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GALGOTIAS UNIVERSITY

ACCOUNTS ASSIGNMENT

TOPIC: ACCOUNTING STATEMENT FOR ISSUE OF DEBENTURES FOR THE


CONSIDERATION OF CASH.

SUBMITTED BY:

VINAMRA KRISHNA MATHUR

SIDDHANT BHARADWAJ

UJJWAL LOHAT

SARTHAK SHARMA

PURU SINGH TOMAR


GENERAL INTRODUCTION

A very Good Afternoon to one and all present here,


First of all I would like to thank my teacher to give us this wonderful
opportunity where we learned a lot about Debentures and then my friends
who helped me in research as well as completion of this presentation.
Today we are here to present you the Accounting Treatment for Issue of
Debentures for the Consideration of Cash .This issue of debentures that
happens can be of three kinds, just like an issue of shares, at par, at a
discount, and at a premium. All three parts, with their respective
accounting entries , will be dealt in brief by my friends .
GENERAL INTRODUCTION TO THE TOPIC:

Debentures: It is an instrument or document issued by the company


acknowledging a debt . It has terms of repayment of principal and also
payment of interest at a rate specified at the time of its issue.
Debentures issued at Par , means Debentures issued at their nominal value .
For Example: Debentures of Nominal Value of Rs.100 issued at Rs.100 .
Debentures issued at Discount , means Debentures issued at a price that is
less than its Nominal Value . For Example , Debentures of Nominal Value Of
Rs.100 are issued at Rs.90, and is debentures issued at Discount .
Debentures issued at Premium , means Debentures issued at a price that is
higher than its nominal value. For Example, Debentures of Nominal Value of
Rs.100 are issued at Rs.125 , is debentures issued at Premium .
ISSUE AT PAR: Money Received in One Installment
Here the debentures will be issued exactly at their nominal price, i.e. not
above or below the face value of the debentures. Now the company can
decide to collect the cash all at once, in a lump sum. Or the money will be
collected in installments, like with allotment, first call, second call, last call
etc. Let us see the accounting journal entries for both these scenarios.
Date PARTICULARS L. AMMOUNT AMMOUNT
F (CR.) (Dr.)
Bank a/c Dr. XX
To Debenture application XX
and allotment a/c
(Being amount received in one
installment)

Debenture Application & Allotment XX


a/c Dr.
To Debenture a/c XX
ISSUED AT PAR: Being Money Received in Two Or More Installments.
Date PARTICULARS L.F AMMOUNT AMMOUNT(
(CR.) Dr.)
Bank a/c Dr.
To Debenture application a/c
(Being amount received on Application)

Debenture Application a/c Dr.


To Debenture a/c
(Allotment being Done)

Debenture Allotment a/c Dr.


To Debenture a/c
(Allotment money becoming due)

Bank a/c Dr.


To Debenture Allotment a/c
(Allotment money Received)
ISSUE AT DISCOUNT:
When the debentures are issued at below face value, such issue of debentures is known
as a discount issue. Like, say for example the debenture has a nominal value of 100/- but
is issued for 90/-. Then such debentures are said to be issued at discount . Discount on
issue of debentures is treated as a capital loss and put under “Miscellaneous Expenses”
on the asset side of the balance sheet until it can be written off. Then during the life of
the debentures, such discount amount is written off by debiting it to the Profit and Loss
A/c. It can also be charged against the Capital Profits of the company.
DATE PARTICULARS L.F AMMOUNT(Cr.) AMMOUNT(Dr.)
DATE PARTICULARS L.F AMMOUNT(Cr.) AMMOUNT(Dr.)
Debenture Allotment a/c Dr.
(i) When Bank a/c Dr.
Discount on Debenture a/c Dr.
debentures To Debenture application
To Debenture a/c
are issued at & allotment a/c
(Being Allotment money becoming
discount
due)
(ii)redeemable Debenture application and allotment
Bank a/c Dr.
at par a/c Dr.
To Debenture Allotment a/c
Discount on issue of debentures a/c
(Allotment Money Received )
Dr.
To Debentures a/c
Profit and Loss a/c Dr.
To Discount on Debenture a/c
ISSUE AT PREMIUM:
Now we come to the issue of debentures at a premium, that is when
more money than the nominal value is charged. So if a debenture with
a face value of 100/- is sold at 110/- then it is issued at a premium.
The amount of the premium is charged to a special account known as
Securities Premium Reserve Account. This account will be shown on
the liabilities side of the Balance Sheet under the heading of
Reserves and Surplus..
DATE PARTICULARS L.F AMMOUNT(Dr.) AMMOUNT(Cr.)

Debenture Allotment/ Call a/c Dr.


To Debenture a/c
To Securities Premium Reserve a/c
(Allotment/Call money becoming Due)

Bank a/c Dr.


To Debenture Allotment/Call a/c
(Allotment/Call Money Received )
END

BIBLIOGRAPHY
The matter has been taken from :

www.wikipedia .com\shares_and_debentures
www.accountsadda.com\debentures
ADVANCED ACCOUNTING PRINCIPLES BY D.K SHAW

CONCISED ACCOUNTS BY JESSICA YADAV

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