Accountancy Part AIssue and Redemption of Debentures

Gaurav Ltd issued 600, 8% debentures of Rs. 100 each as collateral se…

Gaurav Ltd issued 600, 8% debentures of Rs. 100 each as collateral security against a Bank loan of Rs. 50,000. Journal Entry for issue of debentures as collateral security will be:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Debenture Suspense A/c Dr. Rs. 60,000, To 8% Debentures A/c Rs. 60,000

Debentures issued as collateral security are an additional security for the bank loan. No cash comes in and no debt is created beyond the loan itself, so the entry is a book entry: the debentures are credited at their face value and the other side goes to Debenture Suspense A/c.

Face value of the debentures = 600 × Rs. 100 = Rs. 60,000
The bank loan of Rs. 50,000 is not the amount of the entry

Debenture Suspense A/c is shown as a deduction from the debentures in the Notes to Accounts, and the entry is reversed when the loan is repaid.

NCERT (2026-27 edition):
Issue of Debentures as a Collateral Security

Extract from the NCERT textbook

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Debenture Suspense A/c Dr.		60,000
	To Bank A/c			60,000

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	8% Debenture A/c Dr.		60,000
	To 8% Debentures Suspense A/c			60,000

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		60,000
	To Bank Loan A/c			60,000

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Debenture Suspense A/c Dr.		60,000
	To 8% Debentures A/c			60,000

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Debenture Suspense A/c Dr.		60,000
	To Bank A/c			60,000