Question

On 1st April, 2022, Halogen Ltd. issued 4,000, 8% Debentures of ₹ 100 each, to be redeemed in four equal annual installments beginning from 31st March, 2024. The interest on these debentures was payable half-yearly, on 30th September and 31st March, every year.

What is the journal entry to close the Interest on Debentures A/c on the 31st March, 2025?

Options

• Debit Statement of P/L ₹ 32,000; Credit Interest on Debentures A/c ₹ 32,000.

• Debit Statement of P/L ₹ 16,000; Credit Interest on Debentures A/c ₹ 16,000.

• Debit Statement of P/L ₹ 24,000; Credit Interest on Debentures A/c ₹ 24,000.

• Debit Statement of P/L ₹ 8,000; Credit Interest on Debentures A/c ₹ 8,000.

Answer 1

Debit Statement of P/L ₹ 24,000; Credit Interest on Debentures A/c ₹ 24,000.

Explanation:

Step 1: Outstanding Debentures on 31st March, 2025:

1. Initial = 4,000 debentures
2. 1st installment redeemed on 31st March, 2024 = 1,000 debentures
3. Balance as on 1st April 2024 = 3,000 debentures

Step 2: Interest for FY 2024-25:

1. Debentures Outstanding (April 2024 to March 2025) = 3,000
2. Annual Interest = 3,000 × ₹100 × 8% = ₹24,000

Since interest is paid half-yearly, two payments of ₹12,000 each are made on 30th September, 2024 and 31st March, 2025.

Step 3: Journal Entry on 31^st March, 2025 to Close Interest A/c:

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Statement of Profit & Loss A/c    ...Dr.		24,000	-
	To Interest on Debentures A/c		-	24,000
	(Being interest on debentures transferred to Profit & Loss A/c.)