Class 12 Accountancy - ODISHA
Issue and Redemption of Debentures
The chapter 'Issue and Redemption of Debentures' in Class 12 Accountancy under the Odisha Board (BSE) covers the methods by which companies raise long-term borrowed capital through debentures and the subsequent repayment of these instruments. Students will learn journal entries for issuing debentures at par, premium, and discount, along with terms of redemption. It also explores accounting treatments for writing off discount/loss on issue of debentures, issuing debentures as collateral security, and various methods of redemption including creation of Debenture Redemption Reserve (DRR) and sinking fund. This is a high-scoring chapter vital for board exams.
Start Learning FreeKey Concepts
Debenture
A written acknowledgement of debt issued by a company under its common seal, acknowledging its loan from the public or financial institutions.
Issue of Debentures at Par, Premium, and Discount
Debentures can be issued at face value (par), at more than face value (premium), or at less than face value (discount) depending on the financial standing of the company.
Debentures as Collateral Security
Debentures issued as a secondary or additional security to a lender against a primary loan, recorded in the books either by creating an entry or through note to accounts.
Terms of Redemption of Debentures
Conditions settled at the time of issue regarding how the debentures will be repaid, which may involve a premium payable upon redemption requiring special loss provisions.
Debenture Redemption Reserve (DRR)
A statutory reserve created by companies out of their divisible profits before the redemption of debentures begins, ensuring adequate financial liquidity to protect investors.
Important Formulas
Board Exam Info
In the Odisha Board (BSE) Class 12 Accountancy examinations, this chapter typically carries around 8 to 12 marks. Questions usually include a mix of multiple-choice questions (MCQs), short-answer conceptual questions, and a mandatory 6-mark practical journal entry problem based on the issue and terms of redemption of debentures.
Frequently Asked Questions
What is the difference between Shares and Debentures?
Shares represent ownership in the company and holders get dividends, whereas debentures represent debt and holders get a fixed rate of interest regardless of profit or loss.
Is DRR mandatory for all companies?
No, DRR is not required for All India Financial Institutions regulated by RBI, banking companies, and for debentures issued by the government or public financial institutions.
How is 'Loss on Issue of Debentures' treated in the balance sheet?
It is shown under 'Other Non-Current Assets' or 'Other Current Assets' (depending on the write-off period) and is written off against Securities Premium Reserve or Statement of Profit and Loss.
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