Ts Grewal Vol. II 2018 for Class 12 Commerce Accountancy Chapter 18

Question 1:

Vishwas Ltd. issued 2,000; 9% Debentures of ₹ 100 each payable as follows:
₹ 25 on application; ₹ 25 on allotment and ₹ 50 on first and final call.
Applications were received for all the debentures along with the application money did allotment was made . Call money was also received on the due date.
Pass necessary Journal entries in the books of the company.

Answer:

Books of Vishwas Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		50,000
	To 9% Debenture Application A/c				50,000
	(Debenture application money received for 2,000 debentures at Rs 25 each)

	9% Debenture Application A/c	Dr.		50,000
	To 9% Debenture A/c				50,000
	(Debenture application money transferred to 9% Debentures A/c)

	9% Debenture Allotment A/c	Dr.		50,000
	To 9% Debentures A/c				50,000
	(Debenture allotment money due on 2,000 Debentures at Rs 25 each)

	Bank A/c	Dr.		50,000
	To 9% Debenture Allotment A/c				50,000
	(Debenture allotment money received)

	9% Debenture First and Final Call A/c	Dr.		1,00,000
	To 9% Debentures A/c				1,00,000
	(Debenture first and final call money due on 2,000 debentures at Rs 50 each)

	Bank A/c	Dr.		1,00,000
	To 9% Debenture First and Final Call A/c				1,00,000
	(Debenture first and final call received)

Question 2:

A Ltd . issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹20 on applications ;₹ 20 on allotment ; ₹ 30 on first call ; ₹ 30 on final call.
The public applied for 2,400 debentures. Applications for 1,800 debentures were accepted in full. Applications for 400 debentures were allotted 200 debentures and applications for 200 debentures were rejected . Pass necessary Journal entries .

Answer:

Books of A Ltd.
Journal
Date	Particular		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		48,000
	To 9% Debenture Application A/c				48,000
	(Debenture application money received for 2,400 debentures at Rs 20 each)

	9% Debenture Application A/c	Dr.		48,000
	To 9% Debentures A/c				40,000
	To 9% Debentures Allotment A/c				4,000
	To Bank A/c				4,000
	(Debenture application money transferred to 9% Debenture account for 2,000 Debenture, adjusted to Debenture Allotment account for 200 Debentures and money refunded for 200 debentures)

	9% Debenture Allotment A/c	Dr.		40,000
	To 9% Debentures A/c				40,000
	(Debenture allotment money due on 2,000 debentures at Rs 20 each)

	Bank A/c	Dr.		36,000
	To 9% Debentures Allotment A/c				36,000
	(Debenture allotment money received)

	Debenture First Call A/c	Dr.		60,000
	To 9% Debentures A/c				60,000
	(Debenture first call money due on 2,000 9% debenture at Rs 30 each)

	Bank A/c	Dr.		60,000
	To Debenture First Call A/c				60,000
	(Debenture first call money received)

	Debenture Final Call A/c	Dr.		60,000
	To 9% Debentures A/c				60,000
	(Debentures final call money due on 2,000 9% Debentures at Rs 30 each)

	Bank A/c	Dr.		60,000
	To Debenture Final Call A/c				60,000
	(Debenture final call received on 2,000 9% Debenture at Rs 30 each)

Question 3:

ABC Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable in full along with the application. Applications were received for 60,000 debentures . Debentures were allotted and excess application money was refunded. Pass Journal entries in the books of the company.

Answer:

Journal
Date	ABCParticulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (60,000 $\times$ 100)	Dr.		60,00,000
	To Debenture Application and Allotment A/c				60,00,000
	(Received application money on 60,000 Debenture)

	Debenture Application and Allotment A/c	Dr.		60,00,000
	To 10% Debentures A/c (40,000 $\times$ 100)				40,00,000
	To Bank A/c				20,00,000
	(Application money transferred to Debentures A/c)

Question 4:

Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a premium of ₹ 35 per debenture . The full amount was payable on application. Applications were received for 10,000 Debentures. Allotment was made to all the applications on pro rata.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.

Answer:

In the Books of Narain Laxmi Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c (10,000 debentures × 135)	Dr.		13,50,000
	To Debenture Application and Allotment A/c				13,50,000
	(Application money received on 10,000 12% debenture)

	Debenture Application and Allotment A/c	Dr.		13,50,000
	To 12% Debentures A/c				7,50,000
	To Securities Premium Reserve A/c				2,62,500
	To Bank A/c				3,37,500
	(7,500; 12% Debentures of Rs 100 each issued at a premium of Rs 35 and excess money refunded)

Question 5:

Raj Ltd . issued 5,000; 8% Debentures of ₹ 100 each at a premium of 5% payable as follows:
₹ 10 on application ; ₹ 20 along with premium on allotment and balance on first and final call.
Pass necessary Journal entries.

Answer:

Books of Raj Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		50,000
	To 8% Debenture Application A/c				50,000
	(Debenture application money received for 5,000 debentures at Rs 10 each)

	8% Debenture Application A/c	Dr.		50,000
	To 8% Debentures A/c				50,000
	(Debenture application money transferred to 8% Debentures A/c)

	8% Debenture Allotment A/c	Dr.		1,00,000
	To 8% Debentures A/c				75,000
	To Securities Premium A/c				25,000
	(Debenture allotment due on 5,000 8% Debentures at Rs 20 including premium of Rs 5)

	Bank A/c	Dr.		1,00,000
	To 8% Debentures Allotment A/c				1,00,000
	(Debenture allotment money received)

	8% Debentures First and Final Call A/c	Dr.		3,75,000
	To 8% Debenture A/c				3,75,000
	(Debenture first and final call due on 5,000 Debentures at Rs 75 each)

	Bank A/c	Dr.		3,75,000
	To 8% Debenture First and Final Call A/c				3,75,000
	(Debenture first and final call received)

Question 6:

Nipa Limited issued ₹ 10,00,000 Debentures of ₹ 100 each at a premium of 10% , payable 25% on application (including premium) and the balance on allotment . The debentures were applied for and the amount was dully received.
You are required to give Journal entries and prepare Cash Book.

Answer:

Face Value of Debenture = Rs 100

Premium (Rs 100 × 10%) = Rs 10

∴ Issue Price = Rs 110

Amount Payable as:

On Application (25%)	Rs 25 including premium of Rs 10 (i.e. Rs 10 + 15)
On Allotment (85%)	Rs 85 per debenture

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Debenture Application A/c	Dr.		2,50,000
	To Debentures A/c				1,50,000
	To Securities Premium A/c				1,00,000
	(Debenture application money received for 10,000 debentures at Rs 25 including premium of Rs10 each transferred to debenture account)

	Debenture Allotment A/c	Dr.		8,50,000
	To Debentures A/c				8,50,000
	(Debentures allotment due on 10,000 Debentures at Rs 85 each)

Cash Book
Dr.							Cr.
Date	Particulars	L.F.	Bank Rs	Date	Particulars	L.F.	Bank Rs
	Debenture Application		2,50,000
	Debenture Allotment		8,50,000
					Balance c/d		11,00,000
			11,00,000				11,00,000

Question 7:

Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (7,000 $\times$ 200)	Dr.		14,00,000
	To Debenture Application A/c				14,00,000
	(Received application money on 7,000 debentures)

	Debenture Application A/c	Dr.		14,00,000
	To 10% Debentures A/c				14,00,000
	(Transfer of application money to Debentures A/c)

	Debenture Allotment A/c (7,000 $\times$ 350)	Dr.		24,50,000
	Loss on issue of Debentures A/c (7,000 $\times$ 50)	Dr.		3,50,000
	To 10% Debentures A/c (7,000 $\times$ 300)				21,00,000
	To Securities Premium Reserve A/c (7,000 $\times$ 50)				3,50,000
	To Premium on Redemption of Debentures A/c(7,000 $\times$ 50)				3,50,000
	(Allotment due on 7,000 Debentures at a premium of Rs 50 per debentures and redeemable at premium of 10%)

	Bank A/c	Dr.		24,50,000
	To Debenture Allotment A/c				24,50,000
	(Allotment money received)

Question 8:

Vijay Laxmi Ltd. invited applications for 10,000; 12% Debentures of ₹ 100 each at a premium of ₹ 70 per debenture .The full amount was payable on application.
Applications were received for 13,500 debentures. Applications for 3,500 debentures were rejected and application money was refunded . Debentures were allotted to the remaining applications .

