Question

State Bank of India issued 20,000, $6\%$ Debentures of Rs 50 each at a premium of $8\%$ on June 30, 2010 redeemable on June 30, 2018. The issue was fully subscribed. Record necessary entries for issue and redemption of debentures.

Answer 1

$\begin{array}{ccccccc}& & & & \text{Books of State Bank of India}& & \\ & & & & \text{JOURNAL}& & \end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ 2010& & & & & \\ \text{June 30}& \text{Bank A/c}& \text{Dr}& & 10,80,000& \\ & \text{To}6\%\text{Debenture Application and Allotment A/c}& & & & 10,80,000\\ & \text{(Receipt of application money)}& & & & \\ \text{June 30}& 6\%\text{Debenture Application and Allotment A/c}& \text{Dr}& & 10,80,000& \\ & \text{To}6\%\text{Debentures A/c}& & & & 10,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 80,000\\ & \text{(Transfer of application money)}& & & & \\ 2018& & & & & \\ \text{June 30}& 6\%\text{Debentures A/c}& \text{Dr}& & 10,00,000& \\ & \text{To Debentureholder's A/c}& & & & 10,00,000\\ & \text{(Amount due to redemption)}& & & & \\ \text{June 30}& \text{Debentureholder's A/c}& \text{Dr}& & 10,00,000& \\ & \text{To Bank A/c}& & & & 10,00,000\\ & \text{(Payment of amount due to debentureholders)}& & & & \end{array}$

Note :(1) As per section 17(4) with rule 18(7) a Banking Company is not required to create Debenture Redemption Reserve.

(2) A company which is not required to create DRR is exempted from Investing $15\%$ amount also.