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Question
Usha Ltd. issued 30,000, 10% Debentures of ₹ 100 each as collateral security for a loan of ₹ 24,00,000 from Axis Bank. The company was unable to repay the loan on which interest payable was ₹ 6,00,000 as on 31st March, 2025.
Axis Bank, on 31st March, 2025, exercised the right vested in it by way of debentures being issued as collateral Security.
Pass Journal entries in the books of Usha Ltd. on 31st March, 2025.
Journal Entry
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Solution
| Journal for Usha Ltd. | ||||
| Date | Particulars | L.F. | Debit (₹) |
Credit (₹) |
| 1. | Axis Bank A/c (30000 × 100) ...Dr. | 30,00,000 | - | |
| To 10% Debentures A/c | - | 30,00,000 | ||
| (Being 30,000 debentures of ₹100 each previously issued as collateral security now becoming regular debentures) | ||||
| 2. | 10% Debentures A/c ...Dr. | - | 30,00,000 | |
| To Loan from Axis Bank | 24,00,000 | - | ||
| To Outstanding Interest A/c | 6,00,000 | - | ||
| (Being loan and interest settled by issuing debentures as per the collateral agreement) | ||||
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