Question

Varsha Ltd. invited applications for issuing 2,000, 12% Debentures of ₹ 100 each at a premium of ₹ 30 per debenture. Full amount was payable on application. Applications were received for 5,000 debentures. Applications for 3,000 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applicants.

Pass necessary Journal entries for the above transactions in the books of Varsha Ltd.

Answer 1

Journal Entries In the Books of Varsha Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		6,50,000
	To Debentures Application and Allotment A/c			6,50,000
	(Application money received on 5,000 debentures @ ₹ 130 each)
2.	Debentures Application and Allotment A/c   ...Dr.		6,50,000
	To 12% Debentures A/c			2,00,000
	To Securities Premium A/c			60,000
	To Bank A/c			3,90,000
	(2,000 debentures allotted and application money on 3,000 rejected debentures refunded)

Working note:

Issue price per debenture:

₹ 100 + ₹ 30 = ₹ 130

Application money received:

5,000 × ₹ 130 = ₹ 6,50,000

Amount required for 2,000 debentures allotted:

2,000 × ₹ 130 = ₹ 2,60,000

Refund on 3,000 rejected applications:

3,000 × ₹ 130 = ₹ 3,90,000

Securities Premium:

2,000 × ₹ 30 = ₹ 60,000