Question

BG. Ltd. issued 2,000, 12% debentures of Rs.100 each on 1st April 2012. The issue was fully subscribed. According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%. Pass necessary journal entries related to the debenture interest for the half-yearly ending 31st March, 2013 and transfer of interest on debentures of the year to the Statement of Profit & Loss.

Answer 1

                                                                                       Journal

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
2012 Sept.30	Debenture Interest A/c (200000xx12/100xx 6/12)   Dr.     To Income Tax Payable A/c (12,000 ×10%)      To Debenture holders’ A/c (Being amount of interest due for 6 months and tax deducted at source)		12,000	1,200 10,800
Sept. 30	Debenture holders’ A/c     Dr.      To Bank A/c (Being interest paid to the debenture holders)		10,800	10,800
Sept.30	Income Tax Payable A/c   Dr.     To Bank A/c (Being payment of tax on interest on denatures)		1,200	1,200
2013 Mar.31	Debenture Interest A/c  `(200000xx12/100xx6/12)`   Dr.    To Income Tax Payable A/c (12,000 ×10%)     To Debenture holders’ A/c (Being amount of interest due for 6 months and tax deducted at source)		12,000	1,200 10,800
Mar.31	Debenture holders’ A/c   Dr.     To Bank A/c (Being interest paid to the debenture holders)		10,800	10,800
Mar.31	Income Tax Payable A/c   Dr.    To Bank A/c (Being payment of tax on interest on denatures)		1,200	1,200
Mar.31	Statement of Profit and Loss A/c    Dr.   To interest on debentures A/c (Being interest or debentures transferred to statement of profit and loss)		24,000	24,000