COMPETENCY – BASED TEST ITEMS

CLASS: XII
SUBJECT: ACCOUNTANCY
NAME OF CHAPTER: ACCOUNTING FOR DEBENTURES

Q. LEARNING QUESTION MARK

NO OUTCOME
/ASSESSMENT
OBJECTIVE
1 LO: Develop the ‘A’ Ltd. purchased the assets from ‘B’Ltd. for Rs.8,10,000. ‘A’ Ltd. 1
understanding of the issued 10% debentures of Rs.100 each at 10% discount against the
number of payment. The number of debentures received by ‘B’ Ltd. will be:
debentures issued. i) 8,100
ii) 9,000
AO: Solve problems iii) 90,000
to new situations by iv) None of the above
applying acquired
knowledge.
2 LO: Develop the The Principal amount of debentures will be repaid by the company 1
understanding of either at the end of a specified period or by instalments during the
types of debentures. life time of the company. Such types of debentures are called:
i) Redeemable Debentures
AO: To assess the ii) Irredeemable Debentures
understanding of the iii) Convertible Debentures
types of debentures. iv) Bearer Debentures

3 LO: Develop the Globe Ltd. issues 20,000, 9%debentures of Rs.100 each at a 1
understanding of discount of 5% redeemable at the end of 5 years at a premium of
issue of debentures. 6%. For what amount ‘Loss on issue of Debentures Account’ will be
debited?
AO: To assess the i) Rs.1,00,000
understanding of the ii) Rs.1,20,000
issue of debentures. iii) Rs.2,80,000
iv) Rs.2,20,000
4 LO: Develop the A Ltd. acquired assets of Rs.20,00,000 and took over creditors of 1
understand of the Rs. 20,000 from B Ltd. A Ltd. issued 8% debentures of Rs.200 each
purchase of at a discount of 10% as purchase consideration. Mention the number
debentures for of debentures that will be issued:
consideration other i) 11,000
than cash. ii) 9,000
iii) 10,000
AO: To assess the iv) 10,100
understanding of the
accounting
treatment of
purchase of
debentures.
5 LO: Develop the If vendors are issued debentures of Rs. 80,000 in consideration of 1
understand of the net assets of Rs.1,00,000, the balance of Rs. 20,000 will be credited
purchase of to which account:
debentures for i) Statement of Profit and Loss
consideration other ii) Goodwill Account
than cash iii) General Reserve Account
iv) Capital Reserve Account
AO: To assess the
understanding of
issue of debentures
by applying
acquired knowledge.
6 LO: Develop the When debentures of Rs.1,00,000 are issued as Collateral Security
understanding of against a loan of Rs.1,50,000. The entry for issue of such debentures
issue of debentures will be:
as collateral security i) Credit Debentures A/C Rs.1,50,000 and Debit Bank A/C
Rs.1,50,000
AO: Solve problems ii) Debit Debenture Suspense A/C Rs.1,00,000 and Credit
to new situations by Bank A/C Rs.1,00,000
applying acquired iii) Debit Debenture Suspense A/C Rs.1,00,000 and Credit
knowledge. Debentures A/C Rs.1,00,000
iv) Debit Cash A/C Rs.1,50,000 and Credit Bank A/C
Rs.1,50,000
7 LO: Develop the Debentures represent the: 1
understanding of the i) Long Term Borrowings of a Company.
concept of ii) The investment of Equity Shareholders.
debentures iii) Directors shares in a company
iv) Short term borrowings of a company
AO: To assess the
understanding of the
concept of
debentures.
8 LO: Develop the On 1st April 2021, Sunrise Ltd. issued 5,000, 8% debentures of 1
understanding of Rs.100 each at a discount of 5%. What will be the total amount of
interest on issue of interest for the year ending 31st March 2022
debentures

AO: Solve problems

to new situations by
applying acquired
knowledge.
9 LO: Develop the P Ltd. issued 6,000, 12% Debentures of Rs.100 each at par
understanding of the redeemable at a premium of 7% on 1st April, 2022. The debentures
loss on issue of were to be redeemed at the end of third year. You are required to
debentures show Loss on issue of 12% Debentures Account.

