Question

Mahesh Ltd. purchased Plant and Machinery from Ish Ltd. for \rupee 4,50,000. \rupee 50,000 was paid by cheque to Ish Ltd. and the balance by issuing 6\% debentures of \rupee 100 each at a discount of 20\%. Pass the necessary Journal Entries for the above transactions in the books of Mahesh Ltd.

Hint:

When debentures are issued at a discount, the difference between the nominal value and the issue price is treated as a "Discount on Issue of Debentures" and recorded as a loss.

Answer 1

Journal Entries: \begin{center} \begin{tabular}{|l|p{8cm}|r|r|} Date & Particulars & Debit (\rupee) & Credit (\rupee)
1st May, 2023 & Plant and Machinery A/c & 4,50,000 & --
& To Bank A/c & -- & 50,000
& To Ish Ltd. A/c & -- & 4,00,000
& \textit{(Plant and Machinery purchased, part payment made by cheque)} & &
1st May, 2023 & Ish Ltd. A/c & 4,00,000 & --
& Discount on Issue of Debentures A/c & 1,00,000 & --
& To 6\% Debentures A/c & -- & 5,00,000
& \textit{(Issued debentures at 20\% discount to settle remaining amount)} & &
\end{tabular} \end{center}