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. Which of the following will be correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Debenture Suspense A/c Dr. with Rs. 12,00,000.
Debentures issued as collateral security are an additional security for a loan, given besides the main security. The company receives no money for them; they are used only if the company fails to repay the loan. If the company records them, it debits Debenture Suspense Account with their full face value and credits Debentures Account.
Face value of debentures issued = Rs. 12,00,000
Debenture Suspense A/c Dr. Rs. 12,00,000, To 10% Debentures A/c Rs. 12,00,000
The loan of Rs. 10,00,000 is a separate entry (Bank A/c Dr. To Bank Loan A/c), so the debentures are recorded at their own value of Rs. 12,00,000, not at the loan amount. In the balance sheet the Debenture Suspense Account is deducted from the debentures, so only the loan shows as the 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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