National company Ltd issued 4000, 12% mortage debenture of Rs 100 each...
Transaction Recording in Company's Books:
- National Company Ltd issued 4000, 12% mortgage debentures of Rs 100 each secured on the fixed assets of the company.
- Out of these, 3000 debentures were issued to the public at a premium of 2%.
- The remaining 1000 debentures were issued to the company's bankers as collateral security against a loan of Rs 75000.
Accounting Entries:
1. When debentures were issued to the public:
- Bank Account (3000 debentures * Rs 100) Dr
- Debenture Application A/c (3000 debentures * Rs 100) Cr
- Securities Premium Reserve A/c (3000 debentures * Rs 2) Cr
2. When debentures were issued to the bankers:
- Bank Account (1000 debentures * Rs 100) Dr
- Debenture Application A/c (1000 debentures * Rs 100) Cr
- Loan A/c (Rs 75000) Cr
Balance Sheet Presentation:
- Assets side: Fixed Assets will decrease by the value of debentures issued (4000 debentures * Rs 100).
- Liabilities side:
- Debentures will be shown under long-term liabilities.
- Securities Premium Reserve will increase by the premium amount.
- Loan from Bankers will be shown as a liability.
By following these steps, the company's books will accurately reflect the issuance of debentures to the public and bankers, and the balance sheet will provide a clear picture of the company's financial position.