Issue and Redemption of Debentures Class 12 Accountancy PDF

Issue and Redemption of Debentures Class 12 is Chapter 2 of the NCERT Accountancy Part II textbook, Company Accounts and Analysis of Financial Statements. The official NCERT chapter PDF is available for download right here.

Below, the chapter is explained the way you meet it in class: the meaning and types of debentures, the journal entries for issue at par, at a discount and at a premium, the terms of issue, and the four methods of redemption — each tied to the printed page in your book, so you can follow along.

Download the Official NCERT Chapter PDF

This is the same chapter you study at school, published by NCERT and hosted on its official server at ncert.nic.in — the full text, not a summary. Download the NCERT Class 12 Accountancy Chapter 2 Issue and Redemption of Debentures PDF to keep the complete chapter in one file.

It contains all fourteen sections, every worked illustration with its journal entries, balance-sheet extracts and ledger accounts, plus the end-of-chapter questions.

Issue and Redemption of Debentures Class 12: Chapter at a Glance

One thing to know before you start: this is a practical, practice-heavy chapter. It contains no diagrams — the teaching happens through accounting tables, so the real skill this chapter builds is reading journal entries, balance-sheet extracts and ledger accounts.

The chapter runs in 14 numbered sections, from 2.1 Meaning of Debentures to 2.14 Redemption by Conversion. It closes with Test Your Understanding sets, a True/False exercise, and end-of-chapter Short Answer, Long Answer and Numerical Questions.

A sensible order through the chapter: meaning and types → issue entries → terms of issue → redemption methods. The terms-of-issue section is the turning point — it connects everything done at issue with everything done at redemption.

What This Chapter Covers, Section by Section

Use this map to jump straight to the part you need. Each row gives the section number, what it covers, and where it sits in the printed book.

What a Debenture Is, and How It Differs from a Share

Every journal entry in this chapter depends on one distinction. A debenture is borrowed money; a share is ownership of the company. Hold on to that and the rest of the chapter is one application of it.

A debenture is a written instrument acknowledging a debt under the common seal of the company. It contains a contract to repay the principal after a specified period, in instalments, or at the company’s option, and to pay interest at a fixed rate, usually half-yearly or yearly (NCERT, p. 75). The word comes from the Latin debere, to borrow.

Under Section 2(30) of the Companies Act, 2013, the term ‘debenture’ includes debenture inventory, bonds and any other securities of a company, whether or not they carry a charge on the company’s assets. A bond is the same instrument — the two terms are now used interchangeably.

Types of Debentures: Five Ways to Classify Them

Companies classify debentures on five bases, and each type decides the accounting that follows. This one table is all you need to recall them.

Two types drive most of the chapter’s accounting. Redeemable debentures must eventually be repaid — that is what redemption is about. Zero-coupon debentures pay no stated interest, so they are issued at a substantial discount, and that discount is the investor’s compensation for the missing interest (NCERT, p. 78).

Issue of Debentures for Cash: Par, Discount, Premium and Oversubscription

Money comes in first, the liability is created later. That two-stage logic — Bank debited when cash arrives, and only at allotment does the Debentures account appear — is the whole pattern of this section.

For an issue at par in two instalments, the sequence is: Bank A/c Dr. to Debenture Application A/c (application money); Debenture Application A/c Dr. to Debentures A/c (transfer at allotment); Debenture Allotment A/c Dr. to Debentures A/c (allotment due); Bank A/c Dr. to Debenture Allotment A/c (receipt).

At a discount, the allotment entry also debits Discount on Issue of Debentures A/c with the discount. At a premium, it credits Securities Premium Reserve A/c with the premium, which is shown in the balance sheet under Reserves and Surpluses (NCERT, p. 82).

Oversubscription means applications exceeded the debentures offered. The company cannot allot more than it invited, so it keeps the excess application money as an adjustment against allotment money due, and refunds money to applicants who received nothing (NCERT, p. 86).

Mini-case (original figures): Zeta Ltd. issues 2,000, 12% debentures of Rs. 100 each at a premium of Rs. 10, payable Rs. 40 on application and Rs. 70 on allotment, premium included. The total collected is 2,000 at Rs. 110 each — Rs. 2,20,000.

Check the third entry: Rs. 1,40,000 = Rs. 1,20,000 nominal (2,000 at Rs. 60, the balance after application) plus Rs. 20,000 premium (2,000 at Rs. 10). No call is needed because application and allotment cover the full issue price.

