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On 1st April, 2015, Mayfair Ltd. Issued 4,000 9% Debentures of ₹ 100 Each at a Discount of 5% Redeemable at a Premium of 8%. the Debentures Were Redeemable on 31st March, 2019. the Company Created T - Accountancy

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Journal Entry

On 1st April 2015, Mayfair Ltd. issued 4,000 9% debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 8%. The debentures were redeemable on 31st March 2019. The company created the necessary minimum amount of debenture redemption reserve and purchased the required amount of debenture redemption investments as per the provisions of Companies Act, 2013.
Pass the necessary journal entries for the redemption of debentures.

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Solution

In the books of Mayfair Ltd. 
Journal 

Date Particulars   L.F.

Debit

Amount (₹)

Credit

Amount (₹)

2018          
March 31

Surplus i.e. Balance as per Statement of Profit & Loss A/c

Dr.  1,00,000  
 

To Debenture Redemption Reserve A/c

    1,00,000
 

(Being 25% of 4,000 debentures transferred to DRR)

     
 

 

     
2018

Debenture Reserve Investment A/c

Dr. 60,000  
April 30

To Bank A/c

    60,000
 

(Being Debenture Redemption Investment made at 15% for 4,000 debentures )

     
 

 

     
2019

Bank A/c

Dr. 60,000  
March 31

To Debenture Reserve Investment A/c

    60,000
 

(Being debenture reserve securities matured)

     
 

 

     
2019

9% Debenture A/c

Dr. 4,00,000  
March 31

Premium on Redemption A/c

Dr. 32,000  
 

To Debenture holder’s A/c

    4,32,000
 

(For amount due on debenture holders)

     
 

 

     
2019

Debenture holders A/c

Dr. 4,32,000  

March 31

To Bank A/c     4,32,000

 

(For debentures paid)      

 

       
2019

 

Debenture Redemption Reserve A/c Dr.

1,00,000

 
March 31 To General Reserve A/c    

1,00,000

  (For DRR transferred to General reserve)      
Concept: Creation of Debenture Redemption Reserve
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