Question:
Varsha Ltd. invited applications for issuing 2,000, 12% debentures of ₹ 100 each at a premium of ₹ 30 per debenture. Full amount was payable on application. Applications were received for 5,000 debentures. Applications for 3,000 debentures were rejected and money refunded. Debentures were allotted to the remaining applicants. Pass necessary journal entries for the above transactions in the books of Varsha Ltd.
Varsha Ltd. invited applications for issuing 2,000, 12% debentures of ₹ 100 each at a premium of ₹ 30 per debenture. Full amount was payable on application. Applications were received for 5,000 debentures. Applications for 3,000 debentures were rejected and money refunded. Debentures were allotted to the remaining applicants. Pass necessary journal entries for the above transactions in the books of Varsha Ltd.
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Refund excess applications immediately, then allot and transfer amounts to Debentures and Premium A/c.
Updated On: Oct 28, 2025
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Solution and Explanation
Journal Entries in the books of KM Ltd.:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Sundry Assets A/c To Sundry Liabilities A/c To LS Ltd. (To record purchase of assets and liabilities) | 7,20,000 | 2,00,000 9,60,000 |
| LS Ltd. A/c Discount on Issue of Debentures A/c To 12% Debentures A/c (Issue of debentures at 4% discount) | 9,60,000 40,000 | 10,00,000 |
Calculation:
Debentures issued = ₹ 9,60,000 / 96 × 100 = ₹ 10,00,000
= 10,000 debentures
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