Issue and Redemption of Debentures · Class 12 · CBSE · Commerce Accountancy
When debentures are issued as collateral security for a loan taken from a bank, which of the following alternative entries can be passed in the books…
Practice question from Issue and Redemption of Debentures (Class 12 · CBSE · Commerce Accountancy), with the correct answer and a step-by-step solution.
medium · MCQ · Q-995DE5
When debentures are issued as collateral security for a loan taken from a bank, which of the following alternative entries can be passed in the books of the company?
- A.Debit Bank A/c and Credit Debentures A/c
- B.No entry is passed, only a note is given in the Balance Sheet
- C.Debit Debenture Suspense A/c and Credit Percentage Debentures A/c, or pass no entry except disclosureCorrect answer
- D.Debit Loan A/c and Credit Percentage Debentures A/c
Solution
Collateral security can be recorded either by passing an entry (Debenture Suspense A/c Dr. to Percentage Debentures A/c) or by simply disclosing the issue of debentures as collateral security in the notes to accounts of the balance sheet.
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