The correct answer is option 3- A-II, B-IV, C-I, D-III.
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LIST - I
(Particulars)
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LIST - II
(Treatment)
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A. Issue of debentures as collateral security
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II. Debenture Suspense Account will be debited
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B. Issue of debenture to Public
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IV. Bank Account will be debited
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C. Issue of debentures to vendor
for purchase of an Asset
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I. Vendor Account will be credited
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D. Writing off Discount/Loss
on Issue of Debentures
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III. Statement of Profit and Loss will be debited
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(A) Issue of debentures as collateral security- (II) Debenture Suspense Account will be debited.
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. Debentures suspense A/c is deducted from the amount of debentures in the balance sheet as debentures will not going to change.
(B) Issue of debenture to Public- (IV) Bank Account will be debited.
When a company issues debentures to the public, and the public subscribes and pays, the company receives cash. Journal Entry for this-
Bank A/c Dr. (Amount received)
To Debentures A/c (Face value of debentures)
The Bank Account is debited because the company receives money. The Debentures Account is credited because the company incurs a liability to the debenture holders.
(C) Issue of debentures to vendor for purchase of an Asset- (I) Vendor Account will be credited.
Sometimes a company purchased assets from vendors and instead of making payment in cash issues debentures for consideration thereof. Such issue of debentures is called debentures issued for consideration other than cash. In that case also, the debentures may be issued at par, at a premium or at a discount then entries made in such a situation are similar to those of the shares issued for consideration other than cash. Journal for the issue is as follows-
On purchase of assets-
Sundry Assets A/c Dr.
To Vendor’s A/c
(D) Writing off Discount/Loss on Issue of Debentures- (III) Statement of Profit and Loss will be debited.
Discount or Loss on issue of debentures is a capital loss and is written-off in the year when debentures are issued. Discount or loss can be written-off from securities premium reserve [section 52(2)]. In case, capital profit do not exist or are inadequate, the amount should be written off against revenue profits of the year. The journal entry passed is—
Securities Premium Reserve A/c Dr.
Statement of Profit and Loss [If exists to the extent of balance] Dr.
To Discount/Loss on Issue of Debentures A/c
(Discount/Loss on issue of debentures written-off) | 
