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Apollo Ltd.Issued 21,000; 8% Debentures of ₹ 100 Each on 1st April, 2013 Redeemable at a Premium of 8% on 30th June, 2019. - Accountancy

Journal Entry

Apollo Ltd.issued 21,000; 8% Debentures of ₹ 100 each on 1st April, 2013 redeemable at a premium of 8% on 30th June, 2019. The company decided to transfer the required amount to Debentures Redemption Reserve in three equal annual instalments starting with 31st March, 2017. Required investment was made in Government Securities on 30th April, 2019. Ignore interest on debentures and also investment.
Pass necessary Journal entries regarding issue, transfer to DRR, investment, and redemption of debentures.

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Solution

Books of Apollo Ltd.
Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2013

 

 

 

 

April 01

Bank A/c

Dr.

 

21,00,000

 

 

To 8% Debenture Application A/c

 

 

21,00,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

8% Debenture Application A/c

Dr.

 

21,00,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

1,68,000

 

 

To 8% Debentures A/c

 

 

21,00,000

 

To Premium on Redemption A/c

 

 

1,68,000

 

(21,000 8% Debentures of Rs 100 each issued with the term repayable at 8% Premium)

 

 

 

 

 

 

 

 

2017

 

 

 

 

March 31

Statement of Profit and Loss

Dr.

 

1,75,000

 

 

To Debenture Redemption Reserve A/c

 

 

1,75,000

 

(Profit transferred to Debenture Redemption Reserve)

 

 

 

 

 

 

 

 

2018

 

 

 

 

March 31

Statement of Profit and Loss

Dr.

 

1,75,000

 

 

To Debenture Redemption Reserve A/c

 

 

1,75,000

 

(Profit transferred to Debenture Redemption Reserve)

 

 

 

 

 

 

 

 

2019

 

 

 

 

Mach 31

Statement of Profit and Loss

Dr.

 

1,75,000

 

 

To Debenture Redemption Reserve A/c

 

 

1,75,000

 

(Profit transferred to Debenture Redemption Reserve)

 

 

 

 

 

 

 

 

April 30 Debenture Redemption Investment A/c Dr.   3,15,000  
   To Bank A/c       3,15,000
  (Investment is made in government securities equal to 15% of the value of debentures redeemed)        
           

June 30

8% Debenture A/c

Dr.

 

21,00,000

 

 

Premium on Redemption Reserve A/c

Dr.

 

1,68,000

 

 

To Debentureholders’ A/c

 

 

22,68,000

 

(Debenture due for redemption along with premium)

 

 

 

 

 

 

 

 

  Bank A/c Dr.   3,15,000  
    To Debenture Redemption Investment A/c       3,15,000
  (Investment made in specifed securities now encashed)        
           

 

Debentureholders’ A/c

Dr.

 

22,68,000

 

 

To Bank A/c

 

 

22,68,000

 

(Payment made to debentureholders)

 

 

 

 

 

 

 

 

 

Debenture Redemption Reserve A/c

Dr.

 

5,25,000

 

 

To General Reserve A/c

 

 

5,25,000

 

(Debenture Redemption Reserve transferred to General Reserve)

 

 

 

Working Note:
Calculation of Amount transferred to DRR 

As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be redeemed, so, the amount of DRR will be:

Amount for DRR (25 % of Debentures Issued)

`= 2100000 xx 25/100` = Rs 525000

 Annual Instalments for three years `=525000/3` = Rs 175000 

NoteR to be created =6,00,000 × 25100=Rs 1,50,000
1. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year. 

Concept: Creation of Debenture Redemption Reserve
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 2
Chapter 3 Redemption of Debentures
Exercise | Q 14 | Page 30
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