Question

Vedanta Ltd. bought a Building for ₹ 9,00,000 and the consideration was paid by issuing 10% Debentures of the nominal (face) value of ₹ 100 each at a discount of 10%.

Give Journal entries.

Answer 1

Journal Entries In the Books of Vedanta Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Building A/c   ...Dr.		9,00,000
	To Vendor A/c			9,00,000
	(Building purchased for ₹ 9,00,000)
2.	Vendor A/c   ...Dr.		9,00,000
	Discount on Issue of Debentures A/c   ...Dr.		1,00,000
	To 10% Debentures A/c			10,00,000
	(10,000, 10% Debentures of ₹ 100 each issued at 10% discount to vendor)

Working note:

Issue price of each debenture:

₹ 100 − 10% = ₹ 90

Number of debentures issued:

`(9,00,000)/90 = 10,000` Debentures

Face value of debentures:

10,000 × ₹ 100 = ₹ 10,00,000

Discount on Issue of Debentures:

₹ 10,00,000 − ₹ 9,00,000 = ₹ 1,00,000