Debenture 10 Years Explanation

DEBENTURE 10 YEARS QUESTION EXPLANATION
Explanations
1. (c) Debentures issued = 2,00,000 × 100 = ₹ 2,00,00,000
Loss on Issue of Debentures = 5% Premium on Redemption + 5% Discount on Issue = 10%
Loss on issue of debentures =2,00,00,000 × 10/100 = ₹ 20,00,000
2. (c) Discount on issue of debentures = 4,000 × 100 × 10/100 = ₹ 40,000
Premium on redemption = 60,000 - 40,000 = ₹ 20,000
3. (b) Discount on issue =20,000 × 10 = ₹ 2,00,000
Premium on redemption = 4,00,000 - 2,00,000 = ₹ 2,00,000
4. (c) Total loss on redemption = 50,000 × 10 = ₹ 5,00,000
Remaining amount to cover this loss = 5,00,000 - 2,00,000 = ₹ 3,00,000
3 ,00,000
Rate of premium debentures issued = × 100 = 6%
50 ,00,000
5. (b) Total security premium amount used = 25,00,000 - 5,00,000 = ₹ 20,00,000
Premium on redemption = 80,000 × 20 = ₹ 16,00,000
Remaining amount i.e. premium on issue =20,00,000 -16,00,000 = ₹ 4,00,000
4 , 00,000
Rate of discount at which debentures issued = × 100 = 5%
80 , 00,000
6. In the Books of Anthony Ltd.
JOURNAL
Date Particulars LF Amt (Dr) Amt (Cr)
(i) Assets A/c Dr 23,50,000
Goodwill A/c Dr 50,000
To Liabilities A/c 6,00,000
To Mithoo Ltd. 18,00,000
(Being business of Mithoo Ltd. purchased)
(ii) Mithoo Ltd. Dr 18,00,000
Loss on Issue of Debentures A/c Dr 3,00,000
To 9% Debentures A/c 20,00,000
To Premium on Redemption of Debentures A/c 1,00,000
(Being debentures issued to Mithoo Ltd. at discount,

redeemable at premium as purchase consideration)
7. JOURNAL
Date Particulars LF Amt Amt
(Dr) (Cr)
Bank A/c (7,500 × 47) Dr 3,52,500
Tu Debentures Application and Allotment A/c 3,52,500
(Being application money received on debentures issued at

6%)
Debentures Application and Allotment A/c Dr 3,52,500
Loss on Issue of Debentures A/c (7,500 × 8) Dr 60,ODO
To 9% Debentures A/c (7,500 × 50) 3,75,000
To Premium on Redemption of Debentures A/c (7,500 × 5) 37,500
(Being application money transferred to 9% debentures

account)
Dr
9% Debentures Account
Cr
Particulars Amt (₹) Particulars Amt (₹)
To Balance c/d 3,75,000By Debentures application and 3,52,500

allotment A/c
By Loss on Issue of Debentures 22,500

A/c
3,75,000 3,75,000
8. In the Books of ZK Ltd.

JOURNAL

(Dr) (Cr)
Bank A/c (4,000 × 95) Dr 3,80,000
To Debenture Application and Allotment A/c 3,80,000
(Being application money received on 4,000,9% debentures *

of ₹ 95 each)
Debenture Application and Allotment A/c Dr 3,80,000
Loss on Issue of Debentures A/c (4,000 × 15) Dr 60,000
To 9% Debentures A/c (4,000 × 100) 4,00,000

To Premium on Redemption of Debentures A/c (4,000 × 10) 40,000
(Being issue of 4,000,9% debentures at 5% discount and

redeemable at 10% premium)
9. JOURNAL

(Dr) (Cr)
(i) Bank A/c (635 × 475) Dr 3,01,625
(Being application money received on 635 debentures of ₹

475 each)
Loss on Issue of Debentures A/c (31,750 + 15,875) Dr 47,625
To 9% Debentures A/c (635 × 500) 3,17,500
To Premium on Redemption A/c (635 × 50) 31,750
(Being the issue of 635 debentures at 5% discount,

(ii) Bank A/c (635 × 560) Dr 3,55,600
(Being application money received on 635 debentures of ₹

560 each)
Loss on Issue of Debentures A/c (635 × 30) Dr 19,050
To9%DebenturesA/c (635 × 500) 3,17,500
To Securities Premium Reserve A/c (635 × 60) 38,100
To Premium on Redemption A/c (635 × 30) 19,050
(Being the issue of 635 debentures at 12% premium and

