SNS ACADEMY

“ WHERE EVERY STUDENT IS A WINNER”

Class 12 Accountancy
Ch 9 Company Accounts - Issue of Debentures Que and Ans

1. Pass necessary Journal entries for issue of 1,000, 7% Debentures of Rs.100 each in the
following cases:
(a) Issued at 5% premium, redeemable at a premium of 10%.
(b) Issued at a discount of 5%, redeemable at par.

2. X Ltd. invited applications for 1,000, 9% Debentures of Rs.100 each at a discount of 6%.
Application for 1,200 debentures were received. Pro rata allotment was made to all the
applicants.
Pass necessary Journal entries for the issue of debentures assuming that the whole amount
was payable with applications.

3. ‘ZK Ltd.’ issued Rs.4,00,000, 9% Debentures of Rs.100 each at a discount of 5% redeemable

at a premium of 10%.
Pass necessary Journal entries for the above transactions in the books of ZK Ltd.

4. Hina Ltd. purchased assets of Harish Ltd. for Rs.8,40,000 and took over the liabilities
(creditors) of Rs.80,000 for an agreed purchase consideration of Rs.8,00,000. Hina Ltd.
issued 12% Debentures of Rs.100 each at 25% premium for purchase consideration.
Pass necessary Journal entries in the books of Hina Ltd.

5. (Issue of Debentures as Collateral Security). X Ltd. secured a loan of Rs.8,00,000 from the
Bank of Baroda by issuing 10,000; 9% Debentures of Rs.100 each as a collateral security.
How will you show the issue of such debentures in the Balance Sheet?

6. BG. Ltd. issued 2,000, 12% Debentures of Rs.100 each on 1st April, 2012. 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 debentures interest for the half-yearly ending
31st March, 2013 and transfer of interest on debentures of the year to the Statement of
Profit and Loss.

7. On 1st April, 2015, J.K. Ltd. issued 8,000, 9% Debentures of Rs.1,000 each at a discount of
6%, redeemable at a premium of 5% after three years. The company closes its books on 31 st
March every year. Interest on 9% Debentures is payable on 30th September and 31st March
every year. The rate of tax deducted at source is 10%.
Pass necessary Journal entries for the issue of debentures and debenture interest for the
year ended 31st March, 2016.
8. SSS Ltd., issued 25,000; 10% Debentures of Rs.100 each. Give Journal entries and the
Balance Sheet in each of the following cases when:
(i) the debentures were issued at a premium of 20%.
(ii) the debentures were issued as a collateral security to Bank against a loan of Rs.2,00,000.
(iii) the debentures were issued to a supplier of machinery costing Rs.28,00,000 as his full
and final payment.

402-405, J9 HIGH STREET, NEAR DREAM WORLD, CANAL ROAD, VESU. M-9374702012
 SNS ACADEMY
“ WHERE EVERY STUDENT IS A WINNER”
ANSWERS:
1. a) (i) Dr. Bank A/c and Cr. Debentures Application and Allotment A/c by Rs.1,05,000.
(ii) Dr. Debentures Application and Allotment A/c Rs.1,05,000 and Loss on Issue of Debentures A/c
Rs.10,000;
Cr. 7% Debentures A/c Rs.1,00,000; Securities Premium Reserve A/c Rs.5,000 and
Premium on Redemption of Debentures A/c Rs.10,000
b) (i) Dr. Bank A/c and Cr. Debentures Application and Allotment A/c by Rs.95,000.
(ii) Dr. Debentures Application and Allotment A/c by Rs.95,000 and Discount on Issue of Debentures A/c
Rs.5,000.
Cr. 7% Debentures A/c Rs.1,00,000.

2. JOURNAL OF X LTD.
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
Bank A/c ...Dr. 1,12,800
To Debentures Application and Allotment A/c 1,12,800
(Application money received on 1,200 debentures @Rs.94
each)
Debentures Application and Allotment A/c ...Dr. 1,12,800
Discount on Issue of Debentures A/c ...Dr. 6,000
To 9% Debentures A/c (1,000xRs.6) 1,00,000
To Bank A/c (200 x Rs.94) 18,800
(1,000, 9% Debentures of Rs.100 each allotted on pro rata
basis and application money for 200 debentures refunded)

3. In the Books of ZK Ltd.

JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
(i) Bank A/c ...Dr. 3,80,000
To Debentures Application and Allotment A/c 3,80,000
(Debentures application money received)
(ii) Debentures Application and Allotment A/c ...Dr. 3,80,000
Discount on Issue of Debentures A/c ...Dr. 20,000
Loss on Issue of Debentures A/c ...Dr. 40,000 4,00,000
To 9% Debentures A/c 40,000
To Premium on Redemption of Debentures A/c
(9% Debentures issued at 5% discount redeemable at 10%
premium)
Alternative for entry (ii)
Debentures Application and Allotment A/c ...Dr. 3,80,000
Loss on Issue of Debentures A/c ...Dr. 60,000
To 9% Debentures A/c 4,00,000
To Premium on Redemption of Debentures A/c 40,000
(9% Debentures issued at 5% discount redeemable at 10%
premium)

