Question

S. Singh Limited obtained a loan of ₹ 5,00,000 from State Bank of India @ 10% p.a. interest. The company issued ₹ 7,50,000, 10% Debentures of ₹ 100 each in favour of State Bank of India as Collateral Security. Pass necessary Journal entries for the above transactions:
(i) When company decided not to record the issue of 10% Debentures as Collateral Security.
(ii) When company decided to record the issue of 10% Debentures as Collateral Security.

Answer 1

(i) When company decided not to record the issue of 10% debentures as Collateral Security

In the books of S. Singh Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Bank A/c	Dr.		5,00,000
	To Bank Loan A/c				5,00,000
	(Being bank loan taken from State Bank of India @10% p.a. interest)

(ii) When company decided to record the issue of 10% debentures as Collateral Security

In the books of S. Singh Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Bank A/c	Dr.		5,00,000
	To Bank Loan A/c				5,00,000
	(Being bank loan taken from State Bank of India @10% p.a. interest)
	Debentures Suspense A/c	Dr.		7,50,000
	To 10% Debentures A/c				7,50,000
	(Being 7,500, 10% Debentures issued as collateral security)