Class 12 Accountancy - RAJASTHAN
Issue and Redemption of Debentures
The chapter 'Issue and Redemption of Debentures' in Class 12 Accountancy under the Rajasthan Board (RBSE) introduces students to long-term debt financing by companies. You will learn the accounting treatment for issuing debentures at par, premium, and discount, as well as considerations for issuing them as collateral security. Additionally, the chapter covers various methods of redeeming debentures, including the creation of a Debenture Redemption Reserve (DRR) and sinking fund provisions. Mastering this chapter is crucial as it involves comprehensive numerical problems that frequently appear in board examinations.
Start Learning FreeKey Concepts
Debenture
A written instrument or certificate issued by a company acknowledging a debt under its common seal, carrying a specified 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.
Debentures as Collateral Security
Issuing debentures as a secondary or additional security to a lender against a primary loan taken by the company.
Writing off Discount/Loss on Issue of Debentures
The loss or discount suffered on the issue of debentures must be written off within the tenure of the debentures using Securities Premium or Statement of Profit and Loss.
Debenture Redemption Reserve (DRR)
A specific reserve created out of divisible profits before the redemption of debentures begins, as per the guidelines of the Companies Act.
Important Formulas
Board Exam Info
In the Rajasthan Board (RBSE) Class 12 Accountancy exam, this chapter typically carries around 6 to 8 marks. Questions usually include one theoretical short-answer question and a major 6-mark numerical problem on either journal entries for the issue of debentures with different redemption terms or the complete redemption process.
Frequently Asked Questions
What is the difference between Shares and Debentures?
Shares represent ownership in a company and holders get dividends, whereas debentures represent debt and holders get a fixed rate of interest regardless of profit.
Is DRR mandatory for all companies in India?
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 'Interest on Debentures' treated in accounting?
Interest on debentures is a charge against profits and is calculated on the face value of debentures at the specified coupon rate, subject to tax deduction at source (TDS).
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