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Question

Grand Hotels Ltd.issued 30,000, 7% Debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 5% . It decided to write off loss on issue of debentures first from Capital Reserve then from Securities Premium Reserve and balance from Statement of Profit and Loss. It has balances as follows:
Capital Reserve ₹ 80,000 and Securities Premium Reserve₹ 1,00,000 .
Pass the journal entry for writing off loss on Issue of Debentures .

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Solution

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
Capital Reserve A/c
Dr.
80,000
Securities Premium A/c
Dr.
1,00,000
Statement of Profit & Loss
Dr.
1,20,000
To Discount on Issue of Debentures A/c
3,00,000
(Loss on issue of debentures written off)

Working Notes:
WN1: Calculation of discount amount to be written-off
Discount=30,00,000×10100=3,00,000First Rs 80,000 will be set-off from Capital ReserveNext Rs 1,00,000 will be set-off from Securities PremiumRemaining Rs 1,20,000 (3,00,00080,0001,00,000) will be set-off from Statement of Profit & Loss

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