Date |
Particulars |
|
Dr. (₹) |
Cr. (₹) |
2011 |
Bank A/c |
|
3,76,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
3,76,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debentures Application and Allotment A/c |
|
3,76,000 |
|
|
Discount on issue of debentures A/c |
|
24,000 |
|
|
To Debentures A/c |
|
|
4,00,000 |
|
(Being the issue of Debentures at 5% discount) |
|
|
|
2012 |
Statement of Profit and Loss |
|
24,000 |
|
March, |
To Discount on issue of Debentures Account |
|
|
24,000 |
31 |
(Being Discount on issue of debentures written off) |
|
|
|
Debenture redemption reserve is shown under the main head Shareholders’ Funds and sub-head Reserves and Surplus in the Equity and Liabilities part of the Balance Sheet.
When a company purchases its own debentures in the open market for the purpose of immediate cancellation, the purchase and cancellation of such debentures are termed as redemption by purchase in the open market.
Redemption out of capital implies no profits are set aside for redemption of debentures. In such a case no profits are transferred to Debenture Redemption Reserve.
Premium on redemption of debentures is credited at the time of issue of debentures. It is debited at the time of redemption of debentures with premium on redemption.
A company can redeem its debentures by converting them into shares. If the debentureholders finds the offer is beneficial to them, they can exercise their right of converting their debentures into shares.
Yes, a company can purchase its own debentures for the purpose of cancellation. Such an act of purchasing and cancelling the debentures constitutes redemption of debentures by purchase in the open market.
Redemption of debentures refers to discharging the liability on account of debentures in accordance with the terms of the issue. In other words, redemption of debentures means repayment of the amount of debentures by the company.
The portion of discount on issue of debentures to be written off within 12 months is shown under the head ‘Other Current Assets’. The portion to be written off after 12 months is shown under the head ‘Other Non-current Assets’.
Premium on redemption of debentures means discharge of liability on account of debentures by the repayment made to the debenture holders at a premium (higher than the nominal value).
When a debenture is issued at a price below its nominal value. It is said to be issued at discount. For example, the issue of ₹100 debenture at ₹95, ₹5 being the amount of discount.
Mortgage debentures are debentures in which the loan is secured against a company's fixed assets. In a mortgage debenture specific funds or property are pledged as security.
Debentures which are convertible into equity shares or in any other security either at the option of the company or the debentureholders are called ‘Convertible Debenture’.
In such debentures the company does not give any undertaking for the repayment of money borrowed by issuing such debentures. These debentures are repayable on the winding up of the company.
A reserve created out of capital profits is Capital Reserve. It is not created out of the profits earned in the normal course of business. Capital reserve may be created out of profit on sale of fixed assets, profit on revaluation of assets and liabilities etc.
In this debentures are issued at discount and repayable at premium. For example, debenture of face value of ₹100, issued at price of ₹95, but on the date of redemption the debentureholder will get ₹105.
Sometimes a company purchase assets from vendors and instead of making payment in cash issues debentures for consideration thereof. Such issue of debentures is called ‘Issue of debentures for consideration other than cash’. The debentures may be issued at par, premium or discount.
Bearer debentures are the debentures which can be transferred by way of delivery and the company does not keep any record of the debentureholders. Interest is paid to the person who produces the interest coupon attached to such debentures.
Debenture is a written instrument acknowledging a debt under the common seal of the company. It contains a contract for repayment of principal after a specified period or at intervals or at the option of the company and for payment of interest at fixed rate payable usually half yearly on fixed dates.
Discount on Issue of Debentures is a capital loss to the company. It must be written off before such debentures are redeemed.
Until the discount on issue is written off, it is required to be shown as Unamortized Expenses on the Assets side of the Balance Sheet.
Payment in Installments:
Under this method, normally redemption of debenture is made in instalments on the specified date during the tenure of the debentures. The total amount of debenture liability is divided by the number of years. It is to note that the actual debentures redeemable are identified by means of drawing the requisite number of lots out of the debentures outstanding for payment.
Journal Entries
|
Particulars |
|
Dr. ₹ |
Cr. ₹ |
|||
(i) |
Bank a/c |
Dr. |
|
95 |
|
||
|
Disc. on issue of Deb. a/c |
Dr. |
|
5 |
|
||
|
To Debenture a/c |
|
|
100 |
|||
|
(Debenture issued at a discount of ₹5 and repayable at par) |
|
|
|
|||
(ii) |
Bank a/c |
Dr. |
|
95 |
|
||
|
Loss on issue of debentures a/c |
Dr. |
|
10 |
|
||
|
To Debenture a/c |
|
|
100 |
|||
|
To premium on redemption of deb. a/c |
|
|
5 |
|||
|
(Debenture issued at discount of ₹5 and repayable at premium of ₹5 ) |
|
|
|
|||
(iii) |
Bank a/c |
Dr. |
|
100 |
|
||
|
Loss on issue of debentures a/c |
Dr. |
|
5 |
|
||
|
To Debenture a/c |
|
|
100 |
|||
|
To premium on redemption of deb. a/c |
|
|
5 |
|||
|
(Debenture issued at par and repayable at premium of ₹5 ) |
|
|
|
A company can redeem its debentures by converting them into shares or new class of debentures. If the debentureholders find that the offer is beneficial for them, they can exercise their right of converting their debentures into shares or new class of debentures. These new debentures (or shares) can be issued at par, at a discount or at a premium. It should be noted that only actual proceeds of debentures are to be taken into account for ascertaining the number of shares to be issued in lieu of the debentures to be converted. If debentures were originally issued at discount, the actual amount realised from them at the time of issue would be used as the basis for computing the actual number of shares to be issued. It may be remembered that this method is applicable only to convertible debentures.
Basis |
Debentures |
Shares |
Ownership |
A debenture is acknowledgement of debt and is a part of borrowed capital. |
A share is a part of owned capital and represents ownership capital. |
Return |
The return is called interest and is charge on profits of the company. |
The return is called dividend and is appropriation of profits. |
A collateral security may be defined as a subsidiary security or additional security besides the primary security when a company obtains a loan or overdraft from bank or any other financial institutions. It may pledge or mortgage some assets as a secured loan against the said loan. But the lending institutions may insist on additional assets as collateral security so that the amount of loan can be realised in full with the help of collateral security in case the amount from the sale of principal security falls short of the loan money. In such situation, the company may issue its own debentures to the lenders in addition to some assets already pledged. Such an issue of debentures is known as ‘Debentures issued as Collateral Security’.
