Question

The Decor Ltd. issued 20,000, 6% Debentures of ₹ 100 each at 10% discount payable ₹ 30 on application, ₹ 40 (after discount) and balance as first and final call. Debentures were subscribed and allotment was made. Amount due on allotment was made and received. First and final call is yet to be made.

You are required to pass the necessary Journal entries.

Answer 1

Journal Entries In the Books of The Decor Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		6,00,000
	To Debentures Application A/c			6,00,000
	(Application money received on 20,000 debentures)
2.	Debentures Application A/c   ...Dr.		6,00,000
	To 6% Debentures A/c			6,00,000
	(Application money transferred to Debentures A/c)
3.	Debentures Allotment A/c   ...Dr.		8,00,000
	Discount on Issue of Debentures A/c   ...Dr.		2,00,000
	To 6% Debentures A/c			10,00,000
	(Allotment money due, after allowing discount of ₹ 10 per debenture)
4.	Bank A/c   ...Dr.		8,00,000
	To Debentures Allotment A/c			8,00,000
	(Allotment money received)

Working note:

Face value of debentures:

20,000 × ₹ 100 = ₹ 20,00,000

Discount @ 10%:

20,000 × ₹ 10 = ₹ 2,00,000

Application Money:

20,000 × ₹ 30 = ₹ 6,00,000

On allotment, ₹ 40 is payable after discount of ₹ 10. Therefore, the nominal amount due on allotment is:

₹ 40 + ₹ 10 = ₹ 50

Nominal amount remaining for First and Final Call:

₹ 100 − ₹ 30 − ₹ 50 = ₹ 20

Since the First and Final Call is yet to be made, no entry is passed for it.