Question

Moon Ltd. issued 4,000, 10% debentures of ₹ 100 each at a premium of 10% redeemable at par after 5 years.
Pass journal entries in the books of the company for issue of debentures.

Hint:

When debentures are issued at a premium and redeemable at par, the excess received is credited to the Securities Premium Reserve. Always credit the face value to the Debentures A/c and record any premium or discount separately.

Answer 1

We are given: - Number of debentures issued = 4,000 - Face value = ₹ 100 each - Issue price = ₹ 100 + 10% premium = ₹ 110 per debenture - Total amount received = ₹ 4,000 × ₹ 110 = ₹ 4,40,000 - Redeemable at par = ₹ 100 per debenture
Journal Entry: \[ \begin{aligned} \text{Bank A/c Dr.} & \hspace{5pt} ₹ 4,40,000
\text{To 10% Debentures A/c} & \hspace{5pt} ₹ 4,00,000
\text{To Securities Premium A/c} & \hspace{5pt} ₹ 40,000
\end{aligned} \] Narration: Being 4,000 10% debentures of ₹ 100 each issued at a premium of ₹ 10 per debenture, redeemable at par after 5 years.
Explanation: - **Debentures A/c** is credited with the face value of the liability = ₹ 4,00,000 - **Securities Premium A/c** is credited with the premium received = ₹ 40,000 - **Bank A/c** is debited with the total cash received = ₹ 4,40,000 No discount or loss on issue arises because redemption is at par and issue is at premium.