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Mansi Ltd. Had 6,000; 10% Debentures of ₹ 100 Each Due for Redemption on 31st March, 2019. - Accountancy

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Journal Entry

Mansi Ltd. had 6,000; 10% Debentures of ₹ 100 each due for redemption on 31st March, 2019. Assuming that the debentures were redeemed out of profits, pass necessary Journal entries for the redemption of debentures. There was a credit balance of ₹ 6,00,000 in Surplus, i.e., Balance in Statement of Profit and Loss.

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Solution

Journal

 

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

2018

 

 

 

 

 

March 31

Statement of Profit and Loss*

Dr.

 

6,00,000

 

 

To Debenture Redemption Reserve A/c

 

 

6,00,000

 

(Surplus amount is transferred to Debenture Redemption Reserve)

 

 

 

 

       

 

 

 

April 30

Debenture Redemption Investment A/c**

Dr.

 

90,000

 

 

  To Bank A/c

 

 

90,000

 

(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

 

 

 

2019

 

 

 

 

March 31

10% Debentures A/c

Dr.

 

6,00,000

 

 

To Debentureholders’ A/c

 

 

6,00,000

 

(Debenture due for redemption)

 

 

 

 

 

 

 

 

March 31

Bank A/c

Dr.

 

90,000

 

 

To Debenture Redemption Investment A/c

 

 

90,000

 

(Investment made in securities, now encashed)

 

 

 

 

 

 

 

 

March 31

Debentureholders’ A/c

Dr.

 

6,00,000

 

 

To Bank A/c

Dr.

 

 

6,00,000

 

(Payment made to debentureholders)

 

 

 

 

 

 

 

 

March 31

Debenture Redemption Reserve A/c

Dr.

 

6,00,000

 

 

To General Reserve A/c

 

 

6,00,000

 

(Debenture Redemption Reserve transferred to General Reserve)

 

 

 

*In case of redemption of debentures by profits, 100% of the nominal value of debentures is transferred to DRR A/c.

**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below. 

Journal

 

Date

Particular

 

L.F.

Debit Amount
(₹)

Credit Amount
(₹)

2018 & 2019

 

 

     

Mar. 31

Debenture Interest A/c

Dr.

 

60,000

 

 

  To Debentureholders’ A/c

 

   

60,000

 

(Interest on 10% debentures due)

 

     

 

 

 

     

Mar. 31

Debentureholders’ A/c

Dr.

 

60,000

 

 

  To Bank A/c

 

   

60,000

 

(Payment of interest to debentureholders’)

 

     

 

 

 

     

Mar. 31

Statement of Profit and Loss

Dr.

 

60,000

 

 

  To Debenture Interest A/c

 

   

60,000

 

(Transfer of debenture interest to Statement of Profit and Loss)

 

     
Concept: Meaning of Redemption of Debentures
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 2
Chapter 3 Redemption of Debentures
Exercise | Q 10 | Page 30
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