What is Issue of Debentures for Consideration other than Cash?

Debentures can be circulated for noncash applications. Rather than cash payment, enterprises may circulate debentures to such sellers or vendors. Such type of an issue for debentures can be at a premium or at par or at a discount.

Often, an enterprise buys assets from dealers and instead of making payment in cash issues debentures for contemplation thereon. Such circulation of debentures is called debentures issued for consideration other than cash. In that scenario, the debentures may be circulated, at par or at a premium or at a discount. The entries made in such a situation are alike to those of the shares issued for consideration other than cash, namely :

  • On purchase of assets :

Sundry Assets Account Dr.

To Vendors

  • On the issue of debentures :

At premium :

Vendors Dr.

To Debentures Account

To Securities Premium Reserve Account

At par :

Vendors Dr.

To Debentures Account

At a discount :

Vendors Dr.

Discount on Issue of Debenture Account Dr.

To Debentures Account

The above mentioned is the concept, that is elucidated in detail about the Issue of Debentures for Consideration other than Cash for the class 12 Commerce students. To know more, stay tuned to BYJUS.