Download Free PDF of Issue and Redemption of Debentures for Class 12 Accountancy
If you’re preparing for your Class 12 Accountancy board exam, mastering the chapter on Issue and Redemption of Debentures is essential. This chapter appears regularly in the exam and falls within the company accounts section that carries a combined weightage of 24 marks. Here, you’ll find accurate NCERT Solutions for Class 12 Accountancy Chapter 2, focusing on practical accounting problems and stepwise journal entries.
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Many students search for “ncert solutions for class 12 accountancy issue of debenture” or want reliable guidance for “issue of debentures class 12 questions and answers.” This resource covers all board-specific question types, including numerical examples, redemption procedures, and debenture redemption reserve entries, so you can feel confident with every format.
The solutions use company debenture accounting and real CBSE exam patterns to simplify even the most complex sections. Carefully reviewed by Vedantu’s experts, you'll work with answers that are current, clear, and matched with the latest syllabus. For the most recent chapter-wise outlines, check the Class 12 Accountancy syllabus anytime.
FAQs on CBSE Class 12 Accountancy Chapter 2 Issue and Redemption of Debentures – NCERT Solutions 2025-26
1. How do I correctly solve a problem on the issue of debentures at a premium using the NCERT solutions methodology for the 2025-26 session?
To correctly solve a problem involving the issue of debentures at a premium as per the NCERT pattern, you must follow these sequential journal entries:
- On receipt of application money: Debit the Bank A/c and Credit the Debenture Application & Allotment A/c with the total amount received (including premium).
- On allotment of debentures: Debit the Debenture Application & Allotment A/c. Credit the Debentures A/c with the nominal (face) value and credit the Securities Premium Account with the premium amount.
Following this precise step-by-step method ensures compliance with CBSE guidelines and helps secure full marks.
2. What is the step-by-step process for recording journal entries for debentures issued as collateral security as per NCERT solutions?
The NCERT solutions illustrate two methods for treating debentures issued as collateral security:
- Method 1 (No Entry): No journal entry is passed. The issue is simply disclosed as a note under the specific loan in the company's Balance Sheet.
- Method 2 (Entry Passed): A journal entry is recorded to reflect the issue. You must Debit a Debenture Suspense Account and Credit the Debentures Account. This entry is reversed when the loan is repaid.
For board exams, it's crucial to specify which method you are using in your solution.
3. Why is creating a Debenture Redemption Reserve (DRR) a mandatory step in many NCERT problems, and how is it correctly calculated and presented?
Creating a DRR is a mandatory legal requirement under the Companies Act, 2013, to safeguard the interests of debenture holders by ensuring funds are available for redemption. The NCERT solutions strictly adhere to this.
- Logic: It earmarks a portion of distributable profits exclusively for redeeming debentures.
- Correct Calculation: You must transfer a specified percentage (e.g., 10% for certain companies as per current rules) of the face value of outstanding debentures from the Statement of Profit and Loss to the DRR account before redemption begins.
- Presentation: DRR is shown under 'Reserves and Surplus' on the liability side of the Balance Sheet.
4. According to the NCERT solutions for Chapter 2, what is the correct accounting treatment for writing off 'Discount or Loss on Issue of Debentures'?
The correct accounting treatment, as demonstrated in NCERT solutions, requires that the 'Discount or Loss on Issue of Debentures' be written off in the year the debentures are allotted. The amount should be written off against the Securities Premium Account (if any exists) first. Any remaining balance must then be written off against the Statement of Profit and Loss. This is a crucial adjustment entry for preparing final accounts.
5. What are the most common errors students make when solving redemption of debenture problems, and how do the NCERT solutions help prevent them?
Students often make the following errors, which following the structured NCERT solutions can help avoid:
- Incorrect DRR Calculation: Applying the wrong percentage or calculating it on the issue price instead of the face value.
- Forgetting DRR Investment (DRI): Neglecting the separate requirement to invest 15% of the nominal value of debentures maturing during the year.
- Wrong Journal Entry Sequence: Passing redemption entries before completing the DRR/DRI formalities.
- Profit/Loss on Cancellation: Incorrectly calculating the profit or loss when debentures are redeemed by purchasing them from the open market.
The NCERT solutions provide a clear, repeatable CBSE pattern that, if practised, minimizes these risks by reinforcing the correct procedural flow.
6. How does the accounting treatment for redemption differ when debentures are redeemed at a premium versus at par, as shown in NCERT examples?
The key difference lies in accounting for the extra amount paid at redemption:
- Redemption at Par: The accounting is straightforward. You simply Debit the Debentures A/c and Credit the Debenture Holders A/c with the face value.
- Redemption at a Premium: A 'Loss on Issue of Debentures A/c' is debited at the time of issue itself to account for the future premium payable on redemption. This loss is then written off. At the time of redemption, the 'Premium on Redemption of Debentures A/c' is also debited along with the Debentures A/c. This proactive accounting aligns with the principle of prudence.
7. What is the underlying logic in the NCERT solutions for treating debentures issued for a consideration other than cash?
The underlying logic is to record the transaction at its true value. The step-by-step process is:
- First, record the asset or business acquired at its fair market value by debiting the respective Asset A/c and crediting the Vendor's A/c.
- Second, settle the purchase consideration by issuing debentures. Debit the Vendor's A/c and credit the Debentures A/c.
If the value of debentures issued is different from the net asset value taken over, the difference is treated as either Goodwill (if payment is more) or Capital Reserve (if payment is less). This ensures the balance sheet accurately reflects the substance of the transaction.
8. Where can I find reliable, stepwise NCERT Solutions for Class 12 Accountancy Chapter 2 for the 2025-26 session?
You can find comprehensive, step-by-step NCERT Solutions for Class 12 Accountancy, Chapter 2 (Issue and Redemption of Debentures) on the Vedantu website. These solutions are prepared by subject matter experts and are fully aligned with the latest CBSE 2025-26 syllabus and exam pattern, ensuring every step and journal entry is accurate and easy to follow for exam preparation.
9. What is the correct sequence of journal entries to follow for a complete problem covering both the issue and redemption of debentures in a lump sum, as per the NCERT format?
To solve a comprehensive problem as per the NCERT format for the 2025-26 syllabus, follow this exact sequence:
- Journal entries for receipt of application money and allotment of debentures (at par, premium, or discount).
- Entry for writing off any Discount/Loss on Issue of Debentures in the year of issue.
- Entry for the creation of the Debenture Redemption Reserve (DRR) from the Statement of Profit and Loss.
- Journal entries for the redemption of debentures (e.g., making the amount due to debenture holders).
- Final entry for the payment to debenture holders.
- Entry to transfer the DRR balance to the General Reserve after all debentures are redeemed.
