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Question
On 1st April, 2025, Solar Power Ltd. issued 10,000, 8% Debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made.
The company had balance in Securities Premium of ₹ 80,000.
Prepare the Balance Sheet (extract) as at 31st March, 2026.
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Solution
| In the books of Solar Power Ltd. An Extract of Balance Sheet As at 31st March, 2018 |
||
| Particulars | Note No. |
Amount (₹) |
| I. Equity and liabilities | ||
| 1. Shareholders’ Funds |
||
| Reserves and Surplus | 3 | (1,20,000) |
| 2. Non-Current Liabilities | ||
| a. Long-term Borrowings | 1 | 10,00,000 |
| b. Other long-term | 2 | 1,50,000 |
| II. Assets | ||
| Current Assets | ||
| Cash and Cash Equivalents | 4 | 9,50,000 |
Notes to Accounts:
| Note No. |
Particulars | Amount (₹) | Amount (₹) |
| 1. | Long-term Borrowings | ||
| 10,000, 8% Debentures of ₹100 each issued | 10,00,000 | ||
| 2. | Other long-term Liabilities | ||
| Premium on Redemption of Debentures | 1,50,000 | ||
| 3. | Reserves and Surplusc | ||
| Securities Premium Reserve | 80,000 | ||
| Less: Discount on Issue of Debentures | (50,000) | ||
| Less: Loss on Issue of Debentures written off | (30,000) | ||
| Statement of Profit and Loss | – | ||
| Less: Loss on Issue of Debentures written off | (1,20,000) | (1,20,000) | |
| 4. | Cash and Cash Equivalents | ||
| On 8% debentures @ ₹ 95 each (10,000 × 95) | 9,50,000 |
RELATED QUESTIONS
What accounting treatment is given to the issue of debentures in the books of accounts?
Vishwas Ltd. issued 2,000; 9% Debentures of ₹ 100 each payable as follows:
₹ 25 on application; ₹ 25 on allotment and ₹ 50 on first and final call.
Applications were received for all the debentures along with the application money did allotment was made . Call money was also received on the due date.
Pass necessary Journal entries in the books of the company.
Wye Ltd . purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by cheque and the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give journal entries in the books of Wye Ltd.
Bright Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Star Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.
Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.
Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.
Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued ₹ 4,00,000; 9% Debentures of ₹ 100 each at a premium of 8% redeemable at 10% premium.
(b) Issued ₹ 6,00,000; 9% Debentures of ₹ 100 each at par, repayable at a premium of 10%.
(c) Issued ₹ 10,00,000; 9% Debentures of ₹ 100 each at a premium of 5%, redeemable at par.
Pass necessary Journal entries for the issue of debentures in the following cases:
- ₹ 40,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
- ₹ 70,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at ₹ 110.
Pass necessary Journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹ 80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.
Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .
The word 'debenture' has been derived from which Latin word (which means to borrow)?
Loss on Issue of Debenture Account is shown:
The loss on issue of Debentures is written-off from ______.
Pick the odd one out:
Interest on Debentures is a charge against ______.
Which of the following statement is true?
X Ltd. purchased assets of ₹ 18,00,000 and took over liabilities of ₹ 6,00,000 of Y Ltd. for a purchase consideration of ₹ 10,00,000. The payment to Y Ltd. was made by issue of 9% debentures of ₹ 100 each at ₹ 125. Calculate the number of 9% debentures issued in favour of Y Ltd. and pass the necessary journal entries for the above transactions in the books of X Ltd.
