Page 145 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Date Particulars L.F. ( ) ( )
10% Debenture Application Account Dr. 1,05,000
To 10% Debenture Account 1,00,000
To 10% Debenture Account 5,000
Accounting for Companies-I
(Being utilisation of application money)
10% Debenture Allotment Account Dr. 2,00,000
To 10% Debenture Allotment Account 1,25,000
Notes To Debenture Premium Account 75,000
(Being allotment money due with premium on 5,000 debenture @ 40)
10% Debenture First & Final Call Account Dr. 2,75,000
To 10% Debenture Account 2,75,000
(Being first and final call money due on 5,000 debentures @ 55 per
debenture)
Debenture Premium Account Dr. 75,000
To Capital Reserve Account 75,000
(Debenture premium transferred to capital reserve account)

Cash Book
( ) ( )
To 10% Debenture Application 1,20,000 By 10% Debenture Application 15,000
(6,000 × 20) (750 × 20)
Account
To 10% Debenture Allotment Account 1,95,000 By Balance C/d 5,75,000
(2,00,000 – 5,000)
To 10% Debenture First and Final Call Account 2,75,000
5,90,000 5,90,000

!
Caution The procedure for issue of debentures is exactly similar to the procedure of issue
of shares.

Self Assessment

Fill in the blanks:

1. Debenture-holders are entitled to get …………… at a fixed rate.
2. Debentures are shown under the heading of …………… in the liability side of the balance
sheet.

3. Debenture-holders are the …………… of a public limited company.
4. Select the best alternative:
Which of the following debentures is transferred by transfer deed only:
(i) Bearer debenture

(ii) Registered debenture
(iii) Mortgage Debenture
5. The procedure for issue of …………… is exactly similar to the procedure of issue of shares.
3. Issue of Debentures at a Discount: When the issue price of the debenture is less than the
face value or nominal value of the debenture, it is said that debentures are issued at
discount. Take for example, the issue of a debenture of 100 at 85. Here, the deficit of
price of 15 (100-85) will be termed as ‘Discount on Issue of Debenture Account’, which is
debited due to a capital loss. There is no statutory restriction as to the maximum limit for
discount on debenture as there is in the case of shares. According to the Companies Act
1956, ‘Discount on Issue of Debentures’ must be shown on the assets side of the Company’s

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