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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Cases of issue of Debentures from the point of view of Redemption are six in numbers because Debentures can be issued at different prices to the public i.e. at par, at discount, and at Premium and it will be redeemed at par, and at a premium. The accounting treatment of the all will be different as we have explained in this article.
There is six number of case of issue of debentures form the point of view of redemption which is shown as follows:
It means that the debentures are issued at the face(nominal) value of the debentures and also redeemable on the same value. Therefore the company not incurring any loss at the time of redemption of the debentures. The accounting treatment will be followed in this case is shown as following:
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | ***** | |||
| To Debentures App. A/c | ***** | ||||
| (Being Debentures application money received) | |||||
| Debentures Application A/c | Dr. | ***** | |||
| To ___% Debentures A/c | ***** | ||||
| (Being Debenture issued at par and redeemable at par) | |||||
It means that the debentures are issued at the value less than the face(nominal) value of the debentures but redeemable on the face(nominal) value of the debentures. Therefore the company not incurring any loss at the time of redemption of the debentures. The accounting treatment will be followed in this case is shown as following:
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | ***** | |||
| To Debentures App. A/c | ***** | ||||
| (Being Debentures application money received) | |||||
| Debentures Application A/c | Dr. | ***** | |||
| Discount on Issue of Deb. A/c | Dr. | *** | |||
| To ___% Debentures A/c | ***** | ||||
| (Being Debenture issued at Discount and redeemable at par) | |||||
It means that the debentures are issued at the value more than the face(nominal) value of the debentures but redeemable on the face(nominal) value of the debentures. Therefore the company not incurring any loss at the time of redemption of the debentures. The accounting treatment will be followed in this case is shown as following:
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | ***** | |||
| To Debentures App. A/c | ***** | ||||
| (Being Debentures application money received) | |||||
| Debentures Application A/c | Dr. | ***** | |||
| To ___% Debentures A/c | ***** | ||||
| To Securities Premium A/c | *** | ||||
| (Being Debenture issued at a premium and redeemable at par) | |||||
It means that the debentures are issued at the face(nominal) value of the debentures but redeemable on the value more than the face(nominal) value of the debentures(at a premium). Therefore the company incurring loss at the time of redemption of the debentures. The accounting treatment will be followed in this case is shown as following:
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | ***** | |||
| To Debentures App. A/c | ***** | ||||
| (Being Debentures application money received) | |||||
| Debentures Application A/c | Dr. | ***** | |||
| Loss on Issue of Deb. A/c | Dr. | *** | |||
| To ___% Debentures A/c | ***** | ||||
| To Premium on Red. of Deb. A/c | *** | ||||
| (Being Debenture issued at par and redeemable at a premium) | |||||
It means that the debentures are issued at the value less than the face(nominal) value of the debentures but redeemable on the value more than the face(nominal) value of the debentures(at a premium). Therefore the company incurring loss at the time of redemption of the debentures. The accounting treatment will be followed in this case is shown as following:
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | ***** | |||
| To Debentures App. A/c | ***** | ||||
| (Being Debentures application money received) | |||||
| Debentures Application A/c | Dr. | ***** | |||
| Discount on Issue of Deb. A/c | Dr. | *** | |||
| Loss on Issue of Deb. A/c | Dr. | *** | |||
| To ___% Debentures A/c | ***** | ||||
| To Premium on Red. of Deb. A/c | *** | ||||
| (Being Debenture issued at par and redeemable at a premium) | |||||
It means that the debentures are issued at the value more than the face(nominal) value of the debentures but redeemable at the value more than the face(nominal) value of the debentures(at a premium). Therefore the company incurring loss at the time of redemption of the debentures. The accounting treatment will be followed in this case is shown as following:
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Bank A/c | Dr. | ***** | |||
| To Debentures App. A/c | ***** | ||||
| (Being Debentures application money received) | |||||
| Debentures Application A/c | Dr. | ***** | |||
| Loss on Issue of Deb. A/c | Dr. | *** | |||
| To ___% Debentures A/c | ***** | ||||
| To Securities Premium A/c | *** | ||||
| To Premium on Red. of Deb. A/c | *** | ||||
| (Being Debenture issued at par and redeemable at a premium) | |||||
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "Issue of Debentures from the point of view of Redemption", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Advanced Financial Accounting.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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