Zee Ltd. took a loan of ₹10,00,000 from SBI and issued 15000, 9% Debentures of ₹100 as collateral security. How much amount will be shown in Company's Balance Sheet as Long term Loan?

₹10,00,000

The correct answer is option 1- ₹10,00,000

Only loan's amount will be shown as long term liability in Balance sheet as the issued debentures are company's collateral security i.e. ₹10,00,000.

Debentures issued as collateral security can be dealt in two ways in the books of the company.

* 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: 
  Debenture Suspense A/c Dr. 
           To Debentures A/c

As there is no change in debentures amount due to issue of debentures as collateral security. Only loan amount is shown in the balance sheet.