On 1st July 22, Centaur Ltd issued ₹2500000, 8% debentures of ₹100 each as collateral security to first level bank against loan dues of ₹2000000. How much amount will be shown in the balance sheet?

₹2000000

There are two treatments of issuing debentures as collateral security in the accounting books:

1. 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.

2. 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

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