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Advance Accounting ppt

The document provides an overview of accounting for debentures, including types, issuance methods, accounting entries for both issuance and redemption, and disclosure requirements in financial statements. It emphasizes the importance of accurate debenture accounting for compliance and informed decision-making by stakeholders. Key topics include redeemable and irredeemable debentures, accounting treatments for premiums and discounts, and the necessity of transparency in financial reporting.

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8 views

Advance Accounting ppt

The document provides an overview of accounting for debentures, including types, issuance methods, accounting entries for both issuance and redemption, and disclosure requirements in financial statements. It emphasizes the importance of accurate debenture accounting for compliance and informed decision-making by stakeholders. Key topics include redeemable and irredeemable debentures, accounting treatments for premiums and discounts, and the necessity of transparency in financial reporting.

Uploaded by

rishu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Government Vivekanand

P.G. College, Manendragarh


Session-2024-
25
Assignment Advance Accounting
Work:-
Topic :- Accounting for Issues of Debenture

Submitted Submitted
Rishiraj Gupta Agrahari
By:- _______________________
To:-
Roll no. :- 21 Department of Commerce
Class:- M com. 1st Semester
Unit:-
1 s s ue o f
f o r I
nt i ng
c co u nt u r e
A D e b e
Index
• Introduction
• Types of Debentures
• Issue of Debentures
• Accounting Entry for Issue of Debentures
• Accounting Treatment for Discount/Premium
• Redemption of Debentures
• Accounting Entry for Redemption
• Disclosure in Financial Statements
• Conclusion
In tr o d u ctio n
• Debentures are like loans that companies take from investors.
Companies use debentures to borrow money and promise to pay it back
with interest. This helps companies grow and invest in new projects.
• Debentures are a way for companies to borrow money from investors.
When a company issues debentures, it's like taking a loan from a lot of
people at once. The company promises to pay back the money with
some extra money added on top, called interest.

• Importance:
• Understanding debenture accounting is crucial and essential for
accurate financial reporting, as it enables companies to maintain
transparency, precision, and reliability in their financial statements,
which is vital for stakeholders, investors, and regulatory bodies to make
informed decisions.
Ty p es o f
Deb e n tu r es
• Redeemable Debentures: These debentures can be repaid by the
company after a specified period, providing an exit option for investors.
• Irredeemable Debentures: These debentures cannot be repaid by the
company and are perpetual, providing a permanent source of capital.
• Convertible Debentures: These debentures can be converted into
equity shares after a specified period, offering investors a potential
upside.
• Non-Convertible Debentures: These debentures cannot be converted
into equity shares, providing a fixed return for investors.
• Secured Debentures: These debentures are backed by a specific asset
or collateral, reducing the risk for investors.
• Unsecured Debentures: These debentures are not backed by any
specific asset or collateral, increasing the risk for investors.
• Zero-Coupon Debentures: These debentures do not pay interest
regularly but are redeemed at a premium, providing a lump sum
payment.
• Callable Debentures: These debentures can be redeemed by the
company before maturity, allowing for flexibility.
• Puttable Debentures: These debentures can be redeemed by the
investor before maturity, providing an early exit option.
Is s u e o f
Deb e n tu r es
• At Par: When debentures are issued at their face value, it means
the company receives the nominal value of the debenture. This is the
most common method of issuing debentures.
• At Premium: When debentures are issued at a premium, it means
the company receives more than the nominal value of the
debenture. This is often the case when the company has a high
credit rating and investors are willing to pay a premium for the
debenture.
• At Discount: When debentures are issued at a discount, it means
the company receives less than the nominal value of the debenture.
This may happen when the company's credit rating is low or the
market conditions are unfavorable.
Accounting Entry for
Issue of Debentures
• At Par:
- Cash/Bank (Debit) (xxx)
- Debentures Issued (Credit) (xxx)
• At Premium:
- Cash/Bank (Debit) (xxx)
- Debentures Issued (Credit) (xxx)
- Premium on Issue of Debentures (Credit) (xxx)
• At Discount:
- Cash/Bank (Debit) (xxx)
- Discount on Issue of Debentures (Debit) (xxx)
- Debentures Issued (Credit) (xxx)
Re d e m p t i o n o f D e b e n t u r e s

• Debentures can be redeemed at maturity or earlier


• Redemption can be at par, premium, or discount
• Accounting treatment depends on the redemption price

• Accounting Entries for Redemption


• At Par:
- Debentures Issued (Debit) (xxx)
- Cash/Bank (Credit) (xxx)
• At Premium:
- Debentures Issued (Debit) (xxx)
- Premium on Redemption (Debit) (xxx)
- Cash/Bank (Credit) (xxx)
• At Discount:
- Debentures Issued (Debit) (xxx)
- Cash/Bank (Credit) (xxx)
Disclosure in Financial
Statements

• Disclosure in Financial Statements


o Debentures issued: Details of debentures issued during the period
o Debentures outstanding: Balance of debentures outstanding at the
end of the period
o Interest expense: Interest expense incurred on debentures during the
period
o Redemption: Details of debentures redeemed during the period
o Conversion: Details of debentures converted into shares during the
period
• Where to Disclose:
o Debentures issued and outstanding: Long-term liabilities
o Interest expense: Income statement
o Redemption and conversion: Notes to the financial statements
• Why Disclose:
o To show the company's debt and its terms
o To help investors and creditors understand the company's financial
C o n clu s io n
• Accurate accounting for debentures is crucial for compliance, financial
reporting, and investor decisions.
• Accurate accounting for debentures is crucial for companies to ensure
compliance with accounting standards and regulatory requirements
• Proper accounting for debentures affects financial statements, ratios,
and investor decisions.

• Key points:
- Issuance, redemption, and interest expenses
- Disclosure requirements
• Importance:
– Transparency and fairness
– Informed decisions
– Debt management and strategic decisions

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