Concept Enhancer
When debentures are issued at a discount and are redeemable at a premium, the amount of
discount on issue is also debited to loss on issue of debentures'.
10. JOURNAL

(Dr) (Cr)
Bank A/c (2,000 × 110) Dr 2,20,000
(Being application money received on 2,000,12% debentures

of ₹ 100 each issued at a premium of 10% and redeemable
ata premium of 10%)
Loss on Issue of Debentures A/c (2,000 × 10) Dr 20,000
To 12% Debentures A/c (2,000 × 100) 2,00,000
To Securities Premium Reserve A/c (2,000 × 10) 20,000
To Premium on Redemption of Debentures A/c (2,000 × 20,000

10)
(Being amount received on issue of 12% debentures

adjusted)
11. JOURNAL
Bank A/c (7,000 × 200) Dr 14,00,000
To Debenture Application A/c 14,00,000
(Being the debenture application money received

on 7,000 debentures)
Debenture Application A/c Dr 14,00,000
(Being the application money transferred to

debentures account)
Debenture Allotment A/c (7,000 × 350) Dr 24,50,000
Loss on Issue of Debentures A/c (7,000 × 50) Dr 3,50,000
To 10% Debentures A/c (7,000 × 300) 21,00,000
To Securities Premium Reserve A/c (7,000 × 50) 3,50,000

(7,000 × 50)
(Being the amount due on 7,000 debentures)

Bank A/c Dr 24,50,000
To Debenture Allotment A/c 24,50,000
(Being the amount received against allotment)
12. JOURNAL

(Dr) (Cr)
(i) (≡) Bank A/c (400 × 105) QΓ 42,000
To Debenture Application and Allotment A/c 42,000
(Being application money received on 400 debentures of ₹ 100

each, including premium of ₹ 5)
(b) Debenture Application and Allotment A/c βr 42,000
To 12% Debentures A/c (400 × 100) 40,000
To Securities Premium Reserve A/c (400 × 5) 2,000
(Being debenture application money transferred to 12%

debentures and securities premium account)
(ii) Solve as Q. No. 9 (ii) (3 Marks).

13. JOURNAL
2022
Jul 1 Bank A/c Dr 21,60,000
(Being application money received)
Jul 1 Debenture Application and Allotment A/c Dr 21,60,000
To Securities Premium A/c 1,60,000
(Being debentures issued)
2023
Mar 31 Debenture Interest A/c Dr 1,35,000
To Debenturesholders A/c 1,35,000
(Being interest due to debentrues)
Mar 31 Debenturesholders A/c Dr 1,35,000
To Bank A/c 1,35,000
(Being interest paid to debenturesholders)
Mar 31 Statement of Profit and Loss Dr 1,35,000
To Debentures Interest A/c 1,35,000
(Being interest on debentures charged from statement

of profit and loss)
Mar 31 Securities Premium A/c Dr 2,40,000
Statement of Profit and Loss A/c Dr 60,000
To Loss on Issue of Debentures A/c 3,00,000
(Being loss on issue of debentures written-off)
Dr
Loss on Issue of Debentures Account
Cr
Date Particulars Amt (₹) Date Particulars Amt (₹)
2022 2023
Jul 1 To Premium on Redemption 3,00,000Mar 31 By Securities Premium A/c 2,40,000

of
Debentures A/c By Statement of Profit and 60,000

Loss
3,00,000 - 3,00,000
14.
JOURNAL
DateParticulars LF Amt (Dr) Amt (Cr)
(i) Bank A/c (10,000 × 1051 Dr 10,50,000

(Being 9% debenture issued @ 105 and money received

on application and allotment)
To Securities Premium A/c 50,000
(Being application and allotment money transferred to

9% debentures account)
(ii) Bank A/c Dr 10,00,000
(Being money received on issue of 10% debentures @ ₹

100)
To 10% Debentures A/c (10,000 × 100) 10,00,000
(Being issue of 10% debentures at par and redeemable

at 10% premium)
(iii) Bank A/c Dr 9,00,000
(Being money received on issue of 3% Debentures @ ₹

90)
Loss on Issue-of Debentures A/c Dr 1,50,000
To Premium on Redemption of Debentures A/c 50,000
(Being 9% debentures issued at 10% discount and

15. JOURNAL

(Dr) (Cr)
(i) Bank A/c Dr 95,000
(Being money received on issue of 1,000,9%

debentures @ ₹ 95)
Debenture Application and Allotment A/c Dr 95,000
Loss on Issue of Debentures A/c Dr 15,000
(Being 9% debentures issued at 5% discount and

