Pass the Journal entries in the following cases :(i) A debenture issued at 105, repayable at * 100.(ii) A debenture issued at $ 100, repayable at * 105.(iii) A debenture issued at 95, repayable at * 105.(iv) A debenture issued at 95, repayable at * 100.(v) A debenture issued at * 110, repayable at * 105The face value of 8% debenture is 100.
Answers
Journal Entry for Issue of Debenture with Terms of Redemption
Explanation:
this topic is Related to Issue of Debenture with Terms of Redemption
Under this Topic there are many case
which we try to Understand you
Use same Rules which we explain you Earlier ,
Basic rules
Increase in Asset (Debit)
Decrease in Asset (Credit)
Increase in Liability (Credit)
Decrease in Liability (Debit)
Expense and losses (Debit)
Income and Gains (Credit)
to solve this Question there are 2 major concepts we use:
1. Basic Rules or Dual Aspect of Journal Entry.
2. Prudence Concept
1. Basic Rules or Dual Aspect of Journal Entry.
in this topic we pass only issue entry in each case issue entry is same as
in case of shares money comes bank is increase and bank is our asset
that,s why debit
Liability is also increase so % debenture is also credited according to rules
2. Prudence Concept
According to this concept we use our intelligence and take future loss as a
today loss and make Provision in respect of that loss
eg. loss on issue of debenture is our future loss we write it today
and make provision with the name of Premium on Redemption of debenture
the above rule in each and every which you can see in this question
Journal
Particulars Dr. Cr.
(i)Bank A/C DR. 105
To Debenture Application and Allotment A/C 105
Debenture Application and Allotment A/C 105
To 8% Debenture A/C 100
To Security Premium Reserve A/C 5
(ii )Bank A/C DR. 100
To Debenture Application and Allotment A/C 100
Debenture Application and Allotment A/C 100
Loss in issue of Debenture 5
To 8% Debenture A/C 100
To Premium on Redemption of Debenture A/C 5
(iii) Bank A/C DR. 95
To Debenture Application and Allotment A/C 95
Debenture Application and Allotment A/C 95
Loss in issue of Debenture 5
Discount on issue of Debenture 5
To 8% Debenture A/C 100
To Premium on Redemption of Debenture A/C 5
Bank A/C DR. 95
To Debenture Application and Allotment A/C 95
Debenture Application and Allotment A/C 95
Discount on issue of Debenture 5
To 8% Debenture A/C 100
Bank A/C DR. 110
To Debenture Application and Allotment A/C 110
Debenture Application and Allotment A/C 110
Loss on issue of Debenture 5
To 8% Debenture A/C 100
To Premium on Redemption of Debenture 5
To Security Premium Reserve A/C 10
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Explanation:
debentures are issued at 100 and are redeemable at 110