Memory hook: at issue, Bank comes first and the Debentures account comes last — cash must arrive before the liability is booked. At redemption the order reverses: the Debentures account is cancelled first, and Bank leaves last. Keep that and you will never mix up the two ends of the chapter.

Buying Assets with Debentures and Debentures as Collateral Security

Two situations where debentures are issued without anyone paying cash to the company: to settle a vendor’s bill, and as extra security for a loan.

When a company buys assets and pays by issuing debentures, the entry has two steps: Sundry Assets A/c Dr. to Vendors (assets purchased), then Vendors Dr. to Debentures A/c (debentures issued). At a premium, Securities Premium Reserve A/c is credited; at a discount, Discount on Issue of Debentures A/c is debited (NCERT, pp. 87–94).

To find how many debentures to issue, divide the purchase consideration by the issue price of one debenture. The book works this out in Illustration 11 and Illustration 13 — check its workings for the discount case, where the issue price is face value minus the discount.

Mini-case (original figures): A company buys machinery worth Rs. 4,86,000 and settles the bill by issuing 9% debentures of Rs. 100 each at a discount of 10%. The issue price is Rs. 90, so the number issued is:

\[ \text{Number of debentures} = \frac{\text{Rs. } 4,86,000}{\text{Rs. } 90} = 5,400 \]

The entries are: Machinery A/c Dr. to Vendors, Rs. 4,86,000; then Vendors Dr. Rs. 4,86,000 and Discount on Issue of Debentures A/c Dr. Rs. 54,000 to 9% Debentures A/c Rs. 5,40,000. Check: 5,400 debentures at Rs. 90 = Rs. 4,86,000, and 5,400 at Rs. 100 = Rs. 5,40,000, with the Rs. 54,000 discount making up the difference.

When a whole business is taken over, the purchase consideration is paid against net assets (assets minus liabilities). If the consideration exceeds the net assets, the excess is debited to Goodwill (Illustration 11); if it falls short, the difference is credited to Capital Reserve (Illustration 12).

A collateral security is a subsidiary or additional security for a loan, besides the primary security. Debentures issued as collateral create no liability of their own — if the company defaults, the lender may present them for redemption or sell them in the open market (NCERT, p. 94).

There are two ways to record them. First method: pass no entry, and append a note below the loan in the balance sheet that it is secured by the debentures.

Second method: debit Debenture Suspense A/c to Debentures A/c, show the suspense balance as a deduction from the debentures in the Notes to Accounts, and reverse the entry when the loan is repaid (NCERT, pp. 94–97).

Terms of Issue: Matching the Issue Price with the Redemption Price

The issue price decides what comes in now; the redemption price decides what must be provided for later. This section is the conceptual centre of the chapter — everything before it feeds in, everything after it applies it.

When debentures are redeemable at a premium, that premium is a future liability, so it is created at allotment by crediting Premium on Redemption of Debentures A/c. When the issue is also at a discount, both the discount on issue and the premium on redemption are debited together to Loss on Issue of Debentures A/c.

Notice what the Loss on Issue account holds in each case: case 4 holds the premium on redemption, case 5 the discount plus the premium, case 6 only the redemption premium — the issue premium is a gain, carried to Securities Premium Reserve.

Premium on redemption is a provision, shown under Non-current Liabilities, sub-head Long-term Borrowings, until the debentures are redeemed (NCERT, p. 100). This placement is tested in the chapter’s own True/False exercise.

Worked example (original figures): Krisha Ltd. issues 4,500, 13% debentures of Rs. 100 each at a 3% discount, redeemable at a 6% premium. First the three amounts and the cash:

• Nominal value: 4,500 at Rs. 100 = Rs. 4,50,000
• Discount on issue (3%): Rs. 13,500
• Premium on redemption (6%): Rs. 27,000
• Loss on issue: Rs. 13,500 + Rs. 27,000 = Rs. 40,500
• Cash received: Rs. 4,50,000 − Rs. 13,500 = Rs. 4,36,500

The allotment entry:

Check: debits Rs. 4,36,500 + Rs. 40,500 = Rs. 4,77,000, and credits Rs. 4,50,000 + Rs. 27,000 = Rs. 4,77,000. Since Krisha Ltd. has no Securities Premium Reserve, the whole loss is written off from the Statement of Profit and Loss: Statement of Profit and Loss Dr. Rs. 40,500 to Loss on Issue of Debentures A/c Rs. 40,500.

