![]() Such Debentures are by nature a contingent liability against the issuing Company though they become a definite liability in the event of the breach of the agreement. A collateral security can be realised by its possessor if the original loan is not paid on the due date. Issue of Debenture as Collateral Security:Ī Company can issue debentures to serve as collateral security for a loan or for Bank Overdraft. (c) Debentures are issued at 25% Premium.Ĭ. (b) Debentures are issued at 20% discount. ![]() Illustration 2 (Issue of Debentures at Premium):Ī company issued 10,000 9% Debentures of Rs. Illustration 1 (Issue of Debentures at Par):Ī company issued 1,000 10% debentures of Rs 100 each at par, payable Rs 40 on application and the balance on allotment. The amount of discount should be shown on the asset side of the Balance Sheet, under the head ‘Miscellaneous Expenditure, until written off. When debentures are issued at discount, the amount of discount is debited to ‘Discount on Issue of Debentures Account. Debenture Premium Account is a capital profit and is transferred to Capital Reserve Account. When debentures are issued at premium, the amount of premium is credited to Debenture Premium Account. ![]() The amount due on debentures may be paid in installments, such as, Application, Allotment and Calls. The issue procedure with regard to debentures is the same as that of shares. In this article we will discuss about the accounting entries for issue of debentures.
0 Comments
Leave a Reply. |