Page 211 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Particulars
2004
Jan. 1
Dr.
1,25,000
Dr.
Discount on Issue of Debentures A/c

To 12% Debentures Account

(Being issue of 12% debentures at discount)

Dec. 31 Profit and Loss account
25,000
Dr.
25,000

To Discount on Issue of Debentures Account

(Being discount on debentures written off from P & L account)
2005
20,000
Dec. 31 12% Debentures Account
Dr.

18,000
To Bank Account

To Profit on Redemption of Debentures Account
2,000

(Being cancellation of 40 debentures by purchasing them

@ 450 per debenture)

2,000
Dr.
Profit on Redemption of Debenture Account

2,000

To Capital Reserve Account
Date Bank Account L.F. 23,75,000 25,00,000
(Being profit on redemption of debentures transferred to capital
reserve account)
12% Debentures Account Dr. 30,000
To Bank Account 24,000
To Profit on Redemption of Debentures Account 6,000
Accounting for Companies-I (Being cancellation of 60 debentures)
Profit on Redemption of Debenture Account Dr. 6,000
To Capital Reserve Account 6,000
(Being transfer of profit on cancellation of debentures)
Notes Own Debentures Account Dr. 8,000
To Bank Account 8,000
(Being own debenture purchased as own debentures
(38,000 – 30,000)
Profit & Loss Account Dr. 50,000
To General Reserve Account 50,000
(An equal amount to nominal value of debentures redeemed
transferred to general reserve)
Profit and Loss Account Dr. 20,000
To Discount on Issue of Debentures Account 20,000
(Being discount on issue of debentures written off against profits)
Illustration 2 (Redemption by Purchase of Debentures from Open Market)
The following information are available in the balance sheet of Sumeet Company Limited on
st
31 December, 2005:
(a) 15% Debentures of 100 each 14,00,000
(b) Debenture Redemption fund 59,50,000
(c) Debenture Redemption Fund Investment represented by 1,40,000 own debentures
purchased at 98 each and the remaining amount by 4,90,000; 10% Government of India
loan.
On the above date the directors redeemed all the debentures. For this purpose they realised 10%
Government of India loan at par. They realized 2, 10,000 for redemption out of current year’s
profits. Pass journal entries in the books of the company.
Solution:
Journal Entries
Date Particulars L.F.
Dec. 31 Bank Account Dr. 4,90,000
To Debenture Redemption Fund Investment Account 4,57,800
To Debenture Redemption Fund Account 32,200
(Being sale of DRF investment for redemption of debentures)
Profit and Loss Account Dr. 2,10,000
To Debenture Redemption Fund A/c 2,10,000
(An amount transferred from profits to D.R. fund account)
15% Debenture Account Dr. 12,60,000
To Bank Account 12,60,000
(Being redemption made)
15% Debentures Account Dr. 1,40,000
To Own Debentures Account 1,37,200
To Debenture Redemption Fund Account 2,800
(Being cancellation of own debentures and profit thereon
transferred to D.R.F.)
Debenture Redemption Fund Account Dr. 8,40,000
To Capital Reserve Account 35,000
To General Reserve Account 8,05,000
(Being profit on sale of investment and profit on cancellation of
debentures transferred to capital reserve and balance to general
reserve account)
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