A company took a loan of Rs. 10,00,000 from Punjab National Bank and issued 10% debentures of Rs. 12,00,000 of Rs. 100 each as a collateral security. What will be the journal entry to record this?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Debit Debenture Suspense A/c, Credit 10% Debentures A/c with Rs. 12,00,000
Debentures issued as collateral security are an extra security for a loan; the company receives no money for them. If they are recorded in the books (the second method), the entry is made with their face value, and Debenture Suspense Account takes the debit side because nothing was received.
Debentures issued as collateral = Rs. 12,00,000 (face value), not the loan of Rs. 10,00,000
Debenture Suspense A/c Dr. Rs. 12,00,000
To 10% Debentures A/c Rs. 12,00,000
In the Balance Sheet, Debenture Suspense is deducted from the debentures, so only the bank loan of Rs. 10,00,000 is shown as the real liability.
Note: This question is from NCERT (2026-27). NTA sets numerical questions from NCERT too, so do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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