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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.

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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 9: Issue of Debentures - Exercise [Page 56]

APPEARS IN

TS Grewal Accountancy Double Entry Book Keeping Volume 1 and 2 [English] Class 12
Chapter 9 Issue of Debentures
Exercise | Q 40 | Page 56

RELATED QUESTIONS

Short Answer Question

Name the head under which ‘discount on issue of debentures’ appears in the Balance Sheet of a company.


Long Answer Question

Describe the meaning of ‘Debenture Issued as Collateral Securities’. What accounting treatment is given to the issue of debentures in the books of accounts?


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(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.


Pass necessary Journal entries relating to the issue of  debentures for the following:
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(b) Issued  ₹ 30,000; 10% Debentures of  ₹ 100 each at a premium of 10% and redeemable at a premium of 15%.
(c) Issued  ₹ 80,000; 10% Debentures of  ₹ 100 each at par repayable at a premium of 10%.


Pass necessary Journal entries for the issue of Debentures in the following cases:
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Bright Ltd. issued 5,000; 10% Debentures of  ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th  September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .


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On 31st March, 2016 2,000 Debentures;
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Prepare the Loss on Issue of Debentures Account, Debentures Account and Premium on Redemption of Debentures Account for three years.


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When debentures are issued at par and are redeemable at a premium, the loss on such an issue is debited to ______.


The debentures are issued with a specified rate of interest, which is called the coupon rate are known as which types of debentures?


Debenture interest is paid as ______.


Which of the following is false with respect to debentures ?


Assertion (A): Sarita Pvt. Ltd. issued 15% 10,000 debentures at par @ ₹ 100 per debenture. The company suffered a loss but still the directors of the company paid interest on debentures.

Reason (R): Interest on debenture is a charge against profits and therefore, its payment is not subject to the earning of profit.


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