Debentures are a common source of long-term borrowed funds for companies. Corporate accounting covers:
In exams, scoring areas are:
You should be able to:
A debenture is a written acknowledgment of debt issued by a company. It usually carries:
Debentures are shown as non-current liabilities (unless redeemable within 12 months).
Write any 4–6 with short meaning:
If face value is ₹100:
Also, redemption may be at par or premium (e.g., redeem at ₹110).
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Debentures are a common source of long-term borrowed funds for companies. Corporate accounting covers:
In exams, scoring areas are:
You should be able to:
A debenture is a written acknowledgment of debt issued by a company. It usually carries:
Debentures are shown as non-current liabilities (unless redeemable within 12 months).
Write any 4–6 with short meaning:
If face value is ₹100:
Also, redemption may be at par or premium (e.g., redeem at ₹110).
Common terms in problems:
Assume 1,000 debentures of ₹100 each.
Bank A/c Dr
To 10% Debentures A/c
Bank A/c Dr (issue price)
Loss on Issue of Debentures A/c Dr (discount)
To 10% Debentures A/c (face value)
Bank A/c Dr
Loss on Issue of Debentures A/c Dr (premium on redemption)
To 10% Debentures A/c
To Premium on Redemption of Debentures A/c
Note: Loss on issue is usually amortised over the life of debentures (policy/syllabus dependent; mention “written off over period”).
When debentures are issued to a vendor (for purchase of assets/business):
Vendor A/c Dr
To 10% Debentures A/c (at face value)
(and To Securities Premium / Premium on Issue if issued at premium)
If issued at discount:
Vendor A/c Dr (net)
Loss on Issue of Debentures A/c Dr (discount)
To 10% Debentures A/c (face value)
Exam tip: Write “Vendor” or “Business Purchase” as per question.
Redemption means repayment of debenture liability. Common methods:
Loss on issue generally includes:
It is a deferred expense (written off over period).
Mini table:
Interest on debentures is an expense.
Debenture Interest A/c Dr
To Debentureholders A/c
Debentureholders A/c Dr
To Bank A/c
If TDS is considered in syllabus/problems:
Debentureholders A/c Dr
To Bank A/c (net)
To TDS Payable A/c (tax)
For “loss on issue” questions, show:
For vendor issue, show:
From this topic
Debenture vs share:
Hence, debentureholders are creditors while shareholders are owners.
Any three types:
(Other types like unsecured/bearer/registered can also be written.)
Premium on redemption is the extra amount payable over face value at the time of redemption.
Bank A/c Dr (face value received)
Loss on Issue of Debentures A/c Dr (premium payable)
To Debentures A/c (face value)
To Premium on Redemption of Debentures A/c
Premium payable increases the cost of borrowing and is treated as part of loss on issue.