Question

Krishna Ltd. (an unlisted company) has issued 20,000, 9% Debentures of ₹ 100 each of which half the amount is due for redemption on March 31st 2023. It was decided to invest the required amount towards Debenture Redemption Investment. The company has in its Debenture Redemption Reserve Account a balance of ₹ 1,20,000 on 31st March, 2022. Record the necessary journal entries for the Redemption of Debentures.

Answer 1

Journal entries of Krishna Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2022
March 31	Profit & Loss A/c   ...Dr.		80,000	-
	To Debenture Redemption Reserve A/c		-	80,000
	(Being amount transferred to DRR for upcoming redemption)
April 1	Debenture Redemption Investment A/c   ...Dr.		1,50,000	-
	To Bank A/c		-	1,50,000
	(Being 15% of due amount invested as per Companies Act)
2023
March 31	9% Debentures A/c   ...Dr.		10,00,000	-
	To Debentureholders A/c		-	10,00,000
	(Being half of ₹20,00,000 debentures due for redemption)
March 31	Debentureholders A/c   ...Dr.		10,00,000	-
	To Bank A/c		-	10,00,000
	(Being payment made to debentureholders)
March 31	Debenture Redemption Reserve A/c   ...Dr.		1,00,000	-
	To General Reserve A/c		-	1,00,000
	(Being 50% of DRR transferred to General Reserve)

Working Note:

1. Total Debentures Issued
   20,000 × ₹ 100 = ₹ 20,00,000
2. Debentures Due for Redemption (50%)
   ₹ 20,00,000 × 50% = ₹ 10,00,000
3. Debenture Redemption Investment @15%
   ₹ 10,00,000 × 15% = ₹ 1,50,000
4. Total DRR Required (10% of ₹20,00,000)
   ₹ 20,00,000 × 10% = ₹ 2,00,000
   Already Available: ₹ 1,20,000
   Additional Transfer on 31st March 2022 = ₹ 2,00,000 – ₹ 1,20,000 = ₹ 80,000
5. Transfer to General Reserve
   ₹ 2,00,000 × 50% = ₹ 1,00,000