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PERSENTATION OF CORPORATE ACCOUNTING.pptx
- 1. • Issue andRedemption of Debentures •Name : ROZY •Course : SECOND SEMESTER OF FIRST YEAR •Subject: Corporate Accounting •ROLL NO 572
- 2. 2 Introduction to Debentures •What isa Debenture? → A debenture is a loan taken by a company from the public. → It is a written promise to repay the borrowed money with interest after a fixed period. •Example: If a company issues a 1000 debenture at 8% ₹ interest, it will pay 80 interest ₹ yearly.
- 3. Presentation title 3 Featuresof Debentures * A fixed interest rate * No voting rights for debenture holders * Secured or unsecured * Redeemable after a fixed period
- 4. Types of Debentures 1.Securedand Unsecured Debentures – Backed by company assets or not 2.Convertible and Non-Convertible Debentures – Can be converted into shares or not 3.Redeemable and Irredeemable Debentures – Repaid after a fixed period or not 4.Registered and Bearer Debentures – Registered in the company’s records or freely transferable
- 5. Presentation title 5 Issueof Debentures •Issued for raising capital •Can be issued at: * Par – At face value (e.g., 1000 ₹ debenture sold for 1000) ₹ * Premium – Above face value (e.g., 1000 debenture sold for ₹ 1100) ₹ * Discount – Below face value (e.g., 1000 debenture sold for ₹ 900) ₹
- 6. Methods of IssuingDebentures 1.Public Issue – Offered to the general public 2.Private Placement – Offered to selected investors 3.Conversion of Loans – Loans converted into debentures 4.Collateral Security – Issued as security for loans
- 7. 7 Accounting Entries forIssue of Debentures 1.At Premium: Bank A/c Dr. ₹1100 ₹ To Debenture A/c ₹1000 ₹ To Securities Premium A/c ₹100 ₹ 2.At Par: Bank A/c Dr. ₹1000 ₹ To Debenture A/c ₹1000 ₹ 3.At Discount: Bank A/c Dr. ₹900 ₹ Discount on Issue of Debenture A/c Dr. ₹100 ₹ To Debenture A/c ₹1000 ₹
- 8. 8 Interest on Debentures •Interest ispaid regularly to debenture holders (e.g., yearly or half-yearly). •Accounting Entry: *Interest on Debentures A/c Dr. 80 ₹ * To Bank A/c 80 ₹
- 9. Presentation title 9 Redemptionof Debentures Meaning: Paying back the borrowed money to debenture holders •Methods of Redemption: • . Lump Sum Payment – Paid at once after a fixed period . Installment Payment – Paid in parts over time . Purchase in Open Market – Company buys back debentures from the market . Conversion – Converted into shares
- 10. Presentation title 10 Sourcesfor Redemption 1.Profit from business 2.Proceeds from new issues 3.Capital Reserve 4.Sinking Fund
- 11. 11 Accounting Entries forRedemption 1.At Par: Debenture A/c Dr. ₹1000 ₹ To Bank A/c ₹1000 ₹ 2.At Premium: Debenture A/c Dr. ₹1000 ₹ Premium on Redemption A/c Dr. ₹100 ₹ To Bank A/c ₹1100 ₹
- 12. 12 Journal Entry Example Example: Acompany issued 1000 debentures at ₹ 5% interest and redeemed them at 1050. ₹ •Issue: Bank A/c Dr. ₹1000 ₹ To Debenture A/c ₹1000 ₹ •Redemption: Debenture A/c Dr. ₹1000 ₹ Loss on Redemption A/c Dr. ₹50 ₹ To Bank A/c ₹1050 ₹
- 13. Thank you Conclusion •Debentures arean important way for companies to raise funds. •Proper management of issue and redemption is essential for financial stability. •Helps in improving business growth and investor confidence.