Question

Bharat Ltd had an authorized capital of Rs 20,00,000 divided into 2,00,000 equity shares of Rs 10 each. The company issued 1,00,000 shares and the dividend paid per share was Rs 2 for the year ended 31-3-2008. The management of the company decided to export its products to the neighbouring countries Nepal, Bhutan, Sri Lanka and Bangladesh. To meet the requirement of additional funds the financial manager of the company put up the following three alternatives before its Board of Directors:

(i) Issue 54,000 equity shares.

(ii) Obtain a loan from Import and Export Bank of India. The loan was available at $12\%$ per annum interest.

(iii) To issue $9\%$ Debentures at a discount of $10\%$.

After comparing the available alternatives the company decided on 1-4-2008 to issue 6,000 $9\%$ debentures of Rs 100 each at a discount of $10\%$. These debentures were redeemable in four instalments starting from the end of third year. The amount of debentures to be redeemed at the end of third, fourth, fifth and sixth year was as follows:

$\begin{array}{cc}\text{Year}& \text{Amount of Debentures to be redeemed}\\ III& 1,00,000\\ IV& 1,00,000\\ V& 2,00,000\\ VI& 2,00,000\end{array}$

Prepare $9\%$ Debentures Account for the years 2008-09 to 2013-14.

Answer 1

$\begin{array}{ccccccc}\text{Dr}& & & & 9\%\text{DEBENTURE ACCOUNT}& & \text{Cr}\end{array}\begin{array}{cccccccc}\text{Date}& \text{Particular}& \text{L.F}& \text{Amount}& \text{Date}& \text{Particular}& \text{L.F}& \text{Amount}\\ 2009& & & \text{Rs}& 2008& & \text{Rs}& \text{Rs}\\ \text{March 31}& \text{Balance c/d}& & 6,00,000& \text{April 1}& \text{Debentures}& & \\ & & & & & \text{Application and}& & \\ & & & & & \text{Allotment}& & \\ & & & & & \text{A/c}& & 5,40,000\\ & & & & \text{April 1}& \text{Discount on}& & \\ & & & & & \text{Issue}& & \\ & & & & & \text{of Debenture}& & \\ & & & & & \text{A/c}& & 60,000\\ & & & \overline{\underset{–}{\underset{–}{6,00,000}}}& & & & \overline{\underset{–}{\underset{–}{6,00,000}}}\\ 2010& & & & 2009& & & \\ \text{March 31}& \text{Balance c/d}& & \underset{–}{\underset{–}{6,00,000}}& \text{April 1}& \text{Balance b/d}& & \underset{–}{\underset{–}{6,00,000}}\\ 2011& & & & 2010& & & \\ \text{March 31}& \text{Debenture}& & & \text{April 1}& \text{Balance b/d}& & 6,00,000\\ & \text{Holders A/c}& & 1,00,000& & & & \\ \text{March 31}& \text{Balance c/d}& & 5,00,000& & & & \\ & & & \overline{\underset{–}{\underset{–}{6,00,000}}}& & & & \overline{\underset{–}{\underset{–}{6,00,000}}}\\ 2012& & & & 2011& & & \\ \text{March 31}& \text{Debenture}& & & \text{April 1}& \text{Balance b/d}& & 5,00,000\\ & \text{Holders A/c}& & 1,00,000& & & & \\ \text{March 31}& \text{Balance c/d}& & 4,00,000& & & & \\ & & & \overline{\underset{–}{\underset{–}{5,00,000}}}& & & & \overline{\underset{–}{\underset{–}{5,00,000}}}\\ 2012& & & & 2011& & & \\ \text{March 31}& \text{Debenture}& & & \text{April 1}& \text{Balance b/d}& & 5,00,000\\ & \text{Holders A/c}& & 1,00,000& & & & \\ \text{March 31}& \text{Balance c/d}& & 4,00,000& & & & \\ & & & \overline{\underset{–}{\underset{–}{5,00,000}}}& & & & \overline{\underset{–}{\underset{–}{5,00,000}}}\\ 2013& & & & 2012& & & \\ \text{March 31}& \text{Debenture}& & & \text{April 1}& \text{Balance b/d}& & 4,00,000\\ & \text{Holders A/c}& & 2,00,000& & & & \\ \text{March 31}& \text{Balance c/d}& & 2,00,000& & & & \\ & & & \overline{\underset{–}{\underset{–}{4,00,000}}}& & & & \overline{\underset{–}{\underset{–}{4,00,000}}}\\ 2014& & & & 2013& & & \\ \text{March 31}& \text{To Debenture}& & & \text{April 1}& \text{Balance b/d}& & \\ & \text{Holders A/c}& & \underset{–}{\underset{–}{2,00,000}}& & & & \underset{–}{\underset{–}{2,00,000}}\end{array}$