Practicing Success
What will be the journal entry for the issue of debentures, when 10% debentures of ₹1,00,000 are issued as Collateral Security against a loan of ₹1,50,000? |
10% Debentures A/c Dr. ₹1,00,000 10% Debentures Suspense A/c Dr. ₹1,00,000 10% Debentures A/c Dr. ₹1,50,000 10% Debentures Suspense A/c Dr. ₹1,50,000 |
10% Debentures Suspense A/c Dr. ₹1,00,000 |
The correct answer is option 2-
* 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: So, the following journal entry is passed for the issue of debentures- 10% Debentures Suspense A/c Dr. ₹1,00,000 |