Question

On 1st April, 2019, the following balances appeared in the books of Uma Mahesh Ltd. (an unlisted company)

	₹
8% Debentures	24,00,000
Premium on Redemption of Debentures	1,20,000
Debenture Redemption Reserve	1,90,000

The debentures were to be redeemed at a premium of 5% in two equal annual instalments beginning from 31st March, 2021. The company transferred the balance amount to Debenture Redemption Reserve on 31st March, 2020. On 30th April, 2020, it met the requirements of the Companies Act, 2013 regarding Debenture Redemption Investment and redeemed the debentures on the scheduled dates.

You are required to pass necessary journal entries to record the above transactions in the books of the Company (Ignore interest on Debentures).

Answer 1

Journal entries of Uma Mahesh Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2020
March 31	Profit & Loss A/c   ...Dr.		50,000	-
	To Debenture Redemption Reserve A/c		-	50,000
	(Balance transferred to DRR)
April 30	Debenture Redemption Investment A/c   ...Dr.		1,80,000	-
	To Bank A/c		-	1,80,000
	(Investment made as per Companies Act)
2021
March 31	8% Debentures A/c   ...Dr.		12,00,000	-
	Premium on Redemption of Debentures A/c   ...Dr.		60,000	-
	To Debentureholders A/c		-	12,60,000
	(Half debentures due at 5% premium)
March 31	Debentureholders A/c   ...Dr.		12,60,000	-
	To Bank A/c		-	12,60,000
	(Payment made to debentureholders)
March 31	Debenture Redemption Reserve A/c   ...Dr.		1,20,000	-
	To General Reserve A/c		-	1,20,000
	(1st half DRR transferred)
March 31	Bank A/c		1,80,000	-
	To Debenture Redemption Investment A/c		-	1,80,000
	(Being encashment of investment made for redemption)
2022
March 31	8% Debentures A/c   ...Dr.		12,00,000	-
	Premium on Redemption of Debentures A/c   ...Dr.		60,000	-
	To Debentureholders A/c		-	12,60,000
	(Remaining debentures due at 5% premium)
March 31	Debentureholders A/c   ...Dr.		12,60,000	-
	To Bank A/c		-	12,60,000
	(Payment made to debentureholders)
March 31	Debenture Redemption Reserve A/c   ...Dr.		1,20,000	-
	To General Reserve A/c		-	1,20,000
	(2nd half DRR transferred)