Question

During the year 2024-25, IP Ltd. issued:

• 10,000, 7% Debentures of ₹ 50 each at a discount of 5% to the Promoters of the company.
• 2,000, 7% Debentures of ₹ 50 each at par to BL & Co. for the settlement of their underwriting commission.

You are required to record the necessary journal entries in the books of IP Ltd. for the issue of debentures. (Ignore writing off capital losses and interest on debentures)

Answer 1

Journal Entries in the books of IP Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2024-25	(For issue to Promoters)
	Incorporation Expenses A/c   ...Dr.		4,75,000
	Discount on Issue of Debentures A/c   ...Dr.		25,000
	To 7% Debentures A/c			5,00,000
	(Being 10,000 debentures issued to promoters at 5% discount)
	(For issue to Underwriters)
	Underwriting Commission A/c   ...Dr.		1,00,000
	To BL & Co. A/c			1,00,000
	(Being commission due to underwriters)
	BL & Co. A/c   ...Dr.		1,00,000
	To 7% Debentures A/c			1,00,000
	(Being 2,000 debentures issued at par to settle commission)

Working Note:

Promoters = 10,000 × 50

= 5,00,000

Discount = `5,00,000 xx 5/100`

= 25,000

Underwriters = 2,000 × 50

= 1,00,000