Understanding the Procedure and Accounting Entries for Issuing Debentures

The video tutorial explains debentures, their features, and types. It covers the issuance process, including issuing at par, premium, and discount, and the accounting entries involved. The tutorial also discusses issuing debentures for non-cash consideration and as collateral security. The session concludes with a brief overview of the accounting implications of these transactions.

What is the first step in the procedure of issuing debentures?

• Issuing letters of allotment

• Receiving application money

• Issuing a prospectus

• Refunding money on rejection

In the accounting process, what is the entry for receiving application money for debentures?

• Debenture application account debit to bank account

• Bank account debit to debenture application account

• Bank account debit to debenture account

• Debenture account debit to bank account

What does issuing debentures at par mean?

• Issuing at a price higher than face value

• Issuing at face value

• Issuing at a price lower than face value

• Issuing without any value

Why might a company issue debentures at a discount?

• To increase their market goodwill

• To attract more investment from the public

• To increase the face value of debentures

• To reduce their liabilities

What additional account is involved when debentures are issued at a premium?

• Securities premium account

• Discount on issue of debentures account

• Debenture suspense account

• Vendor account

What does issuing debentures for consideration other than cash involve?

• Issuing debentures for cash

• Issuing debentures at a premium

• Purchasing assets from vendors using debentures

• Issuing debentures at a discount

In the case of issuing debentures for assets, which account is debited?

• Bank account

• Debenture account

• Sundry assets account

• Vendor account

What is collateral security in the context of debentures?

• Security for issuing shares

• Additional security for a loan

• Security for issuing bonds

• Primary security for a loan

How can the issue of debentures as collateral security be recorded in the books?

• No journal entry is made

• Vendor account is debited

• Debenture account is debited

• Bank account is credited

When is the lender entitled to the debentures issued as collateral security?

• When the debentures mature

• When the company fails to pay the loan

• When the company issues more debentures

• When the company pays the loan