Class 12 Accountancy - MAHARASHTRA
Issue and Redemption of Debentures
The chapter 'Issue and Redemption of Debentures' in Class 12 Accountancy under the Maharashtra (MSBSHSE) board covers the systematic recording of long-term borrowings by a company. Students learn journal entries for issuing debentures at par, premium, and discount, as well as considerations for their redemption. Debentures represent a written acknowledgment of debt by a company and are crucial for understanding corporate finance. This topic frequently features in board exams through practical 8-to-10-mark full-length accounting problems, testing your mastery of ledger accounts, journal entries, and financial statement presentations.
Start Learning FreeKey Concepts
Debenture
A formal instrument or certificate issued by a company acknowledging a debt to the holder, carrying a fixed rate of interest.
Issue at Par, Premium, and Discount
Debentures can be issued at their nominal face value (par), at a price higher than face value (premium), or lower than face value (discount).
Collateral Security
Debentures issued as a secondary or additional security to lenders against a primary loan taken by the company.
Redemption of Debentures
The repayment of the principal amount of debentures by the company to the debenture holders as per the terms of issue.
Terms of Issue and Redemption
Accounting treatment for losses arising when debentures are issued at par/discount and redeemable at a premium.
Important Formulas
Board Exam Info
Under the Maharashtra (MSBSHSE) board, this chapter typically carries around 8 to 10 marks in the annual board exam. Questions often appear as practical problems requiring comprehensive journal entries for the issue and sometimes redemption of debentures, alongside objective-type questions like multiple-choice or fill-in-the-blanks.
Frequently Asked Questions
What is the difference between a Share and a Debenture?
A share represents ownership in the company and holders get dividends, whereas a debenture represents debt and holders receive fixed interest irrespective of profits.
How do we pass journal entries when debentures are issued as collateral security?
You can either pass no entry (only disclose in notes to accounts) or record it by debiting 'Debentures Suspense Account' and crediting 'Percentage Debentures Account'.
What is meant by writing off 'Loss on Issue of Debentures'?
It is a capital loss that is written off over the tenure of the debentures against Securities Premium Account or Statement of Profit and Loss.
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