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Question No 02 Chapter 3 - UNIMAX Class 12 Part 2 - 2021
PQ Ltd. (an unlisted company) issued ₹ 10,00,000, 8% debenture of ₹ 100 each on April 1,2019 at a premium of 5% redeemable at a premium of 10% on 31st March 2022. Assume the required investment was made in 8% government securities on April 30 of financial year in which redemption is due. Debentures were redeemed on the due date.
Pass journal entries at the time of issue and redemption of debentures.
| Date | Particulars |
L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| 2019 | |||||
| April 1 | Bank A/c | Dr. | 10,50,000 | ||
| To Debenture application & allotment A/c | 10,50,000 | ||||
| (Being receipt of application money) | |||||
| April 1 | Debenture Application & Allotment A/c | Dr. | 10,50,000 | ||
| Loss on issue of debenture A/c | Dr. | 1,00,000 | |||
| To Debenture A/c | 10,00,000 | ||||
| To Securities premium reserve A/c | 50,000 | ||||
| To Premium on redemption of debenture A/c | 1,00,000 | ||||
| (Being application money transferred) | |||||
| 2021 March 31 | Statement of Profit & Loss A/c | Dr. | 1,00,000 | ||
| To Loss on issue of debenture A/c | 1,00,000 | ||||
| (Being loss on issue of debenture written off) | |||||
| 2021 March 3 | Surplus is statement in Profit & Loss A/c | Dr. | 1,00,000 | ||
| To Debenture redemption reserve A/c | |||||
| (Being transfer of profit equal to 10% of the nominal value of debentures issued) | |||||
| April 30 | Debenture redemption investment A/c | Dr. | 1,50,000 | ||
| To Bank A/c | 1,50,000 | ||||
| (Being investment made @ 15% of the face value of debenture to be redeemed) | |||||
| 2020 March 31 | Bank A/c | Dr. | 1,61,000 | ||
| To Debenture redemption investment A/c | 1,50,000 | ||||
| To Interest received A/c | 11,000 | ||||
| (Being investment bearing 8%p.a. interest uncashed) | |||||
| March 31 | Debenture A/c | Dr. | 10,00,000 | ||
| Premium on redemption of debenture A/c | Dr. | 1,00,000 | |||
| To Debenture holder A/c | 11,00,000 | ||||
| (Being payment of amount due to debenture holder) | |||||
| March 31 | Debenture’s A/c | Dr. | 11,00,000 | ||
| To Bank A/c | 11,00,000 | ||||
| (Being payment of amount due to debenture holder) | |||||
| March 31 | Debenture redemption reserve A/c | Dr. | 1,00,000 | ||
| To General reserve A/c | 1,00,000 | ||||
| (Being transfer of debenture redemption reserve A/c to general reserve A/c on redemption) | |||||
| March 31 | Interest received A/c | Dr. | 11,000 | ||
| To Statement of Profit & Loss A/c | 11,000 | ||||
| (Being transfer of interest on investment) | |||||
• Interest is calculated for 11 months.
1,50,000 x 8/100 x 11/12 = 11,000
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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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