Company Accounts

Debentures

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Issue of 8% debentures is shown under which sub-head in the balance sheet of a company:

Long term borrowings

Short term loans and advances.

Long term loans and advances

Other current liabilities.

✅ Correct Option: 1

Debentures are debt instruments issued by a company to raise long-term funds from the public or institutional investors. When 8% debentures are issued, the company borrows money and agrees to pay 8% interest annually.

In the balance sheet, debentures issued by the company represent a liability (money owed by the company to debenture holders). Since debentures are typically issued for a period exceeding one year, they are classified as Non-Current Liabilities.

Under Non-Current Liabilities, the specific sub-head where debentures are shown is Long-term borrowings. This sub-head includes all forms of long-term debt such as:

Debentures
Bonds
Term loans from banks and financial institutions
Public deposits (for more than 12 months)

Options 2 and 3 mention "loans and advances" which represent amounts given by the company to others (an asset), not amounts borrowed by the company.

Option 4 refers to current liabilities, which are obligations due within one year. Debentures are generally long-term in nature.

Therefore, 8% debentures issued by a company are shown under Long-term borrowings in the balance sheet.

2022: 20 July Shift 1

The following journal entry is recorded in the books of RST Ltd. on issue of debentures :

Bank a/c Dr 18,00,000

Loss on issue of Debentures a/c Dr 6,00,000

To 14% Debentures 20,00,000

To Premium on Redemption of Debentunes 4,00,000

Debentures have been issued at a discount of :

2026: 24 May Shift 1

Gaurav Ltd issued 600, 8% debentures of Rs. 100 each as collateral security against a Bank loan of Rs. 50,000. Journal Entry for issue of debentures as collateral security will be:

2025: 27 May Shift 1

X Limited Issued 10,000, 12% debentures of Rs. 100 each payable Rs. 40 on application and Rs. 60 on allotment. The public applied for 14,000 debentures. Applications for 9,000 debentures were accepted in full, applications for 2,000 debentures were allotted 1,000 debentures and the remaining applications, were rejected. All money was duly received. 12% Debenture Application A/c will be credited with -

2025: 3 June Shift 1

The following are the features of Debentures:

(A) The payment of interest is a charge on profits and is to be paid even if there is no profit.

(B) The debentures, which are issued for a specified period are repayable on the expiry of that period.

(D) Debentures can not be converted into shares in any case.

Choose the correct answer from the options given below:

2023: 11 June Shift 3

Debentures that will be redeemed only at the time of winding up of the company are known as :

2026: 20 May Shift 1

A Limited issued 5000, 10% debentures of Rs. 100 each, at a premium of Rs. 10 per debenture payable as follows:

On application Rs. 25, On allotment Rs. 45 (including premium), On first and final call Rs. 40.

The debentures were fully subscribed and all money was duly received.

Select the correct journal entries related to the above case from the following.

(A)

Particulars	Dr. Amount	Cr. Amount
10% Debenture Allotment A/c Dr.	2,25,000
To 10% Debentures A/c		1,75,000
To Securities Premium Reserve A/c		50,000

(B)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		1,25,000
	To 10% Debenture Application A/c			1,25,000

(C)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		2,00,000
	To 10% Debenture First & Final Call A/c			2,00,000

(D)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		2,20,000
	To 10% Debenture Allotment A/c			2,20,000

Choose the correct answer from the options given below:

Issue of 8% debentures is shown under which sub-head in the balance sheet of a company:

Solution

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