Question

On 31st March, 2003, G Ltd. had ₹ 8,00,000;9% Debentures due for redemption. The company had a balance of ₹ 1,40,000 in its Debentures Redemption Reserve . Pass necessary journal entries for redemption of debentures. 

Answer 1

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/2002*	Statement of Profit or Loss	Dr.		60,000
	To Debenture Redemption Reserve A/c				60,000
	(Surplus amount is transferred to DRR)
30/4/2002*	Debenture Redemption Investment A/c             Dr.			1,20,000
	To Bank A/c				1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)
31/3/2003	9% Debentures A/c	Dr.		8,00,000
	To Debentureholders’ A/c				8,00,000
	(Debentures due for redemption)
31/3/2003	Bank A/c                                                Dr.			1,20,000
	To Debenture Redemption Investment A/c				1,20,000
	(Investment made in specified securities is now encashed)
31/3/2003	Debentureholders’ A/c	Dr.		8,00,000
	To Bank A/c				8,00,000
	(Amount paid to debentureholders)
31/3/2003	Debenture Redemption Reserve A/c	Dr.		2,00,000
	To General Reserve				2,00,000
	(DRR transferred to General Reserve)

Working Note: 

Amount for DRR (25% of Debentures Issued) =`800000 xx 25/100` =	Rs 200000
Less : Amount already exist in DRR =	Rs 140000
DRR to be created for redemption =	Rs 60000

Notes:

1. Interest is not calculated on Investment as rate of interest is not provided.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures for the years ending March 31, 2002 and March 31, 2003 as given below.   

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2002
Mar. 31	Debenture Interest A/c	Dr.		72,000
	To Debentureholders’ A/c				72,000
	(Interest on 9% debentures due)
Mar. 31	Debentureholders’ A/c	Dr.		72,000
	To Bank A/c				72,000
	(Payment of interest to debentureholders’)
Mar. 31	Statement of Profit and Loss	Dr.		72,000
	To Debenture Interest A/c				72,000
	(Transfer of debenture interest to Statement of Profit and Loss)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed in the previous accounting year.