Question

IFCI Ltd.(An All India Financial Institution) issued 10,00,000; 9% Debentures of ₹ 50 each on 1st April, 2011 redeemable on 1st April, 2019.  How much amount of Debentures Redemption Reserve is required before the redemption of debentures? Also, pass Journal entries for issue and redemption of debentures. 

Answer 1

Books of IFCI Ltd.
Journal 

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
April 01	Bank A/c	Dr.		5,00,00,000
	To 9% Debenture Application A/c				5,00,00,000
	(Debenture application money received)
April 01	9% Debenture Application A/c	Dr.		5,00,00,000
	To 9% Debentures A/c				5,00,00,000
	(Debenture application money transferred to debenture account)
2017
April 01	9% Debentures A/c	Dr.		5,00,00,000
	To Debentureholders’ A/c				5,00,00,000
	(Debentures due for redemption)
April 01	Debentureholders’ A/c	Dr.		5,00,00,000
	To Bank A/c				5,00,00,000
	(Amount due for redemption paid to debenture holders)

Notes:

1. All India Financial Institutions are exempted from creating DRR. Hence, in this case, no DRR is to be created.
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  every year from April 01, 2011 to March 31, 2017 as given below.

 

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2011
Mar. 31	Debenture Interest A/c	Dr.		45,00,000
	To Debentureholders’ A/c				45,00,000
	(Interest on 9% debentures due)
Mar.31	Debentureholders’ A/c	Dr.		45,00,000
	To Bank A/c				45,00,000
	(Payment of interest to debentureholders’)
Mar. 31	Statement of Profit and Loss	Dr.		45,00,000
	To Debenture Interest A/c				45,00,000
	(Transfer of debenture interest to Statement of Profit and Loss)