Question

Wellness Ltd. has paid-up share capital of ₹ 1,00,00,000 (divided into 5,00,000 Equity Shares of ₹ 20 each) and 10,000, 7% Debentures of ₹ 200 each.

On 1st July, 2025, it further issued 7% Debentures of ₹ 1,65,00,000 at a premium of 10% redeemable at 25% premium to meet the long-term funds requirement. The issue price was payable along with application.

Balance in Securities Premium Account after the issue of debentures is ₹ 25,00,000. Loss for the year ended 31st March, 2026 is ₹ 10,00,000.

You are required to:

1. Pass Journal entries for issue of Debentures.
2. Prepare Loss on Issue of Debentures Account.
3. Pass Journal entries for interest on debentures, if interest is payable on 30th September and 31st March each year.

Answer 1

(i)

Journal Entries for Issue of Debentures
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025 July 1	Bank A/c   ...Dr.		1,65,00,000
	Loss on Issue of Debentures A/c   ...Dr.		22,50,000
	To 7% Debentures A/c			1,50,00,000
	To Premium on Redemption of Debentures A/c			37,50,000
	(Being 7% Debentures of ₹ 1,50,00,000 issued at 10% premium and redeemable at 25% premium)
2025 July 1	Securities Premium A/c   ...Dr.		22,50,000
	To Loss on Issue of Debentures A/c			22,50,000
	(Being loss on issue of debentures written off against Securities Premium)

Working Note:

Issue price of debentures:

₹ 1,50,00,000 + 10% = ₹ 1,65,00,000

Premium on Redemption:

₹ 1,50,00,000 × 25% = ₹ 37,50,000

Premium on Issue:

₹ 1,50,00,000 × 10% = ₹ 15,00,000

Loss on Issue:

₹ 37,50,000 − ₹ 15,00,000 = ₹ 22,50,000

(ii) 

Loss on Issue of Debentures Account
Dr.	Particulars	Amount (₹)	Cr.	Particulars	Amount (₹)
2025 July 1	To Premium on Redemption of Debentures A/c	37,50,000	2025 July 1	By Securities Premium A/c	15,00,000
			2025 July 1	By Securities Premium A/c	22,50,000
	Total	37,50,000		Total	37,50,000

Loss on Issue of Debentures = ₹ 37,50,000 as shown in the answer when the premium payable on redemption is considered.

(iii) Journal Entries for Interest on Debentures

Interest payable on 30th September, 2025

Existing Debentures:

₹ 20,00,000 × 7% × 6/12 = ₹ 70,000

New Debentures:

₹ 1,50,00,000 × 7% × `3/12` = ₹ 2,62,500

Total Interest = ₹ 70,000 + ₹ 2,62,500 = ₹ 3,32,500

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025 Sept. 30	Debenture Interest A/c   ...Dr.		3,32,500
	To Debentureholders A/c			3,32,500
	(Being interest on debentures due)
2025 Sept. 30	Debentureholders A/c   ...Dr.		3,32,500
	To Bank A/c			3,32,500
	(Being debenture interest paid)

Interest payable on 31st March, 2026

Total Debentures:

₹ 20,00,000 + ₹ 1,50,00,000 = ₹ 1,70,00,000

Interest:

₹ 1,70,00,000 × 7% × `6/12` = ₹ 5,95,000

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2026 March 31	Debenture Interest A/c   ...Dr.		5,95,000
	To Debentureholders A/c			5,95,000
	(Being interest on debentures due)
2026 March 31	Debentureholders A/c   ...Dr.		5,95,000
	To Bank A/c			5,95,000
	(Being debenture interest paid)
2026 March 31	Statement of Profit & Loss A/c   ...Dr.		9,27,500
	To Debenture Interest A/c			9,27,500
	(Being total debenture interest transferred to Statement of Profit & Loss)

Total interest for the year = ₹ 3,32,500 + ₹ 5,95,000 = ₹ 9,27,500.