XYZ Ltd. an unlisted company issued - 6000,12% debentures of 100 each at a discount of 5% on 01.04.2021. Interest is payable annually on 31 st March…

In the Books of XYZ Ltd. Journal Entries (₹) (₹) 1-4-21 Bank A/c Dr. 5,70,000 Loss on Issue of Debentures A/c* (W.N.1) Dr. 90,000 To 12% Debentures A/c 6,00,000 To Premium on Redemption of Debentures A/c 60,000 (For issue of debentures at discount and redeemable at premium) 1-4-21 Profit and Loss A/c Dr. 60,000 To Debenture Redemption Reserve A/c 60,000 (Being Debenture Redemption Reserve (DRR) created at 10%) 1-4-21 Debenture Redemption Reserve Investment Dr. 30,000 To Bank A/c 30,000 (Being DRR Investment created at 15%) 31-3-22 Profit & Loss A/c Dr. 90,000 To Loss on issue of debentures 90,000 (Being entire loss on issue of debentures written off) 31-3-22 Debenture Interest A/c** Dr. 72,000 To Bank A/c 72,000 (Being interest to debentures holder paid) 31-3-22 Debenture Redemption Reserve (DRR) Dr. 20,000 To General Reserve 20,000 (For DRR transferred to General reserve) 31-3-22 Bank A/c Dr. 30,000 To Debenture Redemption Reserve Investment 30,000 (Being encashment of Debenture Redemption Reserve Investment for redemption of debentures) 31-3-22 12% Debentures** Dr. 2,00,000 Premium on redemption of debentures A/c Dr. 20,000 To Bank A/c 2,20,000 (Being amount of redemption of2000 debentures paid to debentures holders) 01-04-22 Debenture Redemption Reserve Investment Dr. 30,000 To Bank A/c 30,000 (Being DRR Investment created at 15%) 31-03-23 Debenture Interest A/c Dr. 48,000 To Bank A/c 48,000 (Being interest to debentures holder paid) 31-03-23 Debenture Redemption Reserve (DRR) Dr. 20,000 To General Reserve 20,000 (For DRR transferred to General reserve) 31-03-23 Bank A/c Dr. 30,000 To Debenture Redemption Reserve Investment 30,000 (Being encashment of Debenture Redemption Reserve Investment for redemption of debentures) 31-03-23 12% Debentures A/c Dr. 2,00,000 Premium on redemption of debentures A/c Dr. 20,000 To Bank A/c 2,20,000 (Being amount of redemption of debentures paid to debenture holders) 01-04-23 Debenture Redemption Reserve Investment Dr. 30,000 To Bank A/c 30,000 (Being DRR Investment created at 15%) 31-03-24 Debenture Interest A/c Dr. 24,000 To Bank A/c 24,000 (Being interest to debentures holder paid) 31-03-24 Debenture Redemption Reserve (DRR) Dr. 20,000 To General Reserve 20,000 (For DRR transferred to General reserve) 31-03-24 Bank A/c Dr. 30,000 To Debenture Redemption Reserve Investment 30,000 (being encashment of Debenture Redemption Reserve Investment for redemption of debentures) 31-03-24 12% Debentures A/c Dr. 2,00,000 Premium on redemption of debentures A/c Dr. 20,000 To Bank A/c 2,20,000 (Being final redemption of remaining2000 debentures paid) Working Note: 1. Discount /Loss on issue of debentures Discount on Issue of debentures= 6,000 x 100 x 5% = 30,000 Premium on redemption of debentures = 6,000 x 100 x 10% = 60,000 Total loss on issue of debentures = 30,000 +60,000 = 90,000 *Alternatively, discount on issue and premium on redemption of debentures can also be shown separately. In that case, the entry will be Bank A/c Dr. 5,70,000 Discount on Issue of Debentures A/c (W.N.1) Dr. 30,000 Loss on Issue of Debentures A/c (W.N.2) Dr. 60,000 To 12% Debentures A/c 6,00,000 To Premium on Redemption of Debentures A/c 60,000 (For issue of debentures at discount and redeemable at premium) ** The entries for interest on Debentures and Redemption of debentures can also be routed through debentures holders a/c. In addition to above, the following entry every year to transfer debenture interest and Premium on redemption of Debentures A/c to Profit and Loss A/c can also be passed Profit and Loss A/c Dr. To Debenture Interest A/c To Premium on Redemption of Debentures A/c