Question

On 1st April, 2023, GI Ltd. issued 40,000, 12% debentures of ₹ 100 each at a premium of 10%, redeemable at par after five years. The company closes its books on 31st March every year. Interest on debentures is payable half-yearly on 30th September and 31st March every year. Pass necessary journal entries in the books of the company for issue of debentures and payment of interest for the year ended 31st March, 2024.

Hint:

Premium goes to Securities Premium A/c; interest is expense through Interest on Debentures A/c.

Answer 1

Journal Entries in the books of GI Ltd.

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c     To 12% Debentures A/c     To Securities Premium A/c (Issue of 40,000 debentures at ₹ 110 each)	44,00,000	40,00,000 4,00,000
Interest on Debentures A/c     To Debenture holders A/c (Half-yearly interest due on debentures)	4,80,000	4,80,000
Debenture holders A/c     To Bank A/c (Payment of half-yearly interest)	4,80,000	4,80,000

Calculation:
Interest = ₹ 40,00,000 × 12% = ₹ 4,80,000 annually.
Paid in two equal instalments.