ISSUE OF

DEBENTURES
PART – 1
XII ACCOUNTANCY
2022- 2023
Sources of Funds
 MEANING

Debenture is a written instrument or

Document issued by the company
acknowledging the borrowing,
bearing fixed rate of interest.
It is a long term borrowing.

ISSUE OF DEBENTURES
 • Interest on debentures is a charge against profit
Debenture holders do’ not have voting rights.
Debenture can be issued at Par, Premium, Discount

Basic Journal entries

Replace
Shares = Debentures
Share Capital = __% Debentures (Credited with Face Value)

Interest Rate/ Coupon rate

DEBENTURES CAN BE ISSUED….
Journal
Q.1) Kaju Ltd. on 1st April, 2022, issued 20,000; 11% Debentures of ₹100 each,
payable ₹30 on application and balance amount on allotment.
Applications were received for the issued debentures and allotment was made to all
the applicants.
The amount was received on due dates. Pass the Journal entries for issue of
Debentures.
Q.2) Kishmish Ltd., on 1st April, 2022 issued 20,000; 11% Debentures of ₹100 each at
20% Premium, payable ₹40 on application and balance amount on allotment
including premium. Applications were received for the issued debentures and
allotment was made to all the applicants.
The amount was received on due dates. Pass the Journal entries for issue of
Debentures.
Q.3) Pista Ltd., on 1st April, 2022 issued 20,000; 8% Debentures of ₹100 each at 10%
Discount, payable ₹20 on application and balance amount on allotment. Applications
were received for the issued debentures and allotment was made to all the
applicants.
The amount was received on due dates. Pass the Journal entries for issue of
Debentures.
 Thank you
Download SPCC App for Notes and DPP’s
 ISSUE OF
DEBENTURES
PART – 2
XII ACCOUNTANCY
2022- 2023
OVER SUBSCRIPTION OF DEBENTURES
Q.4) Shree Laxmi Ltd. invited applications for 10,000; 9% Debentures of ₹100 each at
a premium of ₹70 per debenture. The full amount was payable on application.
Applications were received for 12,000 debentures. Applications for 2,000 debentures
were rejected and application money was refunded.
Debentures were allotted to the remaining applications.
Pass necessary Journal entries in the books of Shree Laxmi Ltd. for the above
transactions.
Q.5) Sona Ltd. issued 8,000, 9% Debentures of ₹100 each at a discount of 10%.
₹30 payable on application, balance on Allotment. Applications were received
for 10,000 debentures and allotment was made on pro rata basis Pass the
necessary Journal entries for the above transactions in the books of sona Ltd.
Q.6) Satvik Ltd. issued 5,000, 10% Debentures of ₹500 each at a premium of
₹50 per debenture, redeemable at par after 5 years.
Full amount Payable on Application.
Record necessary Journal entries at the time of issue of 10% Debentures.
 Thank you
Download SPCC App for Notes and DPP’s
 ISSUE OF
DEBENTURES
PART – 3
XII ACCOUNTANCY
2022- 2023
 ISSUE OF DEBENTURES
CONSIDERATION OTHER THAN CASH
Q.7) ROCK Ltd. issued 11% Debentures of ₹100 each at a premium of 25% to Vendors
for purchase of plant costing ₹5,00,000.
Pass the necessary Journal entry for the payment made to vendors.
Q.8) X Ltd. acquired Machinery of ₹ 64,00,000 from Y Ltd. Paid ₹16,00,000 through
cheque and for the balance amount company issued 8% Debentures of ₹ 100 each
at a discount of 20%.
Record necessary journal entries in the books of X Ltd.
Q.9) Neeraj Ltd. took over business of Ajay Enterprises on 1-04-2020. the
details of the agreement regarding the assets and liabilities to be taken over
are:
Particulars Book value Agreed value
Buildings 20,00,000 35,00,000
Plant and machinery 12,00,000 8,00,000
Stock 4,00,000 4,00,000
Trade receivables 5,00,000 4,00,000
Creditors 2,00,000 3,00,000
Outstanding expenses 50,000 1,00,000

It was decided to pay for purchase consideration as ₹7,00,000 through cheque

and balance by issue of 2,00,000, 9% debentures of ₹20 each at a premium of
25%. journalise
Q.10) X Ltd. Purchased a building from Y Ltd. Consideration paid as follow
A) issued Equity shares of ₹1,00,000 face value of ₹10 each at 10% Premium.
B) 5,000 9% Debentures of 100 each at 10% Discount.
C) cheque ₹2,00,000 and
D) 3 months bill payable of ₹45,000 find out the value of building
pass the necessary journal entries.
 Thank you
Download SPCC App for Notes and DPP’s
 ISSUE OF
DEBENTURES
PART – 4
XII ACCOUNTANCY
2022- 2023
 Issue of debentures as collateral security

