Question

Surya Ltd. issued 2,500, $15\%$ Debentures of Rs 100 each at a discount of $10\%$ payabale as follows:

Rs 25 on application; Rs 25 on allotment and the balance on first call.

Applications were received for 2,000 debentures and the allotment was made. All the moneys were dully received. Expenses on issue of deberatures amounted to Rs 8,000. Directors decided to write off 1/5th of "Expenses on issue A/c" and "Discount on Debentures A/c" from Statement of profit and loss each year.

Pass journal entries (for first year only).

Answer 1

$\text{Journal of Surya Ltd.}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt.(Cr)}\\ & \text{Bank A/c}& \text{Dr}& & 50,000& \\ & \text{To 15\% Debenture Application A/c}& & & & 50,000\\ & \text{(Application money received for 2,000 debentures}& & & & \\ & \text{at Rs.25 each)}& & & & \\ & \underset{–}{}& & & & \\ & \text{15\% Debenture Application A/c}& \text{Dr}& & 50,000& \\ & \text{To 15\% Debenture A/c}& & & & 50,000\\ & \text{(Application money transferred)}& & & & \\ & \underset{–}{}& & & & \\ & \text{Bank A/c}& \text{Dr}& & 50,000& \\ & \text{To 15\% Debenture Allotment A/c}& & & & 50,000\\ & \text{(Allotment money received)}& & & & \\ & \underset{–}{}& & & & \\ & \text{15\% Debentures A/c}& \text{Dr}& & 50,000& \\ & \text{Discount on Issue of Debentures A/c}& \text{Dr}& & 20,000& \\ & \text{To 15\% Debenture A/c}& & & & 70,000\\ & \text{(Amount received on allotment transferred to debentures account)}& & & & \\ & \underset{–}{}& & & & \\ & \text{Bank A/c}& \text{Dr}& & 80,000& \\ & \text{To 15\% Debenture First and Final Call A/c}& & & & 80,000\\ & \text{(First and Final Call money received)}& & & & \\ & \underset{–}{}& & & & \\ & \text{15\% Debenture First and Final Call A/c A/c}& \text{Dr}& & 80,000& \\ & \text{To 15\% Debenture A/c}& & & & 80,000\\ & \text{(Amount received on First and Final Call transferred to debentures account )}& & & & \\ & \underset{–}{}& & & & \\ & \text{Expenses on Issue A/c}& \text{Dr}& & 8,000& \\ & \text{To Bank A/c}& & & & 8,000\\ & \text{(Expenses paid on issue of debentures)}& & & & \\ & \underset{–}{}& & & & \\ & \text{Statement of Profit \& Loss A/c}& \text{Dr}& & 5,600& \\ & \text{To Discount on Debentures A/c}& & & & 4,000\\ & \text{To Expenses on Issue A/c}& & & & 1,600\\ & \text{(1/5th of 'Discount on debenture' and 1/5th of}& & & & \\ & \text{'expenses on issue' written off)}& & & & \end{array}$

It should be noted that in case, the full amount of a debenture is received in one installment, the amount should be credited to 'Debenture Application & Allotment A/c', instead of 'Debenture Application A/c'.