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x ltd. has rs 1200000 11 …

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x ltd. has rs 1200000 11 percent debentures outstanding on 1st april 2016 . during the year ,it took a loan of rs 4 lakh from axis bank for which company deposited debentures of rs 5 lakh as collateral security. pass journal entries and show how the debentures and bank loan will appear in the company's balance sheet? ​
  • 1 answers

Preeti Dabral 1 month, 2 weeks ago

FIRST METHOD.  NO ENTRY IS PASSED FOR DEBENTURES

Journal

Date Particulars L.F. Debit (Rs.) Credit (Rs.)
2012
1st April
Bank A/c   Dr.
              To Canara Bank’s loan A/c
  4,00,000 ...
(Loan has taken from the bank against collateral security of debentures worth Rs.5 Lakhs)   .... 4,00,000

Balance Sheet of X Ltd.
As at 1st April, 2012

Particulars Notes No. (Rs.)
Equity And Liabilities   ...
3. Non-Current Liabilities   ...
         (a) Long-term Borrowing 1 16,00,000
Notes to Balance Sheet   ...
Note No. 1 (Rs.)
Long-Term Borrowings: ...
11% Debentures 12,00,000
Bank Loan (Against Collateral Security of Debentures Rs. 5,00,000) 4,00,000
.Total 16,00,000

Second Method. Entry for issue of Debentures is passed.

Journal

Date Particulars L.F. Debit (Rs.) Credit (Rs.)
2012, April 1 Bank A/c    Dr.   4,00,000 ...
                 To Canara Bank’s Loan A/c   ... 4,00,000
  (Loan Taken from bank)   ... ...
  Debentures Suspense A/c  Dr.   5,00,000 ...
                        To 11% Debentures A/c   ... 5,00,000
  (Issue of Rs. 5,00,000 Debentures issued as collateral Securities)   ... ...

Presentation of Debentures and Bank Loan will remain same as explained Balance Sheet Under 1st Method, however, presentation of information in note will differ.

Balance Sheet of X Ltd.
As at 31st March, 2013 (ASSUMED)

Particulars Notes No. (Rs.)
1. Equity and Liabilities   ...
2. Non-Current Liabilities   ...
      (a) Long-term Borrowings 1 16,00,000

IInd Method

Notes to Balance Sheet

Particulars (Rs.) (Rs.)
Note No. 1 ... ...
Other Long-term Borrowings: ... ...
11% Debentures (12,00,000 + 5,00,000) 17,00,000 ...
Less: Debentures Suspense A/c 5,00,000 12,00,000
Bank Loan (Against Collateral Security of Debentures of Rs. 5,00,000) ... 4,00,000
Total ... 16,00,000

*When the loan is paid to the lender, the above entry is cancelled by passing a reverse entry.

* If the company fails to pay the loan along with interest in time,the lender may recover the dues from the sale of primary security or by seeking redemption of collateral security, i.e., debentures. When the loan is paid back, the debentures issued as collateral security are returned to the company.These debentures do not carry any right till the time loan is being repaid along with due interest and the lender has not demanded the loan to be repaid.

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