Answer:

In the Books of Vijay Laxmi Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		22,95,000
	To Debenture Application and Allotment A/c				22,95,000
	(Application money received on 13,500 12% debenture)

	Debenture Application and Allotment A/c	Dr.		22,95,000
	To 12% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				7,00,000
	To Bank A/c				5,95,000
	(10,000; 12% Debentures issued at a premium of Rs 70 and excess money refunded)

Question 9:

Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was received .
Pass Journal entries .

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (5,000×40)	Dr.		2,00,000
	To Debenture Application A/c				2,00,000
	(Application money received)

	Debenture Application A/c	Dr.		2,00,000
	To 9% Debentures A/c (5,000×30)				1,50,000
	To Security Premium Reserve A/c (5,000×10)				50,000
	(Application money adjusted)

	Debenture Allotment A/c (5,000×45)	Dr.		2,25,000
	To 9% Debentures A/c (5,000×30)				1,50,000
	To Security Premium Reserve A/c (5,000×15)				75,000
	(Allotment money due)

	Bank A/c (5,000×45)	Dr.		2,25,000
	To Debenture Allotment A/c				2,25,000
	(Allotment money received)

	Debenture First and Final call A/c (5,000×55)	Dr.		2,75,000
	To 9% Debentures A/c (5,000×40)				2,00,000
	To Security Premium Reserve A/c (5,000×15)				75,000
	(First call money due)

	Bank A/c	Dr.		2,75,000
	To Debenture Final and Final call A/c				2,75,000
	(First Call money Received)

Question 10:

X Ltd . issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months.
Pass Journal entries.

Answer:

Face Value of Debenture = Rs 100

Discount (Rs 100 × 5%) = Rs 5

∴ Issue Price = Rs 95

Amount Payable as:

On Application (25%)	Rs 25 per debenture
On Allotment (20%)	Rs 20 (25 – 5) per debenture
On First and Final Call (50%)	Rs 50 per debenture

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		3,00,000
	To 8% Debenture Application A/c				3,00,000
	(Application money received for 12,000 8% Debentures at Rs 25 each)

	8% Debenture Application A/c	Dr.		3,00,000
	To 8% Debentures A/c				3,00,000
	(Debenture application money transferred to 8% Debentures account)

	8% Debentures Allotment A/c	Dr.		2,40,000
	Discount on Issue of Debentures A/c	Dr.		60,000
	To 8% Debentures A/c				3,00,000
	(Allotment money due on 12,000 8% Debentures at Rs 20 each at discount of Rs 5)

	Bank A/c	Dr.		2,40,000
	To 8% Debenture Allotment A/c				2,40,000
	(Allotment money received)

	8% Debenture First and Final Call A/c	Dr.		6,00,000
	To 8% Debentures A/c				6,00,000
	(First and final call money due on 12,000 8% Debentures at Rs 50 each)

	Bank A/c	Dr.		6,00,000
	To 8% Debentures First and Final Call A/c				6,00,000
	(First and Final call money received)

Question 11:

Alka Ltd . issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable at a premium of 5% after 5 years . According to the terms of issue ₹ 500 was payable on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (5,000 $\times$ 500)	Dr.		25,00,000
	To Debenture Application A/c				25,00,000
	(Received application money on 5,000 debentures)

	Debenture Application A/c	Dr.		25,00,000
	To 10% Debentures A/c				25,00,000
	(Transfer of application money to Debentures A/c)

	Debenture Allotment A/c (5,000 $\times$ 400)	Dr.		20,00,000
	Discount on issue of Debentures A/c (5,000 $\times$ 100)			5,00,000
	Loss on issue of Debentures A/c (5,000 $\times$ 50)	Dr.		2,50,000
	To 10% Debentures A/c (5,000 $\times$ 500)				25,00,000
	To Premium on Redemption of Debentures A/c (5,000 $\times$ 50)				2,50,000
	(Allotment due on 5,000 Debentures at a discount of Rs 100 per debentures and redeemable at premium of 5%)

	Bank A/c	Dr.		20,00,000
	To Debenture Allotment A/c				20,00,000
	(Allotment money received)

Question 12:

Amrit Ltd . was promoted by Amrit and Bhaskar with an authorised capital of ₹ 10,00,000 divide into 1,00,000 shares of ₹ 10 each.
The company decided to issue 1,000,6% Debentures of ₹ 100 each to Amrit and Bhaskar each for their services in incorporating the company.
Pass journal entry.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Incorporation Cost A/c (2,000 × 100)	Dr.		2,00,000
	To 6% Debentures A/c				2,00,000
	( Debentures issued to promoters)

Question 13:

A limited company bought a Building for ₹ 9,00,000 and the consideration was paid by issuing 10% Debentures of the normal (face) value of ₹ 100 each at a discount of 10%.
Give journal entries.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Building A/c	Dr.		9,00,000
	To Vendor A/c				9,00,000
	(Building purchased)

	Vendor A/c	Dr.		9,00,000
	Discount on Issue of Debentures A/c	Dr.		1,00,000
	To 10% Debentures A/c				10,00,000
	(Issued 10,000, 10% debentures at 10% discount)

Working Note:

Question 14:

Wye Ltd . purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by cheque and the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give journal entries in the books of Wye Ltd.

Answer:

Books of Wye Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Sundry Assets A/c	Dr.		2,00,000
	To Vendor A/c				2,00,000
	(Business purchased)

	Vendor A/c	Dr.		65,000
	To Bank A/c				65,000
	(Amount paid to Vendor in cash)

	Vendor A/c	Dr.		1,35,000
	Discount on Issue of Debentures A/c	Dr.		15,000
	To 9% Debentures A/c				1,50,000
	(Issued 1,500 debentures at 10% discount)

Working Note:

Question 15:

Newton Ltd. purchased a Machinery from B for ₹ 5,76,000 to be paid by the issue of 9% Debentures of ₹ 100 each at 4% discount. Journalise the trasactions.

Answer:

Books of Newton Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c	Dr.		5,76,000
	To B				5,76,000
	(Machinery purchased from B)

	B	Dr.		5,76,000
	Discount on Issue of Debenture A/c	Dr.		24,000
	To 9% Debenture A/c				6,00,000
	(Issued 6,000 debentures at 4% discount)

Working Note:

Question 16:

Reliance Ltd. purchased machinery costing ₹ 1,35,000 . It was agreed that the purchase consideration be paid by issuing 9% Debentures of ₹ 100 each . Assume debentures have been issued
(i) at par and
(ii)at a discount of 10%.
Give necessary journal entries.

Answer:

Case 1

Books of Reliance Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c	Dr.		1,35,000
	To Vendor A/c				1,35,000
	(Machinery Purchases)

	Vendor A/c	Dr.		1,35,000
	To 9% Debenture A/c				1,35,000
	(Issued 1,350 debentures at par)

Working Note:

Case 2

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c	Dr.		1,35,000
	To Vendor A/c				1,35,000
	(Machinery purchased)

	Vendor A/c	Dr.		1,35,000
	Discount on Issue of Debentures A/c	Dr.		15,000
	To 9% Debenture A/c				1,50,000
	(Issued 1,500 debentures at 10% discount)

Working Note:

Question 17:

Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a Bill of Exchanged and for the balance the company issued 9% Debenture of ₹ 100 each at a premium of 10% in favour of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.