(ii) Bank A/c Dr 52,500
(Being money received on issue of 1,500,7%

debentures @ ₹ 105)
Date Particulars LF Amt Amt (Cr)

(Dr)
To 7% Debentures A/c 50,000
To Securities Premium Reserve A/c 2,500
(Being 500, 7% debentures issued at 5% premium and

(iii) Bank A/c Dr 1,90,000
To Debentures Application and Allotment A/c 1,90,000
(Being 2,000,10% debentures issued @ ₹ 95 against which

money received)

(Being issue of 2,000,10% debentures at 5% discount and
redeemable at par)
16. JOURNAL
(i) Bank A/c Dr 3,30,000
(Being money received on issue of 3,000,7% debentures

@ ₹ 110)
(Being 3,000,7% debentures issued at 10% premium

and redeemable at 5% premium)
(ii) Bank A/c Dr 2,20,000

@ ₹ 110)
(Being issue of 2,000,8% debentures at 10% premium

and redeemable at par)
(iii) Bank A/c Dr 90,000

@ ₹ 90)

(Being issue of 1,000,9% debentures at 10% discount

and redeemable at 10% premium)
17. (i) In the Books of Health & Wealth Ltd.

JOURNAL
Bank A/c Dr 55,00,000
(Being application money received)
To Securities Premium A/c 5,00,000
(Being debentures issued at premium, to be redeemed at

premium)
Number of debentures issued = 5,00,000/110 = 50,000 debentures

(ii) Dr
Cr
2021 2022
Oct To Premium on Redemption 10,00,000Mar By Securities Premium A/c 7,80,000

1 of Debentures A/c 31
(2,80,000 + 5,00,000)
By Statement of Profit and 2,20,000

Loss
10,00,000 10,00,000
(iii) JOURNAL

(Dr) (Cr)
2022
Mar 31 Debenture Interest A/c Dr 2,00,000
To Debenturesholders A/c 2,00,000
(Being interest due on debentures)
Mar 31 Debentureholders A/c Dr 2,00,000
(Being interest paid to debenturesholders)
Mar 31 Statement of Profit and Loss Dr 2,00,000
To Debentures Interest A/c 2,00,000
(Being interest on debentures charged to

statement of profit and loss)
Common Mistake
Students usually don't read the requirements of the question. The question is asking for
entries in the books 'only on 31st March, 2022’.
18. JOURNAL
(i) Bank A/c Dr 50,00,000
(Being the application money received on 50,000 9%

debenture @ ₹ 100 each)
(Being the application money transferred to debentures

account)
(ii) Solve as Q. No. 12 (i) (5/6 Marks). (iii) Solve as Q. No. 9 (ii) (3 Marks).
(iv) Solve as Q. No. 9 (i) (3 Marks).
19.
52, 50,000
(i) Number of Debentures to be Issued = = 50,000 debentures
105
(ii) In the Books of Yogadatra Ltd.
JOURNAL
2020
Apr 1 Debenture Application and Allotment A/c Dr 52,50,000
To 6% Debentures A/c (50,000 × 100) 50,00,000
To Securities Premium Reserve A/c (5 × 50,000) 2,50,000
To Premium on Redemption of Debentures A/c (50,000 × 5,00,000

10)
(Being the allotment of debentures made)
(iii) JOURNAL
2021
Mar 31 Securities Premium Reserve A/c Dr 2,50,000
Statement of Profit and Loss Dr 2,50,000
(Being the loss on issue of debentures account

written-off)
(iv) Interest on debentures is the annual fixed obligation associated debentures.

Thus, interest on 6% debentures = 50,00,000 × 6 /100 - ₹ 3,00,000
(v) Dr
Cr
2020 2021
Apr 1 To 6% Debentures A/c 5,00,000Mar 31 By Securities Premium 2,50,000

Reserve A/c
By Statement of Profit and 2,50,000

Loss
5,00,000 5,00,000
20. (i) JOURNAL of Neeraj Ltd.