402-405, J9 HIGH STREET, NEAR DREAM WORLD, CANAL ROAD, VESU. M-9374702012
 SNS ACADEMY
“ WHERE EVERY STUDENT IS A WINNER”
4. In the Books of Hina Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
Sundry Assets A/c ...Dr. 8,40,000
Goodwill A/c (Balancing Figure) ...Dr. 40,000
To Creditors A/c 80,000
To Harish Ltd. 8,00,000
(Purchase of business of Harish Ltd.)
Harish Ltd. ...Dr. 8,00,000
To 12% Debentures A/c 6,40,000
To Securities Premium Reserve A/c 1,60,000
(Issue of 6,400, 12% Debentures of Rs.100 each at 25%
premium)

5. AN EXTRACT OF BALANCE SHEET OF X LTD as at ...

Date Particulars Rs.
I. EQUITY AND LIABILITIES
Non-Current Liabilities
Long-term Borrowings 8,00,000
Note to Accounts
1. Long-term Borrowings
Loan from Bank of Baroda 8,00,000
10,000; 9% Debentures of Rs.100 each issued as Collateral Security 10,00,000
Less: Debentures Suspense Account 10,00,000 --

6. In the Books of BG. Ltd

JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
2013 Interest on Debentures A/c (Rs.2,00,000 x 12/100 x 6/12) ...Dr. 12,000
March To Debentures holders’ A/c 10,800
31 To TDS Payable A/c (Rs.12,000 x 10%) 1,200
(Half-yearly interest due on debentures and tax deducted at
source)
March Debentures holders’ A/c ...Dr. 10,800
31 To Bank A/c 10,800
(1,000, 9% Debentures of Rs.100 each allotted on pro rata
basis and application money for 200 debentures refunded)
March TDS Payable A/c ...Dr. 1,200
31 To Bank A/c 1,200
(TDS deposited with income tax authorities)
March Statement of Profit and Loss (Finance Cost) ...Dr. 24,000
31 To Interest on Debentures A/c 24,000
(Yearly interest on debentures transferred to Statement of
Profit and Loss)
402-405, J9 HIGH STREET, NEAR DREAM WORLD, CANAL ROAD, VESU. M-9374702012
 SNS ACADEMY
“ WHERE EVERY STUDENT IS A WINNER”

7. JOURNAL of J.K. Ltd.

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

2015 Bank A/c ...Dr. 75,20,000
April 1 To Debentures Application and Allotment A/c 75,20,000
(Application money on 8,000 debentures @ Rs.940 each
received)
April 1 Debentures Application and Allotment A/c ...Dr. 75,20,000
Loss on Issue of Debentures A/c (8,000xRs.110) ...Dr. 8,80,000
To 9% Debentures A/c 80,00,000
To Premium on Redemption of Debentures A/c 4,00,000
(8,000; 9% Debentures of Rs.1,000 each allotted at a discount
of 6%, redeemable at a premium of 5%)
Sept. Debenture’s Interest A/c (Rs.80,00,000 x9% x 6/12) ...Dr. 3,60,000
30 To Debenture holders’ A/c 3,24,000
To TDS Payable A/c (Rs.3,60,000 x 10%) 36,000
(Interest payable on 9% Debentures for 6 months and tax
deducted at source @10%)
Sept. Debenture holders’ A/c ...Dr. 3,24,000
30 TDS Payable A/c ...Dr. 36,000
To Bank A/c 3,60,000
(Interest paid to debentures holders and TDS deposited)
2016 Debenture’s Interest A/c (Rs.80,00,000 x9% x 6/12) ...Dr. 3,60,000
March To Debenture holders’ A/c 3,24,000
31 To TDS Payable A/c (Rs.3,60,000 x 10%) 36,000
(Interest payable on 9% Debentures for 6 months and tax
deducted at source @10%)
March Debenture holders’ A/c ...Dr. 3,24,000
31 TDS Payable A/c ...Dr. 36,000
To Bank A/c 3,60,000
(Interest paid to debentures holders and TDS deposited)
March Statement of Profit and Loss (Finance Cost) ...Dr. 7,20,000
31 To Debenture’s Interest A/c 7,20,000
(Interest on debentures transferred to Statement of Profit and
Loss)
March Statement of Profit and Loss (Finance Cost) ...Dr. 8,80,000
31 To Loss on Issue of Debentures A/c 8,80,000
(Discount on Issue of Debentures written off)

402-405, J9 HIGH STREET, NEAR DREAM WORLD, CANAL ROAD, VESU. M-9374702012
 SNS ACADEMY
“ WHERE EVERY STUDENT IS A WINNER”

8. JOURNAL OF SSS LTD.

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
Case (i) Bank A/c ...Dr. 30,00,000
To Debentures Application and Allotment A/c 30,00,000
(Debentures application money received)
Debentures Application and Allotment A/c ...Dr. 30,00,000
To 10% Debentures A/c 25,00,000
To Securities Premium Reserve A/c 5,00,000
(Issue of 25,000; 10% Debentures at a premium of 20%)
Case (ii) No Entry
Case (iii) Vendor’s A/c ...Dr. 28,00,000
To 10% Debentures A/c 25,00,000
To Machinery A/c 3,00,000
(Debentures of Rs.25,00,000 issued to supplier of
machinery costing Rs.28,00,000 as his full and final
payment)

***

402-405, J9 HIGH STREET, NEAR DREAM WORLD, CANAL ROAD, VESU. M-9374702012