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Question
Bhagwati Ltd. took loan of ₹ 3,00,000 from IDBI Bank. The company issued 4,000; 9% Debentures of ₹ 100 each as a collateral security to additionally secure the loan. Show how these transactions will be shown in the Balance Sheet of the company.
Ledger
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Solution
| Balance Sheet of Bhagwati Ltd | ||
|---|---|---|
| Particulars | Note No. | Amount (₹) |
| Equity and Liabilities | ||
| Non-Current Liabilities | ||
| Long-term Borrowings | 1 | 3,00,000 |
| Note 1: Long-term Borrowings | |
|---|---|
| Particulars | Amount (₹) |
| Loan from IDBI Bank | 3,00,000 |
| Total | 3,00,000 |
The above loan is secured by the issue of 4,000, 9% Debentures of ₹ 100 each = ₹ 4,00,000 as collateral security.
Working Note:
Value of Debentures issued as collateral security
= 4,000 × ₹ 100
= ₹ 4,00,000
Thus, ₹ 4,00,000 is not added to the Balance Sheet liability, because these debentures were issued only as collateral security.
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