Office Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of ₹ 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.

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Solution

In the books of Office Products Ltd.

Journal

Date

Particulars

L.F.

Debit Amount (₹)

Credit Amount (₹)

2018

April 01
Bank A/c
Dr.

22,00,000

To Debentures Application and Allotment A/c

22,00,000

(Being application money received on 20,000 debentures)

April 01
Debentures Application and Allotment A/c
Dr.

22,00,000

Loss on Issue of Debentures A/c
Dr.

1,00,000

To 9% Debentures A/c

20,00,000

To Securities Premium Reserve A/c

2,00,000

To Premium on Redemption of Debentures A/c

1,00,000

(Being application and allotment money adjusted and 5% premium on redemption of debentures too)

2019

March 31
Securities Premium Reserve A/c
Dr.

1,00,000

To Loss on Issue of Debentures A/c

1,00,000

(Being loss on issue of debentures written off)

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In the books of Office Products Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2018
April 01	Bank A/c	Dr.		22,00,000
	To Debentures Application and Allotment A/c				22,00,000
	(Being application money received on 20,000 debentures)

April 01	Debentures Application and Allotment A/c	Dr.		22,00,000
	Loss on Issue of Debentures A/c	Dr.		1,00,000
	To 9% Debentures A/c				20,00,000
	To Securities Premium Reserve A/c				2,00,000
	To Premium on Redemption of Debentures A/c				1,00,000
	(Being application and allotment money adjusted and 5% premium on redemption of debentures too)

2019
March 31	Securities Premium Reserve A/c	Dr.		1,00,000
	To Loss on Issue of Debentures A/c				1,00,000
	(Being loss on issue of debentures written off)