Question

If the whole amount of debenture is received in one installment, then the journal entry for application of money is:

• A. Debit Bank a/c. and Credit Debenture application & allotment a/c.
• B. Debit Debenture application & allotment a/c. and credit bank a/c
• C. Both (A) and (B)
• D. None of the above

Answer 1

Answer: (A)

Debit Bank a/c. and Credit Debenture application & allotment a/c.

Debentures may be issued at par, premium, or at discount. They can also be issued for consideration other than cash or as collateral security. Debentures are said to be issued at par when face value equals to the issue price of the debenture, the journal entry for such issue is as under:

If whole amount is received in one installment:

Bank A/c Dr.

To Debenture application and allotment A/c

Debenture application and allotment A/c Dr.

To Debentures A/c