Accounting treatment of Issue of debenture

>> November 15, 2008


For rendering the accounting treatment of issue of debenture, you should know debenture and what is use of debenture in any corporate.
Debenture is just long term loan which is taken by company. For this company issue debentures. This is just like a paper on which company has written that company is taking loan from debenture holder with given term. Company has to decide the rate of interest and repayment amount and time of repayment of debenture. These terms must be written in debenture paper at the time of issue of debenture. There are many type of debenture which can be issued by company. It may convertible or non convertible. It means that company converts debenture in to share if company issued convertible debenture but if company issued non convertible, company has no right to convert debentures into shares. Company can also redeemable and non redeemable debenture .It means that company repays the full amount of debenture holder after some time if company has issued redeemable debentures but if company issued non redeemable debentures, company will not repay in his life time. These debentures only will redeem after the winding up of company.
Because of this is important transaction relating to company, so it is very necessary to record in the books of company. Let us start the accounting treatment of issue of debenture.

A – Issue of Debenture at Par
1st journal Entry
When company receives application money of debentures

Bank account Debit
Debenture Application Account Credit

2nd Journal Entry
When company accepts the applications
Debenture Application Account Debit
Debenture Account Credit
3rd Journal Entry

When Allotment money of debenture due

Debenture Allotment Account Debit
Debenture Account Credit
4th Journal Entry

When Allotment money of debenture received

Bank Account Debit
Debenture Allotment Account Credit

5th Journal Entry
When Call money of debenture is payable

Debenture Calls Account Debit
Debenture Account Credit
6th Journal Entry

When Call money of debenture is received

Bank Account Debit
Debenture Calls Account Credit

B- When Company issue of debenture at premium
If premium is receivable with application money

1st Journal Entry
When amount of application received with premium

Bank Account Debit
Debenture Application account Credit

2nd Journal Entry

Debenture Application Account Debit
Debenture Account Credit
Security premium Account credit

If premium receivable on allotment then

Debenture Allotment account debit
Debenture Account Credit
Security Premium Account Credit

And allotment money received with premium

Bank account Debit
Debenture Allotment Account Credit

When Debenture Issued At discount


Debenture Allotment Account Debit
Discount on Issue of Debenture Account Debit
Debenture Allotment Account Credit

When discounted amount of debenture is received

Bank Account Debit
Debenture Allotment Account Credit





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3 comments:

Anonymous,  January 5, 2011 at 11:51 AM  

Please give the vedioes leactures of the debentures.like youtube vedioes.than the persons can easily undersand.

amrit,  September 23, 2012 at 5:12 AM  

thanks a ton, sir really wonderfull notes hope u will make a video series on this topic

Anonymous,  November 1, 2012 at 1:39 AM  

like your style. its simple! :)

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