Question

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.

Answer 1

In the books of Grown Ltd.
Journal

 

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Incorporation Expenses A/c	Dr.		5,00,000
	To Promoters A/c				5,00,000
	(Being amount due to promoters for their services)
	Promoters A/c	Dr.		5,00,000
	To 10% Debentures A/c (500 × 1,000)				5,00,000
	(Being 500, 10% debentures issued as purchase consideration)
	Underwriting Commission A/c	Dr.		1,00,000
	To Underwriters A/c				1,00,000
	(Being amount due to underwriters for their services)
	Underwriters A/c	Dr.		1,00,000
	To 10% Debentures A/c (100 × 1,000)				1,00,000
	(Being 100, 10%  debentures issued as purchase consideration)
	Statement of Profit and Loss A/c	Dr.		6,00,000
	To Incorporation Expenses A/c				5,00,000
	To Underwriting Commission A/c				1,00,000
	(Being expenses transferred to statement of profit and loss at the end of year)