Question

What is the nature of Debenture suspense account? And why 'suspense' word is used?

Answer 1

Dear Student
Debenture Suspense Account is an adjustment account. It is an Asset account as per the Modern Classification while a Real account as per the Traditional Classification.
It is shown as a deduction from Long-term liabilities in the Notes to Accounts as the purpose of making this account is just to disclose the issue of debentures as a collateral security. The debentures issued as such are not to be considered as operational liabilities until and unless there is a default on the payment of the loan and the primary security is considered insufficient to compensate for it. As soon as loan is repaid we nullify the agreement by passing the reverse entry.

Regards