Page 154 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 6: Debentures: Concept, Types, Issue

Second Method: Notes
Journal of Pankaj Limited
Date Particulars L.F. ( ) ( )
Debentures Suspense Account Dr. 1,00,000
To 12% Debentures Account 1,00,000
(Being 1,000; 12% Debentures of 100 each issued to Punjab National
Bank as collateral security)

Balance Sheet of Pankaj Limited as on...

Liabilities ( ) Assets ( )
Secured loans: Miscellaneous Expenditure 1,00,000
Debenture Suspense
Loan from Punjab National Bank (secured by 1,000; 90,000
12% Debentures of 100 each as collateral security)
Debentures:
1,000; 12% Debenture of . 100 each issued as collateral 1,00,000
security.

!
Caution There are some restrictions on the issue of shares at discount but there is no
restriction on issue of debentures at discount.

Self Assessment

Name them:
11. Name the security which is issued in addition to the principal security.
12. Which account is debited while making a journal entry in the books of the company on
issue of debentures as collateral security?
13. On which side of the balance sheet of a company issuing debentures as collateral security
is written the Debentures Suspense A/c?

14. When does a company issue debentures as collateral security?

Did u know? Collateral security is not utilised or realised by the bank until the company
makes its payment (interest and repayment of loan).



Case Study RFU Debenture Sales

The Brief

The Rugby Football Union (RFU) issued, in 2005 debentures, ensuring that the holder had
first refusal to purchase at face value, one ticket for Rugby Union events at Twickenham
Stadium over a ten year period. The principle sum invested would then be returned 75
years from date of issue.
Contd...

LOVELY PROFESSIONAL UNIVERSITY 147