際際滷

際際滷Share a Scribd company logo

accounting for Debentures

Download as PPTX, PDF
P
Poonam Jangid

This document discusses accounting for debentures. It defines debentures as a written acknowledgment of debt issued by a company under its seal. The document then outlines six journal entries for issuing debentures under different terms, such as being issued at par/premium/discount and redeemed at par/premium. It also provides brief explanations of debentures, reasons for investing in them, how they can be categorized, the nature of premium on redemption accounts, and differences between debentures and shares.

Convert to study materialsBETA

Transform any presentation into ready-made study materialselect from outputs like summaries, definitions, and practice questions.

1 of 16
Downloaded 18 times
Accounting for Debentures
Debentures: A debenture is a written acknowledgment of a debt taken by the company as these are issues under the seal of the company. According to section 2(30) of the companies act 2013 debentures includes debenture stock, bonds and any other securities of the company whether
Accounting treatment for issue of debentures for cash Debenture may be issued at par or at premium or at discount and may be redeemed at par or at premium. After taking into consideration the three possibility of issue (i.e., at par or at premium or at discount ) and two possibility of redemption ( that is at par or at premium) in this context three journal entries for different terms of redemption with their impact on the issue of debentures can be summarised in different modes
Journal entries for issue of debentures with condition of redemption 1.when debentures are issued at par and redeemable at par (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr To % Debenture a/c 2. When issued are issued at discount and redeemable at par (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr Discount on issue of debenture a/c Dr To % debenture a/c
3. When debentures are issued at premium and redeemable at par (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr To % denture a/c To securities premium reserve a/c 4. When debenture are issued at par and redeemable at premium (i.e., amount more than face value or nominal value) (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr loss on issue of debenture a/c Dr TO % debenture a/c TO premium on redemption of denture a/c
5. When debentures are issued at discount and redeemable at premium (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr Discount on issue of debenture a/c Dr loss on issue of debenture a/c Dr To % denture a/c To premium on redemption of debentures a/c
6. When debentures are issued at premium and redeemable at premium (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr loss on issue of debenture a/c Dr To % denture a/c To securities premium reserve a/c To premium on redemption of debentures a/c
accounting for Debentures
What is meant by debentures? Debentures is an instrument acknowledging a debt issued by the company under a common seal
Mention any one feature of debenture Itcontainsacontractfortherepayment ofprincipalsumatspecificperiodoftime oritprovidesforafixedrateofinterest.
Why would an investor prefer to invest in debentures of the company rather than its shares? An investor would prefer to invest in debentures of a company rather than its shares (i) to ensure the safety of his investment (ii) assured returns
How can debentures be categorised from point of view of security? From point of view of security debentures can be categorised as: (i) secured debentures (ii) unsecured debenture
What is nature of premium on redemption of debenture account? It is a personal account
State any two difference between shares and debentures A share is a part of owned capital so a shareholder is the owner of the company. A debenture is a part of the borrowed capital so a debenture holder is only a loan creditor The return on shares is known as dividend and may vary depending upon companys profit. The profit on debentures is known as interest and is pre fixed.
What is meant by issue of debenture at discount? Debentures are said to be issued at discount when their issue price is less than the face value
accounting for Debentures

More Related Content

accounting for Debentures

  • 2. Debentures: A debenture is a written acknowledgment of a debt taken by the company as these are issues under the seal of the company. According to section 2(30) of the companies act 2013 debentures includes debenture stock, bonds and any other securities of the company whether
  • 3. Accounting treatment for issue of debentures for cash Debenture may be issued at par or at premium or at discount and may be redeemed at par or at premium. After taking into consideration the three possibility of issue (i.e., at par or at premium or at discount ) and two possibility of redemption ( that is at par or at premium) in this context three journal entries for different terms of redemption with their impact on the issue of debentures can be summarised in different modes
  • 4. Journal entries for issue of debentures with condition of redemption 1.when debentures are issued at par and redeemable at par (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr To % Debenture a/c 2. When issued are issued at discount and redeemable at par (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr Discount on issue of debenture a/c Dr To % debenture a/c
  • 5. 3. When debentures are issued at premium and redeemable at par (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr To % denture a/c To securities premium reserve a/c 4. When debenture are issued at par and redeemable at premium (i.e., amount more than face value or nominal value) (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr loss on issue of debenture a/c Dr TO % debenture a/c TO premium on redemption of denture a/c
  • 6. 5. When debentures are issued at discount and redeemable at premium (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr Discount on issue of debenture a/c Dr loss on issue of debenture a/c Dr To % denture a/c To premium on redemption of debentures a/c
  • 7. 6. When debentures are issued at premium and redeemable at premium (a) Bank a/c Dr To debenture application a/c (b) Debenture application a/c Dr loss on issue of debenture a/c Dr To % denture a/c To securities premium reserve a/c To premium on redemption of debentures a/c
  • 9. What is meant by debentures? Debentures is an instrument acknowledging a debt issued by the company under a common seal
  • 10. Mention any one feature of debenture Itcontainsacontractfortherepayment ofprincipalsumatspecificperiodoftime oritprovidesforafixedrateofinterest.
  • 11. Why would an investor prefer to invest in debentures of the company rather than its shares? An investor would prefer to invest in debentures of a company rather than its shares (i) to ensure the safety of his investment (ii) assured returns
  • 12. How can debentures be categorised from point of view of security? From point of view of security debentures can be categorised as: (i) secured debentures (ii) unsecured debenture
  • 13. What is nature of premium on redemption of debenture account? It is a personal account
  • 14. State any two difference between shares and debentures A share is a part of owned capital so a shareholder is the owner of the company. A debenture is a part of the borrowed capital so a debenture holder is only a loan creditor The return on shares is known as dividend and may vary depending upon companys profit. The profit on debentures is known as interest and is pre fixed.
  • 15. What is meant by issue of debenture at discount? Debentures are said to be issued at discount when their issue price is less than the face value