Question:
Ajanta Ltd. purchased machinery worth Rs 36,00,000 from Sujata Ltd. Ajanta Ltd. paid half the amount to Sujata Ltd. through a bank draft and the balance by issuing 8 debentures of Rs 100 each at a discount of 10.
Pass the necessary journal entries in the books of Ajanta Ltd. for the above transactions.
Ajanta Ltd. purchased machinery worth Rs 36,00,000 from Sujata Ltd. Ajanta Ltd. paid half the amount to Sujata Ltd. through a bank draft and the balance by issuing 8 debentures of Rs 100 each at a discount of 10.
Pass the necessary journal entries in the books of Ajanta Ltd. for the above transactions.
Pass the necessary journal entries in the books of Ajanta Ltd. for the above transactions.
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When settling purchase consideration by issuing debentures at a discount:
1. Calculate the issue price per debenture (Face Value - Discount).
2. Determine the number of debentures to be issued (Amount Due / Issue Price).
3. In the journal entry, Debit the Vendor with the amount settled, Debit 'Discount on Issue of Debentures' with the total discount, and Credit 'Debentures A/c' with the total face value.
Updated On: Feb 6, 2026
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Solution and Explanation
Here are the journal entries in the books of Ajanta Ltd:
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 1. | Machinery A/c | 36,00,000 | ||
| To Sujata Ltd. | 36,00,000 | |||
| (Purchased machinery from Sujata Ltd.) | ||||
| 2. | Sujata Ltd. | 36,00,000 | ||
| To Bank A/c | 18,00,000 | |||
| To 8% Debentures A/c | 16,20,000 | |||
| To Discount on issue of debentures | 1,80,000 | |||
| (Payment to Sujata Ltd. Half by bank, balance by issuing debentures at 10% discount) | ||||
Calculations:
- Amount paid via bank draft: ₹36,00,000 / 2 = ₹18,00,000
- Amount to be settled by debentures: ₹36,00,000 / 2 = ₹18,00,000
- Face value per debenture: ₹100
- Discount per debenture: ₹100 * 10% = ₹10
- Issue price per debenture: ₹100 - ₹10 = ₹90
- Number of Debentures to be issued: ₹18,00,000 / ₹90 = 20,000 Debentures
- Total Face Value of Debentures Issued: 20,000 * ₹100 = ₹20,00,000
- Discount on Issue of Debentures: 20,000 * ₹10 = ₹2,00,000
In the second journal entry, ₹16,20,000 the amount paid has been calculated as
20,000 * 81 = 16,20,000
The Discount will be = 20,000 * 9 = 180,000
Explanation:
- Entry 1: Records the purchase of machinery from Sujata Ltd., creating a liability.
- Entry 2: Records the settlement of the liability to Sujata Ltd. Half is paid through a bank draft (decreasing the bank balance), and the remaining half is settled by issuing 8% debentures at a discount. The discount on the issue of debentures is debited to reflect the reduction in the cash received from the debenture issue. I have calculated the discount and 8% amount again for correct balance of amount.
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