Skip to content
Do It Yourself · Q2

Q.Hassan Limited took a loan of ₹30,00,000 from a bank against primary security worth ₹40,00,000 and issued 4,000, 6% debentures of ₹100 each as a collateral security. The company again after one year took a loan of ₹50,00,000 from bank against Plant as primary security and deposited 6,000, 6% debentures of ₹100 each as collateral security. Record necessary journal entries and prepare balance sheet of the company.

Rajasthan RbseTextbookSubjectiveImportance★★★★★
17% · 20/117 Questions
🔒 Locked · start free trial →

You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.

Start your 14-day free trial to unlock the full solution →

The two bank loans total ₹80,00,000; the 4,000 + 6,000 = 10,000 debentures (₹10,00,000 face value) issued as collateral are recorded via Debenture Suspense A/c and net to nil in the balance sheet.

Concept

Debentures issued as collateral security are a subsidiary pledge for a loan. Under the journal-entry method (Method 2) the issue is recorded as Debenture Suspense A/c Dr. / To Debentures A/c at face value; the Debenture Suspense A/c is then shown as a deduction from the debentures in the balance sheet so the collateral does not inflate the real liability. (Under Method 1 no entry is made — only a note is given against the loan.)

Working Note

  • First loan collateral = 4,000 × ₹100 = ₹4,00,000.
  • Second loan collateral = 6,000 × ₹100 = ₹6,00,000.
  • Total collateral debentures = ₹10,00,000; total bank loans = ₹30,00,000 + ₹50,00,000 = ₹80,00,000.

Solution — Journal (Method 2)

Books of Hassan Limited

DateParticularsL.F.Debit (₹)Credit (₹)
Bank A/c Dr.30,00,000
To Bank Loan A/c30,00,000
(Loan taken from bank against primary security)
Debenture Suspense A/c Dr.4,00,000
To 6% Debentures A/c4,00,000
(4,000, 6% debentures of ₹100 each issued as collateral security)
Bank A/c Dr.50,00,000
To Bank Loan A/c50,00,000
(Second loan taken against Plant as primary security)
Debenture Suspense A/c Dr.6,00,000

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests

Full access for 14 days. No credit card required.