Answer:

Books of Deepak Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Furniture A/c	Dr.		2,20,000
	To Furniture Mart				2,20,000
	(Furniture purchased from Furniture Mart)

	Furniture Mart	Dr.		1,10,000
	To Bills Payable A/c				1,10,000
	(Bill accepted from Furniture Mart against 50% payment)

	Furniture Mart	Dr.		1,10,000
	To 9% Debenture A/c				1,00,000
	To Securities Premium A/c				10,000
	(Issued 1,000 9% Debentures of Rs 100 each at a premium of 10% to Furniture Mart)

Working Note:

Question 18:

X Ltd . took over the assets of ₹ 6,00,000 and liabilities of ₹ 80,000 of Y Ltd for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each . Give necessary journal entries in the books of X Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Assets A/c	Dr.		6,60,000
	Goodwill A/c(Balancing Figure)	Dr.		20,000
	To Liabilities A/c				80,000
	To Y Ltd.				6,00,000
	(Purchase of business of Y Ltd.)
				60,000
	Y Ltd.	Dr.			60,000
	To Cash A/c
	(Payment made in cash)

(a)	Y Ltd.	Dr.		5,40,000
	To 12% Debentures A/c				5,40,000
	( Purchase consideration discharged by issue of 12% Debentures)

(b)	Y Ltd.	Dr.		5,40,000
	To 12% Debentures A/c				4,50,000
	To Security Premium Reserve A/c				90,000
	( Purchase consideration discharged by issue of 12% Debentures)

(c)	Y Ltd.	Dr.		5,40,000
	Discount on Issue of Debentures A/c	Dr.		60,000
	To 12% Debentures A/c				6,00,000
	( Purchase consideration discharged by issue of 12% Debentures)

Working Note:

$1) Number of Debentures to issued = \frac{5, 40, 000}{120} = 4, 500 Debentures$
$2) Number of Debentures to issued = \frac{5, 40, 000}{90} = 6, 000 Debentures$

Question 19:

X Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Y Ltd . for ₹ 6,00,000. Give necessary journal entries in the books of X Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹ 100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹ 100 each issued at 20% premium.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Assets A/c	Dr.		6,60,000
	Goodwill A/c (Balancing Figure)	Dr.		20,000
	To Liabilities A/c				80,000
	To Y Ltd.				6,00,000
	(Purchase of business took over)

a.	Y Ltd.	Dr.		6,00,000
	To Cash A/c				60,000
	To 12% Debentures A/c				5,40,000
	(Purchase consideration discharged)

b.	Y Ltd.	Dr.		6,00,000
	To Cash A/c				60,000
	To 12% Debentures A/c				4,50,000
	To Security Premium Reserve A/c				90,000
	( Purchase consideration discharged)

Question 20:

Perfect Barcode Ltd. purchased computers from M/s. Computer Mart and paid the consideration as follows:
(a) 1,000 , 10% Debentures of ₹ 100 each at a discount of 10% ; and
(b) Issued a cheque for ₹ 80,000 for the balance amount.
Pass the journal entry in the books of Perfect Barcode Ltd.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Computers A/c	Dr.		1,70,000
	Discount on issue of Debentures A/c (1,000×10)	Dr.		10,000
	To 10% Debentures A/c (1,000×100)				1,00,000
	To Bank A/c				80,000
	( Purchase consideration discharged)

Question 21:

Lotus Ltd. took over assets of ₹ 2,50,000 and liabilities of ₹ 30,000 of Goneby Company for the purchase consideration of ₹ 3,30,000. Lotus Ltd. paid the purchase consideration by issuing debentures of ₹ 100 each at 10% premium.
Give journal entries in the books of Lotus Ltd.

Answer:

Books of Lotus Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		2,50,000
	Goodwill A/c (balancing figure)	Dr.		1,10,000
	To Sundry Liabilities A/c				30,000
	To Goneby Company A/c				3,30,000
	(Business purchased of Goneby Company)

	Goneby Company A/c	Dr.		3,30,000
	To Debenture A/c				3,00,000
	To Securities Premium A/c				30,000
	(Issued 3,000 debentures at 10% premium)

Working Note:

Question 22:

Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		4,00,000
	Goodwill A/c (balancing figure)	Dr.		30,000
	To Liabilities A/c				50,000
	To Mohan Bros. A/c				3,80,000
	(Asset and liabilities purchased from Mohan Bros.)

Case 1 When Debentures are issued at Par

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	To Debenture A/c				3,80,000
	(Issued 3,800 debentures at par)

Working Note:

Case 2 When Debentures are issued at 10% discount

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	Discount on issue of Debenture A/c	Dr.		42,220
	To Debenture A/c				4,22,200
	To Bank A/c				20
	(Issued 4,222 Debentures of Rs 100 each at 10% discount to Mohan Bros. and fraction of debentures is paid in cash)

Working Note:

Case 3 When Debentures are issued at 10% premium

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	To Debenture A/c				3,45,400
	To Securities Premium A/c				34,540
	To Bank A/c				60
	(Issued 3,454 Debentures of Rs 100 each at 10% premium to Mohan Bros. and fraction of debentures is paid in cash)

Working Note:

Question 23:

R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹2,80,000 . The payment of S Ltd. was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.

Answer:

Books of R Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		5,00,000
	To Liabilities A/c				2,00,000
	To S Ltd.				2,80,000
	To Capital Reserve A/c (balancing figure)				20,000
	(Asset purchased and liabilities took over from S Ltd.)

	S Ltd.	Dr.		2,80,000
	To 9% Debentures A/c				2,80,000
	(Issued 2,800 9% Debentures of Rs 100 each)

Working Note:

Question 24:

Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Answer:

Books of Romi Ltd.
Journal
Date	Particular		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		20,00,000
	To Creditors A/c				2,00,000
	To Kapil Enterprises				18,00,000
	(Asset purchased and Creditors took over from Kapil Enterprises)

	Kapil Enterprises A/c	Dr.		18,00,000
	To 8% Debentures A/c				14,40,000
	To Securities Premium A/c				3,60,000
	(Issued 14,400 8% Debentures of Rs 100 each at a premium of 25% to Kapil Enterprises)

Working Note:

Question 25:

Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Answer:

Books of Romi Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		20,00,000
	To Creditors A/c				2,00,000
	To Kapil Enterprises				18,00,000
	(Assets purchased and Creditors took over from Kapil Enterprises)

	Kapil Enterprises	Dr.		18,00,000
	Discount on Issue of Debentures A/c	Dr.		2,00,000
	To 8% Debentures A/c				20,00,000
	(Issued 20,000 8% Debentures of Rs 100 each at discount of 10% to Kapil Enterprises)

Working Note:

Question 26:

X Ltd. issued 10% Debentures of nominal value of ₹ 10,00,000 as follows:
(i) To sundry persons for cash at par $—$ ₹ 5,00,000 nominal.
(ii) To a vendor for ₹ 5,50,000 for purchase of fixed assets $—$ ₹ 5,00,000 nominal.
Pass journal entries in the books of X Ltd.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c	Dr.		5,00,000
	Fixed Assets A/c	Dr.		5,50,000
	To 10% Debentures A/c				10,00,000
	To Security Premium Reserve A/c				50,000
	( Purchase consideration discharged by issue of 10% Debentures)

Question 27:

Best Barcode Ltd. took a loan of ₹ 5,00,000 from a bank giving ₹ 6,00,000; 9% Debentures as collateral security. Pass journal entries regarding issue of debentures , if any, and show this loan in the Balance Sheet of the company.

