Question

Hassan Limited took a loan of ₹30,00,000 from a bank against primary security worth ₹40,00,000 and issued 35,000, 6% debentures of ₹100 each as collateral security. The company again, after one year, took a loan of ₹50,00,000 from bank against Plant as primary security and deposited ₹60,000, 6% debentures of ₹100 each as collateral security. Record necessary journal entries. How will you show the issue of debentures and bank loan in the balance sheet of the company?

Answer 1

In the books of Hassan Limited
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		30,00,000	-
	To Bank Loan A/c		-	30,00,000
	(Being loan taken from bank.)
2.	Debenture Suspense A/c  .  ..Dr.		35,00,000	-
	To 6% Debenture A/c		-	35,00,000
	(Being issue of 35,000, 6% debentures of ₹100 each as Collateral Security for a Loan taken from bank.)
3.	Bank A/c   ...Dr.		50,00,000	-
	To Bank Loan A/c		-	50,00,000
	(Being loan taken from bank.)
4.	Debenture Suspense A/c   ...Dr.		60,00,000	-
	To 6% Debenture A/c		-	60,00,000
	(Being issue of 60,000, 6% debenture of ₹100 each as Collateral Security for a Loan taken from bank.)

 

Balance Sheet (Extract)
	Particulars	Note No.	Amount (₹)
I.	EQUITY & LIABILITIES
	Non-Current Liabilities
	Long-term Borrowings	1	80,00,000

Working Note:

	Particulars	Amount (₹)	Amount (₹)
1.	Long-term Borrowings
	Loan from Bank (30,00,000 + 50,00,000)		80,00,000
	95,000, 6% debentures of ₹100 each issued as Collateral Security	95,00,000
	Less: Debenture Suspense A/c	95,00,000	Nil
			80,00,000