Building A/c Dr 35,00,000
Plant and Machinery A/c Dr 8,00,000
Stock A/c Dr 4,00,000
Trade Receivables A/c Dr 4,00,000
Goodwill A/c (Balancing figure) Dr 10,00,000
To Creditors A/c 3,00,000
To Outstanding Expenses A/c 1,00,000
To Ajay Enterprises 57,00,000
(Being assets and liabilities of business taken

over,recorded at agreed value)
Ajay Enterprises Dr 57,00,000
To 9% Debentures A/c (2,00,000 × 20) 40,00,000
To Securities Premium Reserve A/c (2,00,000 × 5) 10,00,000
(Being purchase consideration paid to Ajay

enterprises)
(ii) JOURNAL of Z Ltd.
2019 »
Apr 1 Bank A/c (20,000 × 105) Dr 21,00,000
(Being application money received on

20,000,8% debentures)
Apr 1 Debenture Application and Allotment A/c Dr 21,00,000
Loss on Issue of Debentures A/c (10,000 × 10) Dr 1,00,000
To 8% Debentures A/c (10,000 × 100) 10,00,000
To Securities Premium Reserve A/c (10,000 × 50,000

5)

(10,000 × 10)
To Bank A/c 10,50,000
(Being debentures allotted and the balance

refunded)
2020
Mar 31 Securities Premium Reserve A/c Dr 50,000
Statement of Profit and Loss Dr 50,000
(Being loss on issue of debentures written-off)
21.
JOURNAL
(i) Land A/c Dr 20,00,000
To JSS Ltd. 20,00,000
(Being Land purcahsed from JSS Ltd.)
JSS Ltd. Dr 15,00,000
To Bank A/c 10,00,000
To Bills Payable A/c 5,00,000
(Being cheque issued and promissory note drawn)
JSS Ltd. Dr 5,00,000
Loss on Issue of 10% Debentures A/c Dr 50,000
(Being 10% debentures redeemable at a premium issued for

the balance purchase consideration)
(ii) Assets A/c Dr 4,20,000
To Liabilities A/c 40,000
To Capital Reserve A/c 20,000

To XYZ Ltd. 3,60,000
(Being assets purchased and liabilities taken over of XYZ

Ltd.)
XYZ Ltd. A/c Dr 3,60,000
Discount on Issue of debentures A/c Dr 40,000
(Being 10% debentures issued at a discount in settlement

of purchase consideration)
22. JOURNAL
(i) Bank Ā/c Dr 1,05,000
(Being application and allotment money received with

5% premium)
To 12% Debentures A/c (1,000 × 100) 1,00,000
To Premium on Redemption of Debentures A/c (1,000 × 2,000

2)
To Securities Premium Reserve A/c (1,000 × 5) 5,000
(Being 1,000 debentures issued at a premium of 5% and

(ii) Machinery A/c Dr 9,00,000
To Vendor A/c 9,00,000
(Being machinery purchased from vendor for ₹ 9,00,000)
Vendor's A/c Dr 9,00,000
Discount on Debentures A/c (10,000 × 10) Dr 1,00,000
To 12% Debentures A/c (10,000 × 100) 10,00,000
(Being 10,000,12% debentures issued to vendor in

consideration of machinery purchased)
(iii) Debenture Suspense A/c Dr 10,00,000

To 11% Debentures A/c (10,000 × 100) 10,00,000
(Being 10,000,11% debentures issued as collateral

security to SBI)
Working Notes
1, 00,000
1. Number of debentures issued = = 1,000, 12% debentures
100
9 , 00,000 9 , 00,000
2. Number of issued debentures to the vendor = = = 10,000, 12%
100−10 90
debentures
23. JOURNAL
2015
Apr 1 Bank A/c (8,000 × 940) Dr 75,20,000
(Being debenture application money received)
Apr 1 Debenture Application and Allotment A/c Dr ⅜ 75,20,000
Loss on Issue of Debentures A/c [8,000 × (50 + 60)] Dr 8,80,000
To 9% Debentures A/c [8,000 × 1,000) 80,00,000
To Premium on Redemption of Debentures A/c (8,000 4,00,000

× 50)
(Being debenture application money transferred to

debentures account)
Sep Debenture Interest A/c Dr 3,60,000

30
To Debentureholders' A/c 3,24,000
To TDS Payable A/c 36,000
(Being amount of interest due and tax deducted at

source)
Sep Debentureholders' A/c Dr 3,24,000

3D
TDS Payable A/c Dr 36,000

(Being interest paid to debentureholders and TDS
deposited with government)
2016
Mar Debenture Interest A/c Dr 3,60,000