Answer:

Best Barcode Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	5,00,000
3. Current Liabilities
Total		5,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	5,00,000
Total		5,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)

1	Long-Term Borrowings
	Loan (Secured by issue of 9% Debentures of Rs 6,00,000 as Collateral Security)	5,00,000

2	Cash and Cash Equivalents
	Cash at Bank	5,00,000

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		5,00,000
	To Loan A/c				5,00,000
	(Loan taken against issuing 9% Debentures as collateral Security)

Alternative Method:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		5,00,000
	To Loan A/c				5,00,000
	(Loan taken against issuing 9% debentures as collateral Security)

	Debenture Suspense A/c	Dr.		6,00,000
	To 9% Debentures A/c				6,00,000
	(Issued 9% Debentures of Rs 6,00,000 as collateral security)

Posting in the Company's Balance Sheet

Best Barcode Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	5,00,000
3. Current Liabilities
Total		5,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	5,00,000
Total		5,00,000

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)

1	Long-Term Borrowings
	Secured:
	Loan (Secured by issue of 9% Debentures of Rs 6,00,000 as Collateral Security)		5,00,000
	9% Debentures (Issued as Collateral Security to Bank against loan)	6,00,000
	Less: Debenture Suspense Account	6,00,000	-
			5,00,000

2	Cash and Cash Equivalents
	Cash at Bank		5,00,000

Question 28:

A company took a loan of ₹ 4,00,000 from Bandhan Bank Ltd. and issued 8% Debentures of ₹ 4,00,000 as a collateral security.

Answer:

When Debentures Issued as Collateral Security are shown separately

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		4,00,000
	To Loan from Bandhan Bank Ltd.				4,00,000
	(Loan taken against issuing 8% Debentures as collateral security)

	Debenture Suspense A/c	Dr.		4,00,000
	To 8% Debenture A/c				4,00,000
	(Debentures issued as collateral security)

Posting in the Company's Balance Sheet (When Debentures Issued as Collateral Security are shown separately)

Balance Sheet
Particulars	Note No.	Amount (Rs)
I Equity and Liabilities
1.Shareholders’ Funds
2.Non-Current Liabilities
a. Long-Term Borrowings	1	4,00,000
3.Current Liabilities
Total		4,00,000

II Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	4,00,000
Total		4,00,000

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)

1	Long-Term Borrowings
	Secured:
	Loan from Bandhan Bank (Secured by issue of Debentures of Rs 4,00,000)		4,00,000
	8% Debentures (Issued as Collateral Security to Bank against Loan)	4,00,000
	Less: Debenture Suspense Account	4,00,000	-
			4,00,000

2	Cash and Cash Equivalents
	Cash at Bank		4,00,000

Alternative Method: When debentures Issued as Collateral Security are not shown separately

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		4,00,000
	To Loan From Bandhan Bank Ltd.				4,00,000
	(Loan taken from Bandhan Bank secured by issuing Debentures as collateral security)

(When Debentures Issued as Collateral Security are not shown separately)

Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	4,00,000
3. Current Liabilities
Total		4,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	4,00,000
Total		4,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)

1	Long-Term Borrowings
	Secured:
	Loan from Bandhan Bank (Secured by issue of 8% Debentures of Rs 4,00,000 as Collateral Security)	4,00,000

2	Cash and Cash Equivalents
	Cash at Bank	4,00,000

Question 29:

X Ltd. took a loan of ₹ 3,00,000 from IDBI Bank . The company issued 4,000; 9% Debentures of ₹ 100 each as a collateral security for the same . Show how these items will be presented in the Balance Sheet of the company.

Answer:

When Debentures Issued as Collateral Security is shown separately

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	3,00,000
3. Current Liabilities
Total		3,00,000

II. Assets
1.Non-Current Assets
2.Current Assets
a. Cash and Cash Equivalents	2	3,00,000
Total		3,00,000

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)

1	Long-Term Borrowings
	Secured:
	Loan From IDBI(Secured by issue of Debentures of Rs 4,00,000)		3,00,000
	9 % Debentures (Issued as Collateral Security against loan)	4,00,000
	Less: Debenture Suspense Account	4,00,000	-
			3,00,000

2	Cash and Cash Equivalents
	Cash at Bank		3,00,000

Alternative Method: When Debentures Issued as Collateral Security are not shown separately

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	3,00,000
3.Current Liabilities
Total		3,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	3,00,000
Total		3,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)

1	Long-Term Borrowings
	Secured:
	Loan From IDBI (Secured by issue of 9% Debentures of Rs 4,00,000 as Collateral Security)	3,00,000

2	Cash and Cash Equivalents
	Cash at Bank	3,00,000

Question 30:

Journalise the following:
(a) A debenture issued at ₹95, repayable at ₹ 100.
(b) A debenture issued at ₹95, repayable at ₹ 105.
(c) A debenture issued at ₹95, repayable at ₹ 105.
The face value of debenture is ₹ 100 in each of the above cases.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(a)	Bank A/c	Dr.		95
	To Debenture Application A/c				95
	(Debenture application money received)

	Debenture Application A/c	Dr.		95
	Discount on Issue of Debentures A/c			5
	To Debenture A/c				100
	(Debenture of Rs 100 each issued at Rs 95 with the term repayable at par)

(b)	Bank A/c	Dr.		95
	To Debenture Application A/c				95
	(Debenture application money received)

	Debenture Application A/c	Dr.		95
	Discount on Issue of Debentures A/c	Dr.		5
	Loss on Issue of Debentures A/c	Dr.		5
	To Debentures A/c				100
	To Premium on Redemption A/c				5
	(Debenture of Rs 100 each issued of Rs 95 with the term repayable at Rs 105)

(c)	Bank A/c	Dr.		100
	To Debenture Application A/c				100
	(Debenture Application received)

	Debenture Application A/c	Dr.		100
	Loss on Issue of Debentures A/c	Dr.		5
	To Debentures A/c				100
	To Premium on Redemption A/c				5
	(Debenture of Rs 100 each issued at par with the term repayable at Rs 105)

Question 31:

Pass journal entries in the following cases:
(a) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 5% redeemable at par.
(b) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 10% redeemable at par.
(c) A Co.Ltd. issued ₹40,000; 12% Debentures at par redeemable at 10% premium.
(d) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 5% and redeemable at 5% premium.
(e) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 10% redeemable at 110%.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(a)	Bank A/c	Dr.		42,000
	To 12% Debenture Application A/c				42,000
	(Debenture application money received)

	12% Debenture Application A/c	Dr.		42,000
	To 12% Debentures A/c				40,000
	To Securities Premium A/c				2,000
	(Debenture application money transferred to 12% Debentures account and securities premium account)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(b)	Bank A/c	Dr.		36,000
	To 12% Debenture Application A/c				36,000
	(Debenture application money received)

	12% Debenture Application A/c	Dr.		36,000
	Discount on Issue of Debentures A/c	Dr.		4,000
	To 12% Debentures A/c				40,000
	(Debentures of Rs 40,000 issued at 10% discount)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(c)	Bank A/c	Dr.		40,000
	To 12% Debenture Application A/c				40,000
	(Debenture application money received)

	12% Debenture Application A/c	Dr.		40,000
	Loss on Issue of Debentures A/c	Dr.		4,000
	To 12% Debentures A/c				40,000
	To Premium on Redemption A/c				4,000
	(Debentures of Rs 40,000 issued at par with the term repayable at 10% premium)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(d)	Bank A/c	Dr.		38,000
	To 12% Debenture Application A/c				38,000
	(Debenture application money received)

	Debenture Application A/c	Dr.		38,000
	Discount on Issue of Debenture A/c	Dr.		2,000
	Loss on Issue of Debenture A/c	Dr.		2,000
	To 12% Debentures A/c				40,000
	To Premium on Redemption A/c				2,000
	(Debentures of Rs 40,000 issued at 5% discount with the term repayable at 5% premium)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(e)	Bank A/c	Dr.		44,000
	To 12% Debenture Application A/c				44,000
	(Debenture application money received)

	12% Debenture Application A/c	Dr.		44,000
	Loss on Issue of Debentures A/c	Dr.		4,000
	To 12% Debentures A/c				40,000
	To Securities Premium A/c				4,000
	To Premium on Redemption A/c				4,000
	(Debenture of Rs 40,000 issued at 10% premium with the term payable at 10% premium)

Question 32:

Footfall Ltd. issues 10,000 Debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 5% after the expiry of three years.
Pass Journal entries for the issue of these debentures.

