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S. Singh Limited Obtained a Loan of ₹ 5,00,000 from State Bank of India @ 10% P.A. Interest. - Accountancy

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Question

S. Singh Limited obtained a loan of ₹ 5,00,000 from State Bank of India @ 10% p.a. interest. The company issued ₹ 7,50,000, 10% Debentures of ₹ 100 each in favour of State Bank of India as Collateral Security. Pass necessary Journal entries for the above transactions:
(i) When company decided not to record the issue of 10% Debentures as Collateral Security.
(ii) When company decided to record the issue of 10% Debentures as Collateral Security.

Solution

(i) When company decided not to record the issue of 10% debentures as Collateral Security

In the books of S. Singh Ltd.
Journal 

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

 

Bank A/c

Dr.

 

5,00,000

 

 

  To Bank Loan A/c

 

 

 

5,00,000

 

(Being bank loan taken from State Bank of India @10% p.a. interest)

 

 

 

 

(ii) When company decided to record the issue of 10% debentures as Collateral Security

In the books of S. Singh Ltd.
Journal 

Date

Particulars

 

L.F.

Debit Amount (₹)

Credit Amount (₹)

 

Bank A/c

Dr.

 

5,00,000

 

 

  To Bank Loan A/c

 

 

 

5,00,000

 

(Being bank loan taken from State Bank of India @10% p.a. interest)

 

 

 

 

 

 

 

 

 

 

 

Debentures Suspense A/c

Dr.

 

7,50,000

 

 

  To 10% Debentures A/c

 

 

 

7,50,000

 

(Being 7,500, 10% Debentures issued as collateral security)

 

 

 

 

  Is there an error in this question or solution?
Solution S. Singh Limited Obtained a Loan of ₹ 5,00,000 from State Bank of India @ 10% P.A. Interest. Concept: Debentures as Collateral Security-concept.
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