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
||
Sundry assets A/c |
Dr. |
|
9,00,00,000 |
|
|
To Sundry liabilities a/c |
|
|
70,00,000 |
||
To S. Ltd. |
|
|
8,30,00,000 |
||
(Assets and liabilities of S Ltd. taken over) |
|
|
|
||
S. Ltd. |
Dr. |
|
8,30,00,000 |
|
|
To 8% debentures a/c |
|
|
8,30,00,000 |
||
(8,30,000 8% debentures @ ₹100 each issued to S Ltd. in consideration of assets taken over) |
|
|
|
SEBI Guidelines for redemption of debentures:
Hence, a Company cannot redeem its debentures purely out of capital. Atleast 25% of debentures issued must be redeemed out of profits by creating a ‘Debenture Redemption Reserve’ and the balance of debentures issued may be redeemed out of profits and out of capital.
1. Redemption of debentures out of capital: When before or at the time of redemption profits are neither required by law nor otherwise transferred to DRR, such redemption is said to be out of capital. Section 73 of the Companies Act, 2013 restricts redemption of debentures out of capital by requiring every company (except All India Financial Institutions and Banking Companies) to create Debenture Redemption Reserve out of profits available for dividends.
2. Redemption of Debentures out of Profits: It implies adequate amount of profits are transferred to Debenture Redemption Reserve out of profit available for dividend. According to section 71(4) of the Companies Act 2013, company requires creating a debenture redemption reserve account out of profits of the company available for payment of dividend and the balance in debenture redemption reserve account shall be utilised for the purpose of redemption of debentures only. The company is required to transfer at least 25% of the value of debentures to DRR before the redemption of debentures.
Journal Entries
At the time of repayment of debentures
|
Particulars |
|
|
Dr. ₹ |
Cr. ₹ |
|||
(a) |
Debentures a/c |
Dr. |
|
|
|
|||
|
Premium on red. of deb. a/c |
Dr. |
|
|
|
|||
|
To Debenture holders’ a/c |
|
|
|
||||
|
(Amount due on redemption of debentures at a premium) |
|
|
|
||||
|
Debenture holders’ a/c |
Dr. |
|
|
|
|||
|
To Bank a/c |
|
|
|
||||
|
(Payment made to debenture holders) |
|
|
|
||||
(b) |
Debentures a/c |
Dr. |
|
|
|
|||
|
To Debenture holders’ a/c |
|
|
|
||||
|
(Amount due on redemption of debentures) |
|
|
|
||||
|
Debenture holders’ a/c |
Dr. |
|
|
|
|||
|
To Bank a/c |
|
|
|
||||
|
(Payment made to debenture holders) |
|
|
|
||||
(c) |
Debentures a/c |
Dr. |
|
|
|
|||
|
Premium on red. of deb. a/c |
Dr. |
|
|
|
|||
|
To Debenture holders’ a/c |
|
|
|
||||
|
(Amount due on redemption of debentures at a premium) |
|
|
|
||||
|
Debenture holders’ a/c |
Dr. |
|
|
|
|||
|
To Bank a/c |
|
|
|
||||
|
(Payment made to debenture holders) |
|
|
|
The issue of debentures at par, premium or discount does not affect the entry at the time of redemption of debentures.
Journal Entries
At the time of issue of debentures
|
Particulars |
|
|
Dr. ₹ |
Cr. ₹ |
||
(i) |
Bank a/c |
Dr. |
|
10,00,000 |
|
||
|
To 12% debenture appl. and allot. a/c |
|
|
10,00,000 |
|||
|
(Application and allotment money received on 10,000 12% debentures @ ₹100 per debenture) |
|
|
|
|||
|
12% debenture appl. and allot. a/c |
Dr. |
|
10,00,000 |
|
||
|
Loss on issue of debentures a/c |
Dr. |
|
50,000 |
|
||
|
To 12% Debenture a/c |
|
|
10,00,000 |
|||
|
To premium on redemption of deb. a/c |
|
|
50,000 |
|||
|
(Debenture issued at par and repayable at premium of 5%) |
|
|
|
|||
(ii) |
Bank a/c |
Dr. |
|
9,00,000 |
|
||
|
To 12% debenture appl. and allot. a/c |
|
|
9,00,000 |
|||
|
(Application and allotment money received on 10,000 12% debentures @ ₹100 per debenture at a discount of 10%) |
|
|
|
|||
|
12% debenture appl. and allot. a/c |
Dr. |
|
9,00,000 |
|
||
|
Discount on issue of debentures a/c |
Dr. |
|
1,00,000 |
|
||
|
To 12% Debenture a/c |
|
|
10,00,000 |
|||
|
(Debenture issued at discount of 10% and repayable at par) |
|
|
|
|||
(iii) |
Bank a/c |
Dr. |
|
52,50,000 |
|
||
|
To 12% debenture appl. and allot. a/c |
|
|
52,50,000 |
|||
|
(Application and allotment money received on 5,000 12% debentures @ ₹1,000 per debenture at a premium of 5%) |
|
|
|
|||
|
12% debenture appl. and allot. a/c |
Dr. |
|
52,50,000 |
|
||
|
To 12% Debenture a/c |
|
|
50,00,000 |
|||
|
To securities premium reserve a/c |
|
|
2,50,000 |
|||
|
(Debenture issued at a premium of 5% and repayable at par) |
|
|
|
|||
(iv) |
Machinery a/c |
Dr. |
|
95,000 |
|
||
|
To Vendor Company |
|
|
95,000 |
|||
|
(Machinery purchased from Vendor) |
|
|
|
|||
|
Vendor Company |
Dr. |
|
95,000 |
|
||
|
Disc. on issue of debentures a/c |
Dr. |
|
5,000 |
|
||
|
To 12% debentures a/c |
|
|
1,00,000 |
|||
|
(1,000 12% debentures issued to the vendor at 5% discount in consideration of the machinery purchased) |
|
|
|
|||
(v) |
12% debenture suspense a/c |
Dr. |
|
30,000 |
|
||
|
To 12% debentures a/c |
|
|
30,000 |
|||
|
(300, 12% debentures of ₹100 each issued as a collateral security to a bank) |
|
|
|
Journal Entries
At the time of repayment of debentures
|
Particulars |
|
|
Dr. ₹ |
Cr. ₹ |
||||
(i) |
12% Debentures a/c |
Dr. |
|
10,00,000 |
|
||||
|
Premium on redemption of deb. a/c |
Dr. |
|
50,000 |
|
||||
|
To Debenture holders’ a/c |
|
|
10,50,000 |
|||||
|
(Amount due on redemption of debentures) |
|
|
|
|||||
|
Debenture holders’ a/c |
Dr. |
|
10,50,000 |
|
||||
|
To Bank a/c |
|
|
10,50,000 |
|||||
|
(Payment made to debenture holders) |
|
|
|
|||||
(ii) |
12% Debentures a/c |
Dr. |
|
10,00,000 |
|
||||
|
To Debenture holders’ a/c |
|
|
10,00,000 |
|||||
|
(Amount due on redemption of debentures) |
|
|
|
|||||
|
Debenture holders’ a/c |
Dr. |
|
10,00,000 |
|
||||
|
To Bank a/c |
|
|
10,00,000 |
|||||
|
(Payment made to debenture holders) |
|
|
|
|||||
(iii) |