Answer:

Books of Footfall Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		9,00,000
	To Debenture Application A/c				9,00,000
	(Debenture application money received for 10,000 debentures at Rs 90 each)

	Debenture Application A/c	Dr.		9,00,000
	Discount on Issue of Debenture A/c	Dr.		1,00,000
	Loss on issue of Debentures A/c	Dr.		50,000
	To Debentures A/c				10,00,000
	To Premium on Redemption A/c				50,000
	(10,000 Debentures of Rs 100 each issued at 10% discount with the term repayable at 5% redemption)

	Debentures A/c	Dr.		10,00,000
	Premium on Redemption A/c	Dr.		50,000
	To Debentureholders’ A/c				10,50,000
	(Debentures due for redemption along with premium on redemption)

	Debentureholders’ A/c	Dr.		10,50,000
	To Bank A/c				10,50,000
	(Amount due for redemption paid to debenture holders)

Question 33:

Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued ₹ 4,00,000; 9% Debentures of ₹ 100 each at a premium of 8% redeemable at 10% premium.
(b) Issued ₹ 6,00,000; 9% Debentures of ₹ 100 each at par, repayable at a premium of 10%.
(c) Issued ₹ 10,00,000; 9% Debentures of ₹ 100 each at a premium of 5%, redeemable at par.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(a)	Bank A/c	Dr.		4,32,000
	To Debenture Application and Allotment A/c				4,32,000
	(Application money received on 4,000 9% Debentures)

	Debenture Application and Allotment A/c	Dr.		4,32,000
	Loss on Issue of Debenture A/c	Dr.		40,000
	To 9% Debentures A/c				4,00,000
	To Securities Premium Reserve A/c				32,000
	To Premium on Redemption of debentures A/c				40,000
	(4,000; 9% Debentures issued at a premium of Rs 8 and redeemable at premium of 10%)

(b)	Bank A/c	Dr.		6,00,000
	To Debenture Application and Allotment A/c				6,00,000
	(Application money received on 6,000 9% Debentures)

	Debenture Application and Allotment A/c	Dr.		6,00,000
	Loss on Issue of Debenture A/c	Dr.		60,000
	To 9% Debentures A/c				6,00,000
	To Premium on Redemption of Debentures A/c				60,000
	(6,000; 9% Debentures issued at par and redeemable at premium of 10%)

(c)	Bank A/c	Dr.		10,50,000
	To Debenture Application and Allotment A/c				10,50,000
	(Application money received on 10,000 9%Debentures)

	Debenture Application and Allotment A/c	Dr.		10,50,000
	To 9% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				50,000
	(1,000; 9% Debentures issued at a premium of Rs 5)

Question 34:

Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued ₹ 28,000; 10% Debentures of  ₹ 100 each at a premium of 15% redeemable at par.
(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%.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
(a)	Bank A/c (280 debentures × 115)	Dr.		32,200
	To Debenture Application and Allotment A/c				32,200
	(Application money received)

	Debenture Application and Allotment A/c	Dr.		32,200
	To 10% Debentures A/c				28,000
	To Securities Premium Reserve A/c				4,200
	(280; 10% Debentures issued at a premium of 15%)

(b)	Bank A/c	Dr.		33,000
	To Debenture Application and Allotment A/c				33,000
	(Application money received)

	Debenture Application and Allotment A/c	Dr.		33,000
	Loss On Issue of debentures A/c	Dr.		4,500
	To 10% Debentures A/c				30,000
	To Securities Premium Reserve A/c				3,000
	To Premium on Redemption of debentures A/c				4,500
	(300; 10% Debentures issued at a premium of 10% and redeemable at a premium of 15%)

(c)	Bank A/c	Dr.		80,000
	To Debenture Application and Allotment A/c				80,000
	(Application money received)

	Debenture Application and Allotment A/c	Dr.		80,000
	Loss On Issue of debentures A/c	Dr.		8,000
	To 10% Debentures A/c				80,000
	To Premium on Redemption of debentures A/c				8,000
	(800; 10% Debentures issued at par and redeemable at premium of 10%)

Question 35:

Journalise the following transaction at the time of issue of 12% Debentures:
Nandan Ltd. issued ₹90,000, 12% Debentures of ₹ 100 each at a discount of 5% redeemable at 110%.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Bank A/c	Dr.		85,500
	To Debenture Application and Allotment A/c				85,500
	(Money received on the issue of debentures)

	Debenture Application and Allotment A/c	Dr.		85,500
	Loss on Issue of Debentures A/c	Dr.		13,500
	To 12% Debentures A/c				90,000
	To Premium on Redemption of Debentures A/c				9,000
	(Debenture application and allotment money transferred to Debentures A/c)

Question 36:

Pass necessary Journal entries for the issue of debentures in the following cases:
(a) ₹ 40,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
(b) ₹ 70,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at ₹ 110.

Answer:

(a)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		42,000
	To Debenture Application A/c				42,000
	(400 debentures issued at Rs 100 at a premium of 5%)

	Debenture Application A/c	Dr.		42,000
	To 12% Debenture A/c				40,000
	To Securities Premium A/c				2,000
	(400 debentures issued at a premium of 5% and redeemable at par)

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		73,500
	To Debenture Application A/c				73,500
	(700 debentures issued at Rs 100 at a premium of 5%)

	Debenture Application A/c	Dr.		73,500
	Loss on Issue of Debentures A/c	Dr.		7,000
	To 12% Debenture A/c				70,000
	To Securities Premium A/c				3,500
	To Premium on Redemption A/c				7,000
	(70,000 debentures issued at a premium of 5% and redeemable at Rs 110)

Question 37:

Pass necessary Journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹ 80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.

Answer:

(a)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		36,000
	To Debenture Application A/c				36,000
	(400 debentures issued at Rs 100 at discount of 10%)

	Debenture Application A/c	Dr.		36,000
	Discount on Issue of Debentures A/c	Dr.		4,000
	To 15% Debenture A/c				40,000
	(400 debentures issued at discount and redeemable at a par )

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		88,000
	To Debenture Application A/c				88,000
	(800 debentures issued at Rs 100 at a premium of 10%)

	Debenture Application A/c	Dr.		88,000
	Loss on Issue of Debentures A/c	Dr.		8,000
	To 15% Debenture A/c				80,000
	To Premium on Redemption A/c				8,000
	To Securities Premium A/c				8,000
	(800 debentures issued at a premium of 10% and redeemable at a premium of 10%)

Question 38:

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%.

Answer:

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) = $5, 00, 000 \times \frac{10}{100} \times \frac{6}{12} = Rs 25, 000$

Question 39:

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 .

