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Xyz Ltd.Issued 5,000 , 10% Debentures of ₹ 100 Each on 1st April, 2015 at a Discount of 10% Redeemable at a Premium of 10% After 4 Years. - Accountancy

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Question

XYZ  Ltd.issued 5,000 , 10% Debentures of  ₹ 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable  half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%. 

Journal Entry
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Solution

Books of XYZ Ltd.
Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

2015

 

 

 

 

April 01

Bank A/c

Dr.

 

4,50,000

 

 

To Debenture Application A/c

 

 

 

4,50,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

 

April 01

Debenture Application A/c

Dr.

 

4,50,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

1,00,000

 

 

To 10% Debentures A/c

 

 

 

5,00,000

 

To Premium on Redemption A/c

 

 

 

50,000

 

(5,000 Debentures of Rs 100 each issued at 10% discount with the term repayable at a premium of 10%)

 

 

 

 

2015

 

 

 

 

 

Sept. 30

Interest on Debentures A/c

Dr.

 

25,000

 

 

To Debentureholders’ A/c

 

 

 

22,500

    To Income Tax Payable A/c       2,500

 

(Interest due on 10% Debentures)

 

 

 

 

 

 

 

 

 

 

Sept. 30

Debentureholders’ A/c

Dr.

 

22,500

 

 

To Bank A/c

 

 

 

22,500

 

(Interest on debentures paid to debenture holders)

 

 

 

 

           
Sept. 30 Income Tax Payable A/c Dr.   2,500  
    To Bank A/c       2,500
  (Payment of tax on interest on debentures)        
           

2016

 

 

 

 

 

March 31

Interest on Debentures A/c

Dr.

 

25,000

 

 

To Debentureholders’ A/c

 

 

 

22,500

     To Income Tax Payable A/c       2,500

 

(Interest due on 10% Debentures)

 

 

 

 

 

 

 

 

 

 

March 31

Debentureholders’ A/c

Dr.

 

22,500

 

 

To Bank A/c

 

 

 

22,500

 

(Debenture Interest paid to Debenture holders)

 

 

 

 

           
March 31 Income Tax Payable A/c Dr.   2,500  
    To Bank A/c       2,500
  (Payment of tax on interest on debentures)        
           

March 31

Profit and Loss A/c

Dr.

 

50,000

 

 

To Interest on Debentures A/c

 

 

 

50,000

 

(Interest on debentures transferred to Profit and Loss Account)

 

 

 

 

Working Note

Interest on Debentures (for half year) = `500000 xx 10/100 xx 6/12 = "Rs"   25000`

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Chapter 2: Issue of Debentures - Exercise [Page 56]

APPEARS IN

TS Grewal Accountancy - Double Entry Book Keeping Volume 2 [English] Class 12
Chapter 2 Issue of Debentures
Exercise | Q 40 | Page 56

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