Question 15 Chapter 10 of +2-A
15. On 1st April 2016, following were the balances of Blue Bird Ltd.:
| 10% Debentures redeemableon30thSeptember, 2017 | 15,00,000 |
| Debentures Redemption Reserve | 2,00,000 |
The company met the requirements of the Companies Act, 2013 regarding Debentures Redemption Reserve and Investment and redeemed the debentures. Pass necessary Journal entries for the above transactions in the books of the company.
The solution of Question 15 Chapter 10 of +2-A: –
| Books of Apollo Ltd | |||||
| Date | Particulars |
L.F. | Debit | Credit | |
| 2017 | |||||
| Apr. 01 | Statement of Profit and Loss | Dr | 1,75,000 | ||
| To Debenture Redemption Reserve A/c | 1,75,000 | ||||
| (Being Surplus amount is transferred to DRR ) | |||||
| Apr.30 | Debenture Redemption Investment A/c | Dr | 2,25,000 | ||
| To Bank A/c | 2,25,000 | ||||
| (Being Investment cashed and interest received) | |||||
| Sept. 30 | 10% Debentures A/c | Dr | 15,00,000 | ||
| To Debenture holders A/c | 15,00,000 | ||||
| (Being Profit transferred to Debenture Redemption Reserve) | |||||
| Sept. 30 | Bank A/c | Dr | 2,25,000 | ||
| To Debenture Redemption Investment A/c | 2,25,000 | ||||
| (Being Investment made in specified securities, Owen cashed) | |||||
| Sept. 30 | Debenture holders’ A/c | Dr | 15,00,000 | ||
| To Bank A/c | 15,00,000 | ||||
| (Being Amount paid to debenture holders) | |||||
| Sept. 30 | Debenture Redemption Reserve A/c | Dr | 3,15,000 | ||
| To General Reserve A/c | 3,15,000 | ||||
| (Being DRR amount is transferred to General Reserve ) | |||||
Working Notes:
Calculation of Amount transferred to DRR
As prescribed by Section 714 of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be redeemed, so, the amount of DRR will be:
| Amount of DRR 25 % of Debentures = | 15, 00, 000 × | 25 |
| 100 | ||
| = 3,75,000 | ||
| Less: Amount already exists in DRR | =2,00,000 |
|
| DRR created for redemption | =1,75,000 |
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| Investment made in specified = | 15, 00, 000 × | 15 |
| 100 | ||
| = 2,25,000 |
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs dated11.02.2013, every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed a year before redemption year.
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Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
