Question

Journalise the following (i) A debenture issued at Rs 95, repayable at Rs 100; (ii) A debenture issued at Rs 95, repayable at Rs 105; and (iii) A debenture issued at Rs 100, repayable at Rs 105; The face value of debenture in each of the above cases is Rs 100.

Answer 1

Given : Journalise the following (i) A debenture issued at Rs 95, repayable at Rs 100; (ii) A debenture issued at Rs 95, repayable at Rs 105; and (iii) A debenture issued at Rs 100, repayable at Rs 105; The face value of debenture in each of the above cases is Rs 100.

 

Concept :  

DEBENTURE :  

• Debenture is a written acknowledgement of debt taken by the company.
• Debentures can be issued with /without charge on the assets.
• Debentures may be issued at par, at premium or at discount.  
• Journal entries on issue of debenture are also the same as in case of issue of shares.  The difference is that instead of 'Share capital A/c , a debenture A/c'  is opened in the books of accounts and the rate of interest on debenture is prefixed on the issue of debentures.
• Debentures can be converted into equity shares.
• The debentures can be redeemed in lump sum or in installments.
• Debentures are shown under the head Non current liabilities and subhead long term borrowings.  

 For a record of the above the journal entries are in the attachment below :  

 Hope this answer will help you..

Some more questions of this chapter :  

A.Ltd. issued 10,000, 10% Debentures of Rs 100 each at a premium of 5% payable as follows Rs 10 on Application; Rs 20 along with premium on allotment and balance on First and Final call. Record necessary Journal Entries.

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