Interest on Debentures and Writing Off the Loss on Issue

These two processes appear in almost every numerical question in the chapter, because every debenture carries interest and every discount or loss must eventually be written off.

Interest is calculated on the nominal value of the debentures, at the rate stated in the name of the debentures — 12% debentures earn 12% of face value — and is usually paid half-yearly. It is a charge on profit, payable even when the company has earned no profit, and is transferred to the Statement of Profit and Loss at year-end (NCERT, p. 104).

When interest exceeds the prescribed limit, the company deducts income tax at the prescribed rate — Tax Deducted at Source (TDS) — and deposits it with the tax authorities. The interest entry then credits two accounts: Debentureholders A/c, the net amount, and Income Tax Payable A/c, the TDS (NCERT, p. 104).

Discount or loss on issue is a capital loss, and it is written off first from Securities Premium Reserve where it exists, under Section 52(2) of the Companies Act, and only the remaining balance from the Statement of Profit and Loss (NCERT, p. 106).

The order is where students lose marks: Securities Premium Reserve first, Statement of Profit and Loss second. For Krisha Ltd., if the reserve balance were Rs. 25,000, the write-off would be Rs. 25,000 from the reserve and the remaining Rs. 15,500 from profits.

Redemption of Debentures: Four Methods and the Statutory Rules

Redemption means discharging the debenture liability by repaying the debentureholders according to the terms of issue (NCERT, p. 110). The chapter gives four methods, and two statutory obligations that apply to almost every company.

• Payment in lump sum
• Payment in instalments (by draw of lots)
• Purchase in the open market for cancellation
• Conversion into shares or new debentures

Illustration 22 shows the difference cleanly. XYZ Ltd. issues 200, 15% debentures of Rs. 100 each — Rs. 20,000 in all. If XYZ is a listed company, it buys DRI of Rs. 3,000, which is 15% of Rs. 20,000, and redeems. If XYZ is an ‘other unlisted’ company, it also creates a DRR of Rs. 2,000, which is 10% of Rs.

20,000, out of the Statement of Profit and Loss, and transfers that DRR to General Reserve after redemption (NCERT, pp. 114–116).

Redemption in Lump Sum and in Instalments: Entries and Ledger Accounts

Most of the chapter’s redemption work is these two methods. The entries are few, but the ledger accounts that follow them take practice.

Redemption at par in lump sum: Debentures A/c Dr. to Debentureholders A/c (amount due), then Debentureholders A/c Dr. to Bank A/c (payment made). At a premium, debit Premium on Redemption of Debentures A/c along with the Debentures account in the first entry (NCERT, p. 113).

Instalment redemption repeats the same two entries for each batch. The batch is selected by draw of lots, and the interest entry shrinks each year because it is computed on the outstanding balance.

Reading the 14% Debentures Account (Illustration 26, NCERT p. 126): ABC Ltd. has Rs. 3,00,000 of 14% debentures — 3,000 of Rs. 100 — redeemed in three equal yearly instalments of Rs. 1,00,000. The account opens on the credit side with Rs. 3,00,000.

In each redemption year, Rs. 1,00,000 goes to the debit side as Debentureholders, and the balance is carried down: Rs. 2,00,000 after the first redemption, Rs. 1,00,000 after the second, and nil after the third. That is the balance c/d and balance b/d convention doing its work.

The interest story matches: Rs. 42,000 for the first three years (14% of Rs. 3,00,000), then Rs. 28,000 (14% of Rs. 2,00,000), then Rs. 14,000 (14% of Rs. 1,00,000) (NCERT, pp. 126–127).

Debenture Redemption Investment in instalment redemption (Illustration 27): Vishwas Ltd. must redeem Rs. 20,00,000 of 7% debentures over four years — 3,000, 6,000, 5,000 and 6,000 debentures. Each April the company tops up the DRI so the balance equals 15% of the value maturing in the following year (NCERT, p. 128).

When redemptions are stretched over years, the DRI is not realised after the first redemption — it is carried forward and adjusted so the balance always meets the requirement for the next year.

Redemption by Purchase in the Open Market and by Conversion

These two methods use the market and the debentureholders’ choice instead of a fixed repayment date. Each has one accounting trap that the chapter points out directly.

