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?

On 1st April, 2018, Halogen Ltd. issued 4,000, 8% Debentures of ₹ 100 each, to be redeemed in four equal annual instalments beginning from 31st March, 2020. 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 31st March, 2021?

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.)