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 a 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 the amount of purchase consideration)

Vendor’s A/c

(Towards the 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 the 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 the 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 the purchase of assets)

This concludes the article on the topic of the 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.

Also See:

• Mcq on Debentures

• Types of Debentures

• Redemption of Debentures

• Writing Off Discount Loss on Issue of Debentures

• Issue of Debentures