Question

Dhatu Ltd. invited applications for issuing 4,000, 11% Debentures of ₹100 each at a premium of ₹50 per debenture. Full amount was payable on application. Applications were received for 5,000 debentures. Applications for 1,000 debentures were rejected, and application money was refunded. Debentures were allotted to the remaining applicants. Pass necessary journal entries for the above transactions in the books of Dhatu Ltd.

Hint:

Always separate the face value of debentures and the premium amount while passing journal entries.

Answer 1

Step 1: Analyze the transaction. Total debentures issued: 4,000 at ₹100 each + ₹50 premium = ₹150 per debenture.
Applications received: 5,000 debentures.
Rejected applications: 1,000 debentures (₹150 per debenture refunded).
Applications accepted: 4,000 debentures.
Total application money received: ₹5,000 debentures × ₹150 = ₹7,50,000.
Step 2: Journal Entries: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Bank A/c Dr.} & 7,50,000 & -- \\ & \text{To Debentures Application A/c} & -- & 7,50,000 \\ & \text{(Being the application money received for 5,000 debentures)} & & \\ \hline -- & \text{Debentures Application A/c Dr.} & 7,50,000 & -- \\ & \text{To Bank A/c (Refund for 1,000 debentures)} & -- & 1,50,000 \\ & \text{To 11\% Debentures A/c} & -- & 4,00,000 \\ & \text{To Securities Premium A/c} & -- & 2,00,000 \\ & \text{(Being the application money adjusted for 4,000 debentures and refunded for 1,000 debentures)} & & \\ \hline \end{array} \] Working Notes:

• Application money received for 5,000 debentures: \[ \text{₹150 × 5,000 debentures = ₹7,50,000.} \]
• Application money refunded for 1,000 debentures: \[ \text{₹150 × 1,000 debentures = ₹1,50,000.} \]
• Application money adjusted for 4,000 debentures: \[ \text{₹150 × 4,000 debentures = ₹6,00,000.} \]
• ₹100 per debenture credited to the 11% Debentures Account: ₹4,00,000.
• ₹50 per debenture credited to the Securities Premium Account: ₹2,00,000.