Question

Delta Ltd. invited applications for issuing 30,000, 9% debentures of ₹ 100 each at a premium of ₹ 30 per debenture. The full amount was payable on application. Applications were received for 40,000 debentures. Applications for 2,000 debentures were rejected, and the application money was refunded. Debentures were allotted to the remaining applicants on a pro rata basis.

Pass the necessary journal entries for the above transactions in the books of Delta Ltd.

Answer 1

Journal Entries in the books of Delta Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		52,00,000	-
	To Debenture Application & Allotment A/c		-	52,00,000
	(Being application money received for 40,000 debentures)
2.	Debenture Application & Allotment A/c   ...Dr.		52,00,000	-
	To 9% Debentures A/c (30,000 × 100)		-	30,00,000
	To Securities Premium A/c (30,000 × 30)		-	9,00,000
	To Bank A/c (Refund)		-	13,00,000
	(Being 30,000 debentures allotted and excess money refunded)

Working Notes:

1. Total Amount Received on Application:

Applications received = 40,000

Amount per debenture = Face Value + Premium

= 100 + 30

= 130

Total Received = 40,000 × 130

= 52,00,000

2. Refund for Rejected Applications:

Applications rejected = 2,000

Refund amount = 2,000 × 130

= 2,60,000

3. Amount to be Adjusted/Allotted:

Debentures to be issued: 30,000

Total Application Money for issued debentures = 30,000 × 130

= 39,00,000

4. Excess Application Money (Pro-rata):

Remaining applications = 40,000 − 2,000

= 38,000

Excess applications = 38,000 − 30,000

= 8,000

Since the full amount was payable on application, any excess received from those who were allotted debentures on a pro-rata basis must also be refunded.

Pro-rata refund = 8,000 × 130

= 10,40,000

Total Refund = Rejected + Excess Pro-rata

= 2,60,000 + 10,40,000

= ₹ 13,00,000