Question

In case of issue of debentures as a collateral security for the loan taken from the bank, which account will be debited?

• A. Bank A/c
• B. Bank Loan A/c
• C. Debenture A/c
• D. Debenture Suspense A/c

Hint:

Collateral issue of debentures → Debenture Suspense A/c is used to avoid overstating liabilities.

Answer 1

The Correct Option is D

Step 1: Meaning of collateral security.
When debentures are issued as collateral, they are not for raising capital but as additional security against a bank loan.
Step 2: Accounting treatment.
To show liability correctly, Debenture Suspense A/c is debited and Debenture A/c is credited. Journal entry: \[ \text{Debenture Suspense A/c Dr. \quad To Debentures A/c} \]
Step 3: Conclude.
Thus, Debenture Suspense A/c is debited.
Final Answer: \[ \boxed{\text{Debenture Suspense A/c}} \]