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Tata Ltd. Issued 5,000, 10% Debentures of Rs 100 Each on 1st April 2012 Pass the Necessary Journal Entries Related to the Debenture Interest for the Half-yearly Ending on 31st March 2013 and Transfer of Interest on Debentures to Statement of Profit and Loss - CBSE (Arts) Class 12 - Accountancy

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Question

Tata Ltd. issued 5,000, 10% Debentures of Rs 100 each on 1st April 2012. The issue was fully subscribed. According to the terms of issue, interest on debentures is payable half-yearly on 30th September and 31st March and tax deducted at source is 10%.
Pass the necessary journal entries related to the debenture interest for the half-yearly ending on 31st March 2013 and transfer of interest on debentures to Statement of Profit and Loss.

Solution

Journal
Date Particulars L.F.

Debit

Rs

Credit

Rs

2012

Sept.30

Debenture Interest A/c `(500000xx10/100 xx 6/12)`  Dr.

      To Income Tax Payable A/c (25,000 ×10%)

      To Debenture holders’ A/c

(Being amount of interest due for 6 months and tax deducted at source)

 

25,000

 

 

 

 

2,500

22,500

 

Sept. 30

Debenture holders’ A/c      Dr.

     To Bank A/c

(Being interest paid to the debenture holders)

 

22,500

 

 

 

22,500

 

Sept.30

Income Tax Payable A/c         Dr.

    To Bank A/c

(Being payment of tax on interest on denatures)

 

2,500

 

 

 

2,500

 

2013

Mar.31

Debenture Interest A/c `(500000xx10/100xx6/12)`  Dr.

     To Income Tax Payable A/c (12,000 ×10%)

     To Debenture holders’ A/c

(Being amount of interest due for 6 months and tax
deducted at source)

 

25,000

 

 

 

 

2,500

22,500

 

 

Mar.31

Debenture holders’ A/c       Dr.

    To Bank A/c

(Being interest paid to the debenture holders)

 

22,500

 

 

 

22,500

 

Mar.31

Income Tax Payable A/c     Dr.

    To Bank A/c

(Being payment of tax on interest on denatures)

 

2,500

 

 

 

2,500

 

Mar.31

Statement of Profit and Loss A/c      Dr.

    To interest on debentures A/c

(Being interest or debentures transferred to statement of
profit and loss)

 

50,000

 

 

 

50,000

 

  Is there an error in this question or solution?
Solution Tata Ltd. Issued 5,000, 10% Debentures of Rs 100 Each on 1st April 2012 Pass the Necessary Journal Entries Related to the Debenture Interest for the Half-yearly Ending on 31st March 2013 and Transfer of Interest on Debentures to Statement of Profit and Loss Concept: Meaning and Concept of Debentures.
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