AO: Solve problems

to new situations by
applying acquired
knowledge.
10 LO: Develop the K K Ltd. obtained a loan of Rs.10,00,000 from SBI @ 9% interest. 1
understanding on The company issued Rs.15,00,000 9% debentures of Rs.100 each, in
issue of debentures favour of SBI as collateral security. Pass necessary Journal entries
as collateral security for the above transactions :-when company decide not to record the
issue of 9% Debentures as collateral security
 AO: Solve problems
to new situations by
applying acquired
knowledge.
11 LO:able to Kanak Ltd. Purchased a building for Rs. 60,00,000 payable 1
calculate the as 20% in cash And balance by allotment of 12%
number of debentures of Rs. 500 each at a premium of 20%. Number
debentures of debentures issued will be :
a. 9,600
AO: to assess the b. 8,000
understanding of c. 12,000
problem-solving d. 10,000
12 LO: Able to If vendors are issued debentures of Rs. 6,50,000 in 1
understand the consideration of assets of Rs. 7,00,000 and liabilities of Rs.
accounting 70,000 , the balance of Rs. 20,000 will be debited to :
treatment of a. general reserve account
consideration b. capital reserve account
other than cash c. goodwill account
d. statement of profit & loss
AO: to assess the
understanding of
the accounting
treatment
13 LO: Able to solve On 1st April 2022, Shree Ram Ltd. Issued 12,000,12% 1
the numerical debentures of Rs. 100 each at a discount of 10%. What
problems issue of will be the total amount of interest for the year ending
debentures 31st March 2023.
a. 1,44,000
AO: to assess the b. 1,00,000
understanding c. 1,20,000
and problem- d. 1,29,600
solving ability of
the learner
14 LO: able to Interest on debentures issued as a collateral security is 1
understand the paid on :
accounting a. Nominal value of debentures
treatment of b. No interest is paid
issue of c. Face value of debentures
debentures d. Paid up value of debentures

AO: to assess the

understanding of
the learner of the
accounting
treatment
15 LO: able to Debentures of a company can be issued : 1
understand the a. For cash
accounting b. For Consideration other than cash
treatment of c. As a Collateral security
issue of d. Any of the above
debentures

AO: to assess the

understanding of
the fundamentals
of issue of
debentures
16 LO: able to Debentures issued as collateral security will be debited to 1
understand the :
accounting a. bank account
treatment of b. debentures suspense account
issue of c. debentures account
debentures d. bank loan account

AO: to assess the

understanding of
the fundamentals
of issue of
debentures
17 LO: Able to solve Issued 20,000, 15% debentures of Rs.100 each at a 1
the numerical premium of 2%, redeemable at a premium of 5%. In such
problems issue of case:
debentures a. loss on issue will be debited by Rs. 20,000.
b. loss on issue will be debited by Rs. 80,000.
c. loss on issue will be debited by Rs. 1,00,000.
AO: to assess the d. premium on redemption will be credited by Rs. 20,000.
understanding
and problem-
solving ability of
the learner
18 LO: able to solve Assertion (A) : 1
the reasoning Debentures can be issued at a discount of more than 25 %
aspect of issue of of the face value.
debentures Reason (R) :
There are no restrictions on the issue of debentures at
AO: to assess the discount.
understanding of In the context of the above two statements, which of the
issue of following is correct ?
debentures Codes :
 a. both ( A) and ( R) are correct and ( R) is the correct
reason of (A ).
b. both ( A ) and ( R ) are correct but ( R ) is the not the
correct reason of ( A ).
c. only ( A ) is correct.
d. Both ( A ) and ( R ) are wrong.
19 LO: able to solve Assertion (A) : 1
the reasoning Debenture is a part of ownership capital. As such , a
aspect of issue of company can issue debentures with voting rights.
debentures Reason (R) :
Debentureholders are not members of the company.
In the context of the above two statements , which of the
following is correct ?
AO: to assess the Codes :
understanding of a. both ( A) and ( R) are correct and ( R) is the correct
issue of reason of (A ).
debentures b. both ( A ) and ( R ) are correct but ( R ) is the not the
correct reason of ( A ).
c. only ( R ) is correct.
d. Both ( A ) and ( R ) are wrong.
20 LO: able to solve Assertion (A) : 1
the reasoning A zero coupon bond is issued at zero rate of interest.
aspect of issue of Reason (R) :
debentures In case of zero coupon bond the difference between issue
price and the redemption price represents the total
interest.
In the context of the above two statements , which of the
AO: to assess the following is correct ?
understanding of Codes :
issue of a. both ( A) and ( R) are correct and ( R) is the correct
debentures reason of (A ).
b. both ( A ) and ( R ) are correct but ( R ) is the not the
correct reason of ( A ).
c. ( A) is false , but ( R ) is true.
d. Both ( A ) and ( R ) are wrong.
21 LO: Develop the Fashionable Fabrics Ltd. has decided to start a new showroom. The
understanding of Finance Manager of the company has estimated the capital
issue of debentures requirements at Rs. 12,50,000. The company has arranged Rs.
and collateral 5,00,000 from the internal sources to start the showroom.
security It has also decided to call the unpaid amount of Rs 3 per share on its
10,000 equity shares. The requirement of the remaining capital was
AO: To assess fulfilled by raising a loan from Bank of India payable after five
understanding of years. 8% debentures of Rs 100 each were issued for 1.5 times more
debentures by amount than that of loan as collateral security.The management
applying acquired raised the following questions:
knowledge.
 i) What is meant by ‘Issue of debentures as collateral
security’?

ii) What will be the total number of debentures issued by the

company?

iii) Is the company liable to pay the interest on these

debentures?

