Company Accounts Issue of Debentures Class 12 Handwritten Notes Pdf Download
I. Introduction to the Issue of Debentures
A. Definition and nature of debentures: Provides an overview of debentures, which are long-term debt instruments issued by a company to raise funds from investors.
B. Purpose and benefits of issuing debentures: Discusses the reasons why companies issue debentures, such as raising capital for expansion, financing projects, diversifying funding sources, and taking advantage of tax benefits.
II. Types of Debentures
A. Secured Debentures: Explains secured debentures, which are backed by specific assets of the company, providing additional security to debenture holders.
B. Unsecured Debentures: Discusses unsecured debentures, also known as "naked debentures," which are not backed by any specific collateral but rely on the general creditworthiness of the issuing company.
C. Convertible Debentures: Describes convertible debentures, which allow debenture holders to convert their debt into equity shares of the company at predetermined terms and conditions.
D. Non-convertible Debentures: Covers non-convertible debentures, which cannot be converted into equity shares and are solely redeemed at maturity or after a specified period.
III. Procedure for Issue of Debentures
A. Board and Shareholder Approval: Explains the requirement for obtaining approval from the board of directors and shareholders through passing necessary resolutions as per the company's Articles of Association and applicable laws.
B. Terms and Conditions: Discusses the determination of key terms and conditions for debenture issuance, including interest rate, redemption period, conversion rights (if applicable), and other relevant provisions.
C. Prospectus or Private Placement Memorandum: Addresses the preparation and disclosure of information through a prospectus or private placement memorandum, which provides details about the debenture issue to potential investors.
D. Allotment and Issue of Debentures: Describes the process of allotting and issuing debentures to subscribers, recording their details in the register of debenture holders, and issuing debenture certificates.
IV. Accounting Treatment for Issued Debentures
A. Initial Recording: Explains the initial accounting entries required to record the issue of debentures, including the creation of a debenture liability and corresponding cash or bank inflow.
B. Accrual of Interest Expense: Discusses the periodic accrual of interest expense on debentures based on the applicable interest rate and the impact on the company's financial statements.
C. Redemption of Debentures: Addresses the accounting treatment for the redemption of debentures upon maturity or through buyback, including the reduction of the debenture liability and related cash outflow.
V. Disclosure and Reporting Requirements
A. Financial Statements: Discusses the disclosure of debenture-related information in the company's financial statements, such as notes to accounts, balance sheet, and income statement.
B. Compliance with Regulatory Framework: Highlights the importance of complying with accounting standards, legal requirements, and regulatory guidelines related to the issue of debentures, including proper disclosure and reporting.
VI. Redemption of Debentures
A. Redemption Methods: Covers various methods of debenture redemption, including redemption at par, premium, or discount, and the accounting treatment and financial implications associated with each method.
B. Sinking Fund: Explains the concept of a sinking fund, where a company sets aside funds periodically to redeem debentures, ensuring availability of necessary funds at the time of redemption.
C. Debenture Redemption Reserve: Addresses the requirement of creating a debenture redemption reserve as per regulatory guidelines, which serves as a contingency fund for the repayment of debentures.
VII. Conclusion
A. Recap of key points discussed: Summarizes the main topics covered in the outline.
B. Importance of understanding debenture issuance: Reinforces the significance of comprehending the process and accounting treatment of debenture issuance to effectively raise capital and meet regulatory requirements.
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