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Question
On 1st April, 2025, 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, 2026, if interest is payable on 30th September and 31st March. The company closes its books on 31st March every year.
[Hint: Amount received as Debentures Application and Allotment A/c = 1,000 × ₹ 94 = ₹ 94,000. Interest on 1,000 Debentures of ₹ 100 each for 6 months = ₹ 1,00,000 × 9/100 x 6/12 = ₹ 4,500.]
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Solution
| Journal Entries | ||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1 April 2025 | Bank A/c ...Dr. | 94,000 | ||
| To Debentures Application and Allotment A/c | 94,000 | |||
| (Being application and allotment money received) | ||||
| 1 April 2025 | Debentures Application and Allotment A/c ...Dr. | 94,000 | ||
| Loss on Issue of Debentures A/c ...Dr. | 16,000 | |||
| To 9% Debentures A/c | 1,00,000 | |||
| To Premium on Redemption of Debentures A/c | 10,000 | |||
| (Being 1,000, 9% Debentures of ₹ 100 each issued at 6% discount and redeemable at 10% premium) | ||||
| 30 Sept. 2025 | Debenture Interest A/c ...Dr. | 4,500 | ||
| To Bank A/c | 4,500 | |||
| (Being half-yearly interest on debentures paid) | ||||
| 31 March 2026 | Debenture Interest A/c ...Dr. | 4,500 | ||
| To Bank A/c | 4,500 | |||
| (Being half-yearly interest on debentures paid) | ||||
| 31 March 2026 | Statement of Profit and Loss A/c ...Dr. | 9,000 | ||
| To Debenture Interest A/c | 9,000 | |||
| (Being debenture interest for the year transferred to Statement of Profit and Loss) | ||||
Working Note:
Face Value of Debentures:
1,000 × ₹ 100 = ₹ 1,00,000
Discount on Issue:
₹ 1,00,000 × 6% = ₹ 6,000
Premium on Redemption:
₹ 1,00,000 × 10% = ₹ 10,000
Loss on Issue of Debentures:
₹ 6,000 + ₹ 10,000 = ₹ 16,000
Amount Received:
₹ 1,00,000 − ₹ 6,000 = ₹ 94,000
Half-Yearly Interest:
₹ 1,00,000 × 9% × `6/12` = ₹ 4,500
Total Interest for the Year:
₹ 4,500 × 2 = ₹ 9,000
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