# Issue and Redemption of Debentures Notes | SwaVid Issue and Redemption of Debentures, NCERT Class 12 Accountancy: notes with key ideas, formats, common mistakes and 3 quick checks with worked answers. Canonical: https://www.swavid.com/cbse/class-12/accountancy/chapter/issue-and-redemption-of-debentures Source: https://www.swavid.com/cbse/class-12/accountancy/chapter/issue-and-redemption-of-debentures # Issue and Redemption of Debentures ## Definitions, formats and formulas ## Key ideas ## Common mistakes ## Quick checks ## Keep going ## Questions parents ask ## Class 12 Accountancy on SwaVid ### Meaning and types of debentures ### Issue for cash ### Consideration other than cash ### Issue as collateral security ### Issue considering terms of redemption ### Interest on debentures and writing off loss ### Next chapter ### Related chapter ### Related chapter ### All chapters SwaVid › CBSE › Class 12 › Accountancy › Issue and Redemption of Debentures Notes written by SwaVid from the NCERT textbook. Class 12 Accountancy, NCERT Accountancy Part II: companies, analysis and cash flow. Key ideas, definitions and common mistakes. CBSE does not print marks for a single chapter. Short answer. This chapter covers the meaning, types, and accounting treatment of issuing debentures for cash, for consideration other than cash, and as collateral security. It also details the terms of issue with respect to redemption, interest on debentures, and the writing off of discount or loss on issue. Source: NCERT Accountancy Part II: companies, analysis and cash flow (Reprint 2026-27) , Issue and Redemption of Debentures A debenture is a written instrument issued by a company acknowledging a debt under its common seal. Debentures can be secured or unsecured, redeemable or irredeemable, convertible or non-convertible, and registered or bearer. Debentures can be issued at par, at a premium, or at a discount. Money can be received in a lump sum or through installments like application, allotment, and calls. Companies may issue debentures to vendors against the purchase of assets or an entire business. The number of debentures issued equals the purchase consideration divided by the issue price per debenture. Debentures issued as a secondary or subsidiary security against a loan can be recorded by passing an entry using Debenture Suspense Account or by showing them as a disclosure note under the loan liability without an entry. Debentures may be issued at par, premium, or discount, redeemable either at par or at a premium. Premium payable on redemption is a liability recognized at the time of issue and debited as Loss on Issue of Debentures. Interest on debentures is a charge against profit payable at a fixed rate, regardless of profits. Discount or loss on issue of debentures is written off in the year of issue using Securities Premium, and the balance from Statement of Profit and Loss. Try each question first. Then tap it to see the answer. Issue price per debenture = ₹ 100 + ₹ 10 = ₹ 110 Number of debentures = ₹ 9,90,000 / ₹ 110 = 9,000 9,000 debentures Discount on issue = 1,000 × ₹ 5 = ₹ 5,000 Premium payable on redemption = 1,000 × ₹ 5 = ₹ 5,000 Total Loss on Issue = ₹ 5,000 + ₹ 5,000 = ₹ 10,000 ₹ 10,000 Annual interest = ₹ 5,00,000 × (8 / 100) = ₹ 40,000 Half-yearly interest = ₹ 40,000 / 2 = ₹ 20,000 Amount transferred to Statement of Profit and Loss for the full year = ₹ 40,000 ₹ 40,000 Financial Statements of a Company . Accounting for Share Capital . Cash Flow Statement . The 10 chapters of Class 12 Accountancy . CBSE does not give marks to one chapter. It prints marks for units or parts, and the chapter list page shows them all. No. They are written by SwaVid from the NCERT textbook. The CBSE curriculum is the reference for what is assessed. Financial Statements of a Company. SwaVid is an AI tutor for Indian students in Classes 6 to 12. It finds the earlier ideas a child missed, then teaches today’s chapter. Start free to see how it works. - NCERT NCERT book, Class 12 - 80 marks, theory paper - 3 quick checks - Combining discount on issue and premium on redemption incorrectly . Both discount on issue and premium on redemption can be grouped together into a single account called Loss on Issue of Debentures Account, or recorded separately as Discount on Issue and Loss on Issue. - Dividing purchase consideration by face value instead of issue price . Always divide purchase consideration by the issue price (face value plus premium or face value minus discount) to find the correct number of debentures to be issued. - Treating debenture interest as an appropriation of profit . Debenture interest is a charge against profit, not an appropriation. It must be paid even if the company suffers a loss, and it is transferred to the Statement of Profit and Loss. - Showing Debenture Suspense as an asset in the final balance sheet . Debenture Suspense Account is deducted from the nominal value of debentures under long-term borrowings on the equity and liabilities side; it is never shown as an asset. ## Key Links - [CBSE](https://www.swavid.com/cbse) - [Class 12](https://www.swavid.com/cbse/class-12) - [Accountancy](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [Start free →](https://www.swavid.com/signup) - [All 10 chapters](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [NCERT Accountancy Part II: companies, analysis and cash flow (Reprint 2026-27)](https://ncert.nic.in/textbook.php?leac2=0-6) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/financial-statements-of-a-company) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/accounting-for-share-capital) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/cash-flow-statement) - [Class 12 Accountancy](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [Start free →](https://www.swavid.com/signup)