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प्रश्न
Long Answer Question
Explain the different terms for the issue of debentures with reference to their redemption.
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उत्तर
The different terms for the issue of debentures with reference to their redemption can be the combinations of at par, at premium and at discount. Normally, the debentures are not redeemable at discount. The permutation and the combination of the various terms of issue and redemption of debentures give rise to following six situations:
- Issue at Par, Redeemable at Par.
- Issue at Premium, Redeemable at Par.
- Issue at Discount, Redeemable at Par.
- Issue at Par, Redeemable at Premium.
- Issue at Premium, Redeemable at Premium.
- Issue at Discount Redeemable at Premium.
Issue at Par and Redeemable at Par- When the debentures are issued and are redeemed at their face value, then the following Journal entry is passed.
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Bank A/c |
Dr. (with the amount received) |
|
|
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To Debenture Application A/c |
(with the face value) |
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
|
To Debenture A/c |
|
|
(Application money transferred to Debenture Account) |
||
2. Issue at Premium and Redeemable at Par- When the debentures are issued at premium and are redeemable at par, then the following Journal entry is passed. As premium is a gain for a company so it is credited in the Journal entry.
|
Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
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|
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Debenture Application A/c |
Dr. |
|
|
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To Debenture A/c |
|
|
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To Securities Premium A/c |
|
|
(Debentures issued at premium and redeemable at par) |
||
- Issue at Discount and Redeemable at Par- When the debentures are issued at discount and are redeemable at par, then the following Journal entry is passed. As discount is a loss for a company so it is debited in the Journal entry.
|
Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
||
|
Debenture Application A/c |
Dr. |
|
|
Discount on Issue of Debenture A/c |
Dr. |
|
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To Debenture A/c |
|
|
(Debentures issued at discount and redeemable at par) |
|
|
- Issue at Par and Redeemable at Premium- When debentures are issued at par and redeemable at premium, then the following Journal entry is passed. In such case, the company did not suffer any loss at the time of issue but there will be loss at the time of redemption.
|
Bank A/c |
Dr. |
|
|
|
To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
|
|
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To Debenture A/c |
(with the face value of the debentures) |
|
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
|
(Debentures issued at par and redeemable at premium) |
|
|
5. Issued at Premium and Redemption at Premium- When the debentures are issued and redeemable at premium, then the following Journal entry is passed.
|
Bank A/c |
Dr. |
|
|
|
To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
|
|
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To Debenture A/c |
(with the face value of the debentures) |
|
|
To Securities Premium A/c |
(with the amount of premium on issue) |
|
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
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(Debentures issued at premium and redeemable at premium) |
||
- Issue of Discount and Redemption at Premium-When the debentures are issued at discount and redeemable at premium, then the following Journal entry is passed.
|
Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
Loss on Issue of Debenture A/c |
Dr. (with the amount of discount on issue plus amount of premium on redemption) |
|
|
|
To Debenture A/c |
(with the face value of the debentures) |
|
|
To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
|
(Debentures issued at discount and redeemable at premium) |
|
|
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संबंधित प्रश्न
What is meant by ‘Issue of debentures for Consideration other than Cash’?
What is the discount on the issue of debentures?
A. Ltd. issued 50,00,000, 8% Debentures of Rs 100 at a discount of 6% on April 01, 2009, redeemable at a premium of 4% by draw of lots as under:
20,00,000 Debentures on March, 2011
10,00,000 Debentures on March 2013
20,00,000 Debentures on March 2014
Compute the amount of discount to be written off in each year till debentures are paid. Also prepare the discount/loss on the issue of the debenture account.
B. Ltd. issued debentures at 94% for Rs 4,00,000 on April 01, 2011 repayable by five equal drawings of Rs 80,000 each. The company prepares its final accounts on March 31 every year.
Indicate the amount of discount to be written-off every accounting year assuming that the company decides to write-off the debentures discount during the life of debentures. (Amount to be written-off: 2012 Rs 8,000; 2013 Rs 6,400; 2014 Rs 4,800; 2015 Rs 2,000; 2016 Rs 1,600).
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%.
X Ltd . issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months.
Pass Journal entries.
Alka Ltd. issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable after 5 years. According to the terms of issue, ₹ 500 (after discount of ₹ 50) was payable on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.
Wye Ltd . purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by cheque and the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give journal entries in the books of Wye Ltd.
Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a bill of exchange and for the balance, the company issued 9% debentures of ₹ 100 each at a premium of 10% in favor of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.
Journalise the following:
(a) A debenture issued at ₹95, repayable at ₹ 100.
(b) A debenture issued at ₹95, repayable at ₹ 105.
(c) A debenture issued at ₹95, repayable at ₹ 105.
The face value of debenture is ₹ 100 in each of the above cases.
Global Ltd. issued 10,000, 8% Debentures of ₹ 100 each redeemable in four equal instalments by draw of lots from the end of 3 years at a premium of ₹ 9.
Pass the Journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on issue of Debentures Account.
A debenture is a ______.
Debenture interest is paid as ______.
Assertion (A): Issue of debenture does not result in dilution of interest of equity shareholders.
Reason (R): Debenture holders have voting rights.
Assertion (A): Debentures saves income tax.
Reason (R): Interest on debenture is tax deductible expenditure.
Loss on issue of debentures is treated as ______.
10% Debenture issued at ₹ 105 is repayable at ₹ 110, the face value of the debenture being ₹ 100. Calculate the amount of loss on redemption of debentures.
Maximum limit on premium on issue of debentures is ______.
