Issuing debentures for cash

The entries for issuing debentures for cash follow the same pattern as shares, with 'Debentures' in place of 'Share Capital':

• Bank Dr. To Debenture Application;
• Debenture Application Dr. To Debentures;
• Debenture Allotment Dr. To Debentures, then Bank Dr. To Debenture Allotment; and calls the same way.

The Debentures account is always kept at face value.

• At a discount: the discount is debited to Discount on Issue of Debentures. It is a capital loss, written off later.
• At a premium: the premium is credited to Securities Premium, under Reserves and Surplus.

Over-subscription: as with shares, excess application money is adjusted towards allotment, and applicants who get nothing are refunded.

In the balance sheet, debentures are shown under long-term borrowings (non-current liabilities).

Example: 2,000 debentures of ₹100 are issued at a 10% discount, with ₹50 on application and ₹40 on allotment. Allotment due 2,000 × 40 = 80,000; discount 2,000 × 10 = 20,000. Entry: Debenture Allotment Dr. 80,000, Discount on Issue Dr. 20,000, To Debentures 1,00,000.