In case of issue of debentures as a collateral security for loan from the bank, which account will be debited?

Debentures Suspense A/c

The correct answer is option 4- Debentures Suspense A/c.

Debentures issued as collateral security can be dealt in two ways in the books of the company.

* First Method- Company does not make any journal entry in the account books at the time of issue of these debentures. A note is attached below the loan on the liabilities side of the balance sheet. It will state the fact that they have been secured by the issue of debentures.

* Second Method- Sometimes the issue of debentures as collateral security is shown by making the following journal entry: 
  Debenture Suspense A/c Dr. 
           To Debentures A/c

So, from the second method, we can see that Debenture Suspense A/c  is debited in case of issue of debentures as collateral security.

Debenture Suspense account will appear as a deduction from the debentures in notes to accounts under the subhead long-term borrowings.