22 LO: Develop the On 1st April, 2021 Bhawani Ltd. issued 5,000, 10% Debentures of Rs 3
understanding of 100 each at a discount of 10% redeemable at 5% premium after 5
issue of debentures years. On the same date Bhawani Ltd .entered into the following
for consideration transactions also:
other than cash. It purchased business of Swami Ltd. by taking over sundry assets of
Rs 4,50,000 and sundry liabilities of Rs. 70,000 for the purchase
AO: Solve problems consideration of Rs. 4,80,000. It paid the purchase consideration by
to new situations by issuing 10% Debentures at 4% discount.
applying acquired Bhawani Ltd. borrowed a loan of Rs. 80,000 from SBI for 5 years and
knowledge. issued 10%Debentures of Rs. 1,00,000 to bank as a collateral security.
The interest on debentures is paid half yearly on 30th September and
31St March every year. The company has sufficient balance in its
Securities Premium Reserve Account at the year end and it has
decided to write off loss on issue of debentures from Securities
Premium Reserve Account.
Read above information and answer the following questions:
i) State the circumstances when debentures are issued for
consideration other than cash.
ii) Is Bhawani Ltd. correct in issuing debentures at a
discount?
Pass journal entry for the takeover of business of Swami Ltd. by
Bhawani Ltd.
23 LO: Develop the On 1st April 2021, XYZ Ltd issued 3,000, 12% Debentures of 3
understanding of Rs.100 each at par redeemable at a premium of 7%. The debentures
issue of debentures were to be redeemed at the end of third year.
and its presentation On the basis of the above information, resolve the following issues:
in Balance Sheet i) Can the company write off the ‘Loss on issue of
Debentures’ over the period of 3 years?
AO: Solve problems ii) From which source, the loss on issue of debentures will
to new situations by be written off?
applying acquired Under which sub-head and head, the amount of ‘Premium Payable on
knowledge. Redemption of Debentures’ is shown in the Balance Sheet?
24 LO: Develop the Rose bond Ltd. is in the business of manufacturing electrical 3
understanding of water pumps. It decided to install some Godrej refrigerators and
issue of debentures microwave ovens in the company for providing facilities to its
and interest on employees as the company is located in the remote area. It named
debentures. its welfare scheme as “Employees Relief.” On 1st April 2021 the
purchase price of electrical appliances was paid by issuing 6%
AO: Solve problems debentures. Debentures of Rs. 20,00,000 were issued at a
to new situations by premium of 10% for this purpose.
applying acquired In another case, the company agreed to issue 9% debentures of
knowledge. 100 each at Rs 120 to thevendors for the purchase of machinery
worth Rs 1,25,000.
Read the above information carefully and answer the following
questions.
 i) Assume that during the year 2021-22, the company
suffered a huge loss. Will debenture holders be entitled to
interest of that year?
ii) Which Journal Entry will be passed for the issue of
debentures for the purchase of electrical appliances for
Rose Bond Ltd.
How will you record the issue of debentures for the purchase of
machinery worth Rs.1,25,000 through a journal entry.
25 LO: Able to solve Sheen Ltd. Issued 5,000, 9% debentures of Rs. 100 each at 3
the numerical a discount of 10%. The full amount was payable on
problems issue of application. Applications were received for 6,000
debentures debentures and allotment was made on pro-rata basis.
Pass the necessary journal entries for the above
AO: to assess the transactions in the books of Sheen Ltd.
understanding
and problem-
solving ability of
the learner

26 LO: Able to solve R Limited took over assets of Rs. 7,80,000 and creditors of 3
the numerical Rs. 60,000 from S Limited. R Limited issued 8%
problems issue of debentures of Rs. 20 each at a premium of 20% as
debentures purchase consideration , to S Limited.
Calculate the amount of purchase consideration, number
AO: to assess the of debentures issued by R Limited and pass the necessary
understanding journal entries in the books of R Limited from the above
and problem- mentioned informations.
solving ability of
the learner

27 LO: able to Ranya Ltd. Purchased assets of Shon Ltd. as under : 3

understand the Plant and machinery of Rs. 20,00,000 at Rs. 18,00,000;
accounting land and buildings of Rs. 30,00,000 at Rs. 42,00,000 for
treatment of purchase consideration of Rs. 55,00,000 and paid Rs.
issue of 10,00,000 in cash and remaining by issue of 8%
debentures Debentures of Rs. 100 each at a premium of 20%. Record
necessary entries in the books of Ranya Ltd.
AO: to assess the
understanding of
the fundamentals
of issue of
debentures
28 LO: able to On April 1,2022 , Lawanglata Ltd. issued , 10,000, 8% 3
understand the debentures of Rs. 100 each at premium of 5% to be
accounting redeemable at a premium of 10% , after 5 years. The
treatment of entire amount was payable on application. The issue was
issue of oversubscribed to the extent of 10,000 debentures and
debentures the allotment was made proportionately to all the
applicants. The securities premium amount has not been
AO: to assess the utilized for any other purpose during the year. Give
understanding of journal entries for the issue of debentures and writing off
the fundamentals loss on issue of debentures.
of issue of
debentures

