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Question

B Ltd. issued 1,000, 12% debentures of Rs.100 each on January 1, 2005 at a discount of 5% redeemable at a premium of 10%. Give journal entries relating to the issue of debentures and debentures interest for the period ending December 31, 2005 assuming that interest is paid half yearly on June 30 and December 31 and tax deducted at source is 10%. B Ltd. follows calendar year as its accounting year. 1

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Solution

Journal Entries
DateParticularsLFAmt. (Dr)Amt.(Cr)2001Jan 1Bank A/cDr95,000Loss on Issue on Debentures A/c (W/Note)Dr15,000To 12% Debentures A/c1,00,000To Premium on Redemption of Debenture A/c10,000(Being debenture issued at discount andredeemable premium) –––––––––––––––––––––––––––––––––––––––––––––Jan 30 Debenture Interest A/cDr6,000To Income Tax Payable A/c (TDS)600To Debenture Holder A/c5,400(Being amount of interest on 12% debenturesRs.10,00,000 due for 6 months and 10% tax deductedat source) –––––––––––––––––––––––––––––––––––––––––––––Jun 30 Debenture Holders A/cDr5,400To Bank A/c5,400(Being interest paid to debenture holders) –––––––––––––––––––––––––––––––––––––––––––––Dec 31Debenture Interest A/cDr6,000To Income Tax Payble A/c600To Debentures Holders A/c5,400(Being amount of interest on 12% debenturesRs.1,00,000 due for 6 months and 10% Taxdeducted at source) –––––––––––––––––––––––––––––––––––––––––––––Dec 31Debenture Holders A/cDr5,400To Bank A/c5,400(Being interest paid to debentures holders) –––––––––––––––––––––––––––––––––––––––––––––Dec 31Profit and Loss A/cDr12,000To Debentures Interest A/c12,000(Being interest on debentures transferred toprofit and loss account)

Working Note :

Loss on issue indicate 5% discount of issue of Debentu res and 10% premium of redemption i,e. total loss 15% (5 + 10) on issue of debentures


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