Chapter 4 of 13
Revision Notes
Accounting for Debentures — Revision Notes
Gujarat Board · Class 12 · Elements of Accounts
Accounting for Debentures revision notes for Gujarat Board Class 12 Elements of Accounts: 4 topics in quick points.
3 formulas & key relations5 concepts
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Key Topics to Revise
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1. Introduction to Debentures
- A debenture is a document/certificate issued under the company's common seal acknowledging a debt to the investor.
- Companies raise long-term borrowed funds from the public by issuing debentures when share capital alone is insufficient.
- Debentureholders are creditors of the company, NOT owners — they have no voting rights.
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2. Types of Debentures
- Classification is done on four bases: Security, Negotiability, Conditions of Redemption, and Convertibility.
- SECURITY BASIS: Secured (Mortgage) Debentures — charge on assets (Fixed or Floating charge); Unsecured (Naked) Debentures — no charge, holders treated as unsecured creditors.
- NEGOTIABILITY BASIS: Registered Debentures — transfer requires a transfer deed and entry in company's register; Bearer Debentures — transferred by mere delivery like currency notes, interest coupons a
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3. Procedure for Issue of Debentures
- Board of Directors passes a resolution specifying: number of debentures, amount per debenture, rate of interest, redemption date, and other terms.
- Company must comply with Companies Act, 2013 and SEBI provisions.
- A prospectus (or statement in lieu) is issued inviting public to subscribe.
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4. Accounting Effects for Issue of Debentures
- ISSUE AT PAR: Face value = Issue price. Bank A/c Dr → Debenture Application & Allotment A/c Cr; then Debenture Application & Allotment A/c Dr → Debentures A/c Cr.
- ISSUE AT PREMIUM: Issue price > Face value. Premium credited to 'Securities Premium Reserve A/c'. Securities Premium Reserve is shown under Reserves & Surplus on Equity & Liabilities side.
- ISSUE AT DISCOUNT: Issue price < Face value. Discount debited to 'Discount on Debentures A/c'. There is NO maximum limit on discount under Companies Act.
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Full NotesKey Concepts
A debenture is a document issuedDebentures are classified on four basesWhen debentures are issued at theirWhen debentures are issued at moreWhen debentures are issued at less
Frequently Asked Questions
What are the important topics in Accounting for Debentures for Gujarat Board Class 12 Elements of Accounts?
Key topics in Accounting for Debentures include Introduction to Debentures, Types of Debentures, Procedure for Issue of Debentures, Accounting Effects for Issue of Debentures. Study these first, then practise questions on each for the Gujarat Board Class 12 board exam.
Sources & Official References
Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.
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