12% Debenture a/c |
Dr. |
|
50,00,000 |
|
||||
|
To Debenture holders’ a/c |
|
|
50,00,000 |
|||||
|
(Amount due on redemption of debentures) |
|
|
|
|||||
|
Debenture holders’ a/c |
Dr. |
|
50,00,000 |
|
||||
|
To Bank a/c |
|
|
50,00,000 |
|||||
|
(Payment made to debenture holders) |
|
|
|
|||||
(iv) |
12% debentures a/c |
Dr. |
|
1,00,000 |
|
||||
|
To Vendor Company |
|
|
1,00,000 |
|||||
|
(Amount due to vendor) |
|
|
|
|||||
|
Vendor Company |
Dr. |
|
1,00,000 |
|
||||
|
To Bank a/c |
|
|
1,00,000 |
|||||
|
(Payment made to vendor) |
|
|
|
|||||
(v) |
12% debentures a/c |
Dr. |
|
30,000 |
|
||||
|
To 12% debenture suspense a/c |
|
|
30,000 |
|||||
|
(Debenture and debenture suspense account closed) |
|
|
|
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
||
Bank a/c |
Dr. |
|
37,20,00,000 |
|
|
To 10% deb. Appl. & allotment a/c |
|
|
37,20,00,000 |
||
(Application and allotment money received on 20,00,000 10% debentures @ ₹200 per debenture at 7% discount) |
|
|
|
||
10% deb. Appl. & allotment a/c |
Dr. |
|
37,20,00,000 |
|
|
Loss on issue of debentures a/c |
Dr. |
|
6,00,00,000 |
|
|
To 10% debentures a/c |
|
|
40,00,00,000 |
||
To premium on red. of deb. a/c |
|
|
3,20,00,000 |
||
(Allotment of 20,00,000 debenture @ ₹200 each at 7% discount with the term of 8% premium on redemption) |
|
|
|
||
At the end of first year |
|
|
|
||
Statement of Profit and Loss…….Dr. |
|
6,00,00,000 |
|
||
To Loss on issue of debentures a/c |
|
|
6,00,00,000 |
||
(Being loss on issue of debentures written off against statement of profit and loss) |
|
|
|
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
||
Bank A/c |
Dr. |
|
41,40,00,000 |
|
|
To 9% debenture application a/c |
|
|
41,40,00,000 |
||
(Application money received on 90,00,000 9% debentures @ ₹46 per debenture) |
|
|
|
||
9% debenture application a/c |
Dr. |
|
41,40,00,000 |
|
|
Disc. on issue of debentures a/c |
Dr. |
|
3,60,00,000 |
|
|
To 9% debentures a/c |
|
|
45,00,00,000 |
||
(Application money transferred to 9% debentures account) |
|
|
|
||
At the end of first year |
|
|
|
||
Statement of Profit and Loss…….Dr. |
|
3,60,00,000 |
|
||
To Disc. on issue of debentures a/c |
|
|
3,60,00,000 |
||
(Being loss on issue of debentures written off against statement of profit and loss) |
|
|
|
Yes a company can purchase its own debentures for the purpose of cancellation. Such an act of purchasing and cancelling the debentures constitutes redemption of debentures by purchase in the open market. The advantage of such an option is that a company can redeem the debentures at its convenience, whenever it has surplus funds. Secondly, the company can purchase them when they are available in market at a discount.
When debentures are redeemed by purchasing them in the open market
Journal Entries
(i) When out of profits
|
Particulars |
|
|
Dr. ₹ |
Cr. ₹ |
|
(i) |
Profit and loss app. a/c |
Dr. |
|
|
|
|
|
To Deb. Redemption reserve a/c |
|
|
|
||
|
(Profit transferred to debenture redemption reserve) |
|
|
|
||
|
Own debentures a/c |
Dr. |
|
|
|
|
|
To Bank a/c |
|
|
|
||
|
(Own debentures purchased from open market) |
|
|
|
||
|
Debentures’ a/c |
Dr. |
|
|
|
|
|
To Own debentures a/c |
|
|
|
||
|
(Own debentures cancelled) |
|
|
|
||
(ii) When out of capitals
|
Particulars |
|
|
Dr. ₹ |
Cr. ₹ |
|
|
Own debentures a/c |
Dr. |
|
|
|
|
|
To Bank a/c |
|
|
|
||
|
(Own debentures purchased from open market) |
|
|
|
||
|
Debentures’ a/c |
Dr. |
|
|
|
|
|
To Own debentures a/c |
|
|
|
||
|
(Own debentures cancelled) |
|
|
|
||
Presently conversion of debentures is not in CBSE syllabus.
The steps involved in the working of sinking fund method are:
Note: Presently sinking fund method of redemption of debentures is not in CBSE syllabus.
When a company issues debentures, it usually mentions the terms on which they will be redeemed on their maturity. Depending upon the terms and conditions of issue and redemption of debentures, the following six situations are commonly found in practice:
(i) Issued at par, redeemable at par
(ii) Issued at discount, redeemable at par
(iii) Issued at premium, redeemable at par
(iv) Issued at par, redeemable at premium
(v) Issued at discount, redeemable at premium
(vi) Issued at premium, redeemable at premium
(i) Issued at par, redeemable at par: In this case debenture of face value of ₹100, issued at ₹100 and repayable at ₹100.
(ii) Issued at discount, redeemable at par: In this case debenture of face value of ₹100, issued at ₹90 and repayable at ₹100.
(iii) Issued at premium, redeemable at par: In this case debenture of face value of ₹100, issued at ₹110 and repayable at ₹100.
(iv) Issued at par, redeemable at premium: In this case debenture of face value of ₹100, issued at ₹100 and repayable at ₹110.
(v) Issued at discount, redeemable at premium: In this case debenture of face value of ₹100, issued at ₹90 and repayable at ₹110.
(vi) Issued at premium, redeemable at premium: In this case debenture of face value of ₹100, issued at ₹105 (or ₹110) and repayable at ₹110 (or ₹105).
A company may issue different kinds of debentures which can be classified as follows:
From the point of view of Security:
(1) Secured debentures: It refers to those debentures where a charge is created on the assets of the company for the purpose of payment in case of default.
(2) Unsecured debentures: These debentures do not have a specific charge on the assets of the company.
From the point of view of Tenure:
(1) Redeemable debentures: Debentures which are payable on the expiry of the specific period either in lump sum or in installments during the life of the company.
(2) Irredeemable debentures: In case of these debentures the company does not give any undertaking for the repayment of money borrowed by issuing such debentures.