31
To Debentureholders' A/c 3,24,000
To TDS Payable A/c 36,000
(Being amount of interest due and tax deducted at

source)
Mar Debentureholders’ A/c Dr 3,24,000

31
TDS Payable A/c Dr 36,000
(Being interest paid to debentureholders and TDS

deposited with government)
Mar Statement of Profit and Loss Dr 7,20,000

31
To Debenture Interest A/c (3,60,000 + 3,60,000) 7,20,000
(Being annual debenture interest transferred to

statement of profit and loss)
Working Notes
1. Loss on Issue of Debentures Amt (₹)
Discount on issue = 8,000 × 60 = 4,80,000
(+) Premium on redemption = 8,000 × 50 = 4,00,000
8,80,000
9 6
2. Debenture Interest for Six Months = 80,00,000 × × = ₹ 3,60,000
100 12
10
3. Tax Deducted at Source 3,60,000 × = ₹ 36,000
100
24. Solve as Q. No. 23 (5/6 Marks).
Debenture Interest Transferred to Statement of Profit and Loss = ₹ 22,500 (11,250 +11,250)

Debenture 10 Years Explanation

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DEBENTURE 10 YEARS QUESTION EXPLANATION

Date Particulars LF Amt (Dr) Amt (Cr)

(i) Assets A/c Dr 23,50,000

Goodwill A/c Dr 50,000

To Liabilities A/c 6,00,000

To Mithoo Ltd. 18,00,000

(Being business of Mithoo Ltd. purchased)

(ii) Mithoo Ltd. Dr 18,00,000

Loss on Issue of Debentures A/c Dr 3,00,000

To 9% Debentures A/c 20,00,000

To Premium on Redemption of Debentures A/c 1,00,000

(Being debentures issued to Mithoo Ltd. at discount,

Bank A/c (7,500 × 47) Dr 3,52,500

Tu Debentures Application and Allotment A/c 3,52,500

(Being application money received on debentures issued at

Debentures Application and Allotment A/c Dr 3,52,500

Loss on Issue of Debentures A/c (7,500 × 8) Dr 60,ODO

To 9% Debentures A/c (7,500 × 50) 3,75,000

To Premium on Redemption of Debentures A/c (7,500 × 5) 37,500

(Being application money transferred to 9% debentures

Particulars Amt (₹) Particulars Amt (₹)

To Balance c/d 3,75,000By Debentures application and 3,52,500

By Loss on Issue of Debentures 22,500

8. In the Books of ZK Ltd.

Date Particulars LF Amt Amt

Bank A/c (4,000 × 95) Dr 3,80,000

To Debenture Application and Allotment A/c 3,80,000

(Being application money received on 4,000,9% debentures *

Debenture Application and Allotment A/c Dr 3,80,000

Loss on Issue of Debentures A/c (4,000 × 15) Dr 60,000

To 9% Debentures A/c (4,000 × 100) 4,00,000

(Being issue of 4,000,9% debentures at 5% discount and

Date Particulars LF Amt Amt

(i) Bank A/c (635 × 475) Dr 3,01,625

To Debenture Application and Allotment A/c 3,01,625

(Being application money received on 635 debentures of ₹

Debenture Application and Allotment A/c Dr 3,01,625

Loss on Issue of Debentures A/c (31,750 + 15,875) Dr 47,625

To 9% Debentures A/c (635 × 500) 3,17,500

To Premium on Redemption A/c (635 × 50) 31,750

(Being the issue of 635 debentures at 5% discount,

(ii) Bank A/c (635 × 560) Dr 3,55,600

To Debenture Application and Allotment A/c 3,55,600

(Being application money received on 635 debentures of ₹

Debenture Application and Allotment A/c Dr 3,55,600

Loss on Issue of Debentures A/c (635 × 30) Dr 19,050

To9%DebenturesA/c (635 × 500) 3,17,500

To Securities Premium Reserve A/c (635 × 60) 38,100

To Premium on Redemption A/c (635 × 30) 19,050

(Being the issue of 635 debentures at 12% premium and

Date Particulars LF Amt Amt

Bank A/c (2,000 × 110) Dr 2,20,000

To Debenture Application and Allotment A/c 2,20,000

(Being application money received on 2,000,12% debentures

Debenture Application and Allotment A/c Dr 2,20,000

Loss on Issue of Debentures A/c (2,000 × 10) Dr 20,000

To 12% Debentures A/c (2,000 × 100) 2,00,000

To Securities Premium Reserve A/c (2,000 × 10) 20,000

To Premium on Redemption of Debentures A/c (2,000 × 20,000

(Being amount received on issue of 12% debentures

Date Particulars LF Amt (Dr) Amt (Cr)

Bank A/c (7,000 × 200) Dr 14,00,000

To Debenture Application A/c 14,00,000