Question

Pass necessary journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
(b) ₹ 70,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at a premium of 110.

Answer 1

Solution:

a.

                                          Journal Entries  

Particulars                                                           Debit Rs.    Credit Rs.

Bank A/c                                                     Dr.    42,000

To Debenture Application A/c                                             42,000

(Being 400 debentures issued at Rs.100 at a premium of 5%)

Debenture Application A/c                       Dr.   42,000

To 12% Debenture A/c 40.000 To Securities Premium A/c    2,000

(Being 400 debentures issued at a premium of 5% and redeemable at par)  

b.

                                         Journal Entries  

Particulars                                                        Debit Rs.    Credit Rs.

Bank A/c                                                    Dr.   73,500

To Debenture Application A/c                                            73,500

(Being 700 debentures issued at Rs.100 at a premium of 5%)

Debenture Application A/c                       Dr.   73,500

Loss On Issue of Debentures A/c             Dr.   7,000

To 12% Debenture A/c                                                         70,000

To Securities Premium Reserve A/c                                      3,500

To Premium on Redemption A/c                                            7,000

(Being 70,000 debenture issued at a premium of 5% and redeemable at Rs.110)