Different types of shares and debentures lawfarm free legal. Download book pdf work out accounting a level pp 5257 cite as. Shares cannot be converted into debentures whereas debentures can be converted into shares. However, where a companys shares are listed on the stock. Rd sharma class 12 solutions rd sharma class 11 solutions free pdf download. Accounting for debentures class 12 notes accountancy. Debenture an unsecured bond that can be convertible. The ownership of a company is broken into units we know as shares. What are the guidelines and procedures for issue of debentures. When whole amount due on shares is payable in one instalment. Intro to convertible debentures march, 2009 introduction to convertible debentures convertible debentures are hybrid securities which offer advantages of both bonds and equities. Pdf this case was developed for learning the accounting concepts.
A bonus share is a free share issued without any consideration to an existing shareholder in the ratio of. Debentures may be secured or unsecured and companies frequently issue both kinds of debentures. The procedure of issue of debentures by a company is similar to that of the issue of shares. Company why should issue debentures and shares, which one. It has the qualities of both equity shares and debentures. The best app for cbse students now provides accounting for partnership firms fundamentals class 12 notes latest chapter wise notes for quick preparation of cbse board exams and schoolbased annual examinations. Being the issue of debentures at premium of 5% but repayable at premium of 10% 1,00,000 v bank account. Entities issue bonds to raise money or interest rates are offered as compensation to the lender. Explain how will the issue of debentures be dealt with in the books of the company.
Secured debentures bear charge on certain assets of the company viz. Convertible debentures which can be converted into shares at the option of debenture holder can be issued whereas shares convertible into debentures cannot be issued. A company in india can issue secured or unsecured debentures. It describes the right of the holder to the specified amount of the share. Terms of issue of shares shares can be issued in two ways. Annual premium is rs 60,000 on which return is at 5% p. The new debentures or shares can be issued either at par or at a premium or at a. Ncert solutions for class 12 accountancy part ii chapter 1. Demo lecture of final accounts for class 11th,class 12th. Sep 21, 2017 lets start a new topic in company accounts the issue of debentures along with its introduction, meaning and accounting in the books. The terms debentures and bonds ar e now being used inter changeably. Convertible debentures are redeemed by converting them into new debentures or into shares. Sometimes on nonpayment of call money, we see forfeiture and reissue of shares. Vinod kumar for helping you in accounting, finance and education.
Accounting for debentures class 12 notes accountancy in pdf are available for free download in mycbseguide mobile app. Difference between shares and debentures with similarities. Like ordinary bonds they offer regular interest income through coupon payments and a degree of downside protection not found in equity. Lets start a new topic in company accounts the issue of debentures along with its introduction, meaning and accounting in the books. Accounting for share capital and debentures accounting education. Such an underwriting may be done by one underwriter or by a number of underwriters.
Free ncert solutions for class 12 commerce accountancy, chapter 1. Therefore, by the issue of debentures, trading on equity is possible and, as a result, the rate of equity dividend is increased from 12% to 14%. Pass the necessary journal entries for the issue of debentures in the following cases. Give journal entries at the time of issue and redemption of debentures if debentures are to be redeemed in lump sum at the end of 4th year. This issue of debentures that happens can be of three kinds, just like an issue of shares, at par, at a discount, and at a premium. The companies share capital and debentures rules, 2014. The word debenture has been derived from a latin word debere which means to borrow. The interested investors, then, apply for the same. The word first, second and final were only used when there was more than one call. Corporate accounting issue of debentures part1 introduction. Mar, 20 a debentures is a longterm debt instrument or security.
Notes on accounting treatment for debenture ii grade 12. So let us take a look at all three and their respective accounting entries as well. In case, the entire issue of shares or debentures of a company is undertaken, it is said to be full or complete underwriting. Issue and redemption of preference shares, debentures. By issuing debentures means issue of a certificate by the company under its seal which is an acknowledgment of debt taken by the compan y. These are considered risk free, due to the fact that the government can pay back the amount owed, getting the resources from taxes. Springer nature is making sarscov2 and covid19 research free. Issue of shares at premium issue of shares against lump sum payment. The procedure of issuing debentures by a company is similar to the one followed while issuing equity stocks. Nov 19, 2018 nowadays, investment in shares and debentures has taken a dominant position in the society, as people of different ages, religion, sex, and race invest their hard earned money, with an aim of getting better returns. The company starts by releasing a prospectus declaring the debenture issuance.