29 LO: Develop the On 1st April ,2020, Vishwas Ltd. was formed with an Authorised 4
understanding of Capital of Rs.10,00,000 divided into 1,00,000 equity shares of Rs.10
issue of debentures each.
for consideration On 1st April 2021 it acquired the running business of its competitors
other than cash. with following assets and liabilities:
AO: Solve problems Land Rs.4,50,000; Debtors Rs1,00,000; Furniture Rs.90,000;
to new situations by Creditors Rs.1,80,000. The purchase consideration decided at
applying acquired Rs.6,00,000 which was paid by issuing a cheque of Rs.1,25,000 and
knowledge. balance in form of 8% debentures of Rs.100 each at a discount of
5%.
On the same date, the company issued 1,000, 8% debentures of
Rs.100 each as collateral security to Punjab National Bank who had
advanced a loan of Rs.1,50,000. The company had already a balance
in Security Premium Reserve Account of Rs.20,000.
i) How many 8% debentures are issued to Vendor?
ii) What journal entry will be passed for writing off
Discount on issue of debentures?
iii) How will excess amount on net assets over the purchase
consideration will be treated in the books of account?
iv) How much interest is paid on debentures issued as
collateral security?

30 LO: Ability to solve 4

numerical problems Vishesh Ltd. issued 10,000, 8% debentures of Rs.100 each on 1st
of issue of April 2021 redeemable at a premium of 10% after 4 years. The issue
debentures and was subscribed by 95%.
calculation of According to the terms of issue, interest on the debentures is payable
interest on debenture half-yearly on 30th September and 31st March.
AO: To assess the i) What is the nature of interest on debentures?
understanding of the ii) What journal entry will be passed for writing off the
accounting interest on debentures at the end of the year?
treatment. iii) At the time of issue of debentures what amount will be
credited to premium on redemption of debentures
account?
iv) What is the ownership status of Debenture holders in a
company?
31 LO: Ability to solve Health2Wealth Ltd. had share capital of Rs.80,00,000 divided in 4
numerical problems shares of Rs.100 each and 20,000,8% Debentures of Rs.100 each as
of issue of part of capital employed.
debentures The Company need additional funds of Rs.55,00,000 for which they
decided to issue debentures in such a way that they got required
AO: To assess the funds after issuing debentures of the same class as earlier, at 10%
competency of the premium. These debentures were to be redeemed at 20% premium
learner to apply the after 4 years. These debentures were issued on 1st October 2021.
concept in real life You are required to:
situations. Pass entries for issue of debentures

32 LO: able to A company had Rs. 10,00,000, 12% debentures 4

st
understand the outstanding as on 1 April , 2022.During the year
accounting company took a loan of Rs. 2,00,000 from the state bank
treatment of of india for which the company placed with the bank
issue of debentures for Rs. 2,50,000 as collateral security . pass
debentures journal entries, if any. Also show how the debentures and
bank loan will appear in the company’s balance sheet as
AO: to assess the at 31st March,2023 using first method.
understanding of
the fundamentals
of issue of
debentures

33 LO: able to A company had Rs. 10,00,000, 12% debentures 4

understand the outstanding as on 1st April , 2022.During the year
accounting company took a loan of Rs. 2,00,000 from the state bank
treatment of of india for which the company placed with the bank
issue of debentures for Rs. 2,50,000 as collateral security . pass
debentures journal entries, if any. Also show how the debentures and
bank loan will appear in the company’s balance sheet as
AO: to assess the at 31st March,2023 using second method.
understanding of
the fundamentals
of issue of
debentures

34 LO: able to Niva Ltd. took a loan of Rs. 1,20,000 from bank and 4
understand the deposited 1,400 , 8% debentures of Rs. 100 each as
accounting collateral security along with primary security worth Rs. 2
treatment of lakhs. Company again took a loan of Rs. 80,000 after two
issue of months from a bank and deposited 1,000,8% debentures
debentures of Rs. 100 each as collateral security. Record necessary
journal entries.
AO: to assess the
understanding of
 the fundamentals
of issue of
debentures