From the point of view of Convertibility:
(1) Convertible debentures: These are the debentures which are convertible into equity shares or in any other security either at the option of the company or debentureholders.
(2) Non-Convertible debentures: These are the debentures which cannot convertible into equity shares or in any other security.
From the point of view of Coupon rate:
(1) Specific coupon rate debentures: These debentures are issued with a specified rate of interest. The specified rate may either be fixed or floating. The floating rate is usually tagged with the bank rate.
(2) Zero coupon rate debentures: These debentures do not carry any interest. In order compensate the investors such debentures are issued at substantial discount and difference between the nominal value and the issue price is treated as the amount of interest related to the duration of the debentures.
From the point of view of Registration:
(1) Registered debentures: These are the debentures in respect of which all details including names, addresses and particulars of holding of the debenture holders are entered in a register kept by the company.
(2) Bearer debentures: The record of such debentures is not available with the company and bearer debentures are transferred by mere delivery. Interest on debentures is paid to a person who produces the interest coupon attached to such debentures.
(i)
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2014 |
Bank A/c |
|
30,00,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
30,00,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debentures Application and Allotment A/c |
|
30,00,000 |
|
|
To 12% Debentures A/c |
|
|
30,00,000 |
|
(Being the issue of debentures at par) |
|
|
|
(ii)
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2014 |
Bank A/c |
|
33,00,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
33,00,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debenture Application and Allotment A/c |
|
33,00,000 |
|
|
To 12% Debentures A/c |
|
|
30,00,000 |
|
To Security Premium Reserve A/c |
|
|
3,00,000 |
|
(Being the issue of debentures at 5% premium) |
|
|
|
(iii)
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2014 |
Bank A/c |
|
27,00,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
27,00,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debentures Application and Allotment A/c |
|
27,00,000 |
|
|
Discount on issue of debentures A/c |
|
3,00,000 |
|
|
To 12% Debentures A/c |
|
|
30,00,000 |
|
(Being the issue of Debentures at 5% discount) |
|
|
|
(iv)
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
Date |
Bank A/c |
|
30,00,000 |
|
2014 |
To Debentures Application and Allotment A/c |
|
|
30,00,000 |
April, 1 |
(Being the receipt of debentures application money) |
|
|
|
|
Debenture Application and Allotment A/c |
|
30,00,000 |
|
|
Loss on Issue of Debentures A/c |
|
3,00,000 |
|
|
To 12% Debentures A/c |
|
|
30,00,000 |
|
To Premium on Redemption of Debentures A/c |
|
|
3,00,000 |
|
(Being the issue of debentures at par and redeemable at 5% premium) |
|
|
|
(v)
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2014 |
Bank A/c |
|
30,00,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
30,00,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debenture Application and Allotment A/c |
|
30,00,000 |
|
|
Loss on Issue of Debentures A/c |
|
6,00,000 |
|
|
To 12% Debentures A/c |
|
|
30,00,000 |
|
To Securities Premium Reserve A/c |
|
|
3,00,000 |
|
To Premium on Redemption of Debentures A/c |
|
|
3,00,000 |
|
(Being the issue of debentures at 5% premium and redeemable at 5% premium) |
|
|
|
(vi)
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2014 |
Bank A/c |
|
27,00,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
27,00,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debenture Application and Allotment A/c |
|
27,00,000 |
|
|
Loss on Issue of Debentures A/c |
|
6,00,000 |
|
|
To 12% Debentures A/c |
|
|
30,00,000 |
|
To Premium on Redemption of Debentures A/c |
|
|
3,00,000 |
|
(Being the issue of debentures at 5% discount and redeemable at 5% premium) |
|
|
|
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2019 |
Surplus, i.e., Balance in Statement in Profit and Loss A/c |
|
5,00,000 |
|
April, |
To Debentures Redemption Reserve A/c |
|
|
5,00,000 |
01 |
(Being the creation of DRR as per rule 10(7), 25% of Rs. 20,00,000) |
|
|
|
April, |
Debenture Redemption Investment A/c |
|
3,00,000 |
|
01 |
To Bank A/c |
|
|
3,00,000 |
|
(Being the DRI made equal to 15% of Rs. 20,00,000) |
|
|
|
June, |
Bank A/c |
|
3,00,000 |
|
30 |
To Debenture Redemption Investment A/c |
|
|
3,00,000 |
|
(Being the Debenture Redemption Investment realized) |
|
|
|
June, |
12% Debentures A/c |
|
20,00,000 |
|
30 |
To Debentureholders’ A/c |
|
|
20,00,000 |
|
(Being the amount due on redemption) |
|
|
|
June, |
Debentureholders’ A/c |
|
20,00,000 |
|
30 |
To Bank A/c |
|
|
20,00,000 |
|
(Being the payment made to debentureholders) |
|
|
|
2020 |
|
|
|
|
March, |
Debenture Redemption Reserve A/c |
|
5,00,000 |
|
31 |
To General Reserve A/c |
|
|
5,00,000 |
|
(Being the balance of Debentures Redemption Reserve transferred to General Reserve) |
|
|
|
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2017 |
Surplus, i.e., Balance in Statement in Profit and Loss A/c |
|
7,50,000 |
|
April, |
To Debentures Redemption Reserve A/c |
|
|
7,50,000 |
01 |
(Being the creation of DRR as per rule 10(7), 25% of Rs. 30,00,000) |
|
|
|
April, |
Debenture Redemption Investment A/c |
|
1,50,000 |
|
01 |
To Bank A/c |
|
|
1,50,000 |
|
(Being the DRI made equal to 15% of Rs. 10,00,000) |
|
|
|
2018 |
Statement of Profit and Loss |
