T.S. Grewal Class 12 Vol 2 Chapter 2 Q.46 - Issue of Debentures

Question 46

Suzlon Ltd. issued, on 1st July, 2024, 20,000, 7% Debentures of ₹100 each for subscription at a 10% premium, payable ₹40 on application, ₹40 (including premium) on allotment, and the balance on the first and final call. The debentures were subscribed and allotted. The company did not make the first and final call during the year ended 31st March, 2025. Interest was payable on 31st March each year. Pass the Journal entry for the issue of debentures and interest for the year ended 31st March, 2025, and transfer the interest to the Statement of Profit and Loss.

Solution

JOURNAL (Books of Suzlon Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2024 1st July	Bank A/c    Dr.		8,00,000
	To 7% Debenture Application A/c			8,00,000
	(Application money received on 20,000 debentures at ₹40 each)
1st July	7% Debenture Application A/c    Dr.		8,00,000
	To 7% Debentures A/c			8,00,000
	(Application money transferred to 7% Debentures Account)
	7% Debenture Allotment A/c    Dr.		8,00,000
	To 7% Debentures A/c			6,00,000
	To Securities Premium Reserve A/c			2,00,000
	(Allotment due on 20,000 debentures at ₹40 each, including ₹10 premium)
	Bank A/c    Dr.		8,00,000
	To 7% Debenture Allotment A/c			8,00,000
	(Allotment money received)
31-3-2025	Debenture Interest A/c    Dr.		73,500
	To Debenture Holders’ A/c			73,500
	(Interest allowed on debentures for 9 months)
31-3-2025	Debenture Holders’ A/c    Dr.		73,500
	To Bank A/c			73,500
	(Interest paid)
31-3-2025	Statement of Profit and Loss A/c    Dr.		73,500
	To Debenture Interest A/c			73,500
	(Debenture interest transferred to the Statement of Profit and Loss)

Working Note: Since the first and final call has not been made, interest is calculated on the amount called-up so far (App ₹40 + Allotment face value ₹30 = ₹70 per debenture × 20,000 = ₹14,00,000). 7% interest for nine months (1 July 2024 to 31 March 2025) = (14,00,000 × 7 × 9) ÷ (100 × 12) = ₹73,500.