35 LO: Able to Excel Ltd. an educational company founded in 2007, deals in 6

describe the issue of providing offline (face to face) educational services to the schools,
debenture and its colleges and private institutes. Within a span of 15 years, the
accounting company gained lot of popularity among the students, teachers and
treatment. school principals.
During the Covid-19 pandemic situation, the entire education system
AO: To assess the went online and the company was bound to shift from offline to
competency of the online system. For this a huge investment was required on the part
learner to apply the of the company. The company decided to raise the required funds
concept in real life through issue of debentures. For this, Excel Ltd invited applications,
situations. 12% debentures of Rs.100 each at a premium of Rs.60 per
debenture, repayable after 5 years along with the same amount of
premium.
The full amount was payable on application. Applications were
received for 18,000 debentures.
The company decided to make pro-rata allotment.
Answer the following questions on the basis on information
provided above:
i) How much amount will be received at the time of
application?
ii) While issuing debentures, what amount will be credited
to 12% Debentures Account.
iii) How much amount will be credited to Securities
Premium Reserve Account.
iv) How much amount will be credited on Premium on
Redemption of Debentures Account.
v) The excess application money received on 3,000
debentures will be adjusted to which account?
vi) What journal will be passed to write off loss on issue of
debentures account.

36 LO: Develop the Pass Journal entries to record the following transaction: 6
understanding of
issue of debentures (i) A Ltd. issued 15000; 8% Debentures of Rs. 100 each at
and develop the skill discount of 5% to be repaid at par at the end of 5 years.
of calculating
interest on (ii) A Ltd. Issues 10% Debentures of ` 100 each for the total
debentures. nominal value of Rs. 80,00,000 at a premium of 5% to be
redeemed at par.
AO: Solve problems
to new situations by (iii) A Ltd. Issues ` 50,00,000; 9% Debentures of ` 100 each
applying acquired at par but redeemable at the end of 10 years at 105%.
knowledge.
(iv) A Ltd. Issued ` Rs40,00,000, 12% debentures of ` 100
each at a discount of 5% repayable at a premium of 10%
at the end of 5 years.

(v) A Ltd issued ` 70,000; 12% debentures of ` 100 each at a

premium of 5% repayable at 110% at the end of 10 years.
 (vi) A Ltd issued 2,000; 12% debentures of Rs.100 each at
par , redeemable also at par.

37 LO: Develop the Moti Ltd.obtained loan of Rs.120000 from Bank of India and issued 6
understanding of 1500; 9% Debentures of Rs.100 each as collateral security. How will
issue of debentures be issues of Debentures shown in the Balance Sheet?
as collateral security Case I. when journal entry is not passed.
and its presentation Case II. When journal entry is passed.
in Balance sheet

AO: To assess the

understanding of
accounting
treatment.
38 LO: able to Janhvi Ltd. issued 20,000,9% Debentures of Rs. 100 each 6
understand the at 10% discount to Aryahi Ltd. from whom Assets of
accounting 23,50,000 and liabilities of Rs. 6,00,000 were taken
treatment of over.Pass entries in the books of Janhvi Ltd. if these
issue of debentures were to be redeemed at 5% premium. Loss on
debentures issue is to be written off in the first year.

AO: to assess the

understanding of
the fundamentals
of issue of
debentures

39 LO: On 1.4.2022,J.K.Ltd. issued 8,000 , 9% debentures of 6

able to Rs.1,000 each at a discount of 6% redeemable at a
understand the premium of 5% after three years. The company closes its
accounting books on 31st March every year. Interest on 9%
treatment of debentures is payable on 30th September and 31st March
issue of every year.
debentures Pass necessary journal entries for the year ended
31.3.2023.
AO: to assess the
understanding of
the fundamentals
of issue of
debentures

40 LO: On 1st April , 2022 , R.J.Ltd. issued Rs. 10,00,000 , 9% 6

able to debentures of Rs. 100 each at a discount of 10%. These
understand the debentures were redeemable at a premium of 5% after
accounting four years.
treatment of
issue of Pass necessary journal entries for the year ending 31st
debentures March ,2023 and prepare 9%? Debentures Account and
Loss on Issue of Debentures A/C.( Ignore interest on
AO: to assess the debentures ).
understanding of
the accounting
treatment of
issue of
debentures
ANSWERS:
Q. NO ANSWER
1 ii) 9,000
2 i) Redeemable Debentures
3 iv) Rs.2,20,000
4 i) 11,000
5 iv)Capital Reserve Account
6 iii)Debit Debenture Suspense A/C Rs.1,00,000 and Credit Debentures A/C Rs.1,00,000

7 i) Long Term Borrowings of a Company.