|
3,00,000 |
|
March, |
To Loss on Issue of Debenture A/c |
|
|
3,00,000 |
31 |
(Being Loss on Issue of Debenture written off) |
|
|
|
March, |
Bank A/c |
|
1,50,000 |
|
31 |
To Debenture Redemption Investment A/c |
|
|
1,50,000 |
|
(Being the Debenture Redemption Investment realized) |
|
|
|
March, |
11% Debentures A/c |
|
10,00,000 |
|
31 |
Premium on Redemption of Debenture A/c |
|
1,00,000 |
|
|
To Debentureholders’ A/c |
|
|
11,00,000 |
|
(Being the amount due on redemption) |
|
|
|
March, |
Debentureholders’ A/c |
|
11,00,000 |
|
31 |
To Bank A/c |
|
|
11,00,000 |
|
(Being the payment made to debentureholders) |
|
|
|
2018 |
|
|
|
|
April, |
Debenture Redemption Investment A/c |
|
1,80,000 |
|
01 |
To Bank A/c |
|
|
1,80,000 |
|
(Being the DRI made equal to 15% of Rs. 12,00,000) |
|
|
|
2019 |
|
|
|
|
March, |
Bank A/c |
|
1,80,000 |
|
31 |
To Debenture Redemption Investment A/c |
|
|
1,80,000 |
|
(Being the Debenture Redemption Investment realized) |
|
|
|
March, |
11% Debentures A/c |
|
12,00,000 |
|
31 |
Premium on Redemption of Debenture A/c |
|
1,20,000 |
|
|
To Debentureholders’ A/c |
|
|
13,20,000 |
|
(Being the amount due on redemption) |
|
|
|
March, |
Debentureholders’ A/c |
|
13,20,000 |
|
31 |
To Bank A/c |
|
|
13,20,000 |
|
(Being the payment made to debentureholders) |
|
|
|
2019 |
|
|
|
|
April, |
Debenture Redemption Investment A/c |
|
1,20,000 |
|
01 |
To Bank A/c |
|
|
1,20,000 |
|
(Being the DRI made equal to 15% of Rs. 8,00,000) |
|
|
|
2020 |
|
|
|
|
March, |
Bank A/c |
|
1,20,000 |
|
31 |
To Debenture Redemption Investment A/c |
|
|
1,20,000 |
|
(Being the Debenture Redemption Investment realized) |
|
|
|
March, |
11% Debentures A/c |
|
8,00,000 |
|
31 |
Premium on Redemption of Debenture A/c |
|
80,000 |
|
|
To Debentureholders’ A/c |
|
|
8,80,000 |
|
(Being the amount due on redemption) |
|
|
|
March, |
Debentureholders’ A/c |
|
8,80,000 |
|
31 |
To Bank A/c |
|
|
8,80,000 |
|
(Being the payment made to debentureholders) |
|
|
|
March, |
Debenture Redemption Reserve A/c |
|
7,50,000 |
|
31 |
To General Reserve A/c |
|
|
7,50,000 |
|
(Being the balance of Debentures Redemption Reserve transferred to General Reserve) |
|
|
|
In the Books of Madhur Ltd.
Date |
Particulars |
|
Dr. (Rs.) |
Cr. (Rs) |
2019 |
Surplus, i.e., Balance in Statement in Profit and Loss A/c |
|
10,50,000 |
|
March, |
To Debentures Redemption Reserve A/c |
|
|
10,50,000 |
31 |
(Being the creation of DRR as per rule 10(7), 25% of Rs. 50,00,000 less balance in DRR) |
|
|
|
April, |
Debenture Redemption Investment A/c |
|
7,50,000 |
|
01 |
To Bank A/c |
|
|
7,50,000 |
|
(Being the DRI made equal to 15% of Rs. 50,00,000) |
|
|
|
2020 |
|
|
|
|
Jan, 1 |
Bank A/c |
|
7,50,000 |
|
|
To Debenture Redemption Investment A/c |
|
|
7,50,000 |
|
(Being the Debenture Redemption Investment realized) |
|
|
|
Jan, 1 |
9% Debentures A/c |
|
50,00,000 |
|
|
To Debentureholders’ A/c |
|
|
50,00,000 |
|
(Being the amount due on redemption) |
|
|
|
Jan, 1 |
Debentureholders’ A/c |
|
50,00,000 |
|
|
To Bank A/c |
|
|
50,00,000 |
|
(Being the payment made to debentureholders) |
|
|
|
March, |
Debenture Redemption Reserve A/c |
|
12,50,000 |
|
31 |
To General Reserve A/c |
|
|
12,50,000 |
|
(Being the balance of Debentures Redemption Reserve transferred to General Reserve) |
|
|
|
Dr. |
9% Debentures Account |
Cr. |
|||||
2020 |
|
|
2019 |
|
|
||
Jan, 1 |
To Debenture holders |
50,00,000 |
April, 1 |
By Balance b/d |
50,00.,000 |
||
|
|
50,00,000 |
|
|
50,00,000 |
||
Dr. |
DEBENTURES REDEMPTION RESERVE ACCOUNT |
Cr. |
|||||
2020 |
|
|
2019 |
|
|
||
Mar. |
|
|
April |
By Balance b/d |
2,00,000 |
||
31 |
To General Reserve |
12,50,000 |
, 1 |
By Surplus, i.e., Balance in Statement of Profit and Loss A/c |
10,50.,000 |
||
|
|
12,50,000 |
|
|
12,50,000 |
||
Dr. |
DEBENTURES REDEMPTION INVESTMENT ACCOUNT |
Cr. |
|||||
2019 |
|
|
2020 |
|
|
||
April, 1 |
To Bank A/c |
7,50,000 |
Jan, 1 |
By Bank A/c |
7,50,000 |
||
|
|
7,50,000 |
|
|
7,50,000 |
Date |
Particulars |
|
Dr. (₹) |
Cr. (₹) |
2013 |
Bank A/c |
|
60,00,000 |
|
April, 1 |
To Debentures Application and Allotment A/c |
|
|
60,00,000 |
|
(Being the receipt of debentures application money) |
|
|
|
|
Debenture Application and Allotment A/c |
|
60,00,000 |
|
|
Loss on Issue of Debentures A/c |
|
12,00,000 |
|
|
To 12% Debentures A/c |
|
|
60,00,000 |
|
To Premium on Redemption of Debentures A/c |
|
|
12,00,000 |
|
(Being the issue of debentures at par and redeemable at 20% premium) |
|
|
|
|
Statement of Profit and Loss |
|
7,00,000 |
|
|
Securities Premium Reserve |
|
5,00,000 |
|
|
To Loss on Issue of Debenture A/c |
|
|
12,00,000 |
|
(Being Loss on Issue of Debenture written off) |
|
|
|
2017 |
|
|
|
|
Mar, |
Surplus, i.e., Balance in Statement in Profit and Loss A/c |
|
5,00,000 |
|
31 |
To Debentures Redemption Reserve A/c |
|
|
5,00,000 |
|
(Being the creation of DRR as per rule 10(7), 25% of Rs. 60,00,000 divided by 3) |
|
|
|
|
Debenture Interest A/c |
|
7,20,000 |
|
|
To Debentureholders’ A/c |
|
|
6,48,000 |
|
To TDS payable A/c |
|
|
72,000 |
|
(Being interest due on debentures and tax deducted at source) |
|
|
|
|
Debentureholders’A/c |
|
6,48,000 |
|
|
To Bank A/c |
|
|
6,48,000 |
|
(Bing Payment of interest) |
|
|
|
|
TDS Payable |
|
72,000 |
|
|
To Bank A/c |
|
|
72,000 |
|
(Being TDS deposited in government Account) |
|
|
|
|
Statement of P/L |
|
7,20,000 |
|
|
To Interest on Debentures A/c |
|
|
7,20,000 |
|
(Being Interest on debentures transferred to Statement of Profit and Loss) |
|
|
|
2018 |
|
|
|
|
Mar, |
Surplus, i.e., Balance in Statement in Profit and Loss A/c |
|
5,00,000 |
|
31 |
To Debentures Redemption Reserve A/c |
|
