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?
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Preeti Dabral 1 year, 8 months ago
FIRST METHOD. NO ENTRY IS PASSED FOR DEBENTURES
Journal
1st April
To Canara Bank’s loan A/c
Balance Sheet of X Ltd.
As at 1st April, 2012
Second Method. Entry for issue of Debentures is passed.
Journal
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)
IInd Method
Notes to Balance Sheet
*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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