Question

Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015. The issue was fully subscribed. According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March, 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss.

Answer 1

XYZ Ltd. issued 5,000, 10% Debentures of ₹ 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%.

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Answer 2

Solution:

                                           The books of Bright Ltd.

                                                       Journal  

Particulars                                                        Debit Rs.     Credit Rs.

Debentures Interest A/c                          Dr.    25,000

To Debenture holders A/c                                                    22,500

To Income Tax Payable A/c                                                  2,500

(Being debentures interest due)

Debenture holders A/c                           Dr.   22,500

Income Tax Payable A/c                         Dr.    2,500

To Bank A/c                                                                            25,000

(Being interest on debentures paid)

Statement of Profit and Loss A/c          Dr.  1 ,50,000

To Debentures Interest A/c                                                    50,000

(Being interest transferred to profit and loss)