Question

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

900, 6% debentures of ₹ 1,000 each are issued at 5% 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.		8,55,000
	To Debentures Application and Allotment A/c			8,55,000
	(Being application and allotment money received)
2.	Debentures Application and Allotment A/c   ...Dr.		8,55,000
	Discount on Issue of Debentures A/c   ...Dr.		45,000
	To 6% Debentures A/c			9,00,000
	(Being 900, 6% Debentures of ₹ 1,000 each issued at 5% discount and redeemable at par)
3.	Securities Premium A/c   ...Dr.		45,000
	To Discount on Issue of Debentures A/c			45,000
	(Being discount on issue of debentures written off against Securities Premium)

Working Note:

Face value = 900 × ₹ 1,000 = ₹ 9,00,000

Discount = ₹ 9,00,000 × 5% = ₹ 45,000

Amount received = ₹ 9,00,000 − ₹ 45,000 = ₹ 8,55,000