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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%. - Accountancy

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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.

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Solution

                                                                                       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

 

 

Concept: Interest on Debentures
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