|
5,00,000 |
|
(Being the creation of DRR as per rule 10(7), 25% of Rs. 60,00,000 divided by 3) |
|
|
|
|
Debenture Interest A/c |
|
7,20,000 |
|
|
To Debentureholders’ A/c |
|
|
6,48,000 |
|
To TDS payable A/c |
|
|
72,000 |
|
(Being interest due on debentures and tax deducted at source) |
|
|
|
|
Debentureholders’A/c |
|
6,48,000 |
|
|
To Bank A/c |
|
|
6,48,000 |
|
(Bing Payment of interest) |
|
|
|
|
TDS Payable |
|
72,000 |
|
|
To Bank A/c |
|
|
72,000 |
|
(Being TDS deposited in government Account) |
|
|
|
|
Statement of P/L |
|
7,20,000 |
|
|
To Interest on Debentures A/c |
|
|
7,20,000 |
|
(Being Interest on debentures transferred to Statement of Profit and Loss) |
|
|
|
April, |
Debenture Redemption Investment |
|
9,00,000 |
|
1 |
To Bank A/c |
|
|
9,00,000 |
|
(Being Investment in Securities @ 15% of 60,00,000) |
|
|
|
2019 |
|
|
|
|
Mar, |
Surplus, i.e., Balance in Statement in Profit and Loss A/c |
|
5,00,000 |
|
31 |
To Debentures Redemption Reserve A/c |
|
|
5,00,000 |
|
(Being the creation of DRR as per rule 10(7), 25% of Rs. 60,00,000 divided by 3) |
|
|
|
|
Debenture Interest A/c |
|
7,20,000 |
|
|
To Debentureholders’ A/c |
|
|
6,48,000 |
|
To TDS payable A/c |
|
|
72,000 |
|
(Being interest due on debentures and tax deducted at source) |
|
|
|
|
Debentureholders’A/c |
|
6,48,000 |
|
|
To Bank A/c |
|
|
6,48,000 |
|
(Bing Payment of interest) |
|
|
|
|
TDS Payable |
|
72,000 |
|
|
To Bank A/c |
|
|
72,000 |
|
(Being TDS deposited in government Account) |
|
|
|
|
Statement of P/L |
|
7,20,000 |
|
|
To Interest on Debentures A/c |
|
|
7,20,000 |
|
(Being Interest on debentures transferred to Statement of Profit and Loss) |
|
|
|
|
Bank A/c |
|
9,00,000 |
|
|
To Debenture Redemption Investment |
|
|
9,00,000 |
|
(Being Sale of Investment) |
|
|
|
March, |
12% Debentures A/c |
|
60,00,000 |
|
31 |
Premium on Redemption of Debenture A/c |
|
12,00,000 |
|
|
To Debentureholders’ A/c |
|
|
72,00,000 |
|
(Being the amount due on redemption) |
|
|
|
March, |
Debentureholders’ A/c |
|
72,00,000 |
|
31 |
To Bank A/c |
|
|
72,00,000 |
|
(Being the payment made to debentureholders) |
|
|
|
March, |
Debenture Redemption Reserve A/c |
|
15,00,000 |
|
31 |
To General Reserve A/c |
|
|
15,00,000 |
|
(Being the balance of Debentures Redemption Reserve transferred to General Reserve) |
|
|
|
Journal Entries
Date |
Particulars |
|
|
Dr. ₹ |
Cr. ₹ |
||
2014 |
Bank a/c |
Dr. |
|
95,000 |
|
||
Apr. |
Loss on issue of debentures a/c |
Dr. |
|
15,000 |
|
||
01 |
To 12% debentures a/c |
|
|
1,00,000 |
|||
|
To premium on red. of deb. a/c |
|
|
10,000 |
|||
|
(Debenture issued at discount and redeemable at premium) |
|
|
|
|||
Sept. |
Debenture interest a/c |
Dr. |
|
6,000 |
|
||
30 |
To TDS payable a/c |
|
|
600 |
|||
|
To Debenture holders a/c |
|
|
5,400 |
|||
|
(Half yearly interest due on ₹1,00,000 debenture holders and TDS deducted @ 10%) |
|
|
|
|||
Sept. |
Debenture holders a/c |
|
5,400 |
|
|||
30 |
To Bank a/c |
|
|
5,400 |
|||
|
(Interest paid to debenture holders) |
|
|
|
|||
2015 |
Debenture interest a/c |
Dr. |
|
6,000 |
|
||
Mar. |
To TDS payable a/c |
|
|
600 |
|||
31 |
To Debenture holders a/c |
|
|
5,400 |
|||
|
(Half yearly interest due on ₹1,00,000 debenture holders and TDS deducted @ 10%) |
|
|
|
|||
2015 |
Debenture holders a/c |
|
5,400 |
|
|||
Mar. |
To Bank a/c |
|
|
5,400 |
|||
31 |
(Interest paid to debenture holders after deducting TDS) |
|
|
|
|||
2015 |
Profit and loss a/c |
Dr. |
|
12,000 |
|
||
Mar. |
To debenture interest a/c |
|
|
12,000 |
|||
31 |
(Interest on debentures transferred to profit and loss account) |
|
|
|
Loss on issue of debentures = 5% discount on issue + 10% premium on redemption
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
|||||
Bank a/c |
Dr. |
|
2,70,000 |
|
||||
To 14% debenture application a/c |
|
|
2,70,000 |
|||||
(Application money received on 13,500 debentures @ ₹20 per debenture) |
|
|
|
|||||
14% debenture application a/c |
Dr. |
|
2,70,000 |
|
||||
To 14% debentures a/c |
|
|
2,00,000 |
|||||
To 14% debenture allotment a/c |
|
|
60,000 |
|||||
To Bank a/c |
|
|
10,000 |
|||||
(Application money transferred to 14% debentures account, allotment account and refunded) |
|
|
|
|||||
14% debenture allotment a/c |
Dr. |
|
6,00,000 |
|
||||
To 14% debentures a/c |
|
|
6,00,000 |
|||||
(Debenture allotment money due on 10,000 debentures @ ₹60 per debenture) |
|
|
|
|||||
Bank a/c |
Dr. |
|
5,40,000 |
|
||||
To 14% debenture allotment a/c |
|
|
5,40,000 |
|||||
(Allotment money received on debentures) |
|
|
|
|||||
14% debentures first and final call |
Dr. |
|
2,00,000 |
|
||||
To 14% debentures a/c |
|
|
2,00,000 |
|||||
(Debenture first and final call money due on 10,000 debentures @ ₹20 each) |
|
|
|
|||||
Bank a/c |
Dr. |
|
2,00,000 |
|
||||
To 14% debentures first and final call |
|
|
2,00,000 |
|||||
(Debenture first and final call money received on 10,000 debentures @ ₹20 each) |
|
|
|
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
||||
Bank a/c |
Dr. |
|
6,00,00,000 |
|
|||
To 8% debenture application a/c |
|
|
6,00,00,000 |
||||
(Application money received on 3,00,000 debentures @ ₹200 per debenture) |
|
|
|
||||
8% debenture application a/c |
Dr. |
|
6,00,00,000 |
|
|||
To 8% debentures a/c |
|
|
3,00,00,000 |
||||
To 8% debenture allotment a/c |
|
|
2,00,00,000 |
||||
To securities premium a/c |
|
|
1,00,00,000 |
||||
(Application money transferred to 8% debentures account, allotment a/c and money of rejected application refunded) |
|
|
|
||||
8% debenture allotment a/c |
Dr. |
|
7,00,00,000 |
|
|||
To 8% debentures a/c |
|
|
7,00,00,000 |
||||
(Debenture allotment money due on 2,00,000 debentures @ ₹350 per debenture) |
