{"id":2443,"date":"2019-09-23T05:56:25","date_gmt":"2019-09-23T05:56:25","guid":{"rendered":"https:\/\/commerceiets.com\/?p=2443"},"modified":"2019-09-23T05:56:25","modified_gmt":"2019-09-23T05:56:25","slug":"issue-of-debentures","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/issue-of-debentures\/","title":{"rendered":"ISSUE OF DEBENTURES"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/issue-of-debentures\/#ISSUE_OF_DEBENTURES\" title=\"ISSUE OF DEBENTURES\">ISSUE OF DEBENTURES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/issue-of-debentures\/#ISSUE_OF_DEBENTURES-2\" title=\"ISSUE OF DEBENTURES\">ISSUE OF DEBENTURES<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/issue-of-debentures\/#ISSUE_OF_DEBENTURES_FOR_CASH\" title=\"ISSUE OF DEBENTURES FOR CASH\">ISSUE OF DEBENTURES FOR CASH<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/issue-of-debentures\/#ISSUE_OF_DEBENTURES_FOR_CONSIDERATION_OTHER_THAN_CASH\" title=\"ISSUE OF DEBENTURES FOR CONSIDERATION OTHER THAN CASH\">ISSUE OF DEBENTURES FOR CONSIDERATION OTHER THAN CASH<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/issue-of-debentures\/#ISSUE_OF_DEBENTURES_AS_COLLATERAL_SECURITY\" title=\"ISSUE OF DEBENTURES AS COLLATERAL SECURITY\">ISSUE OF DEBENTURES AS COLLATERAL SECURITY<\/a><\/li><\/ul><\/nav><\/div>\n<h3 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"ISSUE_OF_DEBENTURES\"><\/span>ISSUE OF DEBENTURES<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-medium-font-size\"><a rel=\"noreferrer noopener\" aria-label=\"Debenture (opens in a new tab)\" href=\"https:\/\/commerceiets.com\/debentures\/\" target=\"_blank\">Debenture<\/a> is an instrument issued by the company acknowledging its debt. Issue of Debentures is made by the company under its seal. It is a contract for the repayment of the amount borrowed by the company from the debentureholder after certain period or at the option of company.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>ACCORDING TO SECTION 2 (30) OF THE COMPANIES ACT, 2013<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">\u201cDebenture includes debenture stock, bonds and any other\nsecurities of the company whether constituting a charge on the company\u2019s assets\nor not.\u201d<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>ACCORDING TO JUSTICE WHITY<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">\u201cDebenture is a document which either creates a debt or\nacknowledges it.\u201d<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"ISSUE_OF_DEBENTURES-2\"><\/span>ISSUE OF DEBENTURES<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The debentures are issued in three following ways:<\/p>\n\n\n\n<ul><li>For cash<\/li><li>For consideration other than cash<\/li><li>As a collateral security<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/09\/Slide4-1.jpg\" alt=\"modes of issue of debentures\" class=\"wp-image-2446\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/09\/Slide4-1.jpg 960w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/09\/Slide4-1-300x225.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/09\/Slide4-1-768x576.jpg 768w\" sizes=\"(max-width: 960px) 100vw, 960px\" \/><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"ISSUE_OF_DEBENTURES_FOR_CASH\"><\/span>ISSUE OF DEBENTURES FOR CASH<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p style=\"text-align:center\" class=\"has-medium-font-size\"><strong>ISSUE OF DEBENTURES AT PAR<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>1.On receipt of application money<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Bank A\/c Dr. <\/p><p>         To Debentures Application A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>2. On transfer of Application amount<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debenture Application A\/c Dr.<\/p><p>            To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>3. On making Allotment money due<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debentures Allotment A\/c Dr.<\/p><p>       To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>4. On receipt of Allotment money<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Bank A\/c Dr.<\/p><p>        To Debentures Allotment Account<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>5. On making Calls<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debentures first\/ second\/ final call A\/c Dr.<\/p><p>         To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>6. On receipts of call money<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Bank A\/c&nbsp;&nbsp; Dr.<\/p><p>       To Debentures first\/ second\/ final call A\/c <\/p><\/blockquote>\n\n\n\n<p style=\"text-align:center\" class=\"has-medium-font-size\"><strong>ISSUE OF DEBENTURES AT PREMIUM<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>1. If premium is received on Application<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On receipt of application money<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Bank A\/c Dr. <\/p><p>       To Debentures Application A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On transfer of Application amount<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debenture Application A\/c Dr.