Question

Pass necessary Journal entries for the issue of debentures for the following transaction:

Kajal Ltd. issued 30,000, 11% Debentures of ₹ 100 each at a discount of 10%, redeemable at a premium of 5%.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		27,00,000
	To Debentures Application and Allotment A/c			27,00,000
	(Being application and allotment money received)
2.	Debentures Application and Allotment A/c   ...Dr.		27,00,000
	Loss on Issue of Debentures A/c   ...Dr.		4,50,000
	To 11% Debentures A/c			30,00,000
	To Premium on Redemption of Debentures A/c			1,50,000
	(Being debentures issued at 10% discount and redeemable at 5% premium)

Working note:

Face Value:

30,000 × ₹ 100 = ₹ 30,00,000

Discount on Issue:

₹ 30,00,000 × 10% = ₹ 3,00,000

Amount Received:

₹ 30,00,000 − ₹ 3,00,000 = ₹ 27,00,000

Premium on Redemption:

₹ 30,00,000 × 5% = ₹ 1,50,000

Loss on Issue of Debentures:

₹ 3,00,000 + ₹ 1,50,000 = ₹ 4,50,000