Class 12 Accountancy TS Grewal Solutions Volume 2 Chapter 9 - Issue of Debentures
FAQs on TS Grewal Solutions Class 12 Accountancy Volume 2 Chapter 9
1. What do you mean by the Issue of Debentures?
Debentures are issued by the common seal of the company as written instruments of debt. It is a certificate under which there is an acknowledgment by the seal that the debt is taken by the company. It is issued by the company under Section 2(30) of the Companies Act, 2013. It is issued to the public as of the contract of repayment of money borrowed from them after a fixed period. The issue of Debentures and the issue of shares the same procedure. It includes debenture stocks, bonds, and any other document indicating debt, irrespective of constituting a charge on the assets of the company or not.
2. What is Debenture Redemption Reserve?
Debenture Redemption Reserve (DRR) is a provision divulging that any Indian company that issues debentures must maintain a Debenture Redemption Reserve to protect the people who give the debt to the company or the investors from the possibility or risk of loss or faulting. The companies are liable to maintain or create DRR equivalent to 50% of the amount of debenture issue before the debenture redemption starts. The accounting standards still follow the norm of creating a 25% Debenture Redemption Reserve on the face value of the Debentures issues.
3. What do you mean by issues of Debentures: a) at par, b) at a premium, c) at discount.
The issue of debentures at par - Debentures are issued at par when the issues of Debentures price and a face value price are the same.
The Issue of Debentures at Premium - Debentures are said to be issued at a premium when the issue price of the Debentures is more than the face value of the debentures
The Issue of Debentures at Discount - Debentures are said to be issued at a discount when the issue price of the debentures is less than the face value of the issued debentures.
4. What do you mean by the Issue of Debentures as collateral security?
When a company takes out a loan, it may offer basic security for its assets. However, the lending institution may emphasize other assets as collateral or as collateral. In such a case, the company may issue loans to the lenders as secondary or collateral, such a loan issue is known as ‘collateral’. If the company fails to repay the loan and interest and the principal collateral is insufficient to repay the loan, in that case only the lender is free to use the debt as collateral. Lenders may bring such loans for use or sell them on the open market.
5. What are two ways to get rid of debts as a mortgage?
Method One (Without passing the journal) - In this method, no journal entries are passed in the books for the issuance of debentures as collateral.
However, the fact of debentures that are issued is mentioned in the information below the debentures, which is expressed as a long-term loan under non-current liabilities or as short-term liabilities under current liabilities.
Option Two (By Journal) - Debentures issued as collateral can be recorded in the journal.
The following journal entries will be approved for debt issuance as security for security:
- Debenture Suspense A / c Dr {This appears on the assets side}
- To X% Debentures A / c {This comes from the liabilities side}
If the loan is repaid the above entries are canceled by the reverse transfer. In the balance sheet, the loans issued as collateral should be shown separately from other debentures.