A company may buy its own debentures in the open market for immediate cancellation — useful when it has surplus funds or when the debentures are available at a discount.

Bought below face value: Debentures A/c Dr. to Bank A/c and to Profit on Redemption of Debentures A/c, then Profit on Redemption of Debentures A/c Dr. to Capital Reserve (NCERT, p. 130).

The profit is a capital profit, so it goes to Capital Reserve — the trap is transferring it to the Statement of Profit and Loss instead. Bought above face value, the excess is a loss charged to the Statement of Profit and Loss. Purchase expenses, as in Illustration 29, are added to the cost of purchase.

Conversion replaces cash with equity shares or new debentures. The number of shares is computed on the actual proceeds of the debentures, not the nominal value — so when debentures were originally issued at a discount, the amount actually realised at issue is the base (NCERT, p. 133).

In Illustration 32, 10,000, 9% debentures of Rs. 100 were issued at Rs. 92, and 2,000 are converted. The Debentureholders A/c is credited with what the company actually received on those 2,000 — Rs. 1,84,000 — while the Debentures account is debited with the full Rs. 2,00,000. The gap of Rs.

16,000 is absorbed by the Statement of Profit and Loss and the Discount on Issue of Debentures account, and new shares are issued to the holders for Rs. 1,84,000 (NCERT, pp. 133–134).

Share-count example: 1,000 debentures of Rs. 100 each, Rs. 1,00,000 in all, converted into equity shares of Rs. 10 each at a premium of Rs. 2.50 per share:

\[ \text{Number of shares} = \frac{\text{Rs. } 1,00,000}{\text{Rs. } 10 + \text{Rs. } 2.50} = \frac{\text{Rs. } 1,00,000}{\text{Rs. } 12.50} = 8,000 \]

So Rs. 80,000 goes to Equity Share Capital and Rs. 20,000 to Securities Premium Reserve.

How to Read the Chapter’s Journal, Balance Sheet and Ledger Tables

This chapter has no diagrams, so the tables are the figures. If you can read the three formats below, you can read the whole chapter.

• Journal table (Illustration 1, pp. 80–81): five columns — Date, Particulars, L.F., Debit Amount, Credit Amount. Every row must balance, and the narration in brackets explains the transaction.
• Balance-sheet extract (pp. 80–81): the vertical format. Equity and Liabilities, with Non-current liabilities → Long-term borrowings, is matched against Assets, and the Notes to Accounts carry the detail.
• Ledger account (14% Debentures Account, p. 126): the T-shape, debit side on the left, credit on the right, both sides always totalling the same figure.

Learn the balance c/d and balance b/d convention. The balance c/d (carried down) is placed on the smaller side to make the totals equal, and is reopened as balance b/d (brought down) on the opposite side in the next period. In the 14% Debentures Account: Rs. 3,00,000 opens on the credit side, Rs.

1,00,000 leaves each redemption year, and the balance runs Rs. 2,00,000, Rs. 1,00,000, then nil.

Key Terms and Definitions from the Chapter

Quick lookup glossary — one or two lines per term, with the printed page where the chapter explains it.

• Debenture — a written instrument acknowledging a debt under the common seal of the company, repayable on stated terms with fixed interest (p. 75).
• Bond — the same instrument by another name; the terms are now used interchangeably (p. 75).
• Secured / Unsecured debentures — secured carry a fixed or floating charge on assets; unsecured carry no specific charge (pp. 76–77).
• Redeemable / Irredeemable (perpetual) debentures — redeemable are repaid after a set period; irredeemable are repayable on winding up or after a long period (p. 77).
• Convertible / Non-convertible debentures — convertible can be exchanged for shares or other securities; non-convertible cannot (pp. 77–78).
• Specific coupon / Zero coupon debentures — specific carry a stated rate, fixed or floating; zero coupon carry none and are issued at a substantial discount (p. 78).
• Registered / Bearer debentures — registered are transferred by deed and recorded; bearer are transferred by delivery (pp. 78–79).
• Over subscription — applications exceed the debentures offered; excess is adjusted against allotment or refunded (p. 86).
• Collateral security — subsidiary security for a loan besides the primary security (p. 94).
• Debenture Suspense A/c — debited when debentures are issued as collateral security under the second method; shown as a deduction from debentures (p. 95).
• Premium on Redemption of Debentures A/c — provision for the extra amount payable at redemption, created at allotment (p. 100).
• Discount / Loss on Issue of Debentures A/c — capital loss representing the discount on issue and, where applicable, the premium on redemption (p. 100).
• Securities Premium Reserve — reserve credited with premium on issue; the first source for writing off discount or loss (pp. 82, 106).
• Debenture Redemption Reserve — reserve created out of profits before redemption, 10% of outstanding debentures for ‘other unlisted’ companies (p. 111).
• Debenture Redemption Investment — investment of at least 15% of the debentures maturing in the next year, made on or before April 30 (p. 112).
• Own debentures — a company’s own debentures bought back from the market for cancellation (p. 130).
• Capital Reserve — the reserve that receives profit on redemption of own debentures (p. 131).
• Tax Deducted at Source (TDS) — income tax deducted from debenture interest and deposited with the tax authorities (p. 104).

