Question

On 1^st April, 2016, the following balances appeared in the books of Shikhar Ltd.

10% Debentures	₹ 14,00,000
Premium on Redemption of Debentures	₹ 1,40,000
Debenture Redemption Reserve	₹ 75,000

The debentures were to be redeemed at a premium of 10% in two equal annual instalments beginning from 31^st March, 2018. To meet the requirements of the Companies Act, 2013, the company transferred the balance amount to Debenture Redemption Reserve on 31^st March, 2017. On 30^th April, 2017, it met the requirements of the Companies Act, 2013 regarding Debenture Redemption Investment and redeemed the debentures on the scheduled dates.

You are required to pass necessary journal entries to record the above transactions in the books of Shikhar Ltd. (Ignore interest on Debentures).

Answer 1

Journal In the Books of Shikhar
Date	Particulars	L.F.	Amount (Dr.)	Amount (Cr.)
31-03-17	Statement of Profit and Loss    ...Dr.		2,75,000	-
	To Debenture Redemption Reserve A/c (W. No. 1)		-	2,75,000
	(Being amount transferred to D.R.R.)
30-04-17	Debenture Redemption Investment A/c    ...Dr.		1,05,000	-
	To Bank A/c		-	1,05,000
	(Being amount invested 15%)
31-03-18	Bank A/c    ...Dr.		1,05,000	-
	To Debenture Redemption Investment A/c		-	1,05,000
	(Being Debenture Redemption Investment encashed)
31-03-18	10% Debentures A/c    ...Dr.		7,00,000	-
	Premium on Redemption on Debentures A/c    ...Dr.		70,000	-
	To Debentureholder’s A/c		-	7,70,000
	(Being amount due on debentureholder)
31-03-18	Debentureholder’s A/c    ...Dr.		7,70,000	-
	To Bank A/c		-	7,70,000
	(Being payment made)
31-03-18	Debenture Redemption Reserve A/c    ...Dr.		1,75,000	-
	To General Reserve A/c		-	1,75,000
	(Being proportionate DRR transferred)
30-04-18	Debenture Redemption Investment A/c    ...Dr.		1,05,000	-
	To Bank A/c		-	1,05,000
	(Being amount invested as per law)
31-03-19	Bank A/c    ...Dr.		1,05,000	-
	To Debenture Redemption Investment A/c		-	1,05,000
31-03-19	10% Debentures A/c    ...Dr.		7,00,000	-
	Premium on Redemption A/c		70,000	-
	To Debentureholder’s A/c		-	7,70,000
	(Being amount due)
31-03-19	Dehentureholder’s A/c    ...Dr.		7,70,000	-
	To Bank A/c		-	7,70,000
	(Being amount paid to debentureholder)
31-03-19	Debenture Redemption Reserve A/c    ...Dr.		1,75,000	-
	To General Reserve A/c		-	1,75,000
	(Being proportionate DRR transferred)

Working Note:

As per the recent Amendment in Company Law:

The company shall create Debenture Redemption Reserve equivalent so at least 25 percent of the amount raised through the debenture issue before debenture redemption commences.