Issue of Debentures for Consideration other than Cash

Generally debentures are issued for cash. But, sometimes debentures can be issued for non-cash considerations. It may happen that a company has acquired any other company or purchased some assets from a vendor and then instead of paying by cash, the company has opted to settle the payment by issuing debentures to the vendors. 

The debentures can be issued in three ways: at par, at discount and at premium. Let us have a look at the possible journal entries for each of the above mentioned instances.

1. For Acquisition/ Purchase of Assets

Sundry assets A/c   Dr. (with amount of purchase consideration)

Vendor’s A/c

(Towards purchase of sundry assets)

2. For issue of Debentures at par

Vendor’s A/c   Dr.

Debentures A/c

(Towards debentures issued at par as consideration for purchase of assets)

3. For issue of Debentures at discount

Vendor A/c   Dr.

Discount on Issue of Debentures A/c

To Debentures A/c

(Towards debentures issued at a discount as consideration for purchase of assets)

4. For issue of Debentures at Premium

Vendor A/c   Dr.

To Debentures A/c

To Securities Premium Reserve A/c

(Towards debentures issued at a premium as consideration for purchase of assets)

This concludes the article on the topic of Issue of Debentures for Consideration other than Cash , which is an important topic for Commerce students. For more such interesting articles, stay tuned to BYJU’S.

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