When debentures are issued as collateral security, the final entry for recording the transaction in the books is ________________.

Credit debentures A/c and debit cash A/c

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Debit debentures suspense A/c and credit cash A/c

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Debit cash A/c and credit the loan A/c for which security is given

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Debit debentures A/c and credit the loan A/c for which security is given.

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Solution

The correct option is C Debit cash A/c and credit the loan A/c for which security is given
When debentures are issued as a collateral security there are two treatments in the accounting books.
One of the methods is where no journal entry is made in the account books at the time of issue of such debentures. Hence, only the entry of loan is to be passed.
Hence, C is the correct option.

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Similar questions

Q. A company took a loan of ₹ 4,00,000 from Bandhan Bank Ltd. and issued 8% Debentures of ₹ 4,00,000 as a collateral security.

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?

Q. When debenture are issued as collateral security, the final entry for recording the transaction in the books is _______.

X.Ltd. issued 15,000, 10% debentures of Rs 100 each. Give journal entries and the Balance Sheet in each of the following cases:

(i) The debentures are issued at a premium of 10%;

(ii) The debentures are issued at a discount of 5%;

(iii) The debentures are issued as a collateral security to bank against a loan of Rs 12,00,000; and

(iv) The debentures are issued to a supplier of machinery costing Rs 13,50,000.

On the issue of debentures as collateral security, which account is credited?

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