pass the journal entry when 10,000 debentures of RS. 100 each are issued as collateral security against a bank loan of RS. 8,00,000
my main question entry will pass ya not if not why ?
We know that there are two methods of recording the issue of debentures as collateral security viz. With the help of Journal entries and another one without passing any Journal entries. In this case, as nothing has been mentioned in the question regarding which particular method to follow, so you can solve the question using any one of the two methods.
It should be noted that in both the cases, we need to record the Journal entries related to the obtaining the bank loan. But in the method, where, the company records the Journal entries for the issue of debentures, we need to pass an additional Journal entry (besides the receipt of bank loan) related to the Debenture Suspense Account.
The concerned problem has been solved by both the methods.
(a) When Company records the Issue of Debentures as Collateral Security in the books.
Books XYZ Ltd. Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
|
|
|
|
| |
| Bank A/c | Dr. |
| 8,00,000 |
|
| To Bank Loan A/c |
|
| 8,00,000 | |
| (Loan taken from Bank against Debentures) |
|
|
| |
|
|
|
|
| |
| Debentures Suspense A/c | Dr. |
| 10,00,000 |
|
| To Debenture A/c |
|
| 10,00,000 | |
| (Debentures of Rs 10,00,000 issued as collateral security) |
|
|
| |
|
|
|
|
| |
Balance Sheet | ||
Particulars | Note No. | Amount (Rs) |
I Equity and Liabilities |
|
|
1.Shareholders’ Funds |
|
|
2.Non-Current Liabilities |
|
|
a. Long-Term Borrowings | 1 | 8,00,000 |
3.Current Liabilities |
|
|
Total |
| 8,00,000 |
|
|
|
II Assets |
|
|
1. Non-Current Assets |
|
|
2. Current Assets |
|
|
a. Cash and Cash Equivalents | 2 | 8,00,000 |
Total |
| 8,00,000 |
|
|
|
NOTES TO ACCOUNTS
Note No. | Particulars | Amount (Rs) | |
|
|
| |
1 | Long-Term Borrowings |
| |
| Secured: |
| |
| Loan from Bank (Secured by issue of debentures as Collateral Security) |
8,00,000 | |
| 10,000 Debentures of Rs 100 each (issued as collateral security) | 10,00,000 |
|
| Less: Debenture Suspense Account | (10,00,000) | - |
|
| 8,00,000 | |
|
|
| |
2 | Cash and Cash Equivalents |
| |
| Cash at Bank | 8,00,000 | |
|
|
| |
(b) When Company does not want to record the Issue of Debentures as Collateral Security in the books.
Books XYZ Ltd. Journal | |||||
Date | Particulars | L.F. | Debit Amount Rs | Credit Amount Rs | |
|
|
|
|
| |
| Bank A/c | Dr. |
| 8,00,000 |
|
| To Bank Loan A/c |
|
| 8,00,000 | |
| (Loan taken from Bank against Debentures) |
|
|
| |
Balance Sheet | ||
Particulars | Note No. | Amount (Rs) |
I. Equity and Liabilities |
|
|
1. Shareholders’ Funds |
|
|
2. Non-Current Liabilities |
|
|
a. Long-Term Borrowings | 1 | 8,00,000 |
3. Current Liabilities |
|
|
Total |
| 8,00,000 |
|
|
|
II. Assets |
|
|
1. Non-Current Assets |
|
|
2. Current Assets |
|
|
a. Cash and Cash Equivalents | 2 | 8,00,000 |
Total |
| 8,00,000 |
|
|
|
NOTES TO ACCOUNTS
Note No. | Particulars | Amount (Rs) |
|
|
|
1 | Long-Term Borrowings |
|
| Secured: |
|
| Loan from Bank (Secured by issue of debentures as Collateral Security) |
8,00,000 |
|
|
|
|
| 8,00,000 |
|
|
|
2 | Cash and Cash Equivalents |
|
| Cash at Bank | 8,00,000 |
|
|
|