Issue of Debentures for Consideration Other than Cash

\[\text{Number of Debentures Issued}=\frac{\text{Purchase Consideration}}{\text{Issue Price of Debenture}}\]

A. Issue of Debentures to Promoters

1. When recording incorporation cost or preliminary expenses:

Incorporation Cost A/c or Preliminary Expenses A/c      ...Dr.

      To Promoters’ A/c

(Being cost of company incorporation payable to promoters)

2. When debentures are issued to promoters:

Promoters’ A/c       ...Dr.

     To...% Debentures A/c

(Being debentures issued to promoters)

B. Issue of Debentures to Underwriters

1. When underwriting commission becomes due:

Underwriting Commission A/c     ...Dr.

     To Underwriter’s A/c 

  (Being underwriting commission due)

2. When debentures are issued to settle the dues:

Underwriter’s A/c       ...Dr.

       To ...% Debentures A/c  

(Being debentures issued to underwriters)

C. Issue of Debentures to Vendors

1. On Purchase of Business or Assets:

(i) When Purchase Consideration = Net Assets:

Sundry Assets A/c       ...Dr.

        To Sundry Liabilities A/c 

        To Vendor’s A/c

(Being assets and liabilities taken over and balance payable to vendor)

(ii) When Purchase Consideration > Net Assets - (Excess debited to Goodwill A/c)

Sundry Assets A/c                 ...Dr.

Goodwill A/c                        ...Dr.

       To Sundry Liabilities A/c 

       To Vendor’s A/c

(Being the excess purchase price over net assets treated as goodwill)

(iii) When Purchase Consideration < Net Assets - (Excess credited to Capital Reserve A/c)

Sundry Assets A/c      ...Dr.

      To Sundry Liabilities A/c  

      To Capital Reserve A/c

      To Vendor’s A/c   

(Being purchase consideration less than net assets; balance credited to capital reserve)

2. On Issue of Debentures to Vendors:

(i) When Debentures are issued at Par:

Vendor’s A/c     ...Dr.

      To ...% Debentures A/c  

(Being debentures issued at par to vendor)

(ii) When Debentures are issued at Premium:

Vendor’s A/c        ...Dr.

      To ...% Debentures A/c

      To Securities Premium A/c

(Being debentures issued at premium)

(iii) When Debentures are issued at Discount:

Vendor's A/c                                           ...Dr.

Discount on Issue of Debentures A/c     ...Dr.

      To ...% Debentures A/c 

(Being debentures issued at discount)