Question

B. Ltd. issued 1,000, 12% debentures of Rs 100 each on April 01, 2014 at a discount of 5% redeemable at a premium of 10%.

Give journal entries relating to the issue of debentures and debentures interest for the period ending March 31, 2015 assuming that interest is paid half yearly on September 30 and March 31 and tax deducted at source is 10%.

Answer 1

Date	Particulars					L.F.	Debit Amount Rs	Credit Amount Rs
2014
Apr. 01	Bank A/c				Dr.		95,000
	Loss on Issue on Debentures A/c				Dr.		15,000
		To 12% Debenture A/c						1,00,000
		To Premium on Redemption of Debentures A/c						10,000
	(Debenture issued at discount and redeemable at Premium)
Sept. 30	Debenture Interest A/c				Dr.		6,000
		To Income Tax Payable A/c						600
		To Debenture Holders A/c						5,400
	(Amount of interest on 12% debentures Rs 1,00,000 due for 6 months and 10% tax deducted at source)
Sept. 30	Debenture Holders A/c				Dr.		5,400
		To Bank A/c						5,400
	(Interest paid to Debenture Holders)
2015 Mar. 31	Debenture Interest A/c				Dr.		6,000
		To Income Tax Payable A/c						600
		To Debenture Holders A/c						5,400
	(Amount of interest on 12% Debentures Rs 1,00,000 due for 6 months and 10% tax deducted at source)
Mar. 31	Debenture Holders A/c				Dr.			5,400
		To Bank A/c						5,400
	(Interest paid to Debenture Holders)
Mar. 31	Profit and Loss A/c			Dr.			12,000
		To Debenture Interest A/c						12,000
	(Interest on debentures transferred to Profit and Loss Account)