The procedure and accounting entries for issue of debentures are very much similar to that of share. A prospectus is issued to the public for inviting applications. The money on debentures may be payable in full at a time along with application or by installments on application, allotment and various calls.
There is no legal restriction on the price for which debentures are issued. Thus, a debenture may be issued at par, at premium or at discount. They can be issued at cash, for consideration other than cash and as collateral security as well as issue of debentures with redeemable conditions.
Issue Of Debentures At Par
When a debenture is issued at its face value, it is called issue of debenture at par. If a debenture of $100 is issued at $ 100, it is called the issue of debenture at par.
Issue Of Debentures At Premium
A debenture is said to be issued at premium when the issue price exceeds the par value. If a debenture of $100 is issued at $110, then it is called issue of debenture at premium. The excess amount $10 ($110-$100) is debenture premium.
Issue Of Debentures At Discount
When a debenture is issued at an amount less than its face value, it is said to be issued at discount. If a debenture of $100 is issued at $95, it is said to have been issued at a discount of $5.
