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प्रश्न
Long Answer Question
Explain the different terms for the issue of debentures with reference to their redemption.
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उत्तर
The different terms for the issue of debentures with reference to their redemption can be the combinations of at par, at premium and at discount. Normally, the debentures are not redeemable at discount. The permutation and the combination of the various terms of issue and redemption of debentures give rise to following six situations:
- Issue at Par, Redeemable at Par.
- Issue at Premium, Redeemable at Par.
- Issue at Discount, Redeemable at Par.
- Issue at Par, Redeemable at Premium.
- Issue at Premium, Redeemable at Premium.
- Issue at Discount Redeemable at Premium.
Issue at Par and Redeemable at Par- When the debentures are issued and are redeemed at their face value, then the following Journal entry is passed.
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Bank A/c |
Dr. (with the amount received) |
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To Debenture Application A/c |
(with the face value) |
|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
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To Debenture A/c |
|
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(Application money transferred to Debenture Account) |
||
2. Issue at Premium and Redeemable at Par- When the debentures are issued at premium and are redeemable at par, then the following Journal entry is passed. As premium is a gain for a company so it is credited in the Journal entry.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
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|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
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To Debenture A/c |
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To Securities Premium A/c |
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(Debentures issued at premium and redeemable at par) |
||
- Issue at Discount and Redeemable at Par- When the debentures are issued at discount and are redeemable at par, then the following Journal entry is passed. As discount is a loss for a company so it is debited in the Journal entry.
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Bank A/c |
Dr. |
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
||
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Debenture Application A/c |
Dr. |
|
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Discount on Issue of Debenture A/c |
Dr. |
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To Debenture A/c |
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(Debentures issued at discount and redeemable at par) |
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- Issue at Par and Redeemable at Premium- When debentures are issued at par and redeemable at premium, then the following Journal entry is passed. In such case, the company did not suffer any loss at the time of issue but there will be loss at the time of redemption.
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Bank A/c |
Dr. |
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|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
|
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Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
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To Debenture A/c |
(with the face value of the debentures) |
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
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(Debentures issued at par and redeemable at premium) |
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5. Issued at Premium and Redemption at Premium- When the debentures are issued and redeemable at premium, then the following Journal entry is passed.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
|
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Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
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To Debenture A/c |
(with the face value of the debentures) |
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To Securities Premium A/c |
(with the amount of premium on issue) |
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
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(Debentures issued at premium and redeemable at premium) |
||
- Issue of Discount and Redemption at Premium-When the debentures are issued at discount and redeemable at premium, then the following Journal entry is passed.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
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Loss on Issue of Debenture A/c |
Dr. (with the amount of discount on issue plus amount of premium on redemption) |
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|
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To Debenture A/c |
(with the face value of the debentures) |
|
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
|
(Debentures issued at discount and redeemable at premium) |
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संबंधित प्रश्न
Short Answer Question
State the meaning of ‘Debentures issued as a Collateral Security.
Short Answer Question
What is meant by ‘Issue of debentures for Consideration other than Cash’?
Short Answer Question
What is ‘Capital Reserve’?
B.Ltd. purchased assets of the book value of Rs 4,00,000 and took over the liability of Rs 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at Rs,3,80,000, be paid by issuing debentures of Rs 100 each.
What Journal entries will be made in the following three cases, if debentures are issued: (a) at par; (b) at discount; (c) at premium of 10%? It was agreed that any fraction of debentures be paid in cash.
A company issues the following debentures:
- 10,000 12% debentures of Rs.100 each at par but redeemable at premium of 5% after 5 years;
- 10,000 12% debentures of Rs.100 each at a discount of 10% but redeemable at par after 5 years;
- 5,000 12% debentures of Rs.1,000 each at a premium of 5% but redeemable at par after 5 years;
- 1,000 12% debentures of Rs.100 each issued to a supplier of machinery costing Rs.95,000. The debentures are repayable after 5 years and
- 300 12% debentures of Rs.100 each as a collateral security to a bank that has advanced a loan of Rs.25,000 to the company for a period of 5 years.
Pass the journal entries to record the issue of debentures.
Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was received .
Pass Journal entries .
X Ltd . issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months.
Pass Journal entries.
Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.
Journalise the following:
(a) A debenture issued at ₹95, repayable at ₹ 100.
(b) A debenture issued at ₹95, repayable at ₹ 105.
(c) A debenture issued at ₹95, repayable at ₹ 105.
The face value of debenture is ₹ 100 in each of the above cases.
Pass necessary Journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹ 80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.
On 1st April, 2015, V.V.L.Ltd issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%, redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.
Global Ltd. issued 10,000, 8% Debentures of ₹ 100 each redeemable in four equal instalments by draw of lots from the end of 3 years at a premium of ₹ 9.
Pass the Journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on issue of Debentures Account.
On 1st April, 2017, Solar Power Ltd. issued 10,000, 8% Debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made. The company had balance in Securities Premium Reserve of ₹ 80,000.
Prepare the Balance Sheet (extract) as at 31st March, 2018.
The word 'debenture' has been derived from which Latin word (which means to borrow)?
Premium on redemption is shown under which head until debentures are redeemed?
Which of the following given statement is correct.
Statement 1 - "Debenture is written instrument acknowledging a debt under the common seal of the company"
Statement 2 - Debenture is oral instrument acknowledging a debt under the common seal of the company"
Which of the following statement is true?
Loss on issue of debentures is treated as ______.
Debenture is ______.
