Question

X.Ltd. issued 15,000, 10% debentures of Rs 100 each. Give journal entries and the Balance Sheet in each of the following cases:

(i) The debentures are issued at a premium of 10%;

(ii) The debentures are issued at a discount of 5%;

(iii) The debentures are issued as a collateral security to bank against a loan of Rs 12,00,000; and

(iv) The debentures are issued to a supplier of machinery costing Rs 13,50,000.

Answer 1

(i)

Books of X. Ltd. Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c		Dr.		16,50,000
		To 10% Debentures A/c				15,00,000
		To Securities Premium A/c				1,50,000
	(Issued 15,000, 10% debentures of Rs 100 each at 10% premium)

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Reserves and Surplus	1	1,50,000
2. Non-Current Liabilities
a. Long-Term Borrowings	2	15,00,000
3. Current Liabilities
Total		16,50,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	16,50,000
Total		16,50,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)
1	Reserves and Surplus
	Securities Premium	1,50,000
2	Long-Term Borrowings
	10% Debentures (Secured)	15,00,000
3	Cash and Cash Equivalents
	Cash at Bank	16,50,000

(ii)

	Bank A/c			Dr.		14,25,000
	Discount on Issue of Debentures A/c			Dr.		75,000
		To 10% Debentures					15,00,000
	(Issued 15,000 10% Debenture of Rs 100 each at 5% discount)

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholder’s Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	15,00,000
3. Current Liabilities
Total		15,00,000
II. Assets
1. Non-Current Assets
a. Other Non-Current Assets	2	75,000
2. Current Assets
a. Cash and Cash Equivalents	3	14,25,000
Total		15,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)
1	Long-Term Borrowings
	10% Debentures (Secured)	15,00,000
2	Other Non-Current Assets
	Discount on Issue of Debentures	75,000
3	Cash and Cash Equivalents
	Cash at Bank	14,25,000

(iii) No entry will be passed for issuing debentures as a collateral security

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	12,00,000
3. Current Liabilities
Total		12,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	12,00,000
Total		12,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)
1	Long-Term Borrowings
	Bank Loan (Secured against issue Debentures of Rs 12,00,000)	12,00,000
2	Cash and Cash Equivalents
	Cash at Bank	12,00,000

Alternative Method

	Debenture Suspense A/c				Dr.		15,00,000
		To 10% Debentures A/c						15,00,000
	(Issued 15,000 10% Debentures of Rs 100 each as collateral security to bank against a loan of Rs 12,00,000)

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Fund
2. Non-Current Liabilities
a. Long-Term Borrowings	1	12,00,000
3. Current Liabilities
Total		12,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	12,00,000
Total		12,00,000

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)
1	Long Term Borrowings
	Secured:
	Bank Loan		12,00,000
	10 % Debentures (Secured against issue of Debentures of Rs 12,00,000)	15,00,000
	Less: Debenture Suspense Account	15,00,000	-
			12,00,000
2	Cash and Cash Equivalents
	Cash at Bank		12,00,000

(iv)

	Machinery A/c			Dr.		13,50,000
		To Vendor A/c					13,50,000
	(Machinery purchased from vendor)
	Vendor A/c			Dr.		13,50,000
	Discount on Issue of Debentures A/c			Dr.		1,50,000
		To 10% Debenture A/c					15,00,000
	(15,000 10% Debentures @ Rs 100 each issued at 10% discount to the vendor in consideration of Machinery of Rs 13,50,000)

X Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long Term Borrowings	1	15,00,000
3. Current Liabilities
Total		15,00,000
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets	2	13,50,000
b. Other Non-Current Assets	3	1,50,000
2. Current Assets
Total		15,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)
1	Long Term Borrowings
	10% Debentures (Secured)	15,00,000
2	Tangible Assets
	Plant and Machinery	13,50,000
3	Other Non-Current Assets
	Discount on Issue of Debentures	1,50,000