In case debentures were issued as collateral security for taking loan from ABC Bank. Choose the correct journal entry for cancellation of debentures as collateral security on repayment of bank loan.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → % Debentures A/c Dr., To Debenture Suspense A/c
Debentures issued as collateral security are recorded by debiting Debenture Suspense A/c and crediting Debentures A/c. They are only a security, not a loan, so when the bank loan is repaid the debentures are returned to the company and the first entry no longer stands.
NCERT (2026-27 edition):
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