# On 1st April, 2012, Neptune Finance Company (a listed NBFC) issued 4,000, 9 % Debentures of ₹ 100 each to be redeemed at a premium of 5% on 31st March, 2021. - Accounts

Journal Entry

On 1st April, 2012, Neptune Finance Company (a listed NBFC) issued 4,000, 9 % Debentures of ₹ 100 each to be redeemed at a premium of 5% on 31st March, 2021.

You are required to pass necessary journal entries for the issue and redemption of debentures.

#### Solution

 In the Books of Neptune Finance Company Journal Entries Date Particulars L.F. Debit (₹) Credit (₹) 2012April 1 Bank A/c         Dr.    To Debenture Application and Allotment A/c 4,00,000 4,00,000 April 1 Debenture Application and Allotment A/c     Dr.Loss on Issue of Debentures A/c       Dr.    To 9% Debentures A/c    To Premium on Redemption of Debenture A/c(Being 4,000 9% Debentures issued at par and redeemable @ 5% premium) 4,00,00020,000 4,00,00020,000 2020April 1 Debenture Redemption Investment A/c      Dr.     To Bank A/c(Being amount invested) 60,000 60,000 2021March 31 Bank A/c       Dr.     To Debenture Redemption Investment A/c(Being DRI realised) 60,000 60,000 March 31 9% Debentures A/c       Dr.Premium on Redemption of Debentures A/c     Dr.    To Debentureholders A/c(Being amount due) 4,00,00020,000 4,20,000 March 31 Debentureholders A/c     Dr.    To Bank A/c(Being amount paid) 4,20,000 4,20,000

Note: A listed NBFC is not required to create DRR but has to invest 15% of the value in DRI (Debenture Redemption Investment).

Working Notes:

1. Premium on Redemption of Debentures = 5 % × ₹ 4,00,000 = ₹ 20,000
2. Amount invested in Debenture Redemption Investment = 15% × ₹ 4,00,000 = ₹ 60,000
Concept: Issue of Debentures at Par at Premium and at Discount
Is there an error in this question or solution?