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Question
Raja Ltd. issued ₹ 2,00,000, 10% Debentures at a discount of 5%. The terms of issue provide the repayment at the end of 4 years. Kitply Ltd. has a balance of ₹ 5,00,000 in Securities Premium.
Pass the Journal entries for issue of debentures and writing off the discount.
[Hint: Dr. Securities Premium A/c and Cr. Discount on Issue of Debentures A/c by ₹ 10,000
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Solution
| Journal Entries in the Books of Raja Ltd. |
||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1. | Bank A/c ...Dr. | 1,90,000 | ||
| Discount on Issue of Debentures A/c ...Dr. | 10,000 | |||
| To 10% Debentures A/c | 2,00,000 | |||
| (Being ₹ 2,00,000, 10% Debentures issued at 5% discount) | ||||
| 2. | Securities Premium A/c ...Dr. | 10,000 | ||
| To Discount on Issue of Debentures A/c | 10,000 | |||
| (Being discount on issue of debentures written off against Securities Premium) | ||||
Working Note:
Discount on Issue of Debentures
= ₹ 2,00,000 × 5%
= ₹ 10,000
Balance in Securities Premium = ₹ 5,00,000
Therefore, the full discount of ₹ 10,000 can be written off immediately against Securities Premium.
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