Summary of Issue of Debenture Video Lecture - Accountancy Class 12 - Commerce

let us do a quick recap of all that we
covered in this session we first
discussed what our debentures what our
debentures debentures our loan issued to
the public they carried a fixed rate of
interest they are redeemable impressed
is a charge against profits and
debenture holders are lenders of the
company we also compared shares equity
shares with dimensions largely basic
difference is that a shareholder is an
owner of a company with voting rights
whereas debenture holder is an lender no
voting rights no control as such but
they are entitled to a fixed rate of
interest and they are usually redeemable
after a period of time whereas equity
shares are repaid on the on liquidation
what are the features of debentures the
other features of debentures like I said
they carry a fixed rate of interest
interest is a charge against profits
they are redeemable we then discussed
some of the features of the debentures
debentures odd loans carry a fixed rate
of interest interest is charged against
profits they are usually redeemable
they are usually secured they may be
listed on a stock exchange they may be
issued at par Premium or discount they
may also be redeemed at par Premium or
discount what are the types of
dimensions you we may have redeemable on
irredeemable dimensions we may have
registered or bearer debentures that is
depending on the transferability we may
have convertible and non convertible
debentures convertible to shares and not
convertible
we may have secured and unsecured
debentures the debentures are usually
secure and the security may be a
specific charge or it may be a floating
charge the general charge on all the
assets of the company usually the
benches are secured usually depends
already mobile and usually the benches
may be non convertible
you may also have a first mortgage and
second mortgage dementia first mortgage
those are the debenture holders who will
get preference of free payments in case
of winding up of the company the second
mortgage dimensions will be paid only
after the first mortgage dimensions are
paid up then we went on to discuss the
accounting entries on issue and
redemption of dimensions accounting
entries on issue of dimensions is
basically bank account debit to
debentures if the addition at path back
to debentures to securities premium if
they are issued at a premium and bank
account debit is called the conduit to
debentures if they are issued at a
discount however the terms of issue of
dimensions always contain also the terms
of redemption and if this redemption is
at a premium mind you when redemption is
at a premium it's lost to the company
because the company has to repay more
than the face value of the debenture so
at the time of issue if the company is
aware of the terms of redemption then
such loss if the ventures are to be
redeemed at the premium such loss is
provided for at the time of issue itself
so besides our basic entries that we
just discussed when they shares when the
debentures are issued at par premium on
discount in addition we have one more
entry loss on issue of the venture
account debit to premium on redemption
of dimensions however though the
ventures are not usually redeemed at a
discount even if they are we do not
for any profits which may arise we do
not recognize profits which may arise in
future therefore at the time of issue
itself we account for any loss that is
expected at the time of production
these were with respect to issue of
debentures for cash
however the ventures may also be issued
for consideration other than cash so it
may be for the purchase of a business
for the purchase of some assets
possession in such case also debentures
may be issued a path premium or discount
in order to find out it in order to find
out the number of dimensions we normally
divide the purchase consideration by the
issue price of a debenture and arrive at
the number of avenches next we went on
to do issue of debentures as collateral
security this is when debentures are
issued in addition to a security which
has been offered against a loan taken by
the company such dimensions are not
really exercisable they are retained by
the lender by the bank who has given
money and there would be exercised only
if the company defaults in the repayment
of the loan no accounting entry need
because only unnoted in the notes to
accounts in the notes to the balance
sheet would suffice or collectively if
an entry is passed we debit the venture
suspense account and credit the venture
account so like a contra and both sides
it appears on both sides of the balance
sheet mind you low interest is payable
on these dimensions because these
debentures are still not exercisable
interest is payable by the company only
on the loan which it has take
and he should dimensions as collateral
security we also discussed the treatment
of discount on issue of debentures
discount or loss on issue of avenches
this discount includes not only the
discount on issue of debentures also the
premium which is payable on Redemption
which is expressed as loss on his shirt
dimensions account debit to premium and
redemption of aventures
finally we touched upon the accounting
entries with respect to interest on the
benches where we had gross interest less
the tds payable and the net amount which
is paid to the debenture holders we also
understood two other concepts interest
accrued and view which is shown along
with the benches and interest accrual
but not you which is shown as a part of
current liability this would cover our
entire discussion on company accounts
issue of the benches thank you