Question

What is the accounting treatment when debentures are issued as a collateral security?

Answer 1

Debentures issued as collateral can be handled two ways in the books:

1. First Method: In this method, no entry is recorded in the books of accounts. The Balance Sheet’s Equity & Liabilities section lists the debentures as collateral security under ‘Secured Loans.’
2. Second Method: The Following entry is passed in this method:

Debenture Suspense A/c .......Dr.	(This appears on the Assets side.)
To Debentures A/c	(This appears on the Equity & Liabilities Side)
(Issue of debentures as collateral security)