MEANING
When company issue debentures as
an additional security with principal
security to obtain a loan it is known
as issue of debentures as collateral
security
Journal
Extract of Balance sheet
Q.11) S. Singh Limited obtained a loan of ₹5,00,000 from State Bank of India
@ 10% p.a. interest. The company issued ₹7,50,000, 10% Debentures of ₹100
each in favor of State Bank of India as Collateral Security.
Pass necessary Journal entries for the above transactions also show how these
items will be presented in Balance sheet.
a) When company decided not to record the issue of 10% Debenture as
Collateral security
b) when company decided to record the issue of 10% debentures as collateral
security
 Thank you
Download SPCC App for Notes and DPP’s
 ISSUE OF
DEBENTURES
PART – 5
XII ACCOUNTANCY
2022- 2023
REDEMPTION OF DEBENTURES
 Issue of debentures

with Terms of Redemption

Journal
 Q.12) Sania Ltd. issued ₹5,00,000, 9% Debentures of ₹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 Sania
Ltd.
Q.13) On 1st April, 2023, Anant Ltd. issued 2,000, 11% Debentures of ₹100 each at a
Premium of 6%, redeemable at a premium of 5% after three years. Pass the
necessary Journal entries for the issue of debentures in the books of Anant Ltd.
Q.14) Satvik Ltd. issued 5,000, 10% Debentures of ₹500 each at a premium of ₹50
per debenture, redeemable at par 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.
Also Prepare 10% Debentures Account.
Q.15) Pioneer Fitness Ltd. took over the running business of Healthy World Ltd.
having assets of ₹10,00,000
and liabilities of ₹ 1,70,000 by:
a) Issuing 8,000 8% Debentures of ₹ 100 each at 5% premium redeemable after 6
years @ ₹ 110;
and
b) Cheque for ₹ 50,000.
Pass the Journal entries in the books of Pioneer Fitness Ltd
 Thank you
Download SPCC App for Notes and DPP’s
 ISSUE OF
DEBENTURES
PART – 6
XII ACCOUNTANCY
2022- 2023
 INTEREST ON DEBENTURES
Interest on debentures is always calculated on the face value of debentures.
It is charged against profits.
It is a Fixed Obligation for the company.
It is Shown as Finance Cost and
Debited to statement of Profit or loss
Journal (Excluding TDS)
Q.16) Satyam Ltd. issued 10,000; 10% Debentures of ₹100 each on 1st April, 2022.
The issue was fully subscribed. As per the terms of issue, interest on the debentures
is payable half-yearly on 30th September and 31st March.
Pass necessary Journal entries related to the debenture interest for the year ending
31st March, 2023 and transfer of interest on debentures of the year to the
Statement of Profit & Loss.
 Thank you
Download SPCC App for Notes and DPP’s
 ISSUE OF
DEBENTURES
PART – 7
XII ACCOUNTANCY
2022- 2023
 Writing of Discount or loss on issue of debentures

It is a capital loss for the company.

It is to be written off in the year it is incurred.
It is first write off from the Balance available in Securities premium reserve
If Amount is insufficient or not available then it is to be written off from
Statement of profit or loss.
Journal Entries
 LOSS ON ISSUE OF DEBENTURES ACCOUNT

DISCOUNT ON ISSUE OF DEBENTURES ACCOUNT

Q.17) Raja Ltd. issued ₹4,00,000, 10% Debentures at a discount of 5%. The terms of
issue provide the repayment at the end of 4 years at Par. Raja Ltd. has a balance of
₹8,000 in Securities Premium. Pass the Journal entries for issue of debentures and
writing off the discount.
Q.18) Global Ltd. issued 10,000, 8% Debentures of ₹100 each redeemable in four
equal instalments by draw of lots from the end of 3 years at a premium of ₹9 per
share.
Pass the Journal entries for writing off the Loss on Issue of Debentures.
Also prepare Loss on Issue of Debentures Account.
Q.19) On 1st January, 2022, X Ltd. issued 6,000, 8% Debentures of nominal (face)
value of ₹100 each redeemable at 5% premium in equal proportions at the end of 5,
10 and 15 years. It has a balance of ₹10,000 in Securities Premium.
Pass Journal entries for writing off Loss on Issue of Debentures.
20) On July 01, 2022, Panther Ltd. issued 20,000, 9% Debentures of ₹ 100 each at 8%
premium and redeemable at a premium of 15% in four equal instalments starting
from the end of the third year. The
balance in Securities Premium on the date of issue of debentures was ₹ 80,000.
Interest on debentures was to be paid on March 31 every year.
Pass Journal entries for the financial year 2022-23. Also prepare Loss on Issue of
Debentures account.
 Thank you
Download SPCC App for Notes and DPP’s