Issue of Debentures from the point of view of Redemption

Posted by By Sarbjit Singh 11 Min Read January 20, 2021
Issue of Debentures from the point of view of Redemption-min
Issue of Debentures from the point of view of Redemption-min

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. 

The way to issue of debentures from the point of view of redemption: –

There is six number of case of issue of debentures form the point of view of redemption which is shown as follows: 

  1. Issued at Par and redeemable at par 
  2. Issued at Discount but redeemable at par
  3. Issued at a Premium but redeemable at par
  4. Issued at Par but redeemable at Premium
  5. Issued at Discount but redeemable at Premium
  6. Issued at a Premium and redeemable at Premium

1. Issued at Par and redeemable at par: –

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)      

2. Issued at Discount 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)      

3. Issued at Premium 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)      

4. Issued at Par and redeemable at Premium: –

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)      

5. Issued at Discount and redeemable at 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)      

6. Issued at Premium and redeemable at 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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References: –

    1. mca.gov.in
    2. Class +2 Accountancy by Sultan Chand & Sons (P) Ltd.

 

 

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