Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .

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Solution

Journal

In the books of Bright Ltd.

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2016

Mar. 31

Debentures Interest A/c

Dr.

25,000

To Debenture Holder’s A/c

22,500

To Income Tax Payable A/c

2,500

(Debentures interest due)

Debenture Holder’s A/c

Dr.

22,500

Income Tax Payable A/c

2,500

To Bank A/c

25,000

(Interest on debentures paid)

Mar. 31

Statement of Profit & Loss A/c

Dr.

50,000

To Debentures Interest A/c

50,000

(Interest transferred to profit and loss)

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Journal In the books of Bright Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Mar. 31	Debentures Interest A/c	Dr.		25,000
	To Debenture Holder’s A/c				22,500
	To Income Tax Payable A/c				2,500
	(Debentures interest due)

	Debenture Holder’s A/c	Dr.		22,500
	Income Tax Payable A/c			2,500
	To Bank A/c				25,000
	(Interest on debentures paid)

Mar. 31	Statement of Profit & Loss A/c	Dr.		50,000
	To Debentures Interest A/c				50,000
	(Interest transferred to profit and loss)