|
|
|
||||
Bank a/c |
Dr. |
|
5,00,00,000 |
|
|||
To 8% debenture allotment a/c |
|
|
5,00,00,000 |
||||
(Allotment money received on debentures) |
|
|
|
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
||||||
Bank a/c |
Dr. |
|
96,000 |
|
|||||
To 9% debenture application a/c |
|
|
96,000 |
||||||
(Application money received on 4,800 debentures @ ₹20 per debenture) |
|
|
|
||||||
9% debenture application a/c |
Dr. |
|
96,000 |
|
|||||
To 9% debentures a/c |
|
|
80,000 |
||||||
To 9% debenture allotment a/c |
|
|
8,000 |
||||||
To Bank a/c |
|
|
8,000 |
||||||
(Application money transferred to 9% debentures account, allotment a/c and money of rejected application refunded) |
|
|
|
||||||
9% debenture allotment a/c |
Dr. |
|
80,000 |
|
|||||
To 9% debentures a/c |
|
|
80,000 |
||||||
(Debenture allotment money due on 4,000 debentures @ ₹20 per debenture) |
|
|
|
||||||
Bank a/c |
Dr. |
|
72,000 |
|
|||||
To 9% debenture allotment a/c |
|
|
72,000 |
||||||
(Allotment money received on debentures) |
|
|
|
||||||
9% debentures first call a/c |
Dr. |
|
1,20,000 |
|
|||||
To 9% debentures a/c |
|
|
1,20,000 |
||||||
(Debenture first call money due on 4,000 debentures @ ₹30 each) |
|
|
|
||||||
Bank a/c |
Dr. |
|
1,20,000 |
|
|||||
To 9% debentures first call a/c |
|
|
1,20,000 |
||||||
(Debenture first call money received on 4,000 debentures @ ₹30 each) |
|
|
|
||||||
9% debentures final call a/c |
Dr. |
|
1,20,000 |
|
|||||
To 9% debentures a/c |
|
|
1,20,000 |
||||||
(Debenture final call money due on 4,000 debentures @ ₹30 each) |
|
|
|
||||||
Bank a/c |
Dr. |
|
1,20,000 |
|
|||||
To 9% debentures final call a/c |
|
|
1,20,000 |
||||||
(Debenture final call money received on 4,000 debentures @ ₹30 each) |
|
|
|
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
|||||
Bank a/c |
Dr. |
|
1,00,000 |
|
||||
To 10% debenture application a/c |
|
|
1,00,000 |
|||||
(Application money received on 10,000 debentures @ ₹10 per debenture) |
|
|
|
|||||
10% debenture application a/c |
Dr. |
|
1,00,000 |
|
||||
To 10% debentures a/c |
|
|
1,00,000 |
|||||
(Application money transferred to 10% debentures account) |
|
|
|
|||||
10% debenture allotment a/c |
Dr. |
|
2,50,000 |
|
||||
To 10% debentures a/c |
|
|
2,00,000 |
|||||
To securities premium a/c |
|
|
50,000 |
|||||
(Debenture allotment money due on 10,000 debentures @ ₹25 per debenture including premium) |
|
|
|
|||||
Bank a/c |
Dr. |
|
2,50,000 |
|
||||
To 10% debenture allotment a/c |
|
|
2,50,000 |
|||||
(Allotment money received on 10,000 debentures @ ₹25 per debenture including premium) |
|
|
|
|||||
10% debentures first and final call a/c |
Dr. |
|
7,00,000 |
|
||||
To 10% debentures a/c |
|
|
7,00,000 |
|||||
(Debenture first and final call money due on 10,000 debentures @ ₹70 each) |
|
|
|
|||||
Bank A/c |
Dr. |
|
7,00,000 |
|
||||
To 10% debentures first and final call a/c |
|
|
7,00,000 |
|||||
(Debenture first and final call money received on 10,000 debentures @ ₹70 each) |
|
|
|
|||||
Balance Sheet (Extract)
Particulars |
Note no. |
₹ |
I. Equity and Liabilities |
|
|
1. Shareholders’ Funds |
|
|
Reserves and Surplus |
|
50,000 |
2. Non-current Liabilities |
|
|
Long-term Borrowings |
|
10,00,000 |
II Assets |
|
|
1. Cash and cash equivalents |
|
10,50,000 |
Notes to Accounts:
Particulars |
₹ |
1. Reserves and Surplus |
|
Securities premium reserve |
50,000 |
2. Long-term Borrowings |
|
10,000 10% debentures of ₹100 each |
10,00,000 |
3. Cash and Cash Equivalents |
|
Cash at bank |
10,50,000 |
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
|||||
Bank a/c |
Dr. |
|
50,000 |
|
||||
To 6% debenture application a/c |
|
|
50,000 |
|||||
(Application money received on 2,000 debentures @ ₹25 per debenture) |
|
|
|
|||||
6% debenture application a/c |
Dr. |
|
50,000 |
|
||||
To 6% debentures a/c |
|
|
50,000 |
|||||
(Application money transferred to 6% debentures account) |
|
|
|
|||||
6% debenture allotment a/c |
Dr. |
|
1,00,000 |
|
||||
To 6% debentures a/c |
|
|
1,00,000 |
|||||
(Debenture allotment money due on 2,000 debentures @ ₹50 per debenture) |
|
|
|
|||||
Bank a/c |
Dr. |
|
1,00,000 |
|
||||
To 6% debenture allotment a/c |
|
|
1,00,000 |
|||||
(Allotment money received on 2,000 debentures @ ₹50 per debenture) |
|
|
|
|||||
6% debentures first and final call |
Dr. |
|
50,000 |
|
||||
To 6% debentures a/c |
|
|
50,000 |
|||||
(Debenture first and final call money due on 2,000 debentures @ ₹25 each) |
|
|
|
|||||
Bank a/c |
Dr. |
|
50,000 |
|
||||
To 6% debentures first and final call |
|
|
50,000 |
|||||
(Debenture first and final call money received on 2,000 debentures @ ₹25 each) |
|
|
|
Journal Entries
Particulars |
|
Dr. ₹ |
Cr. ₹ |
||||
Bank a/c |
Dr. |
|
11,25,00,000 |
|
|||
To 6% debenture application a/c |
|
|
11,25,00,000 |
||||
(Application money received on 75,00,000 6% debentures @ ₹15 per debenture) |
|
|
|
||||
6% debenture application a/c |
Dr. |
|
11,25,00,000 |
|
|||
To 6% debentures a/c |
|
|
11,25,00,000 |
||||
(Application money transferred to 6% debentures account) |
|
|
|
||||
6% debenture allotment a/c |
Dr. |
|
26,25,00,000 |
|
|||
To 6% debentures a/c |
|
|
26,25,00,000 |
||||
(Debenture allotment money due on 75,00,000 debentures @ ₹35 per debenture) |
|
|
|
||||
Bank a/c |
Dr. |
|
26,25,00,000 |
|
|||
To 6% debenture allotment a/c |
|
|
26,25,00,000 |
||||
(Allotment money received on 75,00,000 debentures @ ₹35 per debenture) |
|
|
|
