Question

On 1st April 2024, Yash Ltd. invited applications for issuing 20,000, 9% debentures of ₹ 100 each at a discount of 6%. These debentures were repayable at a premium of 10% after five years. The issue was fully subscribed, and the debentures were allotted in full to all the applicants. On 31st March, 2025, the company had a balance of ₹ 1,80,000 in its Securities Premium Account.

Pass necessary journal entries for the issue of 9% debentures and write off the loss on the issue of debentures. Also prepare ‘Loss on Issue of Debentures Account’.

Answer 1

Journal Entries in the Books of Yash Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2024
April 1	Bank A/c    ... Dr.		18,80,000	-
	To Debenture Application & Allotment A/c		-	18,80,000
	(Being application money received @ ₹ 94 per debenture)
April 1	Debenture Application & Allotment A/c   ... Dr.		18,80,000	-
	Loss on Issue of Debentures A/c   ... Dr.		3,20,000	-
	To 9% Debentures A/c		-	20,00,000
	To Premium on Redemption A/c		-	2,00,000
	(Being debentures issued at 6% discount and redeemable at 10% premium)
2025
Mar 31	Securities Premium A/c   ... Dr.		1,80,000	-
	Statement of Profit & Loss   ... Dr.		1,40,000	-
	To Loss on Issue of Debentures A/c		-	3,20,000
	(Being loss on issue of debentures written off)

 

Dr.	Loss on Issue of Debentures Account				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2024			2025
April 1	To 9% Debentures A/c (Discount)	1,20,000	Mar 31	By Securities Premium A/c	1,80,000
April 1	To Premium on Redemption A/c	2,00,000	Mar 31	By Statement of P&L	1,40,000
		3,20,000			3,20,000

Working Notes:

1. Face Value of Debentures = 20,000 × 100

= 20,00,000

2. Discount on Issue (6%) = `20,00,000 xx 6/100`

= 1,20,000

3. Premium on Redemption (10%) = `20,00,000 xx 10/100`

= 2,00,000

4. Total Loss on Issue = Discount + Premium on Redemption

= 1,20,000 + 2,00,000

= 3,20,000

5. Writing off the Loss: Total loss is ₹ 3,20,000. We first use the existing Securities Premium (₹ 1,80,000), and the balance will be charged to the Statement of Profit & Loss.

From Statement of P&L = 3,20,000 − 1,80,000

= 1,40,000