Question

On 1st April, 2015, V.V.L.Ltd issued 1,000, 9% Debentures of  ₹ 100 each at a  discount of 6%, redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year. 

Answer 1

	Particulars		L. F.	Debit Amount (₹)	Credit Amount (₹)
2015
Apr. 01	Bank A/c (1,000 × 94)	Dr.		94,000
	To Debenture Application and Allotment A/c				94,000
	(Received application money on 1,000 Debenture at a  discount of 6%)
Apr. 01	Debenture Application and Allotment A/c	Dr.		94,000
	Discount on Issue of Debenture A/c (1,000 × 6)	Dr.		6,000
	Loss on Issue of Debentures A/c (1,000 × 10)	Dr.		10,000
	To 9% Debentures A/c				1,00,000
	To Premium on Redemption of Debentures A/c				10,000
	(Debenture application and allotment money transferred to Debentures A/c)
Sep. 30	Debenture Interest A/c	Dr		4500
	To Debenture holder A/c				4050
	To TDS Payable A/c				450
	(Being Interest payable 9% Debentures and tax deducted at source @10%)
Sep. 30	Debenture holder A/c	Dr.		4050
	TDS Payable A/c	Dr.		450
	To Bank A/c				4500
	(Being the interest paid to debentureholders and TDS deposited)
2016
March 31	Debenture Interest A/c	Dr.		4,500
	To Debenture holder's A/c				4050
	To TDS Payable A/c				450
	(Being Interest payable 9% Debentures and tax deducted at source @10%)
March 31	Debenture holder A/c			4,500
	TDS Payable A/c				4050
	To Bank A/c				450
	(Being the interest paid to debentureholders and TDS deposited)
March 31	Statement of Profit and Loss A/c	Dr.		9,000
	To Debenture Interest A/c				9,000
	(Being the interest on debentures transferred to statement of profit and Loss)
March 31	Statement of Profit and Loss A/c	Dr.		10,000
	To Loss on Issue of Debentures A/c				10,000
	(Being the discount on issue of debentures written off)

king Notes:

1) Debenture Interest = (1,000 × 100) × `9/100 × 6/12`
= (1,00,000) × `9/100 × 1/2`
= ₹ 4500

2) TDS Payable = `4500 × 10/100` = ₹ 450

Debenture holder = 4500 - 450 = 4050.