8 Rs. 40,000
9 Dr Loss on Issue of Debentures Account Cr
Date Particulars Amount Date Particulars Amount
2022 To Premium on 42,000 2023 By Statement of 42,000
April redemption of March Profit and Loss A/C
1 debentures A/C 31

10 JOURNALS
Date Particulars LF Dr. Cr.
Bank A/C Dr 10,00,000
To Bank Loan A/C 10,00,000
(Obtained loan from SBI @9%)

11 b. 8,000
12 c. goodwill account
13 a. 1,44,000
14 b. No interest is paid
15 d. Any of the above
16 b. debentures suspense account
17 c. loss on issue will be debited by Rs. 1,00,000
18 a. both ( A) and ( R) are correct and ( R) is the correct reason of (A )
19 c. only ( R ) is correct
20 c. ( A) is false , but ( R ) is true
21 i) Issue of debentures as collateral security means issuing debebtures as an additional
security that may be offered against the loan in addition to principal security.
ii) Debentures issued as collateral security are of nominal value i.e., 10,800, 8%
debentures of Rs.100 each =Rs. 10,80,000
(Rs.7,20,000x1.5=Rs.10,80,000)
iii) No, the company is not liable to pay interest on these debentures because
debentures are issued as collateral security

22 i) (i) Issue of debentures for purchase of assets to the vendor.

(ii)Issue of debentures for purchase of business of a company.
(iii)Issue of debentures as collateral security.
ii) Bhawani Ltd.can easily issue debentures at discount as the Companies Act 2013
does not restrict issue of debentures at discount.
iii)
JOURNALS
 Date Particulars LF Dr. Cr.
Sundry Assets A/c Dr 4,50,000
Goodwill A/C (b/f) Dr 1,00,000
To Sundry Liabilities A/C 70,000
To Swami Ltd 4,80,000
(Being assets and liabilities of Swami
Ltd. taken over for a consideration of
iv) Rs.4,80,000 )
23 i) No, because according to Accounting Standard 16, borrowing cost requires that the
loss on issue of debentures be written off in the same year in which it is incurred.
ii) In the absence of any information about Securities Premium Reserve, the loss on
issue of debentures ins written off from Statement of Profit and Loss.
iii) Premium payable on Redemption of Debentures is shown as ‘Other non- current
liability under Non-Current Liabilities in Equity and Liabilities part of Balance
Sheet.
iv)
24 i) Debenture holders will be entitled to interest of the year 2018-19 as interest on
debentures is a charge against profits of the company and is payable irrespective of
the fact whether the company has earned profit or not.

ii) Journal

Date Particulars L.F. Dr. Cr.

Godrej Ltd. Dr 22,00,000
To 6% Debentures A/C 20,00,000
To Securities Premium Reserve A/C 2,00,000
(Being the issue of debentures at 10%
premium to Godrej Ltd))

iii)

Journal
Date Particulars L.F. Dr. Cr.
Machinery A/C Dr 1,25,000
To 9% Debentures A/C(1041x100) 1,04,100
To Securities Premium Reserve A/C 20,820
(1041x20)
To Cash A/C 80
(Being the issue of 1,041 debentures @Rs.100
each at 20% premium and fraction of payment
in cash to settle the account to vendors)
iv)
25 Particulars L.F Dr. Cr.
Bank A/C………………..Dr. 5,40,000
To 9% Debenture application and
allotment A/C 5,40,000
9% Debenture Application and Allotment
A/C……………….Dr. 5,40,000
Discount on issue of Debentures
A/C………………Dr. 50,000
To 9% Debentures A/C 5,00,000
To Bank A/C 90,000
 Statement of Profit and Loss A/C ………Dr. 50,000
To discount on issue of debentures A/C 50,000
26 Purchase consideration = Assets – creditors
= 7,80,000 – 60,000 = 7,20,000
Debenture of Rs. 20 is issued at 20% premium i.e. at Rs. 4 premium
Hence , Number of Debentures Issued = 7,20,000/24 = 30,000
Date Particulars L.F Dr. Cr.
Assets A/C………..Dr. 7,80,000
To Creditors A/C 60,000
To S Ltd. A/C 7,20,000
(purchase of assets and creditors
from S Ltd.)
S Ltd. A/C ………………….Dr. 7,20,000
To 8% Debentures A/C ( 6,00,000
30,000*20) 1,20,000
To Securities Premium A/C(
30,000*4)
(issue of 30,000 debentures of
Rs.20 each at 20% premium)
27 Date Particulars L.F Dr. Cr.
Plant and machinery A/C…Dr. 18,00,000
Land and buildings A/C….Dr. 42,00,000
To capital reserve A/C 5,00,000
To Shon Ltd. A/c 55,00,000
Shon Ltd.A/C ……Dr. 10,00,000
To bank A/C 10,00,000
Shon Ltd. A/c ……Dr. 45,00,000
To 8% Debentures A/C 37,50,000
To Securities PremiumA/C 7,50,000
( issue of 37,500 debentures of Rs.
100 each at 20% premium
calculated as 45,00,000-120 =
37,500 )
28 Date Particulars L.F Dr. Cr.
2022
April 1 Bank a/c ….dr 21,00,000
To debenture application and 21,00,000
allotment A/c
Debenture application and
allotment a/c…..dr 21,00,000
Loss on issue of debentures 1,00,000
a/c..dr 10,00,000
To 8% debentures a/c 50,000
To securities Premium a/c
 To premium on redemption of 1,00,000
debentures a/c 10,50,000
To bank a/c
Securities premium a/c…dr 50,000
Statement of profit and loss 50,000
a/c…dr 1,00,000
To loss on issue of debentures
a/c
29
i) 5,000
ii) Security Premium Reserve A/C Dr. 20,000
Statement of P/L A/C Dr. 5,000
To Discount on issue of deb. A/C 25,000
iii) Debited to Goodwill A/C by Rs.1,40,000
iv) Nil

