Question

A Limited issued 5000, 10% debentures of Rs. 100 each, at a premium of Rs. 10 per debenture payable as follows:
On application Rs. 25, On allotment Rs. 45 (including premium), On first and final call Rs. 40.
The debentures were fully subscribed and all money was duly received.
Select the correct journal entries related to the above case from the following.
(A)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	10% Debenture Allotment A/c Dr.		2,25,000
	To 10% Debentures A/c			1,75,000
	To Securities Premium Reserve A/c			50,000

(B)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		1,25,000
	To 10% Debenture Application A/c			1,25,000

(C)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		2,00,000
	To 10% Debenture First & Final Call A/c			2,00,000

(D)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		2,20,000
	To 10% Debenture Allotment A/c			2,20,000

Choose the correct answer from the options given below:

• A. (A), (B) and (C) only
• B. (A), (B) and (D) only
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D) only

Hint:

Multiply 5,000 by 25, 45 and 40 for each instalment. Allotment of Rs. 2,25,000 includes Rs. 50,000 premium, so a bank entry of Rs. 2,20,000 is wrong.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Debentures issued at a premium are collected in instalments. Money received on each instalment is debited to Bank. Money due on allotment is first transferred from the Debentures Allotment account, where the premium goes to Securities Premium Reserve and the rest to Debentures account.

Step 2: Work out the amounts:
Number of debentures = 5,000.
Application: 5,000 x 25 = Rs. 1,25,000.
Allotment: 5,000 x 45 = Rs. 2,25,000, which includes premium of 5,000 x 10 = Rs. 50,000. So face value part is 2,25,000 - 50,000 = Rs. 1,75,000.
First and final call: 5,000 x 40 = Rs. 2,00,000.
Check: 25 + 45 + 40 = 110 per debenture, equal to 100 face value plus 10 premium.

Step 3: Check entry (A):
Allotment due is Rs. 2,25,000. Debentures Allotment A/c is debited by 2,25,000, Debentures A/c is credited by 1,75,000 and Securities Premium by 50,000. This matches our figures, so (A) is CORRECT.

Step 4: Check entry (B):
Application money received is Rs. 1,25,000. Bank is debited and Debenture Application A/c is credited by Rs. 1,25,000. So (B) is CORRECT.

Step 5: Check entry (C):
First and final call money received is Rs. 2,00,000. Bank is debited and First and Final Call A/c is credited by Rs. 2,00,000. So (C) is CORRECT.

Step 6: Check entry (D):
Allotment money received is Rs. 2,25,000, not Rs. 2,20,000. The entry shows Rs. 2,20,000, which is Rs. 5,000 short. So (D) is WRONG.

Step 7: Match with the options:
A, B and C are correct, and D is wrong. This is option 1.

Final Answer:
Entries (A), (B) and (C) are correct. This is option 1. \[ \boxed{\text{Option 1: (A), (B) and (C) only}} \]