Issue of debentures accounts class 12 notes, ebook free. Equity share capital into 8% debentures, equity share application into debentures application and. The companies share capital and debentures rules, 2014 hereinafter referred to as rules provide that no company whether it is unlisted, listed or a public company limited by shares shall issue equity shares with differential rights as to dividend, voting or otherwise, unless it complies with the following conditions. Applications for 1,400,000 ordinary shares were received on 7 february 2016. Traditionally, the government issued bonds, but these days, bonds are also being issued by semigovernment and nongovernmental organisations. Jun 27, 2017 pass journal entries regarding issue of debentures, if any, and show this loan in the balance sheet of the company.
A limited company may raise finance either by issuing shares or by raising loans. Examples of governmentissued debentures are treasury bonds and treasury bills. Issue and redemption of debentures 75 can be converted into shares if the terms of issue so provide, and in that case these are known as convertible debentures. In the straightforward case of repaying debentures the entry will be cr. This pdf file for class 12 accounts subjects issue of debentures topic contains brief and concise notes for easy understanding of topics and quick learning. Interest out of profit is given on debentures and not the share in profits. These typically carry higher interest rates than their convertible counterparts. These installments were application, allotment, first call, second call and final call. Shares may be further subdivided into different types, as follows. It is only one of the methods of raising the loan capital of the company. The term and conditions of conversion are generally announced at the time of issue of debentures. These shares represent a part of the company, so the shareholder becomes a part owner.
Understand the meaning and basic purpose for raising debentures by the company differentiate between shares and debentures of a company understand various types of debentures pass entries for issue of debentures payable in installments. Class 12 accountancy notes chapter 8 company accounts issue. The debenture holders of such debentures cannot convert their. Cumulative preference shares are similar to preference shares, but if in any one year, because of the circumstances described above, the dividend is not paid it accumulates and is carried forward until such time as there are sufficient profits to cover both current dividends on the shares and the arrears. Applications for debentures are invited from the public through the prospectus and the applicants are asked to pay the application money along with the applications. Ts grewal solutions for class 12 accountancy cbse tuts. This video is suitable for class 12, ca, cs, cma, bba, bcom. A company issued 2,000 10% debentures of rs 100 each on 1st january 2002. Debentures 2 learning objectives after studying this unit, you will be able to.
A share is a share in share of the sharecapital of the company. Issue and redemption of debentures 2 download ncert text. Bond issued by government do not have any risk of default. Issue of shares payable by installments play accounting. In case of debentures, the rate of debentures are fixed and known to investors. These debentures are redeemed after the redemption of first debentures.
If there was only one call, it will not be named as the first call. Explanation companies usually used to issue the shares payable by installments. The procedure for issuing debentures by a company is very much similar to that of an issue of shares. Debentures in the general course of business are issued for cash. Debenture is a written instrument acknowledging a debt under the common seal of the company. It also contains solved questions for the better grasp of the subject in an easy to download pdf file and will help you score more marks in board exams. Sebi has given various guidelines for the issue of debentures. While shares refers to the share capital of the company. This payment is to be made at the end of the third year.
Class 12 accountancy notes chapter 8 company accounts issue of debentures pdf download free. Accounting education is a notforprofit educational organization created by prof. Explain the term forfeiture of shares and give the accounting. Issue of debentures lecture 1 by cacma santosh kumarfree download pdf duration. As in case of debentures, fixed rate of dividends is paid to the preference shareholder, despite the profits earned by the company it is liable to pay interest to the preference shareholders. What are the guidelines and procedures for issue of. Holders of convertible debentures enjoy the option of having their debentures converted either into shares of new debentures according to the term and condition of the issue. A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. In this case accounting entries will be same as at the time of issue of shares in instalments with small change in the name of term likethe share capital word replaced with the x% debentures ac, and share word replaced with debentures e.
Bond is also an instrument of acknowledgement of debt. Download app now for getting latest updates regularly. An agreement to undertake the shares or debentures of a company are of the following types. Definition,type and issue of debentures caclubindia. Issue and redemption of debentures types of debentures. On 1st january 2002 an insurance policy was taken to provide for redemption of these debentures. There are no restriction on issue of debentures at a discount, whereas shares at discount can be issued only after observing certain legal formalities. The procedure for the issue of debentures is as follows.
The following pdf s helps to state the meaning of debenture capital and explain the difference between debentures and shares,it describes the methods for the issue of debenture for cash and for consideration other than cash,it helps to explain the issue of debenture as a collateral security and also explain the sources and record transaction. Convertible debentures usually have a lower interest rate compared to non. Class 12 accountancy notes chapter 8 company accounts. Chapter notes issue and redemption of debentures commerce.
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