T.S. Grewal Class 12 Vol 2 Chapter 2 Q.10 - Issue of Debentures

Question 10

Kamya Ltd. issued 30,000, 8% Debentures of ₹100 each at 10% premium for subscription. The issue price was payable ₹40 on application, ₹40 (including premium) on allotment, and the balance on the first and final call. It received application money amounting to ₹10,80,000. Allotment was made and the allotment money was received. The first and final call is yet to be made. You are required to pass the necessary Journal entries.

Solution

JOURNAL (Books of Kamya Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c    Dr.		10,80,000
	To 8% Debenture Application A/c			10,80,000
	(Debenture application money received for 27,000 debentures at ₹40 each)
	8% Debenture Application A/c    Dr.		10,80,000
	To 8% Debentures A/c			10,80,000
	(Debenture application money transferred to 8% Debentures Account)
	8% Debenture Allotment A/c    Dr.		10,80,000
	To 8% Debentures A/c			8,10,000
	To Securities Premium Reserve A/c			2,70,000
	(Debenture allotment money due on 27,000 debentures at ₹40 each, including ₹10 premium)
	Bank A/c    Dr.		10,80,000
	To 8% Debenture Allotment A/c			10,80,000
	(Debenture allotment money received)

Note: Only 27,000 of the 30,000 debentures offered were applied for and allotted (the remaining 3,000 were simply not issued, since debentures are not subject to the minimum-subscription rules applicable to shares).