<\/p><p>         To Debentures A\/c<\/p><p>         To securities premium A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>2.If premium is received on Allotment<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On making Allotment money due<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debentures Allotment A\/c Dr.<\/p><p>      To Debentures A\/c<\/p><p>      To securities premium A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On receipt of Allotment money<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Bank A\/c Dr.<\/p><p>      To Debentures Allotment Account<\/p><\/blockquote>\n\n\n\n<p style=\"text-align:center\" class=\"has-medium-font-size\"><strong>ISSUE OF DEBENTURES AT DISCOUNT<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On making Allotment money due<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debentures Allotment A\/c Dr.<\/p><p>Discount on issue of debentures A\/c Dr.<\/p><p>        To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On receipt of Allotment money<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Bank A\/c Dr.<\/p><p>     To Debentures Allotment Account<\/p><\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"ISSUE_OF_DEBENTURES_FOR_CONSIDERATION_OTHER_THAN_CASH\"><\/span>ISSUE OF DEBENTURES FOR CONSIDERATION OTHER THAN CASH<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-medium-font-size\">It may happen that a company may acquire some new assets and\nmake the payment by the issue of debentures. In that case, the journal entries\nwill be as follows:<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On purchase of Assets<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Sundry Assets A\/c Dr.<\/p><p>     To Vendor A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On Allotment of debentures (at par)<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Vendor\u2019s Account Dr.<\/p><p>To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On Allotment of debentures (at premium)<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Vendor\u2019s Account Dr.<\/p><p>     To Debentures A\/c<\/p><p>     To securities premium A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On Allotment of debentures (at discount)<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Vendor\u2019s Account Dr.<\/p><p>Discount on issue of debentures A\/c Dr.<\/p><p>         To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"ISSUE_OF_DEBENTURES_AS_COLLATERAL_SECURITY\"><\/span>ISSUE OF DEBENTURES AS COLLATERAL SECURITY<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-medium-font-size\">A collateral security may be defined as the secondary\nsecurity. It refers to the additional security in addition to the principal\nsecurity.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">When a company takes a loan or overdraft from a bank, it may\ndeposit its own debentures with the lending agency as collateral security in\naddition to another security it may give. When the loan is paid back, the\ndebentures issued as collateral security are returned to the company.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Debentures issued as collateral security may be treated in two\nways in the books of the accounts.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>FIRST METHOD:<\/strong> no accounting entry is made in the books of the accounts. The debentures issued as collateral security is mentioned as a note under the loan against which they are issued.<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  LIABILITIES\n  <\/td><td>\n  AMOUNT\n  <\/td><td>\n  ASSETS\n  <\/td><td>\n  AMOUNT\n  <\/td><\/tr><tr><td>Secured Loan   <br \/>Bank Loan   <\/td><td>   &nbsp;   <br \/>1,00,000   <\/td><td>\n  &nbsp;\n  <\/td><td>\n  &nbsp;\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-medium-font-size\">(Secured by the issue of Rs. 1,25,000, 10% debentures as\ncollateral security)<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>SECOND METHOD:<\/strong> The journal entries are made in the second method which are as follows:<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On the issue of debentures as collateral security<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debentures suspense A\/c Dr.<\/p><p>       To Debentures A\/c<\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><strong>On repayment of loan and release of debentures<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>Debentures A\/c Dr.<\/p><p>      To Debenture Suspense A\/c<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>ISSUE OF DEBENTURES Debenture is an instrument issued by the company acknowledging its debt. Issue of Debentures is made by the company under its seal. It is a contract for the repayment of the amount borrowed by the company from the debentureholder after certain period or at the option of company. ACCORDING TO SECTION 2&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/issue-of-debentures\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;ISSUE OF DEBENTURES&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2445,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2443"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=2443"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2443\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/2445"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=2443"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=2443"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=2443"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}