Question

Sargam Limited issued 2,000, 9 debentures of Rs 500 each at a premium of 10. The amount was payable as follows:
On Application - Rs 200 per debenture
On Allotment - Balance (including premium)
The debentures were fully subscribed and all amounts were duly received.
Pass the necessary journal entries for issue of debentures in the books of Sargam Limited.

Hint:

When debentures are issued at a premium, the premium amount is credited to the 'Securities Premium' account, usually at the allotment stage unless specified otherwise. Ensure the Debenture account is credited only with the face value portion of the instalments.

Answer 1

Workings: % Option (A) Face Value per Debenture = Rs 500 % Option (B) Premium per Debenture = 10 of Rs 500 = Rs 50 % Option (C) Issue Price per Debenture = Face Value + Premium = 500 + 50 = Rs 550 % Option (D) Application Money per Debenture = Rs 200 % Option (E) Allotment Money per Debenture = Issue Price - Application Money = 550 - 200 = Rs 350 \quad (Comprising Rs 300 towards Face Value and Rs 50 towards Premium) % Option (F) Total Amounts (for 2,000 debentures): \begin{itemize} % Option (G) Application Received: 2,000 \( \times \) 200 = Rs 4,00,000 % Option (H) Allotment Due: 2,000 \( \times \) 350 = Rs 7,00,000 \subitem Face Value part: 2,000 \( \times \) 300 = Rs 6,00,000 \subitem Premium part: 2,000 \( \times \) 50 = Rs 1,00,000 % Option (I) Allotment Received: Rs 7,00,000 (as fully received) \end{itemize} Journal Entries in the books of Sargam Limited:
\vspace{0.2cm} \begin{tabularx}{\textwidth}{X r r} \toprule Particulars & Dr. (Rs) & Cr. (Rs)
\midrule \multicolumn{3}{l}{\textit{1. On receipt of application money:}}
Bank A/c \dotfill & 4,00,000 &
\quad To Debenture Application A/c \dotfill & & 4,00,000
\textit{(Being application money received on 2,000 debentures @ Rs 200 each)} & &
\midrule \multicolumn{3}{l}{\textit{2. On allotment of debentures (transferring application money):}}
Debenture Application A/c \dotfill & 4,00,000 &
\quad To 9 Debentures A/c \dotfill & & 4,00,000
\textit{(Being application money transferred to Debentures account)} & &
\midrule \multicolumn{3}{l}{\textit{3. On allotment money becoming due:}}
Debenture Allotment A/c \dotfill & 7,00,000 &
\quad To 9 Debentures A/c \dotfill & & 6,00,000
\quad To Securities Premium A/c \dotfill & & 1,00,000
\textit{(Being allotment money due on 2,000 debentures @ Rs 350 each, including premium @ Rs 50)} & &
\midrule \multicolumn{3}{l}{\textit{4. On receipt of allotment money:}}
Bank A/c \dotfill & 7,00,000 &
\quad To Debenture Allotment A/c \dotfill & & 7,00,000
\textit{(Being allotment money received)} & &
\bottomrule \end{tabularx} \vspace{0.2cm}