Question

Q. 32. On 1st April, 2019, Star Ltd. issued 8,000, 8% Debentures of 250 each at
premium of 5% and redeemable at a premium of 4% after 4 years. According to the
terms of issue, 100 was payable on application and balance on allotment. Record
neessary entries regarding issue of debentures and writing off loss on issue of
debentures.​

Answer 1

Debentures are issued by company under the seal of government as company is asking debt from the public and promises to repay the amount after the given period of time with interest prescribed earlier on the certificate of debenture.

  Journal entries for the issue of debenture.

1. Bank a/c dr.   800000

    to debenture application 800000

2. Debenture application a/c dr. 800000

     to 8% debenture a/c                    800000

3. Debenture allotment a/c dr.   1200000

   loss on issue of deb.  a/c dr.    80000

        to 8% debenture a/c                        1200000

        to premium on redemption a/c          80000

4. Bank a/c dr.             1280000

          to debenture allotment a/c      1280000.