Question

Pass necessary journal entries relating to issue of debentures and to write off discount/loss on issue of debentures in the books of Dhatu Ltd. in the following case:

400, 11% debentures of ₹ 1,000 each are issued at 10% discount and redeemable at par. Balance in Securities Premium Account is ₹ 50,000.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		3,60,000
	To Debentures Application and Allotment A/c			3,60,000
	(Being application and allotment money received)
2.	Debentures Application and Allotment A/c   ...Dr.		3,60,000
	Discount on Issue of Debentures A/c   ...Dr.		40,000
	To 11% Debentures A/c			4,00,000
	(Being 400, 11% Debentures of ₹ 1,000 each issued at 10% discount and redeemable at par)
3.	Securities Premium A/c   ...Dr.		40,000
	To Discount on Issue of Debentures A/c			40,000
	(Being discount on issue of debentures written off against Securities Premium)

Working Note:

Face value = 400 × ₹ 1,000 = ₹ 4,00,000

Discount = ₹ 4,00,000 × 10% = ₹ 40,000

Amount received = ₹ 4,00,000 − ₹ 40,000 = ₹ 3,60,000