A company has an outstanding balance of Debentures of ₹10,00,000. It issued Debentures of ₹2,50,000 as collateral security for a loan of ₹2,00,000. How much amount will be shown in Balance Sheet against Debentures under long term Borrowing?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 10,00,000
Debentures issued as collateral security create no new liability: the company owes only the loan of ₹2,00,000. No entry is made for them; the loan is shown with a note saying it is secured by the issue of debentures as collateral.
Debentures shown under long-term borrowings = the outstanding debentures only = Rs. 10,00,000
(Under the second method the ₹2,50,000 debentures are shown and the same amount is deducted as Debenture Suspense, so the net figure is still Rs. 10,00,000.)
Option (1) Rs. 13,00,000 — Incorrect. It adds the collateral debentures and the loan wrongly.
Option (2) Rs. 7,50,000 — Incorrect. Nothing is deducted from the outstanding debentures.
Option (3) Rs. 10,00,000 — Correct.
Option (4) Rs. 12,50,000 — Incorrect. The collateral debentures are not a liability of the company.
NCERT (2026-27 edition): |