Practicing Success
Debentures issued as Collateral Security: |
Recorded in the books Not recorded in the books Either option 1 or 2 None of these |
Either option 1 or 2 |
There are two treatments of issuing debentures as collateral security in the accounting books: 1. First MethodCompany 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. 2. Second MethodSometimes the issue of debentures as collateral security is shown by making the following journal entry:
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