Common Mistakes Students Make in This Chapter

These are the errors the chapter itself flags — its closing True/False exercise (NCERT, p. 110) turns each wrong belief into a statement to test. The table pairs the mistake with the correction and the reason the text gives.

Exam Notes: What the Chapter Asks You to Be Able to Do

The chapter’s learning objectives are its own test list: state the meaning of debentures, classify them, record issue entries at par, discount and premium, handle consideration other than cash and collateral security, apply the terms of issue, present items in the balance sheet, write off discount or loss, and account for all four redemption methods (NCERT, p. 74).

The book’s illustrations drill one of three shapes of numerical work. Know which shape you are facing and follow its plan:

• Journal entries — the commonest shape. Record cash with Bank, transfer to the Debentures account at allotment, and let the discount, premium and redemption-premium accounts take their sides. Always total a row: debits must equal credits.
• Balance-sheet extracts with Notes to Accounts — show debentures under Long-term borrowings, premium on redemption as a provision under the same sub-head, Securities Premium under Reserves and Surplus, and discount on issue as an asset until written off. Quote the notes exactly as the book does.
• Ledger accounts — balance the T-shape: balance c/d on the smaller side, balance b/d next period, and check the closing balance against the debentures still outstanding.

For practice, the chapter provides Test Your Understanding sets at several points, Do It Yourself boxes after almost every illustration, a closing True/False block, and end-of-chapter Short Answer, Long Answer and Numerical Questions. Work the illustrations first, then the exercises without looking back.

By page count the chapter devotes the most space to redemption — the lump-sum and instalment sections together run for about eighteen pages of the book. It is worth practising until the entries are automatic.

One caution: textbook contents and the examinable syllabus are not always identical — check the current official syllabus.

The Whole Chapter in One Read

The night-before version. Each bullet is one idea; cover the page and try to recall the journal entry or the rule behind it.

• A debenture is borrowed capital (Latin debere, to borrow): a written acknowledgement of debt with fixed interest; a bond is the same thing. A share is owned capital — dividend, voting rights, no fixed repayment.
• Five classifications: secured/unsecured, redeemable/irredeemable, convertible/non-convertible, specific/zero coupon, registered/bearer. Redeemable and convertible types drive the accounting.
• Three issue prices: par (no difference), discount (Discount on Issue debited), premium (Securities Premium Reserve credited). Oversubscription: excess adjusted against allotment, refunded to rejected applicants.
• Vendor purchases: Sundry Assets Dr to Vendors; Vendors Dr to Debentures A/c, with premium or discount in the same entry. Whole business: excess over net assets = Goodwill, shortfall = Capital Reserve. Collateral: no entry plus a note, or Debenture Suspense A/c Dr to Debentures A/c, reversed when the loan is repaid.
• Terms of issue: six combinations. Whenever redemption is at a premium, Premium on Redemption is created at allotment; whenever the issue is at a discount, both the discount and the redemption premium collect in Loss on Issue of Debentures A/c.
• Interest is on nominal value, a charge on profit, half-yearly, with TDS deducted when interest exceeds the limit. Discount/loss on issue is a capital loss: write off Securities Premium Reserve first, then the Statement of Profit and Loss.
• Four redemption methods: lump sum, instalments by draw of lots, open-market purchase, conversion. ‘Other unlisted’ companies: DRR at 10% of outstanding debentures. All companies: DRI at least 15% of the value maturing in the next year, invested before April 30.
• Open-market purchase below face value: profit on redemption goes to Capital Reserve (capital profit). Above face value: loss to the Statement of Profit and Loss. Conversion: share count on actual proceeds, so discount-issued debentures convert at the realised amount.
• Balance sheet: debentures under Long-term borrowings; premium on redemption as a provision under the same sub-head; Securities Premium in Reserves and Surplus; discount on issue under Other Current or Other Non-Current Assets until written off.

