Mansi Ltd. had 6,000; 10% Debentures of ₹ 100 each due for redemption on 31st March, 2019. Assuming that the debentures were redeemed out of profits, pass necessary Journal entries for the redemption of debentures. There was a credit balance of ₹ 6,00,000 in Surplus, i.e., Balance in Statement of Profit and Loss.
Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2018
March 31
Statement of Profit and Loss*
Dr.
6,00,000
To Debenture Redemption Reserve A/c
6,00,000
(Surplus amount is transferred to Debenture Redemption Reserve)
April 30
Debenture Redemption Investment A/c**
Dr.
90,000
To Bank A/c
90,000
(Investment is made in specified securities equal to 15% of the value of debentures redeemed)
2019
March 31
10% Debentures A/c
Dr.
6,00,000
To Debentureholders’ A/c
6,00,000
(Debenture due for redemption)
March 31
Bank A/c
Dr.
90,000
To Debenture Redemption Investment A/c
90,000
(Investment made in securities, now encashed)
March 31
Debentureholders’ A/c
Dr.
6,00,000
To Bank A/c
Dr.
6,00,000
(Payment made to debentureholders)
March 31
Debenture Redemption Reserve A/c
Dr.
6,00,000
To General Reserve A/c
6,00,000
(Debenture Redemption Reserve transferred to General Reserve)
*In case of redemption of debentures by profits, 100% of the nominal value of debentures is transferred to DRR A/c.
**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.
Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.
Journal
Date
Particular
L.F.
Debit Amount
(₹)
Credit Amount
(₹)
2018 & 2019
Mar. 31
Debenture Interest A/c
Dr.
60,000
To Debentureholders’ A/c
60,000
(Interest on 10% debentures due)
Mar. 31
Debentureholders’ A/c
Dr.
60,000
To Bank A/c
60,000
(Payment of interest to debentureholders’)
Mar. 31
Statement of Profit and Loss
Dr.
60,000
To Debenture Interest A/c
60,000
(Transfer of debenture interest to Statement of Profit and Loss)
|
Journal |
||||||
|
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
||
|
2018 |
|
|
|
|
|
|
|
March 31 |
Statement of Profit and Loss* |
Dr. |
|
6,00,000 |
|
|
|
|
To Debenture Redemption Reserve A/c |
|
|
6,00,000 |
||
|
|
(Surplus amount is transferred to Debenture Redemption Reserve) |
|
|
|
||
|
|
|
|
|
|
||
|
April 30 |
Debenture Redemption Investment A/c** |
Dr. |
|
90,000 |
|
|
|
|
To Bank A/c |
|
|
90,000 |
||
|
|
(Investment is made in specified securities equal to 15% of the value of debentures redeemed) |
|
|
|
||
|
2019 |
|
|
|
|
||
|
March 31 |
10% Debentures A/c |
Dr. |
|
6,00,000 |
|
|
|
|
To Debentureholders’ A/c |
|
|
6,00,000 |
||
|
|
(Debenture due for redemption) |
|
|
|
||
|
|
|
|
|
|
||
|
March 31 |
Bank A/c |
Dr. |
|
90,000 |
|
|
|
|
To Debenture Redemption Investment A/c |
|
|
90,000 |
||
|
|
(Investment made in securities, now encashed) |
|
|
|
||
|
|
|
|
|
|
||
|
March 31 |
Debentureholders’ A/c |
Dr. |
|
6,00,000 |
|
|
|
|
To Bank A/c |
Dr. |
|
|
6,00,000 |
|
|
|
(Payment made to debentureholders) |
|
|
|
||
|
|
|
|
|
|
||
|
March 31 |
Debenture Redemption Reserve A/c |
Dr. |
|
6,00,000 |
|
|
|
|
To General Reserve A/c |
|
|
6,00,000 |
||
|
|
(Debenture Redemption Reserve transferred to General Reserve) |
|
|
|
||
|
|
|
|
|
|
||
*In case of redemption of debentures by profits, 100% of the nominal value of debentures is transferred to DRR A/c.
**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.
Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.
|
Journal |
|||||
|
Date |
Particular |
|
L.F. |
Debit Amount |
Credit Amount |
|
2018 & 2019 |
|
||||
|
Mar. 31 |
Debenture Interest A/c |
Dr. |
60,000 |
||
|
|
To Debentureholders’ A/c |
|
60,000 |
||
|
|
(Interest on 10% debentures due) |
|
|||
|
|
|
||||
|
Mar. 31 |
Debentureholders’ A/c |
Dr. |
60,000 |
||
|
|
To Bank A/c |
|
60,000 |
||
|
|
(Payment of interest to debentureholders’) |
|
|||
|
|
|
||||
|
Mar. 31 |
Statement of Profit and Loss |
Dr. |
60,000 |
||
|
|
To Debenture Interest A/c |
|
60,000 |
||
|
|
(Transfer of debenture interest to Statement of Profit and Loss) |
|
|||
