Question

Pass necessary Journal entries in the books of RR Ltd. for issue of debentures in the following case:

Issued 5,000, 11% Debentures of ₹ 100 each at a premium of 10%, redeemable at a premium of 5% after 5 years.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		5,50,000
	To Debentures Application and Allotment A/c			5,50,000
	(Being application and allotment money received)
2.	Debentures Application and Allotment A/c   ...Dr.		5,50,000
	Loss on Issue of Debentures A/c   ...Dr.		25,000
	To 11% Debentures A/c			5,00,000
	To Securities Premium A/c			50,000
	To Premium on Redemption of Debentures A/c			25,000
	(Being 11% debentures issued at 10% premium and redeemable at 5% premium after 5 years)

Working note:

Face Value:

5,000 × ₹ 100 = ₹ 5,00,000

Premium on Issue:

₹ 5,00,000 × 10% = ₹ 50,000

Amount Received:

₹ 5,00,000 + ₹ 50,000 = ₹ 5,50,000

Premium on Redemption:

₹ 5,00,000 × 5% = ₹ 25,000

Loss on Issue of Debentures: ₹ 25,000