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प्रश्न
What accounting treatment is given to the issue of debentures in the books of accounts?
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उत्तर
Accounting Treatment
There are two ways to record the issue of debentures as collateral security:
No Entry
As no liability has been created so no Journal entry is recorded in the books of account. As per the Revised Schedule-VI of the Companies Act, the issue of debentures as collateral security is shown as Long-Term Borrowings under the heading of Non-Current Liabilities on the Equity and Liabilities side of the Balance Sheet. In the Notes to Accounts of Long-Term Borrowings, the Loan so taken is shown. And in the Notes to Accounts of Cash and Cash Equivalents, the amount of loan so received (in cash) is shown. This can be better understood with the help of the below explained example.
Example- Suppose Best Bus Ltd. issued 4,000 9% Debentures of Rs 100 each as collateral security to NBP bank for a loan of Rs 3,00,000.
Best Bus Ltd.
Balance Sheet
|
Particulars |
Note No. |
Amount (Rs) |
|
I. Equity and Liabilities |
|
|
|
1. Shareholders’ Funds |
|
|
|
2. Non-Current Liabilities |
|
|
|
a. Long-Term Borrowings |
1 |
3,00,000 |
|
3. Current Liabilities |
|
|
|
Total |
|
3,00,000 |
|
II. Assets |
|
|
|
1. Non-Current Assets |
|
|
|
2. Current Assets |
|
|
|
a. Cash and Cash Equivalents |
2 |
3,00,000 |
|
Total |
|
3,00,000 |
NOTES TO ACCOUNTS
|
Note No. |
Particulars |
Amount (Rs) |
|
1 |
Long-Term Borrowings |
|
|
|
Loan (Secured by issue of 9% Debentures of Rs 4,00,000 as Collateral Security) |
3,00,000 |
|
2 |
Cash and Cash Equivalents |
|
|
|
Cash at Bank |
3,00,000 |
- By Making Entry
In order to record the issue of debentures as collateral security, the following necessary Journal entries are made in the books of account.
At the time of Issue of Debentures as Collateral Security
|
Debenture Suspense A/c |
Dr. |
|
|
|
To Debenture A/c |
|
|
(Debentures issued as collateral security) |
||
In this case, as per the Revised Schedule VI of the Companies Act, Debentures so issued as collateral security will be shown as Long-Term Borrowings under the head of Non-Current Liabilities of the Equity and Liabilities side of the Company's Balance Sheet. Unlike Method-1, in this method, Debentures Suspense Account is deducted from the Debentures Account in the Notes to Accounts of Long-Term Borrowings.
Best Bus Ltd.
Balance Sheet
|
Particulars |
Note No. |
Amount (Rs) |
|
I. Equity and Liabilities |
|
|
|
1. Shareholders’ Funds |
|
|
|
2. Non-Current Liabilities |
|
|
|
a. Long-Term Borrowings |
1 |
3,00,000 |
|
3. Current Liabilities |
|
|
|
Total |
|
3,00,000 |
|
II. Assets |
|
|
|
1. Non-Current Assets |
|
|
|
2. Current Assets |
|
|
|
a. Cash and Cash Equivalents |
2 |
3,00,000 |
|
Total |
|
3,00,000 |
NOTES TO ACCOUNTS
|
Note No. |
Particulars |
Amount (Rs) |
|
|
1 |
Long-Term Borrowings |
|
|
|
|
Secured: |
|
|
|
|
Loan (Secured by issue of 9% Debentures of Rs 4,00,000 as Collateral Security) |
3,00,000 |
|
|
|
9% Debentures (Issued as Collateral Security to Bank against loan) |
4,00,000 |
|
|
|
Less: Debenture Suspense Account |
(4,00,000) |
- |
|
|
|
3,00,000 |
|
|
2 |
Cash and Cash Equivalents |
|
|
|
|
Cash at Bank |
3,00,000 |
|
APPEARS IN
संबंधित प्रश्न
What is meant by ‘Issue of debenture at discount and redeemable at premium’?
Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a premium of ₹ 35 per debenture . The full amount was payable on application. Applications were received for 10,000 Debentures. Allotment was made to all the applications on pro rata.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.
Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.
Alka Ltd . issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable at a premium of 5% after 5 years . According to the terms of issue ₹ 500 was payable on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.
The Amrit Ltd was promoted by Amrit and Bhaskar with an authorised capital of ₹ 10,00,000 divide into 1,00,000 shares of ₹ 10 each.
The company decided to issue 1,000 6% Debentures of ₹ 100 each to Amrit and Bhaskar, each for their services in incorporating the company.
Pass journal entry.
Newton Ltd. purchased a Machinery from B for ₹ 5,76,000 to be paid by the issue of 9% Debentures of ₹ 100 each at 4% discount. Journalise the trasactions.
Bright Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Star Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.
Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a premium of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
Green Ltd. purchased the assets of Strong Ltd. for ₹ 40,00,000 and took over liabilities of 7,00,000 at an agreed value of ₹ 32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.
XYZ Ltd.issued 5,000 , 10% Debentures of ₹ 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%.
On 1st April, 2015, V.V.L.Ltd issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%, redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.
On 1st April, 2015. Mathew Ltd. issued 10,000, 9% Debentures of ₹ 100 each at a discount of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:
| On 31st March, 2016 | 2,000 Debentures; |
| On 31st March, 2017 | 5,000 Debentures; |
| On 31st March, 2018 | 3,000 Debentures. |
Prepare the Loss on Issue of Debentures Account, Debentures Account and Premium on Redemption of Debentures Account for three years.
Fill in the blank.
For recording the issue of debentures as collateral security by a journal entry _______ account is debited.
Discount on issue of debentures is shown under the following head in the Balance Sheet?
The word 'debenture' has been derived from which Latin word (which means to borrow)?
A debenture is a ______.
Assertion (A): Issue of debenture does not result in dilution of interest of equity shareholders.
Reason (R): Debenture holders have voting rights.
Debenture is ______.
Premium received on issue of debentures may be utilised for:
X Ltd. purchased assets of ₹ 18,00,000 and took over liabilities of ₹ 6,00,000 of Y Ltd. for a purchase consideration of ₹ 10,00,000. The payment to Y Ltd. was made by issue of 9% debentures of ₹ 100 each at ₹ 125. Calculate the number of 9% debentures issued in favour of Y Ltd. and pass the necessary journal entries for the above transactions in the books of X Ltd.
