Question

B. Ltd. issued 1,000, 12% debentures of Rs 100 each on April 01, 2014, at a discount of 5% redeemable at a premium of 10%.

Give journal entries relating to the issue of debentures and debenture interest for the period ending March 31, 2015, assuming that interest is paid half-yearly on September 30 and March 31, and tax deducted at source is 10%.

Answer 1

Date	Particulars					L.F.	Debit Amount Rs	Credit Amount Rs
2014
Apr. 01	Bank A/c				Dr.		95,000
	Loss on Issue on Debentures A/c				Dr.		15,000
		To 12% Debenture A/c						1,00,000
		To Premium on Redemption of Debentures A/c						10,000
	(Debenture issued at discount and redeemable at Premium)
Sept. 30	Debenture Interest A/c				Dr.		6,000
		To Income Tax Payable A/c						600
		To Debenture Holders A/c						5,400
	(Amount of interest on 12% debentures Rs 1,00,000 due for 6 months and 10% tax deducted at source)
Sept. 30	Debenture Holders A/c				Dr.		5,400
		To Bank A/c						5,400
	(Interest paid to Debenture Holders)
2015 Mar. 31	Debenture Interest A/c				Dr.		6,000
		To Income Tax Payable A/c						600
		To Debenture Holders A/c						5,400
	(Amount of interest on 12% Debentures Rs 1,00,000 due for 6 months and 10% tax deducted at source)
Mar. 31	Debenture Holders A/c				Dr.			5,400
		To Bank A/c						5,400
	(Interest paid to Debenture Holders)
Mar. 31	Profit and Loss A/c			Dr.			12,000
		To Debenture Interest A/c						12,000
	(Interest on debentures transferred to Profit and Loss Account)