Class 12 Accountancy - PUNJAB
Issue and Redemption of Debentures
The chapter 'Issue and Redemption of Debentures' in Class 12 Accountancy under the Punjab School Education Board (PSEB) deals with the methods companies use to raise long-term borrowed capital. Students learn journal entries for issuing debentures at par, premium, and discount, and how they can be issued as collateral security or with terms of redemption. The chapter also covers various methods of redeeming debentures, including the creation of a Debenture Redemption Reserve (DRR) as per regulatory norms. This is a high-scoring, practical chapter that frequently features comprehensive numerical problems in board exams.
Start Learning FreeKey Concepts
Debenture
A written instrument or certificate issued by a company acknowledging a debt under its common seal, carrying a fixed rate of interest.
Issue of Debentures for Consideration other than Cash
When a company purchases assets or a running business and issues debentures to the vendor instead of paying cash.
Collateral Security
Debentures issued as a secondary or additional security to a lender against a principal loan, recorded by opening the 'Debenture Suspense' account.
Writing off Discount/Loss on Issue of Debentures
The loss or discount incurred on issuing debentures must be written off against Capital Reserve or Securities Premium first, and then Statement of Profit and Loss.
Debenture Redemption Reserve (DRR)
A specific reserve created out of divisible profits by companies before redeeming debentures, ensuring adequate funds are available for repayment.
Important Formulas
Board Exam Info
In the PSEB Class 12 Accountancy board examination, this chapter typically carries around 8 to 12 marks. Students can expect one 6-mark or 8-mark long numerical problem involving both the issue and redemption of debentures or collateral security, along with 1-mark objective questions.
Frequently Asked Questions
What is the difference between a Share and a Debenture?
A share represents ownership in the company and the holder gets a dividend, whereas a debenture represents a loan given to the company and the holder gets a fixed rate of interest.
Is creating a Debenture Redemption Reserve (DRR) mandatory for all companies under PSEB guidelines?
No, DRR is not required for All India Financial Institutions, banking companies, and Non-Banking Financial Companies (NBFCs) registered with RBI, or for privately placed debentures.
How is 'Debenture Suspense Account' shown in the Balance Sheet?
When debentures are issued as collateral security, the Debenture Suspense Account is shown on the asset side as a deduction from the face value of the debentures issued, or under non-current/current liabilities depending on the presentation.
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