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Question

On 1st April, 2013, ABC Ltd. issued 10,000 , 10% Debentures of ₹ 100 each at a discount of 4% redeemable after 5 years at a premium of 6% .
Pass the necessary journal entries for issue of debentures and writing off Loss on issue of Debentures. Also prepare Loss on issue of Debentures Account.

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Solution

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2013
Apr. 01
Bank A/c
Dr.
9,60,000
To Debenture Application and Allotment A/c
9,60,000
(Money received on the issue of debentures)
Debenture Application and Allotment A/c
Dr.
9,60,000
Loss on Issue of Debentures A/c
Dr.
1,00,000
To 9% Debentures A/c
10,00,000
To Premium on Redemption of Debentures A/c
60,000
(Debenture application and allotment money transferred to Debentures A/c)
2014-15 Statement of Profit & Loss
Dr.
20,000
To Loss on Issue of Debentures A/c
20,000
(One-fifth of the total loss written-off)
2015-16 Statement of Profit & Loss
Dr.
20,000
To Loss on Issue of Debentures A/c
20,000
(One-fifth of the total loss written-off)
2016-17 Statement of Profit & Loss
Dr.
20,000
To Loss on Issue of Debentures A/c
20,000
(One-fifthof the total loss written-off)
2017-18 Statement of Profit & Loss
Dr.
20,000
To Loss on Issue of Debentures A/c
20,000
(One-fifth of the total loss written-off)
2018-19 Statement of Profit & Loss
Dr.
20,000
To Loss on Issue of Debentures A/c
20,000
(One-fifth of the total loss written-off)

Working Notes:
WN1:
Calculation of discountamount to be written-off
Discount=10,00,000×10100=1,00,000
Discount on Issue of Debentures Account
Dr.
Cr.
Date
Particulars
J.F.
Amount
(₹)
Date
Particulars
J.F.
Amount
(₹)
2013-14
2013-14
Apr. 01
10% Debentures A/c
1,00,000
Mar. 31
Balance c/d
1,00,000
1,00,000
1,00,000
2014-15
2014-15
Apr. 01
Balance b/d
1,00,000
Mar. 31
Statement of Profit and Loss
20,000
Mar. 31
Balance c/d
80,000
1,00,000
1,00,000
2015-16
2015-16
Apr. 01
Balance b/d
80,000
Mar. 31
Statement of Profit and Loss
20,000
Mar. 31
Balance c/d
60,000
80,000
80,000
2016-17
2016-17
Apr. 01
Balance b/d
60,000
Mar. 31
Statement of Profit and Loss
20,000
Mar. 31
Balance c/d
40,000
60,000
60,000
2017-18
2017-18
Apr. 01
Balance b/d
40,000
Mar. 31
Statement of Profit and Loss
20,000
Mar. 31
Balance c/d
20,000
40,000
40,000
2018-19
2018-19
Apr. 01
Balance b/d
20,000
Mar. 31
Statement of Profit and Loss
20,000
20,000
20,000

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