Accountancy Part AIssue and Redemption of Debentures

X Ltd. issued 20,000, 9% debentures of ₹100 each on July 1st, 2021 as…

X Ltd. issued 20,000, 9% debentures of ₹100 each on July 1st, 2021 as a Collateral Security. Calculate interest on debentures for the year ending March 31, 2022 to be paid on 9% debentures issued as Collateral Security.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → NIL

Debentures issued as collateral security only back a loan; the company receives no money for them and owes nothing on them unless it defaults on the loan.

So no liability arises and no interest is paid on them. Interest is paid only on the loan they secure.

NCERT (2026-27 edition):
First Method – “No entry is made in the books of accounts since no liability is created by such issue. However, on the liability side of the balance sheet, below the item of loan, a note to the effect that it has been secured by issue of debentures as a collateral security is appended.”