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Question
On 1st April, 2026, Star Ltd. issued ₹ 20,00,000, 9% Debentures of ₹ 100 each at a premium of 10%, redeemable at apremium of 5%.
Pass the necessary Journal entries for issue of debentures in the books of Star Ltd.
Journal Entry
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Solution
| Journal Entries in the Books of Star Ltd. |
||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1 April 2026 | Bank A/c ...Dr. | 22,00,000 | ||
| To Debentures Application and Allotment A/c | 22,00,000 | |||
| (Being application and allotment money received on 9% Debentures issued at 10% premium) | ||||
| 1 April 2026 | Debentures Application and Allotment A/c ...Dr. | 22,00,000 | ||
| Loss on Issue of Debentures A/c ...Dr. | 1,00,000 | |||
| To 9% Debentures A/c | 20,00,000 | |||
| To Securities Premium A/c | 2,00,000 | |||
| To Premium on Redemption of Debentures A/c | 1,00,000 | |||
| (Being 9% Debentures issued at 10% premium and redeemable at 5% premium) | ||||
Working Note:
Face Value of Debentures: ₹ 20,00,000
Premium on Issue:
₹ 20,00,000 × 10% = ₹ 2,00,000
Amount received:
₹ 20,00,000 + ₹ 2,00,000 = ₹ 22,00,000
Premium on Redemption:
₹ 20,00,000 × 5% = ₹ 1,00,000
Loss on Issue of Debentures: ₹ 1,00,000
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