---
type: "Chapter"
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id: "66def5203f8b4e9e69bd6fcd"
title: "Issue and Redemption of Debentures"
board: "CBSE"
curriculum: "CBSE"
class: "Class 12"
subject: "Accountancy"
book: "Accountancy Part - II"
chapter: "Issue and Redemption of Debentures"
chapter_slug: "issue-and-redemption-of-debentures"
canonical_url: "https://www.edzy.ai/cbse-class-12-accountancy-accountancy-part-ii-issue-and-redemption-of-debentures"
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source: "Edzy"
version: 1
last_updated: "2026-06-20"
---

# Issue and Redemption of Debentures

This chapter focuses on the accounting treatment regarding the issuance and redemption of debentures, a crucial source of long-term financing for companies. Debentures are critical financial instruments that help bridge capital gaps created by insufficient funds from share issues.

---

## Knowledge Snapshot

| Field | Details |
| :--- | :--- |
| Class | Class 12 |
| Subject | Accountancy |
| Book | Accountancy Part - II |
| Chapter | Issue and Redemption of Debentures |
| Pages | 75-143 |

---

## Chapter Summary

### Short Summary
This chapter explains the concept of debentures including their issuance, redemption, types, and the distinctions between shares and debentures.

### Detailed Summary
The chapter explores the definition of debentures as instruments acknowledging debts, details their accounting treatment during issuance and redemption, and differentiates between debentures and shares. Various types of debentures are discussed, as well as the specific processes related to their issuance and redemption including journal entries and their effects on financial statements.

---

## Topic-Wise Explanation

### Meaning of Debentures
A debenture is a written instrument acknowledging a debt under a company's seal with a promise for repayment and interest at a fixed rate, as defined in Section 2(30) of The Companies Act, 2013.

### Distinction between Shares and Debentures
Shares indicate ownership in a company, while debentures are debt instruments. Returns from shares are dividends, which fluctuate, while debenture returns are fixed interest payments. Debentures must be repaid, whereas shares typically are not returned.

### Types of Debentures
Different types of debentures include secured and unsecured, redeemable and irredeemable, convertible and non-convertible, specific coupon rate and zero coupon rate, and registered and bearer debentures.

### Issue of Debentures
Debentures may be issued at par, premium, or discount, reflecting their valuation. The process for issuing debentures is similar to shares, requiring applications and payment structures.

### Over Subscription
Omitted.

### Issue of Debentures for Consideration other than Cash
Omitted.

---

## Core Ideas

| Idea | Explanation |
| :--- | :--- |
| Debenture Definition | A legal acknowledgment of debt with specified repayment conditions and interest payments. |
| Share vs Debenture | Explains items such as ownership, returns, and repayment obligations. |
| Types of Debentures | Classification includes security, tenure, convertibility, coupon rate, and registration methods. |

---

## Key Concepts

| Concept | Meaning |
| :--- | :--- |
| Secured Debentures | Debentures backed by specific company assets for security. |
| Convertible Debentures | Debentures that can be converted into equity shares. |

---

## Important Points for Revision

* Debentures are used by companies to raise long-term debt.
* A debenture acknowledges a debt and incurs an obligation to pay interest.
* The primary differences between shares and debentures include ownership status and payment rights.
* Debentures can be categorized based on security, tenure, convertibility, coupon rate, and registration.
* The process for issuing debentures resembles that for issuing shares, including application structures.
* Kinds of debentures like convertible and zero coupon rate ones affect company financing strategies.
* Journal entries must be accurately recorded to reflect debentures issued and their receipt schedule.
* Redemption of debentures involves various methods that impact company financials.

---

## Vocabulary and Glossary

| Word / Phrase | Meaning |
| :--- | :--- |
| Debenture | A financial instrument acknowledging a debt. |
| Redemption | The process of repaying the debenture holder. |

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## Practice Questions

### Short Answer Questions
1. What is a debenture?
2. Explain the difference between shares and debentures.
3. List the types of debentures based on security.
4. Describe the process for issuing debentures.
5. What are convertible debentures?

### Long Answer Questions
1. Discuss the accounting treatment for the issuance of debentures at par, at a discount, and at a premium. Include journal entries.
2. Explain in detail the methods for redeeming debentures and their impacts on a company's financial statements.
3. Highlight the distinctions between secured and unsecured debentures with examples.

---

## Related Concepts

* Accounting treatment of financial instruments
* Company financing strategies

---

## Source Attribution

| Field | Value |
| :--- | :--- |
| Source | Edzy |
| Reference Type | examSubjectBookChapter |
| Reference ID | 66def5203f8b4e9e69bd6fcd |
| Canonical URL | https://www.edzy.ai/cbse-class-12-accountancy-accountancy-part-ii-issue-and-redemption-of-debentures |
| Markdown URL | https://www.edzy.ai/okf/chapter/cbse-class-12-accountancy-accountancy-part-ii-issue-and-redemption-of-debentures.md |