Question

Priya Ltd. (an unlisted company) issued 30,000, 8% debentures of ₹ 200 each on August 1, 2016 redeemable as follows:

On 31st March, 2020	6,000 Debentures
On 31st March, 2021	7,000 Debentures
On 31st March, 2022	7,000 Debentures
On 31st March, 2023	10,000 Debentures

It was decided to transfer ₹ 1,75,000 each to Debenture Redemption Reserve on March 31, 2017 and March 31, 2018 and balance required to be transferred to Debenture Redemption Reserve on March 31, 2019. Record necessary journal entries. Ignore entries for payment of interest.

Answer 1

Journal entries of Priya Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2017
Aug 1	Profit and Loss A/c   ...Dr.		1,75,000	-
	To Debenture Redemption Reserve A/c		-	1,75,000
	(Being amount transferred to DRR)
2018
Mar 31	Profit and Loss A/c   ...Dr.		1,75,000	-
	To Debenture Redemption Reserve A/c		-	1,75,000
	(Being amount transferred to DRR)
2019
Mar 31	Profit and Loss A/c   ...Dr.		2,50,000	-
	To Debenture Redemption Reserve A/c		-	2,50,000
	(Being balance transferred to DRR to meet requirement)
Apr 30	Debenture Redemption Investment A/c   ...Dr.		1,80,000	-
	To Bank A/c		-	1,80,000
	(Being 15% investment made for debentures)
2020
Apr 30	Debenture Redemption Investment A/c   ...Dr.		3,30,000	-
	To Bank A/c		-	3,30,000
	(Investment ₹ 3,30,000)
Mar 31	Debentures A/c   ...Dr.		12,00,000	-
	To Bank A/c		-	12,00,000
	(Being redemption of 6,000 debentures due)
Mar 31	Debenture Redemption Reserve A/c   ...Dr.		1,20,000	-
	To General Reserve A/c		-	1,20,000
	(Being DRR transferred to General Reserve for redeemed debentures)
2021
Mar 31	8% Debentures A/c   ...Dr.		14,00,000	-
	To Debentures holders A/c		-	14,00,000
	(Being redemption of 7,000 debentures due)
Mar 31	Debenture Redemption Reserve A/c   ...Dr.		1,40,000	-
	To General Reserve A/c		-	1,40,000
	(Being DRR transferred to General Reserve for redeemed debentures)
2022
Apr 30	Debenture Redemption Investment A/c   ...Dr.		90,000	-
	To Bank A/c		-	90,000
	(Investment ₹ 90,000)
Mar 31	Debentures holders A/c   ...Dr.		14,00,000	-
	To Bank A/c		-	14,00,000
	(Being payment made to debenture holders)
Mar 31	Debenture Redemption Reserve A/c   ...Dr.		1,40,000	-
	To General Reserve A/c		-	1,40,000
	(Transfer ₹1,40,000)
2023
Mar 31	Debentures A/c   ...Dr.		20,00,000	-
	Bank A/c   ...Dr.		3,00,000	-
	To Bank A/c		-	20,00,000
	To Debenture Redemption Investment A/c		-	3,00,000
	(Redeemed 10,000 debentures and encashed all investments ₹3,00,000)
Mar 31	Debenture Redemption Reserve A/c   ...Dr.		3,20,000	-
	To General Reserve A/c		-	3,20,000
	(Being transfer ₹ 3,20,000 to General reserve)