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Question
Nipa Limited issued 10,000 Debentures of ₹ 100 each at a premium of 10%, payable 30% of nominal (facе) value on application (including premium) and the balance on allotment. The debentures were applied for and the amount was duly received.
You are required to give Journal entries and prepare Cash Book.
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Solution
| Journal Entries In the Books of Nipa Limited |
||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
| 1. | Bank A/c ...Dr. | 3,00,000 | ||
| To Debentures Application A/c | 3,00,000 | |||
| (Application money received on 10,000 debentures) | ||||
| 2. | Debentures Application A/c ...Dr. | 3,00,000 | ||
| To Debentures A/c | 2,00,000 | |||
| To Securities Premium A/c | 1,00,000 | |||
| (Application money transferred, including premium of ₹ 10 per debenture) | ||||
| 3. | Debentures Allotment A/c ...Dr. | 8,00,000 | ||
| To Debentures A/c | 8,00,000 | |||
| (Allotment money due @ ₹ 80 per debenture) | ||||
| 4. | Bank A/c ...Dr. | 8,00,000 | ||
| To Debentures Allotment A/c | 8,00,000 | |||
| (Allotment money received) | ||||
Working note:
Face value of debentures:
10,000 × ₹ 100 = ₹ 10,00,000
Premium @ 10%:
10,000 × ₹ 10 = ₹ 1,00,000
Application money: 30% of face value, including premium
10,000 × ₹ 30 = ₹ 3,00,000
Out of ₹ 30 application money:
Premium = ₹ 10, Capital = ₹ 20
Therefore, capital received on application:
10,000 × ₹ 20 = ₹ 2,00,000
Balance payable on allotment:
₹ 110 − ₹ 30 = ₹ 80 per debenture
10,000 × ₹ 80 = ₹ 8,00,000
RELATED QUESTIONS
What accounting treatment is given to the issue of debentures in the books of accounts?
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