months only
3. More than 12 months
4. Less than 6 months or more than 36 months
Show answer
Answer: D. Less than 6 months or more than 36 months
Deposits are accepted only for a period between 6 months and 36 months.
Company deposits are mainly used to meet the company's:
1. Short term working capital needs
2. Permanent capital needs
3. Need to repay share capital
4. Need to issue bonus shares
Show answer
Answer: A. Short term working capital needs
A deposit is a short term source of finance for working capital.
Depositors are ........ of the company.
1. Members
2. Creditors
3. Debtors
4. Owners
Show answer
Answer: B. Creditors
They lend money to the company, so they are creditors.
Depositors do not vote at company meetings because they:
1. Are debtors of the company
2. Are employees
3. Are creditors and not owners
4. Hold preference shares
Show answer
Answer: C. Are creditors and not owners
Depositors are creditors, so they have no management or voting rights.
The return on a fixed deposit is:
1. Dividend at a varying rate
2. Bonus shares
3. Discount
4. Interest at a fixed rate
Show answer
Answer: D. Interest at a fixed rate
Depositors get regular interest at a fixed rate.

All Class 12 Secretarial Practice chapters

Class 12 Secretarial Practice notes: all chapters