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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 ‘Capital Reserve’?
A. Ltd. issued 50,00,000, 8% Debentures of Rs 100 at a discount of 6% on April 01, 2018, redeemable at a premium of 4% by draw of lots as under:
20,00,000 Debentures on March, 2020
10,00,000 Debentures on March 2021
20,00,000 Debentures on March 2022
Compute the amount of discount to be written off in each year till debentures are paid. Also prepare the discount/loss on the issue of the debenture account.
A company issues the following debentures:
- 10,000 12% debentures of Rs. 100 each at par but redeemable at a premium of 5% after 5 years;
- 10,000 12% debentures of Rs. 100 each at a discount of 10% but redeemable at par after 5 years;
- 5,000 12% debentures of Rs. 1,000 each at a premium of 5% but redeemable at par after 5 years;
- 1,000 12% debentures of Rs. 100 each issued to a supplier of machinery costing Rs. 95,000. The debentures are repayable after 5 years and
- 300 12% debentures of Rs. 100 each as collateral security to a bank that has advanced a loan of Rs. 25,000 to the company for a period of 5 years.
Pass the journal entries to record the: (a) issue of debentures, and (b) repayment of debentures after the given period.
B. Ltd. issued 1,000, 12% debentures of Rs 100 each on April 01, 2014, at a discount of 5% redeemable at a premium of 10%.
Give journal entries relating to the issue of debentures and debenture interest for the period ending March 31, 2015, assuming that interest is paid half-yearly on September 30 and March 31, and tax deducted at source is 10%.
Nipa Limited issued ₹ 10,00,000 Debentures of ₹ 100 each at a premium of 10% , payable 25% on application (including premium) and the balance on allotment . The debentures were applied for and the amount was dully received.
You are required to give Journal entries and prepare Cash Book.
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.
Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a bill of exchange and for the balance, the company issued 9% debentures of ₹ 100 each at a premium of 10% in favor of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.
Pass necessary Journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹ 80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.
Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .
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On 1st June, 2017, R Energy Ltd. issued 10,000, 7% Debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 10% at the end of five years. All the debentures were subscribed and allotment was made.
Prepare the Balance Sheet (extract) as at 31st March, 2018.
When debentures are issued at par and are redeemable at a premium, the loss on such an issue is debited to ______.
Which of the following given statement is correct.
Statement 1 - "Debenture is written instrument acknowledging a debt under the common seal of the company"
Statement 2 - Debenture is oral instrument acknowledging a debt under the common seal of the company"
Debenture interest is paid as ______.
The loss on issue of Debentures is written-off from ______.
Debenture premium cannot be used to ______.
Loss on issue of debentures is treated as ______.
Madhur Ltd. has outstanding 9% debentures of Rs. 50,00,000 redeemable at par on January 01, 2020. Debenture Redemption Reserve of Rs. 2,00,000 on March 31, 2018 and balance of the required amount of DRR was created on March 31, 2019. The company invested in specified securities (DRI) the required amount on April 01, 2019. Debentures were redeemed on the due date. Record necessary journal entries in the books of the company and also prepare the ledger accounts (ignore interest).
MK Ltd. has outstanding Rs. 30,000 11% debentures of Rs. 100 each redeemable at 10% premium as follows:
| March 31, 2018 - | 10,000 debentures |
| March 31, 2019 - | 12,000 debentures |
| March 31, 2020 - | Remaining debentures |
Pass necessary journal entries in the books of the company.
