Question

Assertion (A): A company has issued 1,00,000, 8% Debentures of ₹ 200 each to a bank as collateral security. It may or may not record it in the books of account by passing a Journal entry.

Reason (R): Journal entry if passed by the company will be:

Debenture Suspense A/c   ...Dr.	₹ 2,00,00,000
To 8% Debentures A/c		₹ 2,00,00,000

In the context of above two statements, which of the below options is correct?

Options

• Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) is incorrect but Reason (R) is correct.

• Both Assertion (A) and Reason (R) are incorrect.

Answer 1

Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

Explanation:

Debentures issued as collateral security may be recorded with or without a journal entry. If an entry is passed, Debenture Suspense A/c is debited and Debentures A/c is credited, as shown in the Reason.