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On 1st April, 2013, Rayon Ltd. Issued 2,000, 9% Debentures of ` 100 Each at a Discount of 10%, Redeemableat Par on 31st March, 2017. the Issue Was Fully Subscribed. to Meet the Provisions of the - Accounts

On 1st April, 2013, Rayon Ltd. issued 2,000, 9% Debentures of 100 each at a discount of 10%, redeemable
at par on 31st March, 2017. The issue was fully subscribed. To meet the provisions of the Companies Act,
2013, the Board of Directors decided to transfer  30,000 to Debenture Redemption Reserve on 31st March,
2014, and the balance on 31st March, 2015. On 1st April, 2016, the company made the required investment in
government securities.

The investments were encashed and the debentures were redeemed on the due date.
It is the policy of the company to write off capital losses in the year in which they occur.
You are required to pass journal entries for issue and redemption of debentures (ignore interest on
debentures).

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Solution

                             Journal of Rayon Ltd.

Date Particulars L.F. Amount Rs. Amount Rs.
1/4/2013 Bank A/c .... Dr 
To Deb. Application and Allotment A/c
(Being deb. App. and allotment money
received)
 

1,80,000

 

 

 

 

 

 

 

1,80,000
  Deb. Application and allotment A/c .......Dr 
Discount on issue of Debentures A/c .......Dr 
To 9% Debentures A/c 
(Being debentures issued)
 

1,80,000

 

 

20,000

 

 

 

 

 

2,00,000

31/3/2014 Surplus in Statement of P/L ....Dr 
To Debentures Redemption reserve 
(Being money transferred to Debentures
Redemption reserve )
 

30,000

 

 

 

 

30,000
31/3/2014 Statement of P/L .......Dr 
To Discount on issue of Debentures 
(Being discount on issue of Debentures
written off)
 

20,000

 

 

 

 

20,000
31/3/2015 Surplus in statement of P/L...... Dr 
To Debentures Redemption reserve 
(Being balance as per requirement transferred
to DRR)
 

20,000

 

 

 

 

20,000
1/4/2016 Debentures Redemption Investment A/c .....Dr 
To Bank A/c 
(Being purchase of investment equal to
15% of the face value of debentures to be
redeemed)
 

 

 

30,000

 

 

 

 

 

30,000

 

 

31/3/2017 Bank A/c .....Dr 
To DRI 
(Being DRI sold)
 

30,000

 

30,000
31/3/2017 Debentures A/c .....Dr 
To Debentures holder A/c 
(Being amount due to the debenture holder)
 

2,00,000

 

 

 

2,00,000

31/3/2017 Debentures holder A/c .......Dr 
To Bank
(Being debentures redeemed)
 

2,00,000

 

 

2,00,000
31/3/2017 Debentures Redemption Reserve A/c ..... Dr 
To General Reserve 
(Being DRR transferred to GR)
 

50,000

 

50,000

Concept: Accounting Entries at the Time of Issue When Debentures Are Redeemable at Par and Premium
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