30
i) Charge against profits.
ii) Statement of P/L A/c Dr. 76,000
To Interest on debentures A/C 76,000
iii) Credited by Rs. 95,000
iv) Lenders of the company.

31 IN THE BOOKS OF HEALTH2WEALTH LTD.

JOURNALS
Date Particulars L.F. Dr. Cr.
Bank A/C Dr 55,00,000
To Debentures Application and Allotment A/C 55,00,000
(Being application money received)
Debentures Application and Allotment A/C Dr 55,00,000
Loss on Issue of Debentures A/C Dr.
To 8% Debentures A/C 10,00,000
To Securities Premium Reserve A/C 50,00,000
To Premium on Redemption of Debentures 5,00,000
A/C 10,00,000
(Being debentures issued at premium to be
redeemed at premium)
32 Bank a/c ….dr. 2,00,000
To bank loan a/c 2,00,000
( loan taken from the bank and Rs. 2,50,000 debentures deposited as collateral
security)
Balance sheet
As at 31st march ,2023
Particulars N.N 31.3.23 31.3.22
1. equity and liabilities :
Non – current liabilities :
Long term borrowings 1 12,00,000 10,00,000
Notes to accounts :
Amount
 1. long term borrowings :
12% debentures ( in addition, debentures for Rs. 10,00,000
2,50,000 have been issued as collateral security )
Bank loan ( on collateral security of debentures of Rs.
2,50,000) 2,00,000

12,00,000
33 Bank a/c ….dr. 2,00,000
To bank loan a/c 2,00,000
( loan taken from the bank)
Debentures suspense a/c ….dr 2,50,000
To 12% debentures a/c 2,50,000
( issue of Rs. 2,50,000 debentures as collateral security to secure a loan of Rs.
2,00,000 from the bank )
Balance sheet
As at 31st march ,2023
Particulars N.N 31.3.23 31.3.22
1. equity and liabilities :
Non – current liabilities :
Long term borrowings 1 12,00,000 10,00,000
Notes to accounts :
Amount
1. long term borrowings :
12% debentures 12,50,000
Less : debentures suspense a/c ( 2,50,000) 10,00,000
Bank loan ( on collateral security of debentures of Rs. 2,00,000
2,50,000)
12,00,000
34 Books of Niva Ltd.
Journal
Date Particulars L.F Dr. Cr.
Bank a/c ….dr 1,20,000
To bank loan a/c 1,20,000
(loan taken from bank secured
by primary security worth Rs.
2,00,000 and Rs. 1,40,000,8%
debentures as collateral
security)
Debentures suspense a/c ….dr 1,40,000
To 8% debentures a/c 1,40,000
Bank a/c …dr 80,000
To bank loan a/c 80,000
Debenture suspense a/c …dr 1,00,000
 To 8 % debentures a/c 1,00,000
35 Answer:
i) Rs.28,80,000
ii) Rs.15,00,000
iii) Rs.9,00,000
iv) Rs.9,00,000
v) Refunded and credited to bank
Dr. Security Premium Reserve, Cr loss on issue of debentures.
36 [Issue of debentures from terms of Redemption]

DATE PARTICULARS Dr. (Rs) Cr. (Rs)

(i) Bank A/c Dr. 14,25,000
To Debenture application and allotment, A/C 14,25,000
(Being the debenture application money record)

Debenture application & Allotment A/c Dr. 14,25,000

To 10 Debentures A/c 75,000
(Being the issue of 15,000, 8% debentures of 15,00,000
Rs. 100 each at a discount of 5%

(ii) Bank A/c Dr. 84,00,000

To Debenture application and allotment A/c 84,00,000
(Being the debenture application money
received)

Debenture application and allotment A/C Dr. 84,00,000

To 10% Debenture A/C 80,00,000
To security premium A/C 4,00,000
(Being the issue of 80,000, 10% debenture of
Rs. 100 each at a premium of 5%)

(iii) Bank A/C Dr. 50,00,000

To Debenture application and allotment A/C 50,00,000
(Being the debenture application money
received)