Answer:

Journal In the books of Bright Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Mar. 31	Debentures Interest A/c	Dr.		25,000
	To Debenture Holder’s A/c				22,500
	To Income Tax Payable A/c				2,500
	(Debentures interest due)

	Debenture Holder’s A/c	Dr.		22,500
	Income Tax Payable A/c			2,500
	To Bank A/c				25,000
	(Interest on debentures paid)

Mar. 31	Statement of Profit & Loss A/c	Dr.		50,000
	To Debentures Interest A/c				50,000
	(Interest transferred to profit and loss)

Question 40:

On 1st April, 2015, V.V.L.Ltd issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%, redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2015
Apr. 01	Bank A/c	Dr.		94,000
	To Debenture Application and Allotment A/c				94,000
	(Money received on the issue of debentures)

	Debenture Application and Allotment A/c	Dr.		94,000
	Loss on Issue of Debentures A/c	Dr.		16,000
	To 9% Debentures A/c				1,00,000
	To Premium on Redemption of Debentures A/c				10,000
	(Debenture application and allotment money transferred to Debentures A/c)

Sept 30	Debenture Interest A/c	Dr.		4,500
	To Debenture holders’ A/c				4,050
	To TDS Payable A/c				450
	(Interest due)

	Debenture holders’ A/c	Dr.		4,050
	To Bank A/c				4,050
	(Payment of interest)

	TDS Payable A/c	Dr.		450
	To Bank A/c				450
	(Payment of tax)
2016
Mar 31	Debenture Interest A/c	Dr.		4,500
	To Debenture holders’ A/c				4,050
	To TDS Payable A/c				450
	(Interest due)

	Debenture holders’ A/c	Dr.		4,050
	To Bank A/c				4,050
	(Payment of interest)

	TDS Payable A/c	Dr.		450
	To Bank A/c				450
	(Payment of tax)

Question 41:

X Ltd. issued 30,000, 10% Debentures of ₹ 100 each at a discount of 5% on 1st April, 2015. As per the terms of issue , debentures are to be redeemed at the end of five years . Show the amount of discount to be written off from Statement of Profit and Loss every year.

Answer:

$\begin{array}{l} Amount of Discount = 30, 00, 000 \times 5 % = Rs 1, 50,000 \\ Amount of Discount to be written off every year = \frac{1, 50, 000}{5} = Rs 30,000 every year \end{array}$

Question 42:

A limited company issued ₹ 10,00,000;9% Debentures at a discount of 6% on 1st April, 2014. These debentures are to be redeemed equally, in 5 annual installments starting from 31st March, 2015. Discount on Issue of Debentures is written off during the tenure of debentures.
Pass the journal entries for issue of debentures and writing off the discount.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2014
Apr.01	Bank A/c( $10, 00, 000 - 10, 00, 000 \times \frac{6}{100}$ )	Dr.		9,40,000
	To Debenture Application and Allotment A/c				9,40,000
	(Application money received on issue of Debenture)

Apr.01	Debenture Application and Allotment A/c	Dr.		9,40,000
	Discount on Issue of Debenture A/c	Dr.		60,000
	To 9% Debentures A/c				10,00,000
	(Application money transferred to Debentures A/c)
2015
Mar.31	Statement of P&L A/c	Dr.		20,000
	To Discount on Issue of Debenture A/c				20,000
	(Proportionate discount on Issue of Debenture written off)

2016 Mar.31 2017 Mar.31 2018 Mar.31 2019 Mar.31	Statement of P&L A/c Dr. To Discount on Issue of Debenture A/c (Proportionate discount on Issue of Debenture written off) Statement of P&L A/c Dr. To Discount on Issue of Debenture A/c (Proportionate discount on Issue of Debenture written off) Statement of P&L A/c Dr. To Discount on Issue of Debenture A/c (Proportionate discount on Issue of Debenture written off) Statement of P&L A/c Dr. To Discount on Issue of Debenture A/c (Proportionate discount on Issue of Debenture written off)			16,000 12,000 8,000 4,000	16,000 12,000 8,000 4,000

Working Notes:

Calculation of amount of Discount to be written off every year:
$A m o u n t o f D i s c o u n t = 10, 00, 000 \times \frac{6}{100} = 60, 000$

Year End	Outstanding Amount (Rs.)	Ratio	Discount
31st March, 2015	10,00,000	10	$60, 000 \times \frac{10}{30} = 20, 000$
31st March, 2016	8,00,000	8	$60, 000 \times \frac{8}{30} = 16, 000$
31st March, 2017	6,00,000	6	$60, 000 \times \frac{6}{30} = 12, 000$
31st March, 2018	4,00,000	4	$60, 000 \times \frac{4}{30} = 8, 000$
31st March, 2019	2,00,000	2	$60, 000 \times \frac{2}{30} = 4, 000$
	Total	30	60,000

Question 43:

On 1st April, 2014, Popular Ltd. issued 20,000;10% Debentures of ₹ 100 each at a discount of 10% redeemable at par. Show the 'Discount on Issue of Debentures Account ' if
(a) such debentures are redeemable after 4 years, and
(b) such debentures are redeemable by equal annual drawings in 4 years , starting from 31st March, 2015. Popular Ltd.follows financial year as its accounting year .

Answer:

Case (a)

Discount on Issue of Debentures Account
Dr.				Cr.
Date	Particulars	J.F.	Amount (₹)		Date	Particulars	J.F.	Amount (₹)
2014-15					2014-15
Apr. 01	10% Debentures		2,00,000		Mar. 31	Statement of Profit and Loss		50,000
					Mar. 31	Balance c/d		1,50,000
			2,00,000					2,00,000
2015-16					2015-16
Apr. 01	Balance b/d		1,50,000		Mar. 31	Statement of Profit and Loss		50,000
					Mar. 31	Balance c/d		1,00,000
			1,50,000					1,50,000
2016-17					2016-17
Apr. 01	Balance b/d		1,00,000		Mar. 31	Statement of Profit and Loss		50,000
					Mar. 31	Balance c/d		50,000
			1,00,000					1,00,000
2017-18					2017-18
Apr. 01	Balance b/d		50,000		Mar. 31	Statement of Profit and Loss		50,000
			50,000					50,000

Working Notes:

WN1: Calculation of discount amount to be written-off

table attributes columnalign left end attributes row cell Total space Discount equals 20 comma 00 comma 000 cross times 10 over 100 equals 2 comma 00 comma 000 end cell row cell Discount space written minus off space each space year equals fraction numerator 2 comma 00 comma 000 over denominator 4 end fraction equals 50 comma 000 end cell end table

Case (b)

Discount on Issue of Debentures Account
Dr.				Cr.
Date	Particulars	J.F.	Amount (₹)		Date	Particulars	J.F.	Amount (₹)
2014-15					2014-15
Apr. 01	10% Debentures		2,00,000		Mar. 31	Statement of Profit and Loss		80,000
					Mar. 31	Balance c/d		1,20,000
			2,00,000					2,00,000
2015-16					2015-16
Apr. 01	Balance b/d		1,20,000		Mar. 31	Statement of Profit and Loss		60,000
					Mar. 31	Balance c/d		60,000
			1,20,000					1,20,000
2016-17					2016-17
Apr. 01	Balance b/d		60,000		Mar. 31	Statement of Profit and Loss		40,000
					Mar. 31	Balance c/d		20,000
			60,000					60,000
2017-18					2017-18
Apr. 01	Balance b/d		20,000		Mar. 31	Statement of Profit and Loss		20,000
			20,000					20,000

Working Notes:

At the end of	Outstanding Balance	Weight	Discount Written-off
Year I	20,00,000	4	$80 comma 000 space open parentheses 4 over 10 cross times 2 comma 00 comma 000 close parentheses$
Year II	15,00,000	3	$60 comma 000 space open parentheses 3 over 10 cross times 2 comma 00 comma 000 close parentheses$
Year III	10,00,000	2	$40 comma 000 space open parentheses 2 over 10 cross times 2 comma 00 comma 000 close parentheses$
Year IV	5,00,000	1	$20 comma 000 space open parentheses 1 over 10 cross times 2 comma 00 comma 000 close parentheses$
		10

Question 44:

On 1st April 2012, Z Ltd. issued ₹ 10,00,000, 10% Debentures of ₹ 100 each at 94% redeemable at par. The debentures are to be redeemed by drawings method in the following manner:

Year end	2nd	3rd	4th	5th
Nominal value of Debentures to be Redeemed	10%	20%	30%	40%

Calculate the amount of discount on issue of debentures to be written off each year.

