Question

What journal entries will be made in the following cases:

1. A company issued ₹ 40,000 12% Debentures at par, redeemable also at par.
2. A company issued ₹ 40,000 12% Debentures at a discount of 10% redeemable at par.
3. A company issued ₹ 40,000, 12% Debentures at a premium of 5% redeemable at par.
4. A company issued ₹ 40,000, 12% Debentures at par, redeemable at a 10% premium.
5. A company issued ₹ 40,000 12% Debentures at a discount of 5% and redeemable at a 5% premium.

Note: The face value of a 12% Debenture is ₹ 100. Assume that the discount or loss on issue of debentures is to be written off in the first year itself.

Answer 1

Case (i):

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		40,000	-
	To 12% Debenture A/c		-	40,000
	(Being debentures issued at par, redeemable at par.)

Case (ii):

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		36,000	-
	Loss on issue of debentures A/c   ...Dr.		4,000	-
	To 12% Debenture A/c		-	40,000
	(Being debentures issued at 10% discount, redeemable at par; discount written off immediately.)

Case (iii):

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c    ...Dr.		42,000	-
	To 12% Debenture A/c		-	40,000
	To Securities Premium A/c		-	2,000
	(Being debentures issued at 5% premium, redeemable at par.)

Case (iv):

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		40,000	-
	To 12% Debenture A/c		-	40,000
	(Being debentures issued at par, redeemable at 10% premium.)
2.	Premium on Redemption of Denbenture A/c   ...Dr.		4,000	-
	To Premium on Redemption Payable A/c		-	4,000
	(Being premium on redemption recognized.)

Case (v):

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		38,000	-
	Loss on issue of debentures A/c   ...Dr.		2,000	-
	To 12% Debenture A/c		-	40,000
	(Being debentures issued at 5% discount redeemable at 5% premium; discount written off.)
2.	Premium on Redemption of Debentures A/c  ...Dr.		2,000	-
	To Premium on Redemption Payable A/c		-	2,000
	(Being premium on redemption recognized.)