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.

1. 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 company’s 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