Page 142 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 6: Debentures: Concept, Types, Issue

1. Issue of debentures at par: When the price of the issue is equal to the face value or nominal Notes
value of debenture, it is said that debentures are issued at par e.g., the issue of a debenture
of 1,000 for 1,000. The following accounting entries are adopted when debentures are
issued at par:
A. If the whole value of debenture is payable in one lump sum with application.

(i) On receipt of debenture application money:
Bank Account Dr
To Debenture Application Account
(ii) On allotment of debentures

Debenture Application Account Dr
To Debentures account.
In the place of above two entries, only the following single entry can be
passed Bank Account Dr
To Debentures Account.
B. If the amount of debenture is payable in different instalments:
(i) On receipt of debenture application money

Bank Account
To Debenture Application Account
(ii) When applications are accepted –
Debenture Application Account Dr.

To Debentures Account
Bank Account Dr.
To Debenture Account
(iii) When allotment money is due to debentures–

Debenture Allotment Account Dr.
To Debenture Account
Instead of opening two separate accounts-debenture application account and
debenture allotment account, one combined account for application and
allotment may be opened. In that case for above (ii) & (iii) entries, the following
single entry will be passed:
Debenture Application & Allotment Account Dr.
To Debenture Account.
(iv) When allotment money is received-

Bank Account Dr.
To Debenture Allotment Account.
(v) When call money is due to Debenture-holders-
Debenture Call Account Dr.

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