Page 181 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Particulars
2001
Dr.
Jan. 1

30,000
Loss on Issue of Debentures Account
Dr.

To 12% Debentures Account

To Premium on Redemption of Debentures Account

10,000
(Being issue of 12% debentures at discount and redeemable at

premium)

2001
Dec. 31 12% Debentures Account
50,000
Dr.
Dr.
Premium on Redemption of Debentures Account

2,500

To Debenture-holders’ Account

52,500

(Being amount due to debenture-holders on redemption)
Debenture-holders’ Account
Dr.
52,500

52,500
To Bank Account

(Being payment made to debenture-holders)
2002
50,000
Dec. 31 12% Debentures Account
Dr.
Dr.
2,500

Premium on Redemption of Debentures Account

To Debenture-holders’ account

52,500
Date Bank Account L.F. 1,80,000 2,00,000
(Being amount due to debenture-holders on redemption)
Debenture-holders’ Account Dr. 52,500
To Bank Account 52,500
(Being amount paid to debenture-holders on redemption)
Accounting for Companies-I 2003
Dec. 31 12% Debentures Account Dr. 50,000
Premium on Redemption of Debentures Account Dr. 2,500
To Debenture-holders’ Account 52,500
Notes (Being amount due to debenture-holders on redemption)
Debenture-holders’ account Dr. 52,500
To Bank Account 52,500
(Being amount paid to debenture-holder)
2004
Dec. 31 12% Debentures Account Dr. 50,000
Premium on Redemption of Debentures Account Dr. 2,500
To Debenture-holders’ account 52,500
(Being amount due to debenture-holders on redemption)
Debenture-holders Account Dr. 52,500
To Bank Account 52,500
(Being amount paid to debenture-holders)
Illustration 2 (Redemption Out of Capital by Drawings and Purchase of Debentures)
On 1st January 2003 Pankaj Ltd. issued 2,000, 11% Debentures of 500 each at a discount of 10%.
The terms of issue provided that beginning with 2006 2,50,000 of debentures should be redeemed
either by drawings at par or by purchase in the market every year. The expenses of the issue
amounted to 4,000 which were written off in 2003. The company wrote off 20,000 from the
discount on debentures every year. In 2006, the debentures to be redeemed were repaid at the
end of the year by drawings. In 2006, the company purchased for cancellation 500 debentures at
a running rate of 480 on 31st December, the expenses being 200. Interest is payable yearly.
Ignore income tax.
Pass journal entries to record the above mentioned transactions in the books of Pankaj Ltd. on
31st December 2006.
Solution:
Pankaj Ltd.
Journal Entries
Date Particulars L.F.
2003
Jan. 1 Bank Account Dr. 9,00,000
Discount on Debentures Account Dr. 1,00,000
To 11% Debentures Account 10,00,000
(Being issue of 11% Debentures at discount)
Jan. 1 Debenture Issue Expenses Account Dr. 4,000
To Bank Account 4,000
(Being payment of expenses on issue of debentures)
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,000
(Being payment of interest on debentures)
Dec. 31 Profit and Loss Account Dr. 1,34,000
To Debenture Issue Expenses Account 4,000
To Discount on Debentures Account 20,000
To Interest on Debentures Account 1,10,000
(Being written off of discount on debentures, debenture issue
expenses and interest on debentures)
2004
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,000
(Being payment of interest on debentures)

Dec. 31 Profit and Loss Account Dr. 1,30,000
To Interest on Debentures Account 1,10,000
To Discount on Debentures Account 20,000
(Being transfer of interest on debentures and discount on debentures)
174 LOVELY PROFESSIONAL UNIVERSITY
2005
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,000
(Being the payment of interest on debentures)
Dec. 31 Profit and Loss Account Dr. 1,30,000
To Interest on Debentures Account 1,10,000
To Discount on Debentures Account 20,000
(Being transfer of interest and discount on debentures)
2006
Dec. 31 11% Debentures Account Dr. 2,50,000
To Profit on Redemption of Debentures Account 10,000
To Bank Account 2,40,000
(Being purchase of 500 debentures @ Rs. 480 per debentures from
the market for cancellation)
2006 Expenses on Redemption of Debentures Account Dr. 200
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,200
(Being the payment of interest and expenses on debentures)
Profit and Loss Account Dr. 1,30,200
To Expenses on Redemption of Debentures Account 200
To Interest on Debentures Account 1,10,000
To Discount on Debentures Account 20,000
(Being written off of expenses interest and discount on debentures)
Profit on Redemption of Debentures Account Dr. 10,000
To Profit and Loss Account 10,000
(Being transfer of profit on redemption to P. and L. Account)