Question

Exercise

Dinesh Ltd. Issued 10,00,000 6% Debentures on 1^st April, 2010. Interest is paid on 30 sept., 2010 and 31^st March, 2011.

Record necessary journal entries assuming that income tax is deducted at 30% of the amount of interest.

Answer 1

Books of Dinesh Ltd.
Journal Entry
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
Apr.01	Bank A/c	Dr.		10,00,000
	To Debenture Application and Allotment A/c				10,00,000
	(Debenture application and Allotment received on 10,000 6% Debentures of Rs 100 each)
Apr.01	Debenture Application and Allotment A/c	Dr.		10,00,000
	To 6% Debentures A/c				10,00,000
	(Debenture application and allotment transferred to 6% Debenture A/c)
Sept.30	Debenture Interest A/c	Dr.		30,000
	To Income Tax Payable A/c				9,000
	To Debentureholders A/c				21,000
	(Amount of interest due on debenture and TDS)
Sept.30	Debentureholders A/c	Dr.		21,000
	To Bank A/c				21,000
	(Interest paid to Debenture holder)
2011
Mar.31	Debenture Interest A/c	Dr.		30,000
	To Income Tax Payable A/c				9,000
	To Debentureholders A/c				21,000
	(Amount due on Debenture and TDS)
Mar.31	Debentureholders A/c	Dr.		21,000
	To Bank A/c				21,000
	(Interest paid to Debenture Holder)
Mar.31	Income Tax Payable A/c	Dr.		18,000
	To Bank A/c				18,000
	(Income Tax paid)
Mar.31	Profit and Loss A/c	Dr.		60,000
	To Debenture Interest A/c				60,000
	(Interest on Debenture transferred to Profit and Loss A/c)

Working Notes:

Calculation of Interest on Debenture and TDS (Income Tax Payable)