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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.
|
Bank A/c |
Dr. (with the amount received) |
|
|
|
To Debenture Application A/c |
(with the face value) |
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
|
To Debenture A/c |
|
|
(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.
|
Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
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To Debenture A/c |
|
|
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To Securities Premium A/c |
|
|
(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.
|
Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
||
|
Debenture Application A/c |
Dr. |
|
|
Discount on Issue of Debenture A/c |
Dr. |
|
|
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To Debenture A/c |
|
|
(Debentures issued at discount and redeemable at par) |
|
|
- 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.
|
Bank A/c |
Dr. |
|
|
|
To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
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) |
|
(Debentures issued at par and redeemable at premium) |
|
|
5. Issued at Premium and Redemption at Premium- When the debentures are issued and redeemable at premium, then the following Journal entry is passed.
|
Bank A/c |
Dr. |
|
|
|
To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
|
|
|
To Debenture A/c |
(with the face value of the debentures) |
|
|
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) |
|
(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.
|
Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
|
|
|
Debenture Application A/c |
Dr. |
|
|
Loss on Issue of Debenture A/c |
Dr. (with the amount of discount on issue plus amount of premium on redemption) |
|
|
|
To Debenture A/c |
(with the face value of the debentures) |
|
|
To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
|
(Debentures issued at discount and redeemable at premium) |
|
|
APPEARS IN
संबंधित प्रश्न
What is meant by ‘Issue of debenture at discount and redeemable at premium’?
What accounting treatment is given to the issue of debentures in the books of accounts?
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 a premium of 10%? It was agreed that any fraction of debentures be paid in cash.
(Note: Goodwill Rs. 30,000)
ABC Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable in full along with the application. Applications were received for 60,000 debentures . Debentures were allotted and excess application money was refunded. Pass Journal entries in the books of the company.
Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a bill of exchange and for the balance, the company issued 9% debentures of ₹ 100 each at a premium of 10% in favor of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
'Sangam Woollens Ltd.', Ludhiana, are the manufacturers and exporters of woollen garments. The company decided to distribute free of cost woollen garments to 10 villages of Lahaul and Spiti District of Himachal Pradesh. The company also decided to employ 50 young persons from these villages in its newly established factory. The company issued 40,000 Equity Shares of ₹ 10 each and 1,000, 9% Debentures of ₹ 100 each to the vendor for the purchase of machinery of ₹ 5,00,000. Pass necessary Journal entries.
Pass journal entries in the following cases:
(a) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 5% redeemable at par.
(b) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 10% redeemable at par.
(c) A Co.Ltd. issued ₹40,000; 12% Debentures at par redeemable at 10% premium.
(d) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 5% and redeemable at 5% premium.
(e) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 10% redeemable at 110%.
Journalise the following transaction at the time of issue of 12% Debentures:
Nandan Ltd. issued ₹90,000, 12% Debentures of ₹ 100 each at a discount of 5% redeemable at 110%.
Kitply Ltd.issued ₹ 2,00,000, 10% Debentures at a discount of 5% .The terms of issue provide the repayment at the end of 4 years . Kitply Ltd.has a balance of ₹ 5,00,000 in Securities Premium Reserve . The company decided to write off discount on issue of debentures from Securities Premium Reserve in the first year.
Pass the journal entry.
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.
X Co. Ltd. purchased assets worth Rs.28,80,000. It issued debentures of Rs. 100 each at a discount of 4 per cent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is ______.
When debentures are issued at par and are redeemable at a premium, the loss on such an issue is debited to ______.
Premium on redemption is shown under which head until debentures are redeemed?
When the debenture of face value of ₹ 100 is issued at ₹ 100 is called, issue off debenture at ______.
Debentures are considered as ______ equity.
Interest on Debentures is a charge against ______.
Pick the odd one out.
Debenture is ______.
