Issue and Redemption of Debentures
Madhya Pradesh Board · Class 12 · Accountancy
Summary of Issue and Redemption of Debentures for Madhya Pradesh Board Class 12 Accountancy. Key concepts, important points, and chapter overview.
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Debentures are a crucial source of long-term finance for companies in India. When a company's share capital is insufficient to meet its financial needs, it issues debentures to raise borrowed capital. This chapter covers the complete process of issuing debentures at different terms and their eventua
Key Concepts
A debenture is a written acknowledgment
A debenture is a written acknowledgment of debt under the company's seal, derived from the Latin word 'debere' meaning 'to borrow'. It represents borr
Debentures are classified based on security
Debentures are classified based on security (secured/unsecured), redemption (redeemable/irredeemable), convertibility (convertible/non-convertible), i
Debentures can be issued at par
Debentures can be issued at par (face value), at discount (below face value), or at premium (above face value). The accounting treatment varies for ea
Companies can issue debentures to vendors
Companies can issue debentures to vendors for purchasing assets instead of cash payment. The accounting involves debiting the asset account and credit
Debentures issued as additional security
Debentures issued as additional security for loans from banks or financial institutions. Two methods exist: no accounting entry (disclosure in balance
Learning Objectives
- Understand the meaning and nature of debentures and distinguish them from shares
- Learn about different types of debentures and their characteristics
- Master journal entries for issuing debentures at par, discount, and premium
- Understand debentures issued for non-cash considerations and as collateral security
- Learn the accounting treatment for debenture interest and tax deductions
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