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Question 13 Chapter 10 of +2-A
13. Godrej Ltd. has 20,000; 7% Debentures of 100 each due for redemption on 31st August 2018. There is a balance of 3,50,000 in Debentures Redemption Reserve Account as on 31st March 2016. Investment, as required by the Companies Act, 2013 is made on 1st April 2017 in fixed deposit bearing interest @ 6% p.a. Bank deducted TDS @ 10% on its maturity which is 31st March 2018. Pass Journal entries for the redemption of debentures.
In the Books of Godrej Ltd
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| 2017 | |||||
| Apr. 01 | Debenture Redemption Investment A/c | Dr | 3,00,000 | ||
| To Bank A/c | 3,00,000 | ||||
| (Being Investment made in specified securities) | |||||
| 2018 | |||||
| Mar. 31 | Bank A/c 3, 00, 000 +16, 200 | Dr | 3,16,200 | ||
| Tax Payable A/c | Dr | 1,800 | |||
| To Interest on Debenture Redemption Investment A/c | 18,000 | ||||
| To Debenture Redemption Investment A/c | 3,00,000 | ||||
| (Being Investment cashed and interest received) | |||||
| Mar 31 | Statement of Profit and Loss | Dr | 1,50,000 | ||
| To Debenture Redemption Reserve A/c | 1,50,000 | ||||
| (Being DRR created) | |||||
| Aug. 31 | 7% Debentures A/c | Dr | 20,00,000 | ||
| To Debenture holders' A/c | 20,00,000 | ||||
| (Being Surplus amount is transferred to Debenture Redemption Reserve) | |||||
| Aug. 31 | Debenture holders’ A/c | Dr | 20,00,000 | ||
| To Bank A/c | 20,00,000 | ||||
| (Being Payment made on the redemption of debentures) | |||||
| Aug. 31 | Debenture Redemption Reserve A/c | Dr | 5,00,000 | ||
| To General Reserve A/c | 5,00,000 | ||||
| (Being Transfer of Debenture Redemption Reserve to General Reserve) | |||||
| Amount of DRRRs | 20, 00, 000 × | 25 |
| 100 | ||
| = 5,00,000 | ||
| Less: Amount already exists in DRR | =1,50,000 |
|
| DRR created for redemption | = 3,50,000 |
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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