Page 182 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Particulars
`
`
Date
`
L.F.
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Particulars
2003
2003
Dr.
Jan. 1
9,00,000
Bank Account
Dr.
Jan. 1
Dr.
Discount on Debentures Account
1,00,000

Discount on Debentures Account
1,00,000
Dr.

To 11% Debentures Account

To 11% Debentures Account

10,00,000
(Being issue of 11% Debentures at discount)

(Being issue of 11% Debentures at discount)

Dr.
4,000
Debenture Issue Expenses Account
Jan. 1
Jan. 1
Debenture Issue Expenses Account
Dr.
4,000
4,000

To Bank Account

4,000
To Bank Account

(Being payment of expenses on issue of debentures)

(Being payment of expenses on issue of debentures)

1,10,000
Dec. 31 Interest on Debentures Account
Dr.
1,10,000
Dr.
Dec. 31 Interest on Debentures Account
1,10,000

To Bank Account

To Bank Account

1,10,000

(Being payment of interest on debentures)

(Being payment of interest on debentures)

Dec. 31 Profit and Loss Account
1,34,000
Dr.
1,34,000
Dec. 31 Profit and Loss Account
Dr.

To Debenture Issue Expenses Account

4,000
To Debenture Issue Expenses Account

Date Bank Account L.F. 9,00,000 10,00,000
4,000
To Discount on Debentures Account 20,000
To Discount on Debentures Account 20,000
To Interest on Debentures Account 1,10,000
To Interest on Debentures Account 1,10,000
(Being written off of discount on debentures, debenture issue
(Being written off of discount on debentures, debenture issue
expenses and interest on debentures)
expenses and interest on debentures)
2004
2004
Dec. 31 Interest on Debentures Account Dr. 1,10,000 Unit 8: Methods of Redemption–I
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,000
To Bank Account 1,10,000
(Being payment of interest on debentures)
(Being payment of interest on debentures)

Dec. 31 Profit and Loss Account Dr. 1,30,000 Notes
Dec. 31 Profit and Loss Account Dr. 1,30,000
To Interest on Debentures Account 1,10,000
To Interest on Debentures Account 1,10,000
To Discount on Debentures Account 20,000
To Discount on Debentures Account 20,000
(Being transfer of interest on debentures and discount on debentures)
(Being transfer of interest on debentures and discount on debentures)
2005
2005
Dec. 31 Interest on Debentures Account Dr. 1,10,000
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,000
To Bank Account 1,10,000
(Being the payment of interest on debentures)
(Being the payment of interest on debentures)
Dec. 31 Profit and Loss Account Dr. 1,30,000
Dec. 31 Profit and Loss Account Dr. 1,30,000
To Interest on Debentures Account 1,10,000
To Interest on Debentures Account 1,10,000
To Discount on Debentures Account 20,000
To Discount on Debentures Account 20,000
(Being transfer of interest and discount on debentures)
(Being transfer of interest and discount on debentures)
2006
2006
Dec. 31 11% Debentures Account Dr. 2,50,000
Dec. 31 11% Debentures Account Dr. 2,50,000
To Profit on Redemption of Debentures Account 10,000
To Profit on Redemption of Debentures Account 10,000
To Bank Account 2,40,000
To Bank Account 2,40,000
(Being purchase of 500 debentures @ Rs. 480 per debentures from
(Being purchase of 500 debentures @ Rs. 480 per debentures from
the market for cancellation)
the market for cancellation)
2006 Expenses on Redemption of Debentures Account Dr. 200
2006 Expenses on Redemption of Debentures Account Dr. 200
Dec. 31 Interest on Debentures Account Dr. 1,10,000
Dec. 31 Interest on Debentures Account Dr. 1,10,000
To Bank Account 1,10,200
To Bank Account 1,10,200
(Being the payment of interest and expenses on debentures)
(Being the payment of interest and expenses on debentures)
Profit and Loss Account Dr. 1,30,200
Profit and Loss Account Dr. 1,30,200
To Expenses on Redemption of Debentures Account 200
To Expenses on Redemption of Debentures Account 200
To Interest on Debentures Account 1,10,000
To Interest on Debentures Account 1,10,000
To Discount on Debentures Account 20,000
To Discount on Debentures Account 20,000
(Being written off of expenses interest and discount on debentures)
(Being written off of expenses interest and discount on debentures)
Profit on Redemption of Debentures Account Dr. 10,000
Profit on Redemption of Debentures Account Dr. 10,000
To Profit and Loss Account 10,000
To Profit and Loss Account 10,000
(Being transfer of profit on redemption to P. and L. Account)
(Being transfer of profit on redemption to P. and L. Account)
Self Assessment
Fill in the blanks:
1. In order to avoid financial …………………… when debentures become due for redemption,
it is necessary to make arrangements for the accumulation of addition funds for the purpose
of redemption.
2. When the redemption of …………………… is made out of capital, no amount is transferred
from Profit and Loss Account to the Debenture Redemption Reserve Account (DRR).
3. With the amount received on the …………………… of policy the company faces no problem
in carrying out the redemption.
4. Every company has to create a ……………………
Notes Debenture Redemption Reserve (DRR) equivalent to 50% of the amount of
debentures issue before commencement of redemption on 14.1.1987.
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