Question

Kaveri Ltd. (an unlisted company) issued 50,000, 8% Debentures of ₹ 100 each at par on Oct. 1, 2020 redeemable on March, 31, 2025. It was decided to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment on 30th April, 2024. Debentures were redeemed on due date. Record necessary entries for issue and redemption of debentures.

Answer 1

Journal entries of Kaveri Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2020
Oct. 1	Bank A/c   ...Dr.		50,00,000	-
	To 8% Debentures A/c		-	50,00,000
	(Being issue of 50,000 debentures of ₹100 each at par)
2024
Mar. 31	Profit and Loss Appropriation A/c   ...Dr.		5,00,000	-
	To Debenture Redemption Reserve A/c		-	5,00,000
	(15% of face value debentures transferred to DRR)
Apr. 30	Debenture Redemption Investment A/c   ...Dr.		7,50,000	-
	To Bank A/c		-	7,50,000
	(Being DRI purchased as per rules)
2025
Mar. 31	8% Debentures A/c   ...Dr.		50,00,000	-
	To Debentureholders A/c  A/c		-	50,00,000
	(Being redemption of debentures at par)
Mar. 31	Debentureholders A/c   ...Dr.		50,00,000	-
	To Bank A/c		-	50,00,000
	(Redeemed debentures and paid to holders)
Mar. 31	Bank A/c   ...Dr.		7,50,000	-
	To Debenture Redemption Investment A/c		-	7,50,000
	(Being DRI realized on redemption)
Mar. 31	Debenture Redemption Reserve A/c   ...Dr.		5,00,000	-
	To General Reserve A/c		-	5,00,000
	(Transfer of DRR on redemption of debentures)

Working Note:

Number of Debentures = 50,000

Face Value per Debenture = ₹ 100

Total Debentures = 50,000 × ₹ 100 = ₹ 50,00,000

DRI requirement = 15% of face value (for unlisted companies)

DRI to be invested = ₹ 50,00,000 × 15% = ₹ 7,50,000