A collateral security may be defined as a subsidiary security or additional security besides the primary security when a company obtains a loan or overdraft from bank or any other financial institutions. It may pledge or mortgage some assets as a secured loan against the said loan. But the lending institutions may insist on additional assets as collateral security so that the amount of loan can be realised in full with the help of collateral security in case the amount from the sale of principal security falls short of the loan money. In such situation, the company may issue its own debentures to the lenders in addition to some assets already pledged. Such an issue of debentures is known as ‘Debentures issued as Collateral Security’.
Debentures issued as a collateral security can be dealt in two ways in the books of accounts of the company.
First method:
No entry is made in the books of accounts since no liability is created by such issue. However, on the liability side of the Balance Sheet, below the items of the loan a note to the effect that it has been secured by issue of debentures as a collateral security is appended. For example, 300, 12% debentures of ₹100 each as a collateral security to a bank which has advanced a loan of ₹25,000 to the company for a period of 5 years. This fact may be shown in the Balance Sheet as under:
Balance Sheet (Extract)
Particulars |
Note no. |
₹ |
I. Equity and Liabilities |
|
|
1. Non-current Liabilities |
|
|
Long-term Borrowings |
|
25,000 |
Notes to Accounts:
Particulars |
₹ |
1. Long-term Borrowings |
|
Bank Loan |
25,000 |
(Secured by issue of 300, 12% debentures of ₹100 each as Collateral Security) |
|
Second method: The issue of debentures as a collateral security may be recorded by means of journal entry as follows:
At the time of issue of debentures as collateral security:
|
12% debenture suspense a/c |
Dr. |
|
30,000 |
|
|
To 12% debentures a/c |
|
|
30,000 |
|
|
(300, 12% debentures of ₹100 each issued as a collateral security to a bank) |
|
|
|
Balance Sheet (Extract)
Particulars |
Note no. |
₹ |
I. Equity and Liabilities |
|
|
1. Non-current Liabilities |
|
|
Long-term Borrowings |
|
25,000 |
Notes to Accounts:
Particulars |
₹ |
|
1. Long-term Borrowings |
|
|
Bank Loan |
25,000 |
|
300 12% debentures of ₹100 each as Collateral Security) |
30,000 |
|
Less: Debenture Suspense |
30,000 |
---- |
|
|
25,000 |
At the time of cancellation of debentures issued as collateral security (after repayment of loan amount):
(ii) |
12% debentures a/c |
Dr. |
|
30,000 |
|
|
To 12% debenture suspense a/c |
|
|
30,000 |
|
|
(Debenture and debenture suspense account closed) |
|
|
|
Basis |
Debentures |
Shares |
Ownership |
A debenture is acknowledgement of debt and is a part of borrowed capital. |
A share is a part of owned capital and represents ownership capital. |
Return |
The return is called interest and is charge on profits of the company. |
The return is called dividend and is appropriation of profits. |
Repayment |
These are issued for a specified period and repayable on the expiry of that period. |
The amount is not returned during the life of company. |
Voting rights |
Debentureholders normally do not have any voting rights. |
Shareholders enjoy voting rights. |
Issue at discount |
These are no restrictions on issue of debentures at discount. |
Shares cannot be issued at discount except Sweat Equity Shares. |
Risk |
Debentureholders are safe as they are normally secured. |
They are at a greater risk. Even they can lose the amount invested in shares. |
Debenture represents debt capital as it is an acknowledgement of debt by the company, which carries specified rate of interest, normally are secured against the assets of the company and are repayable as per the terms of the issue.
Math is a subject that analyses the critical and analytical thinking of a student and tests numerical questions. So, the best way to prepare for Math is by studying the NCERT solutions. Make a timetable, jot down the important formulas, and theorems, make time for revision and give as much time as you can give to practicing questions. Solve a maximum number of questions and time your efforts. Extramarks - The Learning App has several sample papers along with NCERT 12 solutions that can be used for practicing for class 12 Math exam.
Class 12 exams seem like a major feat, but they are actually quite simple and really just a milestone that every student cross in his/her academic life. There is nothing to fear as you can easily prepare for the exams with the help of NCERT solutions for class 12 that are given on the Extramarks website or Extramarks – The Learning App
The CBSE guide for class 12 study material NCERT contains all syllabus prescribed to students of class 12. Look for NCERT solutions on the Extramarks website in the footer section and you will find all solutions there.
Yes, Extramarks provides all NCERT class 12 solutions for all subjects for class 12. Extramarks - The Learning App also has solved and unsolved sample papers that you can use to practice for your exams. You can also find the previous year`s solved board question paper on the app.
To score good marks in class 12 CBSE board exams, you must follow these tips:
1. Make a timetable to study well. Organize and prioritize the topics you want to study and haven`t yet had the time to open. Start studying with the most crucial topics.
2. Follow your timetable religiously. Save time for relaxing activities like meditation, swimming or sleeping.
3. Make brief notes containing important answers, character sketches, theorems, formulae, etc. Make clear notes so you can study them before the exam.
4. Learn from class 12 NCERT solutions given on Extramarks website.
5. Be confident that you can crack these exams and take time off to relax.
6. Revise thoroughly before the exam.
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