Question

Krishna Ltd. had outstanding 20,000, 9% debentures of ₹ 100 each on 1^st April 2014. These debentures were redeemable at a premium of 10% in two equal installments starting from 31^st March 2018. The company had a balance of ₹ 4,00,000 in Debenture Redemption Reserve on 31^st March 2017. Pass necessary journal entries for the redemption of debentures in the books of Krishna Ltd. for the year ended 31^st March 2018.

Answer 1

Books of Krishna Ltd.
Journal 

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2017
April 01	Debenture Redemption Investment A/c (15% of ₹ 10,00,000)	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Being investment made to the extent of minimum 15% of the redeemable value of debentures)
2018
March 31	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Being investment in securities realised)
March 31	Statement of Profit & Loss A/c	Dr.		1,00,000
	To Debenture Redemption Reserve A/c				1,00,000
	(Being shortage in DRR to the extent of 25% of the nominal value of debentures transferred to DRR)
March 31	9% Debenture A/c	Dr.		10,00,000
	Premium on Redemption of Debentures A/c	Dr.		1,00,000
	To Debenture holder’s A/c				11,00,000
	(Being redemption of 10,000 debentures due in the first installment )
March 31	Debenture holders A/c	Dr.		11,00,000
	To Bank A/c				11,00,000
	(Being payment made to debenture holders)
March 31	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Being proportionate amount of DRR transferred to General reserve)