Question:
EF Ltd. invited applications for issuing 4000, 10% debentures of \u20b9 100 each at a premium of \u20b9 10 per debenture. The amount was payable as follows :
On application \hspace{1.5cm} -- \u20b9 40 per debenture
On allotment \hspace{2cm} -- \u20b9 70 per debenture (including premium)
The debentures were fully subscribed and all money was duly received.
Pass necessary journal entries for the above transactions in the books of EF Ltd.
EF Ltd. invited applications for issuing 4000, 10% debentures of \u20b9 100 each at a premium of \u20b9 10 per debenture. The amount was payable as follows :
On application \hspace{1.5cm} -- \u20b9 40 per debenture
On allotment \hspace{2cm} -- \u20b9 70 per debenture (including premium) The debentures were fully subscribed and all money was duly received. Pass necessary journal entries for the above transactions in the books of EF Ltd.
On application \hspace{1.5cm} -- \u20b9 40 per debenture
On allotment \hspace{2cm} -- \u20b9 70 per debenture (including premium) The debentures were fully subscribed and all money was duly received. Pass necessary journal entries for the above transactions in the books of EF Ltd.
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Break the debenture amount into face value and premium. Record money received and amounts due separately in the journal.
Updated On: Jul 7, 2025
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Solution and Explanation
Working:
Total Debentures = 4,000
Face Value per Debenture = ₹100
Premium = ₹10
Total Issue Price = ₹110
Application Money = ₹40, Allotment (including premium) = ₹70
Journal Entries:
1. For receipt of application money:
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Bank A/c | 1,60,000 | |
| To Debenture Application A/c | 1,60,000 | |
| (Being application money received on 4,000 debentures @ ₹40 each) | ||
2. For transfer of application money to Debenture A/c:
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Debenture Application A/c | 1,60,000 | |
| To 10% Debentures A/c | 1,60,000 | |
| (Being application money transferred to Debenture A/c) | ||
3. For amount due on allotment (face value + premium):
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Debenture Allotment A/c | 2,80,000 | |
| To 10% Debentures A/c | 2,40,000 | |
| To Securities Premium A/c | 40,000 | |
| (Being allotment due including premium @ ₹10 per debenture) | ||
4. For receipt of allotment money:
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Bank A/c | 2,80,000 | |
| To Debenture Allotment A/c | 2,80,000 | |
| (Being allotment money received in full) | ||
Final Answer: EF Ltd. passed four journal entries to record full subscription and premium received.
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