Issue of Debentures as Collateral Security Archives - RBL Academy

Debentures It is a financial instrument, issued by Companies to raise Funds from the Market that acknowledges Payment of Interest on regular intervals and Repayment of Principle on maturity of the instrument to its holders. It includes Debentures, Stock, Bonds or any other Instrument of a Company that evidences debt on it. It can be redeemable (having maturity period) or Irredeemable (No maturity period.) (Explanation of Types of Debentures has been ignored intentionally.) Accounting Treatment & Disclosures in relation to Discount or Loss on Issue of Debentures Discount or Loss on Issue of Debentures is a capital loss which can be written off against 1. Security Premium Reserve or 2. Profit & Loss A/C A Company can write off Discount or Loss on Issue of Debentures in two ways: 1. In first Year itself either from Security Premium Reserve A/C or P&L A/C. 2. Writing Off amount of Discount or Loss on Issue of Debentures in equal Installments every year over the maturity period of Debentures. For Example Company issues 1000 Debentures of Rs. 100 at 10 % Discount and to be redeemable after 5 years at 20 % Premium. Loss on issue is to written off in 5 equal installments over 5 Years maturity period.

Class 12 Accounts

Accounting For Issue of Debentures

Accounting for issue of debentures at Par, Premium, Discount, as collateral security, Writing off Discount/ Loss on issue, redemption & Interest on Debentures

By admin, 3 yearsJune 22, 2022 ago