Question

Diwakar enterprises Ltd. Issued 10,00,000, 6% debentures on April 1, 2016. Interest is paid on September 30, 2016 and March 31, 2017.

Record necessary journal entries assuming that income tax is deducted @10% of the amount of interest.

Answer 1

Journal of Diwakar Enterprises Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2016
Sept 30	Debenture Interest A/c   ...Dr.		30,000	-
	To Debentureholders A/c		-	27,000
	To TDS Payable A/c		-	3,000
	(Being interest due on 6% debentures and tax deducted at source @ 10%)
Sept 30	Debentureholders A/c   ...Dr.		27,000	-
	TDS Payable A/c   ...Dr.		3,000	-
	To Bank A/c		-	30,000
	(Being payment made to debentureholders and tax deposited into the government account)
2017
Mar 31	Debenture Interest A/c   ...Dr.		30,000	-
	To Debentureholders A/c		-	27,000
	To TDS Payable A/c		-	3,000
	(Being half-yearly interest due and tax deducted)
Mar 31	Debentureholders A/c   ...Dr.		27,000	-
	TDS Payable A/c   ...Dr.		3,000	-
	To Bank A/c		-	30,000
	(Being payment made for interest and tax clearance)
Mar 31	Statement of Profit & Loss		60,000	-
	To Debenture Interest A/c		-	60,000
	(Being total interest for the year transferred to Statement of P & L)

Working Note:

Total Principal Amount = Rs. 10,00,000

Annual Interest Rate = 6% per annum

Half-Yearly Interest = `10,00,000 xx 6/100 xx 6/12`

= 30,000

TDS @ 10% = `30,000 xx 10/100`

= 3,000

Net Payable to Debentureholders = 30,000 − 3,000

= 27,000

Total Annual Interest = 30,000 + 30,000

= 60,000