A company issues the following debentures:
(i) 10,000, 12% debentures of Rs 100 each at par but redeemable at premium of 5% after 5 years;
(ii) 10,000, 12% debentures of Rs 100 each at a discount of 10% but redeemable at par after 5 years;
(iii) 5,000, 12% debentures of Rs 1,000 each at a premium of 5% but redeemable at par after 5 years;
(iv) 1,000, 12% debentures of Rs 100 each issued to a supplier of machinery costing Rs 95,000. The debentures are repayable after 5 years; and
(v) 300, 12% debentures of Rs 100 each as a collateral security to a bank which has advanced a loan of Rs 25,000 to the company for a period of 5 years.
Pass the journal entries to record the: (a) issue of debentures; and (b) repayment of debentures after the given period.
Solution
In the books of …………..
Journal
a) Issue of Debentures
S. No. 
Particulars 
L.F. 
Debit Amount Rs 
Credit Amount Rs 

(i) 
Bank A/c 
Dr. 

10,00,000 




To 12% Debenture Application A/c 


10,00,000 


(Debenture Application money of 10,000 12% debentures @ 100 each received) 





12% Debenture Application A/c 
Dr. 

10,00,000 



Loss on Issue of Debenture A/c 
Dr. 

50,000 




To 12% Debenture A/c 


10,00,000 



To Premium on Redemption of Debenture A/c 


50,000 


(Debenture Application money of 10,000 12% debentures @ Rs 100 each transferred to 12% Debentures Account and the Debentures are issued with term of repayable at 5% premium) 




(ii) 
Bank A/c 
Dr. 

9,00,000 




To Debenture Application and Allotment A/c 


9,00,000 


(Debenture Application money received excluding discount on issue) 





12% Debenture Application & Allotment A/c 
Dr. 

9,00,000 



Discount on Issue of Debenture A/c 
Dr. 

1,00,000 




To Debentures A/c 


10,00,000 


(Debenture Allotment made due) 




(iii) 
Bank A/c 
Dr. 

52,50,000 




To Debenture Application and Allotment A/c 


52,50,000 


(Debenture Application money received) 





Debenture Application and Allotment A/c 
Dr. 

52,50,000 




To Debenture A/c 


50,00,000 



To Security Premium A/c 


2,50,000 


(Allotment of debenture at premium) 




(iv) 
Machinery A/c 
Dr. 

95,000 




To Vender A/c 


95,000 


(Machinery purchased from supplier) 






Vender A/c 
Dr. 

95,000 



Discount on Issue of Debenture 
Dr. 

5,000 




To 12% Debenture A/c 


1,00,000 


(Debenture issue at discount to vender of machinery) 




(v) 
12% Debenture Suspense A/c 
Dr. 

30,000 




To Debenture A/c 


30,000 


(300, 12% Debentures of Rs 100 each issued as collateral security to the bank against a loan of Rs 25,000) 

b) Repayment of Debentures
S.No. 
Particulars 
L.F. 
Debit Amount Rs 
Credit Amount Rs 

(i) 
12% Debentures A/c 
Dr. 

10,00,000 



Premium on Redemption of Debenture A/c 
Dr. 

50,000 




To Debenture Holders A/c 


10,50,000 


(Amount due on redemption of debentures) 





Debenture Holders A/c 
Dr. 

10,50,000 




To Bank A/c 


10,50,000 


(Payment made to Debenture Holders) 




(ii) 
12% Debenture A/c 
Dr. 

10,00,000 




To Debenture Holders A/c 


10,00,000 


(Amount due on redemption of debentures) 





Debenture Holders A/c 
Dr. 

10,00,000 




To Bank A/c 


10,00,000 


(Payment made to Debenture Holders) 




(iii) 
12% Debenture A/c 
Dr. 

50,00,000 




To Debenture Holders A/c 


50,00,000 


(Amount due on redemption of debentures) 





Debenture Holders A/c 
Dr. 

50,00,000 




To Bank A/c 


50,00,000 


(Payment made to Debenture Holders) 




(iv) 
12% Debenture A/c 
Dr. 

1,00,000 




To Vender A/c 


1,00,000 


(Amount due to vender) 





Vender A/c 
Dr. 

1,00,000 




To Bank 


1,00,000 


(Payment made to vender) 




(v) 
12% Debenture A/c 
Dr. 

30,000 




To Debenture Suspense A/c 


30,000 


(Debenture and debenture Suspense Account closed) 