Question

Meghnath Limited took a loan of Rs 1,20,000 from a bank and deposited 1,400, $8\%$ debentures of Rs 100 each as collateral security along with primary security worth Rs 2 lakhs. Company again took a loan of Rs 80,000 after two months from a bank and deposited 1,000 , $8\%$ debentures of Rs 100 each as collateral security. Record necessary journal entries. How will you show the issue of Debentures and Bank Loan in the balance sheet of the company?

Answer 1

Books of Meghnath Ltd.
JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ \text{When}& \text{Bank A/c}& \text{Dr}& & 1,20,000& \\ \text{loan}& \text{To Bank Loan A/c}& & & & 1,20,000\\ \text{is taken}& \text{(Loan obtained from bank secured by primary}& & & & \\ & \text{security worth Rs 2,00,000 and Rs 1,40,000,}8\%& & & & \\ & \text{debentures as collateral security}& & & & \\ "& \text{Debenture Suspense A/c}& \text{Dr}& & 1,40,000& \\ & \text{To}8\%\text{Debenture A/c}& & & & 1,40,000\\ & \text{(Issue of Rs 1,40,000 debentures as collateral security}& & & & \\ & \text{to secure a loan of Rs 1,20,000 from the bank)}& & & & \\ "& \text{Bank A/c}& \text{Dr}& & 80,000& \\ & \text{To Bank Loan A/c}& & & & 80,000\\ & \text{(Loan obtained from bank secured by Rs 1,00,000,}8\%& & & & \\ & \text{debentures as collateral security)}& & & & \\ "& \text{Debenture Suspense A/c}& \text{Dr}& & 1,00,000& \\ & \text{To}8\%\text{Debenture A/c}& & & & 1,00,000\\ & \text{(Issue of Rs 1,00,000 debentures as collateral security}& & & & \\ & \text{to secure a loan of Rs 80,000 from the bank)}& & & & \end{array}$

Note : * No entry is passed for primary security in the books of accounts.

EXTRACT OF BALANCE SHEET OF MEGHNATH LTD
as at ...............................

$\begin{array}{cccc}\text{Particulars}& \text{Note}& \text{Current}& \text{Previous}\\ & \text{No}& \text{year}& \text{year}\\ 1.\text{EQUALITY AND LIABILITIES:}& & Rs& Rs\\ \text{Non- current Liabilities:}& & & \\ \text{Long -term Borrowings}& 1& \underset{–}{\underset{–}{2,00,000}}& \end{array}$

Notes to Accounts :
$\begin{array}{ccc}& & Rs\\ \left(1\right)\text{Long -term Borrowings :}& & \\ 8\%\text{Debentures}& 2,40,000& \\ \text{Less : Debenture Suspense A/c}& \underset{–}{2,40,000}& -\\ \text{Bank Loan (On primary security worth Rs 2,00,000 and}& & 2,00,000\\ \text{collateral security of Debentures of Rs 2,40,000)}& & \end{array}$