Answer:

At the end of	Outstanding Balance	Weight	Discount Written-off
Year I	10,00,000	10	$15, 000 (\frac{10}{40} \times 60, 000)$
Year II	10,00,000	10	$15, 000 (\frac{10}{40} \times 60, 000)$
Year III	9,00,000	9	$13, 500 (\frac{9}{40} \times 60, 000)$
Year IV	7,00,000	7	$10, 500 (\frac{7}{40} \times 60, 000)$
Year V	4,00,000	4	$6, 000 (\frac{4}{40} \times 60, 000)$
		40

Working Notes:

WN1: Calculation of discount amount to be written-off

Discount = 10, 00, 000 \times \frac{6}{100} = 60, 000

Question 45:

A company issued 9% Debentures of ₹ 10,00,000 at 8% discount, redeemable at par. The debentures are to be redeemed by drawings method in the following manner:
Year-end Amount (Face Value ) ( ₹)
2 1,00,000
3 2,00,000
4 3,00,000
5 4,00,000
Calculate the amount of discount on issue of debentures to be written off each year.

Answer:

(

Calculation of amount of Discount to be written off every year:

$Amount of Discount = 10, 00, 000 \times 8 % = Rs 80,000$

Year End	Outstanding Amount (Rs.)	Ratio	Discount
1	10,00,000	10	$80, 000 \times \frac{10}{40} = 20, 000$
2	10,00,000	10	$80, 000 \times \frac{10}{40} = 20, 000$
3	9,00,000	9	$80,000 \times \frac{9}{40} =18,000$
4	7,00,000	7	$80,000 \times \frac{7}{40} =14,000$
5	4,00,000	4	$80,000 \times \frac{4}{40} =8,000$
	Total	40	80,000

Question 46:

Kangaroo Ltd. issued 5,000, 8% Debentures of ₹ 100 each at a discount of 8%. The company decided to write off discount in the year of loss from Capital Reserve which has a balance of ₹ 1,00,000. Pass the journal entry for writing off discount.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Capital Reserve A/c	Dr.		40,000
	To Discount on Issue of Debentures A/c				40,000
	(Discount on 8% Debentures written off)

Working Notes:
WN1: Calculation of discount amount to be written-off
$Discount = 10, 00, 000 \times \frac{6}{100} = 60, 000$

Question 47:

Grand Hotels Ltd.issued 30,000, 7% Debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 5% . It decided to write off loss on issue of debentures first from Capital Reserve then from Securities Premium Reserve and balance from Statement of Profit and Loss. It has balances as follows:
Capital Reserve $—$ ₹ 80,000 and Securities Premium Reserve $—$ ₹ 1,00,000 .
Pass the journal entry for writing off loss on Issue of Debentures .

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Capital Reserve A/c	Dr.		80,000
	Securities Premium A/c	Dr.		1,00,000
	Statement of Profit & Loss	Dr.		1,20,000
	To Discount on Issue of Debentures A/c				3,00,000
	(Loss on issue of debentures written off)

Working Notes:
WN1: Calculation of discount amount to be written-off

\begin{array}{l} Discount = 30, 00, 000 \times \frac{10}{100} = 3, 00, 000 \\ First Rs 80,000 will be set - off from Capital Reserve \\ Next Rs 1,00,000 will be set - off from Securities Premium \\ Remaining Rs 1,20,000 (3,00,000 - 80, 000 - 1, 00, 000) will be set - off from Statement of Profit & Loss \end{array}

Question 48:

Kitply Ltd.issued ₹ 2,00,000, 10% Debentures at a discount of 5% .The terms of issue provide the repayment at the end of 4 years . Kitply Ltd.has a balance of ₹ 5,00,000 in Securities Premium Reserve . The company decided to write off discount on issue of debentures from Securities Premium Reserve in the first year.
Pass the journal entry.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Security Premium Reserve A/c	Dr.		10,000
	To Discount on Issue of Debentures A/c				10,000
	(Discount on Issue of Debentures written off)

Note: Discount on issue of Debentures = 2,00,000×5% = Rs 10,000

Question 49:

Typhoo Ltd.issued 5,000, 9% Debentures of ₹ 100 each at a discount of 5% redeemable at the end of 5 years at a premium of 10%. Typhoo Ltd.has a balance of ₹ 2,00,000 in Securities Premium Reserve . Loss on Issue of debentures is to be written off equally over the life of debentures from Securities Premium Reserve to the extent possible.
Pass the journal entries for writing off the Loss on Issue of Debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Security Premium Reserve A/c	Dr.		15,000
	To Loss on Issue of Debentures A/c				15,000
	(Loss on Issue of Debentures written off)

Note: The above entry will be passed for every year for 5 years.

$\begin{array}{l} Loss on issue of Debentures = 5, 00, 000 \times 15 % = Rs 75,000 \\ Amount of loss on issue of Debentures to be written off every year = \frac{75, 000}{5} = Rs 15,000 every year \end{array}$

Question 50:

Tetley Ltd. issued 10,000,9% Debentures of ₹ 100 each at a discount of 5% redeemable at the end of 5 years at a premium of 10%. Tetley Ltd. has a balance of ₹ 50,000 in Securities Premium Reserve . Loss on Issue of debentures is to be written off equally over the life of debentures.
Pass the journal entries for writing off the Loss on Issue of Debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

Year 1	Security Premium Reserve A/c	Dr.		30,000
	To Loss on Issue of Debentures A/c				30,000
	(Loss on Issue of Debentures written off)

Year 2	Security Premium Reserve A/c	Dr.		20,000
	Statement of Profit & Loss A/c	Dr.		10,000
	To Loss on Issue of Debentures A/c				30,000
	(Loss on Issue of Debentures written off)

Year 3	Statement of Profit & Loss A/c	Dr.		30,000
	To Loss on Issue of Debentures A/c				30,000
	(Loss on Issue of Debentures written off)

Note: Last entry will be passed for next two remaining years.

$\begin{array}{l} Loss on Issue of Debentures = Discount on Issue of Debentures + Premium on Redemption of Debentures \\ = 10, 00, 000 \times 5 % + 10, 00, 000 \times 10 % = Rs 1,50,000 \\ Amount of Loss on Issue of Debentures to be written off every year = \frac{1, 50, 000}{5} = Rs 30,000 every year \end{array}$

Question 51:

Global Ltd.issued 10,000, 8% Debentures of ₹ 100 each redeemable at the end of 3 years at a premium of ₹ 9.
Pass the journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on Issue of Debentures Account.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Statement of Profit & Loss A/c	Dr.		30,000
	To Loss on Issue of Debentures A/c				30,000
	(Loss on Issue of Debentures written off)

Note: This entry will be passed for next two years.

