• Debenture interest is the amount paid to debenture holders at a pre determined rate.
  • When debentures are issued to vendors they are known as issue of debentures for consideration other than cash. The value of debentures issued in this is generally equal to the price of goods and services purchased.
  • Debentures can be issued against purchase of business. In this case a company purchases business of another company along with its assets and liabilities.
  • If purchase consideration is more than net assets, difference is transferred to goodwill account and if it is less, than difference is transferred to capital reserve account.
  • When debentures are issued as a secondary security in addition to primary security for a bank loan or debt, it is considered as debentures issued as collateral security.
  • In case of default, the lender will first realise amount from principal security.
  • There are two methods that can be followed in this. In first method no entry is passed at the time of issue and it is only presented in Balance Sheet. In second method, an entry is passed in which debenture suspense account is debited and debentures account is credited.
  • Debenture suspense account is deducted from debentures itself under Long Term Borrowings to nullify the effect.
  • Interest accrued and due is shown under Current Liabilities and Interest accrued and not due is shown under Other Current Liabilities head of the Balance Sheet.

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