Debenture application and allotment A/C 50,00,000

Dr. 250000
Loss on issue of debenture A/c Dr. 5000000
To 12% Debenture A/c 250,000
To premium on Redemption of Debenture A/c
(Being the issue of 50,000, 12% debenture of
Rs. 100 each at par redeemable at 105%
 (iv) Bank A/C Dr. 38,00,000
To Debenture application and allotment A/C 38,00,000
(Being the debentures application money
received)
Debenture application and allotment A/C Dr 38,00,000
Loss on issue of debenture A/C Dr. 6,00,000
To 12% debenture A/C 4000000
To premium on redemption of debenture A/c 400000
(Being the issue of 40,000, 12% debenture of
Rs. 100 each at a discount of 5% and repayable
at a premium 10%
(v) Bank A/c Dr. 73,50,000
To Debenture application and allotment A/c 73,50,000
(Being the debenture application money
second)

Debenture application and allotment A/c Dr. 73,50,000

Loss on issue of debenture A/c Dr. 7,00,000
To 12% Debenture A/c 70,00,000
To security Premium Reserve A/c 3,50,000
To premium on redemption of debenture A/c. 7,00,000
(Being the issue of 70,000, 12% debentures of
Rs. 100 each at a premium of 5% and repable at
a premium of 10%

(vi) Bank A/c Dr. 2,00,000

To 12% Debenture application and allotment A/c 2,00,000
(Being the debenture application money
second)

12% Debenture application and allotment A/C

Dr.
To 12% Debenture A/C 2,00,000
2,00,000
(Being the transfer of application money to
Debenture Account issued at par)
37 :[ Debentures as collateral Security]

Case I. An extract of Balance Sheet of Moti Ltd.

Particulars Note NO. Rs.
1. EQUITY AND LIABILITIES
Non-Current liabilities
Long term Borrowings 1 120000

Notes to Accounts
1. Long-term Borrowings
Loan from Bank of India 120000
 (Secured by issue of 1500;9%Debentures of Rs100 each as
collateral Security)

Case II Journal Entry

DATE PARTICULARS Dr. (Rs) Cr. (Rs)
(i) Debenture Suspense A/C Dr. 150000
To 9% Debentures A/C 150000
(Being the issue of 1500;9%debentures of
Rs.100 each as collateral security for a loan
from a bank as per Board’s resolution
No….Dated…)

An extract of Balance Sheet Moti Ltd.

Particulars Note NO. Rs.
1. EQUITY AND LIABILITIES
Non-Current liabilities
Long term Borrowings 1 120000
Notes to Accounts
1. Long-term Borrowings
Loan from Bank of India 120000
1500;9% Debentures of par value Rs.100 each issued as collateral security:
150000
Less: Debenture Suspense A/C 150000 ……..

120000

38 Date Particulars L.F Dr. Cr.

Sundry assets a/c…dr 23,50,000
Goodwill a/c ….dr 50,000
To sundry liabilities a/c 6,00,000
To Aryahi Ltd. a/c 18,00,000
Aryahi Ltd. a/c ….dr 18,00,000
Loss on issue of debentures 3,00,000
a/c…dr 20,00,000
To 9% debentures a/c 1,00,000
To premium on redemption of
debentures a/c
Statement of profit and loss 3,00,000
a/c…dr 3,00,000
To loss on issue of debentures
a/c
39 Date Particulars L.F Dr. Cr.
2022
April 1 Bank A/C……Dr 75,20,000
To debenture application& 75,20,000
allotment A/c
Debenture Application &
Allotment A/c …Dr 75,20,000
 Loss on issue of debentures 8,80,000
A/c…Dr.
To 9% Debentures A/C 80,00,000
To premium on Redemption of
debentures A/c 4,00,000
Sept.30 Interest on debentures A/C…Dr. 3,60,000
To Debentureholders A/C 3,60,000
Sept.30 Debentureholders A/C…Dr. 3,60,000
To bank A/C 3,60,000
2023
Mar.31 Interest
40 R. J. Ltd.
JOURNAL
Date Particulars L.F Dr. Cr.
2022
April 1 Bank A/C…………Dr. 9,00,000
To Debentures Application & 9,00,000
Allotment A/C
Debentures Application & 9,00,000
Allotment A/c …Dr
Loss on issue of Debentures A/c 1,50,000
….Dr.
To 9% Debentures A/C 10,00,000
To premium on redemption of
debentures A/C 50,000
2023 Statement of profit and loss 1,50,000
Mar.31 A/C..Dr. 1,50,000
To loss on issue of debentures
A/C
9% debentures A/C
Date Particulars Amount Date Particulars Amount
2023 2022
Mar.31 To balance c/d 10,00,000 April 1 By debenture
Application &
Allotment A/C 9,00,000
By loss on issue
of debentures 1,00,000
A/c

10,00,000 10,00,000

Loss on issue of debentures A/C

Date Particulars Amount Date Particulars Amount
2022 2023
April To 9% Mar.31 By statement of
Debentures A/C 1,00,000 profit & loss 1,50,000
To premium on A/C
redemption A/C 50,000
1,50,000 1,50,000