Question

Bisco Ltd. issued 10,000, 9% Debentures of ₹ 100 each at a discount of 4%, redeemable at a premium of 8% after five years. The company had a balance of ₹ 80,000 in Securities Premium Account and ₹ 1,00,000 in Statement of Profit and Loss.

Give the journal entry to write off the Loss on the issue of Debentures.

Answer 1

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Securities Premium A/c Dr.		80,000	-
	Statement of Profit and Loss Dr.		40,000	-
	To Loss on Issue of Debentures A/c		-	1,20,000
	(Being loss on issue of debentures written off)

Working note:

Total Face Value of Debentures = 10,000 × 100

= 10,00,000

Discount on Issue (4%) = `10,00,000 xx 4/100`

= 40,000

Premium on Redemption (8%) = `10,00,000 xx 8/100`

= 80,000