Related Resources

This listing is maintained for the 2026-27 academic session using the NCERT textbook information available to us. NCERT remains the authority for confirming the latest edition.

This chapter is Chapter 2 of the Accountancy Part II book. It follows Chapter 1, Accounting for Share Capital, which covers the parallel entries for shares; the chapter that follows it continues the same company-accounts framework, and its title is listed in the book’s contents.

• Class 12 Accountancy notes — the full set of topic notes for Class 12 accountancy, including the chapters around this one.
• Overview of Class 12 Accountancy — how the two parts of the book fit together, so you can see where debentures sit in the year.
• Reconstitution of a partnership firm: retirement and death of a partner — a Part I chapter on the same kind of journal-entry work, useful practice for year-end adjustments.
• Class 12 study material — notes and textbook pages for every Class 12 subject.
• CBSE notes — the main notes index, from Class 6 to 12.

Sources and Data Verification

This page describes Chapter 2, Issue and Redemption of Debentures, of the NCERT Class 12 Accountancy Part II textbook, Company Accounts and Analysis of Financial Statements, as published by NCERT at ncert.nic.in. The page covers this one book and no other; printed page numbers refer to the NCERT edition.

The chapter details on this page are maintained for the current academic session using the NCERT information available to us. NCERT settles the textbook, its editions and the official PDFs; CBSE settles the curriculum, the syllabus and the examinations.

Textbook contents and the examinable syllabus are not always identical — check the current official syllabus before planning study. Reference: NCERT Class 12 Accountancy textbook, chapter 2, official edition on ncert.nic.in.

Frequently Asked Questions

What is the difference between a share and a debenture?

A share is part of the owned capital of the company and represents ownership; a debenture is part of borrowed capital and represents a debt.

The return on a share is dividend, an appropriation of profits; the return on a debenture is interest at a fixed rate, a charge on profits paid even when there is no profit. Shareholders have voting rights, debentureholders normally do not, and debentures are generally secured by a charge on the company’s assets (NCERT, p. 76).

When is Debenture Redemption Reserve created and what is its amount?

Debenture Redemption Reserve is created by the companies that must create it — the ‘other unlisted’ companies — out of profits before redemption, at 10% of the value of outstanding debentures.

Listed companies, banking companies and specified financial institutions are exempt from creating DRR. After the debentures are redeemed, the reserve is transferred to General Reserve (NCERT, pp. 111–112).

What is the journal entry when debentures are issued at a discount and redeemable at a premium?

At allotment, the entry is: Debenture Application & Allotment A/c Dr., Loss on Issue of Debentures A/c Dr. (with the discount plus the premium on redemption), To Debentures A/c (nominal value) and To Premium on Redemption of Debentures A/c (with the redemption premium).

Both the discount and the redemption premium gather in the Loss on Issue account, which is later written off from Securities Premium Reserve and then the Statement of Profit and Loss (NCERT, pp. 98–100).

Where is premium on redemption of debentures shown in the balance sheet?

It is a provision, shown under Non-current Liabilities, sub-head Long-term Borrowings, until the debentures are redeemed. It is not shown under Securities Premium, which is a reserve (NCERT, p. 100).

How are own debentures purchased from the open market accounted for?

The Debentures account is debited with the face value, Bank is credited with the cost, and the difference is Profit on Redemption of Debentures A/c when bought below face value, or a loss when bought above face value.

Profit on redemption is a capital profit and is transferred to Capital Reserve; a loss is charged to the Statement of Profit and Loss (NCERT, pp. 130–131).

Can debentures be issued as collateral security and how is it recorded?

Yes. There are two methods. First: pass no journal entry and append a note to the loan in the balance sheet that it is secured by the debentures.

Second: debit Debenture Suspense A/c to Debentures A/c, show the suspense balance as a deduction from debentures in the Notes to Accounts, and reverse the entry when the loan is repaid (NCERT, pp. 94–97).