Question

On 1st April, 2016, following were the balances of Blue Bird Ltd.:

10% Debentures (redeemable on 30th September, 2017)	₹ 15,00,000
Debentures Redemption Reserve	₹   2,00,000

The company met the requirements of the Companies Act, 2013 regarding Debentures Redemption Reserve and Investment and redeemed the debentures.

Pass necessary Journal entries for the above transactions in the books of the company.

Answer 1

Journal

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2017
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Surplus amount is transferred to DRR)
April 30	Debenture Redemption Investment A/c	Dr.		2,25,000
	To Bank A/c				2,25,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)
Sept. 30	10% Debentures A/c	Dr.		15,00,000
	To Debentureholders A/c				15,00,000
	(10% Debentures due for redemption)
Sept. 30	Bank A/c	Dr.		2,25,000
	To Debenture Redemption Investment A/c				2,25,000
	(Investment made in specified securities, now encashed)
Sept. 30	Debentureholders' A/c	Dr.		15,00,000
	To Bank A/c				15,00,000
	(Amount paid to debentureholders)
Sept. 30	Debenture Redemption Reserve A/c	Dr.		3,75,000
	To General Reserve A/c				3,75,000
	(DRR amount is transferred to General Reserve)

Working Notes:

Amount for DRR (25% of Debentures Issued) = `15,00,000 xx 25/100` =	Rs 3,75,000
Less : Amount already exist in DRR =	Rs 200000
DRR to be created for redemption =	Rs 1,75,000

Investment made in Specified Securities 

`= 15,00,000 xx 15/100` = Rs 2,25,000

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed a year before redemption year.

Note: 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 as given below.

Journal

Date	Particular		L.F.	Debit Amount (₹)	Credit Amount (₹)
2017-18
Mar. 31	Debenture Interest A/c	Dr.		75,000
	To Debentureholders’ A/c				75,000
	(Interest on 10% debentures due)
Mar. 31	Debentureholders’ A/c	Dr.		75,000
	To Bank A/c				75,000
	(Payment of interest to debentureholders’)
Mar. 31	Statement of Profit and Loss	Dr.		75,000
	To Debenture Interest A/c				75,000
	(Transfer of debenture interest to Statement of Profit and Loss)