NCERT Book Class 12 Accountancy (Part 2) Chapter 2 Issue and Redemption of Debentures

Issue and Redemption of Debentures 2
LEARNING OBJECTIVES
After studying this chapter
you will be able to :
• state the meaning of
debenture and explain the
A company raises its capital by means of issue of
shares. But the funds raised by the issue of
shares are seldom adequate to meet their long term
difference between financial needs of a company. Hence, most companies
debentures and shares;
• describe various types of turn to raising long-term funds also through
debentures; debentures which are issued either through the route
• record the journal entries
for the issue of debentures of private placement or by offering the same to the
at par, at a discount and public. The finances raised through debentures are
at premium;
• explain the concept of also known as long-term debt. This chapter deals with
debentures issued for the accounting treatment of issue and redemption of
consideration other than
cash and the accounting debentures and other related aspects.
thereof;
• explain the concept of
issue of debentures as a SECTION I
collateral security and the
accounting thereof; 2.1 Meaning of Debentures
• record the journal entries for
issue of debentures with Debenture: The word ‘debenture’ has been derived
various terms of issue,
terms of redemption; from a Latin word ‘debere’ which means to borrow.
• show the items relating to Debenture is a written instrument acknowledging a
issue of debentures in
company’s balance sheet; debt under the common seal of the company. It
• describe the methods of contains a contract for repayment of principal after
writing-off discount/loss
on issue of debentures; a specified period or at intervals or at the option of
• explain the methods the company and for payment of interest at a fixed
of redemption of
debentures and the
rate payable usually either half-yearly or yearly on
accounting thereof; and fixed dates. According to section 2(30) of The
• explain the concept of Companies Act, 2013 ‘Debenture’ includes
sinking fund, its use for
redemption of debentures Debenture Inventory, Bonds and any other
and the accounting securities of a company whether constituting a
thereof.
charge on the assets of the company or not.