Question

X Ltd. issued on 1st April, 2024, 50,000, 7% Debentures of ₹ 100 each at a 4% discount redeemable after five years at a premium of ₹ 10. All the debentures were subscribed. During the year ended 31st March, 2025, the company earned a profit of ₹ 1,20,000. It has a balance of ₹ 5,50,000 in Securities Premium.

Pass the Journal entries and prepare an extract of Balance Sheet as of 31st March, 2025 showing Loss on Issue of Debentures.

Answer 1

In the books of X Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2024
Apr. 1	Bank A/c (50,000 × 96)   ...Dr.		48,00,000	-
	To Debenture Application & Allotment A/c		-	48,00,000
	(Being application money received.)
Apr. 1	Debenture Application & Allotment A/c   ...Dr.		48,00,000	-
	Discount on Issue of Debenture A/c (50,000 × 4)   ...Dr.		2,00,000	-
	Loss on Issue of Debentures A/c   ...Dr.		5,00,000	-
	To 7% Debenture A/c (50,000 × 100)		-	50,00,000
	To Premium on Redemption A/c (50,000 × 10)		-	5,00,000
	(Being application money transfer to Debenture A/c.)
2025
Mar. 31	Securities Premium A/c   ...Dr.		5,50,000	-
	Statement of Profit & Loss A/c   ...Dr.		1,50,000	-
	To Loss on Issue of Debenture A/c		-	7,00,000
	(Being loss on issue of debenture written off.)

 

Balance Sheet as of 31st March, 2025.
	Particulars	Note No.	Amount (₹)
I.	EQUITY & LIABILITIES
	1. Shareholder’s Funds:
	(a) Reserve and Surplus	1	(30,000)
	2. Non-Current Liabilities
	(a) Long-term Borrowings	2	55,00,000

Working Notes:

	Particulars	Amount (₹)	Amount (₹)
1.	Reserve and Surplus
	Securities Premium	5,50,000
	Less: Loss on Issue of Debentures	(5,50,000)	Nil
	Surplus, i.e, balance in Statement of Profit & Loss	1,20,000
	Less: Loss on Issue of Debentures	(1,50,000)	(30,000)
2.	Long-term Borrowings
	50,000; 7% Debentures @ ₹100 each	50,00,000
	Premium on Redemption	5,00,000	55,00,000