Question

Pass necessary journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹ 80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.

Answer 1

Solution:

a.

                                            Journal Entries  

Particulars                                                     Debit Rs.     Credit Rs.

Bank A/c                                             Dr.      36,000

To Debenture Application A/c                                         36,000

(Being 400 debentures issued at Rs.100 at a premium of 10%)

Debenture Application A/c                 Dr.     36,000

Discount on Issue of Debentures Ac  Dr.     4,000

To 15% Debenture A/c                                                       40,000

(Being 400 debentures issued at discount and redeemable at par)  

b.

                                        Journal Entries  

Particulars                                                         Debit Rs.    Credit Rs.

Bank A/c                                                    Dr.    88,000

To Debenture Application Ac                                              88,000

(Being 800 debentures issued at Rs.100 at a premium of 10%)

Debenture Application A/c                      Dr.    88,000

Loss On Issue of Debentures A/C           Dr.    8,000

To 15% Debenture Ac                                                            80,000

To premium on Redemption Ac                                             8,000

To Securities Premium Ac 8,000

(Being 800 debenture issued at a premium of 10% and redeemable at a premium of 10%)