Question

Pushpak Ltd. (an unlisted company) issued 20,000, 9% Debentures of ₹ 100 each on 1st April, 2019 redeemable at 5% premium in instalments. It redeemed the debentures as follows:

On 1st March 2023	2,000 Debentures
On 1st October 2023	4,000 Debentures
On 1st March 2024	5,000 Debentures

Pass Journal entries for issue and redemption of debentures.

Answer 1

Journal entries in the Books of Pushpak Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2019
1 April	Bank A/c   ...Dr.		20,00,000	-
	To 9% Debentures A/c		-	20,00,000
	(Being debentures issued at par)
2020
31 March	Loss on Issue of Debentures A/c   ...Dr.		1,00,000	-
	To Statement of Profit & Loss A/c		-	1,00,000
	(Being loss on issue of debentures written off)
2022
31 March	Profit & Loss Appropriation A/c   ...Dr.		2,00,000	-
	To Debenture Redemption Reserve A/c		-	2,00,000
	(Being amount transferred to DRR)
30 April	Debenture Redemption Investment A/c   ...Dr.		30,000	-
	To Bank A/c		-	30,000
	(Being DRI made @15% of ₹2,00,000 due in March 2023)
2023
1 March	9% Debentures A/c   ...Dr.		2,00,000	-
	Premium on Redemption A/c   ...Dr.		10,000	-
	To Debentureholders A/c		-	2,10,000
	(Being 2,000 debentures redeemed @5% premium)
31 March	Debenture Redemption Reserve A/c   ...Dr.		20,000	-
	To General Reserve A/c		-	20,000
	(Being amount transferred to general reserve)
30 April	Debenture Redemption Investment A/c   ...Dr.		1,05,000	-
	To Bank A/c		-	1,05,000
	(Being DRI made @15% of ₹7,00,000 due in Oct 2023 & Mar 2024)
1 October	9% Debentures A/c   ...Dr.		4,00,000	-
	Premium on Redemption A/c   ...Dr.		20,000	-
	To Debentureholders A/c		-	4,20,000
	(Being 4,000 debentures redeemed @5% premium)
1 October	Debenture Redemption Reserve A/c   ...Dr.		40,000	-
	To General Reserve A/c		-	40,000
	(Being amount transferred to general reserve)
2024
1 March	9% Debentures A/c   ...Dr.		5,00,000	-
	Premium on Redemption A/c   ...Dr.		25,000	-
	To Debentureholders A/c		-	5,25,000
	(Being redemption of 5,000 debentures at 5% premium)
1 March	Debenture Redemption Reserve A/c   ...Dr.		50,000	-
	To General Reserve A/c		-	50,000
	(Being amount transferred to general reserve)

Working Note:

1) Total Debentures Issued: 20,000 × ₹ 100 = ₹ 20,00,000

2) Premium on Redemption @5%: ₹ 20,00,000 × 5% = ₹ 1,00,000

3) Debenture Redemption Schedule:

• 01/03/2023: 2,000 debentures → ₹ 2,00,000
• 01/10/2023: 4,000 debentures → ₹ 4,00,000
• 01/03/2024: 5,000 debentures → ₹ 5,00,000
  Total redemption = ₹ 11,00,000

4) DRI (Debenture Redemption Investment @15%):

• 15% of ₹ 2,00,000 (due 2022–23) = ₹ 30,000 → Invested on 30/04/2022
• 15% of ₹ (4,00,000 + 5,00,000) = ₹ 1,35,000 → ₹ 1,05,000 invested on 30/04/2023

5) DRR (Debenture Redemption Reserve @ 10%):

10% of ₹ 20,00,000 = ₹ 2,00,000 → Transferred on 31/03/2022

6) Transfer from DRR to General Reserve:

• 01/03/2023: `(₹2,00,000)/(20,000) × 2,000` = ₹20,000
• 01/10/2023: `(₹2,00,000)/(20,000)` × 4,000 = ₹40,000
• 01/03/2024: `(₹2,00,000)/(20,000)` × 5,000 = ₹50,000

7) DRI not encashed:

As redemption of all debentures is not completed in one go, DRI remains invested until the final redemption (as per Companies Act).