Principles
UNIT 5: ACCOUNTING FOR DEBENTURES
LEARNING OBJECTIVES I) II) III) IV) V) VI) VII) IX) X) Understand the meaning and features of debentures. Differentiate between shares and debentures. Understand different classes of debentures Journal entries regarding issue of debentures for cash and for consideration other than cash. Accounting treatment of debentures issued as collateral security Accounting treatment of issue and redemption of debentures at par, discount and at premium. Understand the methods of redemption of debentures. Understand the redemption of debentures by purchase in the open market Understand redemption of debentures by conversion into shares and new debentures. VIII) Accounting treatment of redemption of debentures out of capital and profit.
1)
What do you meant by Debentures?
Debentures is an instrument of debt owned by a company as an acknowledgement of debt, such measurements are issued under the seal of company and duly signed by authorized signatory. 2) Write any four types of debentures i) ii) iii) i) 3) Redeemable debentures Perpetual Debentures Convertible debentures Secured debentures
What is debenture Trust Deed? Debenture trust deed is a document created by the company whereby trustee is appointed to protect the interest of debenture holders before they are offered for public subscription.
4) What is meant by convertible debentures? Convertible debentures are those, the holders of which are given an option to exchanging the amount of their debentures with equity shares or other securities after a specified period. 5) Why is premium on the issue of debentures considered as a capital profit? Premium on the issue of debentures is considered a capital profit because it is not an income arising from the normal course of business operations. 85
6)
Explain deep discount Bond When debentures are issued without interest rate and issue price is thereby discounted, the issue of debenture is said to have been made as deep
LEARNING OBJECTIVES I) II) III) IV) V) VI) VII) IX) X) Understand the meaning and features of debentures. Differentiate between shares and debentures. Understand different classes of debentures Journal entries regarding issue of debentures for cash and for consideration other than cash. Accounting treatment of debentures issued as collateral security Accounting treatment of issue and redemption of debentures at par, discount and at premium. Understand the methods of redemption of debentures. Understand the redemption of debentures by purchase in the open market Understand redemption of debentures by conversion into shares and new debentures. VIII) Accounting treatment of redemption of debentures out of capital and profit.
1)
What do you meant by Debentures?
Debentures is an instrument of debt owned by a company as an acknowledgement of debt, such measurements are issued under the seal of company and duly signed by authorized signatory. 2) Write any four types of debentures i) ii) iii) i) 3) Redeemable debentures Perpetual Debentures Convertible debentures Secured debentures
What is debenture Trust Deed? Debenture trust deed is a document created by the company whereby trustee is appointed to protect the interest of debenture holders before they are offered for public subscription.
4) What is meant by convertible debentures? Convertible debentures are those, the holders of which are given an option to exchanging the amount of their debentures with equity shares or other securities after a specified period. 5) Why is premium on the issue of debentures considered as a capital profit? Premium on the issue of debentures is considered a capital profit because it is not an income arising from the normal course of business operations. 85
6)
Explain deep discount Bond When debentures are issued without interest rate and issue price is thereby discounted, the issue of debenture is said to have been made as deep