$\begin{array}{l} Loss on issue of Debentures = 10, 000 \times 9 = Rs 90,000 \\ Amount of loss on issue of Debentures to be written off every year = \frac{90, 000}{3} = Rs 30,000 every year \end{array}$

Loss on Issue of Debentures Account
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)

Year 1	8% Debentures A/c	90,000	Year 1		Statement of Profit & Loss A/c	30,000
					Balance c/d	60,000
		90,000				90,000
Year 2	Balance b/d	60,000	Year 2		Statement of Profit & Loss A/c	30,000
					Balance c/d	30,000
		60,000				60,000
Year 3	Balance b/d	30,000	Year 3		Statement of Profit & Loss A/c	30,000

		30,000				30,000

Question 52:

On 1st April, 2013, ABC Ltd. issued 10,000 , 10% Debentures of ₹ 100 each at a discount of 4% redeemable after 5 years at a premium of 6% .
Pass the necessary journal entries for issue of debentures and writing off Loss on issue of Debentures. Also prepare Loss on issue of Debentures Account.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2013
Apr. 01	Bank A/c	Dr.		9,60,000
	To Debenture Application and Allotment A/c				9,60,000
	(Money received on the issue of debentures)

	Debenture Application and Allotment A/c	Dr.		9,60,000
	Loss on Issue of Debentures A/c	Dr.		1,00,000
	To 9% Debentures A/c				10,00,000
	To Premium on Redemption of Debentures A/c				60,000
	(Debenture application and allotment money transferred to Debentures A/c)

2014-15	Statement of Profit & Loss	Dr.		20,000
	To Loss on Issue of Debentures A/c				20,000
	(One-fifth of the total loss written-off)

2015-16	Statement of Profit & Loss	Dr.		20,000
	To Loss on Issue of Debentures A/c				20,000
	(One-fifth of the total loss written-off)

2016-17	Statement of Profit & Loss	Dr.		20,000
	To Loss on Issue of Debentures A/c				20,000
	(One-fifthof the total loss written-off)

2017-18	Statement of Profit & Loss	Dr.		20,000
	To Loss on Issue of Debentures A/c				20,000
	(One-fifth of the total loss written-off)

2018-19	Statement of Profit & Loss	Dr.		20,000
	To Loss on Issue of Debentures A/c				20,000
	(One-fifth of the total loss written-off)

Working Notes:
WN1:
Calculation of discountamount to be written-off

Discount = 10, 00, 000 \times \frac{10}{100} = 1, 00, 000

Discount on Issue of Debentures Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2013-14				2013-14
Apr. 01	10% Debentures A/c		1,00,000	Mar. 31	Balance c/d		1,00,000

			1,00,000				1,00,000

2014-15				2014-15
Apr. 01	Balance b/d		1,00,000	Mar. 31	Statement of Profit and Loss		20,000
				Mar. 31	Balance c/d		80,000
			1,00,000				1,00,000
2015-16				2015-16
Apr. 01	Balance b/d		80,000	Mar. 31	Statement of Profit and Loss		20,000
				Mar. 31	Balance c/d		60,000
			80,000				80,000
2016-17				2016-17
Apr. 01	Balance b/d		60,000	Mar. 31	Statement of Profit and Loss		20,000
				Mar. 31	Balance c/d		40,000
			60,000				60,000
2017-18				2017-18
Apr. 01	Balance b/d		40,000	Mar. 31	Statement of Profit and Loss		20,000
				Mar. 31	Balance c/d		20,000
			40,000				40,000
2018-19				2018-19
Apr. 01	Balance b/d		20,000	Mar. 31	Statement of Profit and Loss		20,000
			20,000				20,000

Question 53:

Feeble Ltd.issued 10% Debentures at 94% for ₹ 20,00,000 on 1st July, 2013 repayable by five equal annual installments of ₹ 4,00,000 each starting from 30th June, 2014. Calculate the amount of discount to be written off in every accounting year assuming that the company decides to write off the debentures discount during the life of the debentures.

Answer:

Calculation of amount of Discount to be written off every year:

$A m o u n t o f D i s c o u n t = 20, 00, 000 \times \frac{6}{100} = 1, 20, 000$

Period	Year End	Outstanding Amount (Rs.)	Months Used	Product	Ratio	Discount	Total Discount to be written off
2013-14	31st March, 2014	20,00,000	9	1,80,00,000	180	$1, 20, 000 \times \frac{180}{720} = 30, 000$	30,000
2014-15	30th June, 2014	20,00,000	3	60,00,000	60	$1, 20, 000 \times \frac{60}{720} = 10, 000$
	31st March, 2015	16,00,000	9	1,44,00,000	144	$1, 20, 000 \times \frac{144}{720} = 24, 000$	34,000
2015-16	30th June, 2015	16,00,000	3	48,00,000	48	$1, 20, 000 \times \frac{48}{720} = 8, 000$
	31st March, 2016	12,00,000	9	1,08,00,000	108	$1, 20, 000 \times \frac{108}{720} = 18, 000$	26,000
2016-17	30th June, 2016	12,00,000	3	36,00,000	36	$1, 20, 000 \times \frac{36}{720} = 6, 000$
	31st March, 2017	8,00,000	9	72,00,000	72	$1, 20, 000 \times \frac{72}{720} = 12, 000$	18,000
2017-18	30th June, 2017	8,00,000	3	24,00,000	24	$1, 20, 000 \times \frac{24}{720} = 4, 000$
	31st March, 2018	4,00,000	9	36,00,000	36	$1, 20, 000 \times \frac{36}{720} = 6, 000$	10,000
2018-19	30th June, 2018	4,00,000	3	12,00,000	12	$1, 20, 000 \times \frac{12}{720} = 2, 000$	2,000
		Total		7,20,00,000	720	1,20,000	1,20,000

Question 54:

On 1st May, 2016, Goodluck Ltd. issued 16,000, 9% Debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 10% redeemable after five years. All the debentures were subscribed and allotment was made . Discount on issue of Debentures is to be written off over the life of the debentures.
Prepare the Balance Sheet (extract) as at 31st March, 2017 showing Discount on issue of Debentures.

Answer:

Balance Sheet as at March 31, 2017
Particulars	Note No.	Amount (Rs)

II Assets
1. Non-Current Assets
a. Other Non-Current Assets	1	96,000
2. Current Assets
a. Other Current Assets	2	32,000
Total		1,28,000

*NOTES TO ACCOUNTS*
Note No.	Particulars		Amount (Rs)
1.	Other Non-Current Assets
	Loss on issue of Debentures	1,28,000
	Less: Shown as Other Current Assets	32,000	96,000
	(To the extent to be written off after 12 months from the date of Balance sheet )
2.	Other Current Assets
	Loss on issue of Debentures		32,000
	(To the extent to be written off within 12 months from the date of Balance sheet )

Question 55:

On 1st June, 2015, R Energy Ltd. issued 10,000, 7% Debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 10% at the end of five years . All the debentures were subscribed and allotment was made . Loss on issue of Debentures is to be written off over the life of the debentures.
Prepare the Balance Sheet (extract) as at 31st March, 2016 and 31st March, 2017 showing Loss on issue of Debentures.

Answer:

Balance Sheet as at March 31, 2016
Particulars		Note No.	Amount (Rs)

II Assets
1. Non-Current Assets
a. Other Non-Current Assets			1,20,000
2. Current Assets
a. Other Current Assets			40,000
Total			1,60,000

*NOTES TO ACCOUNTS*
Note No.	Particulars				Amount (Rs)
1.	Other Non-current Assets
	Loss on issue of Debentures			1,60,000
	Less: Shown as Other Current Assets			40,000	1,20,000
	(To the extent to be written off after 12 months from the date of Balance sheet )
2.	Other Current Assets
	Loss on issue of Debentures				40,000
	(To the extent to be written off within 12 months from the date of Balance sheet )

Balance Sheet as at March 31, 2017
Particulars		Note No.	Amount (Rs)

II Assets
1. Non-Current Assets
a. Other Non-Current Assets			80,000
2. Current Assets
a. Other Current Assets			40,000
Total			1,20,000

*NOTES TO ACCOUNTS*
Note No.	Particulars				Amount (Rs)
1.	Other Non-current Assets
	Loss on issue of Debentures			1,20,000
	Less: Shown as Other Current Assets			40,000	80,000
	(To the extent to be written off after 12 months from the date of Balance sheet )
3	Other Current Assets
	Loss on issue of Debentures				40,000
	(To the extent to be written off within 12 months from the date of Balance sheet )

Ts Grewal Vol. II 2018 for Class 12 Commerce Accountancy Chapter 18 - Issue Of Debentures

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