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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%.
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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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