Question:
Delta Ltd. invited applications for issuing 30,000, 9% debentures of Rs 100 each at a premium of Rs 30 per debenture. The full amount was payable on application. Applications were received for 40,000 debentures. Applications for 2,000 debentures were rejected and the application money was refunded. Debentures were allotted to the remaining applicants on pro rata basis. Pass the necessary journal entries for the above transactions in the books of Delta Ltd.
Delta Ltd. invited applications for issuing 30,000, 9% debentures of Rs 100 each at a premium of Rs 30 per debenture. The full amount was payable on application. Applications were received for 40,000 debentures. Applications for 2,000 debentures were rejected and the application money was refunded. Debentures were allotted to the remaining applicants on pro rata basis. Pass the necessary journal entries for the above transactions in the books of Delta Ltd.
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Receive 40,000 x Rs. 130 = Rs. 52,00,000. Keep 30,000 x Rs. 130 = Rs. 39,00,000 (Debentures Rs. 30,00,000 and Securities Premium Rs. 9,00,000) and refund Rs. 13,00,000.
Updated On: Oct 26, 2026
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Solution and Explanation
Step 1: Read the facts:
Delta Ltd. offers 30,000 9% debentures of Rs. 100 each at a premium of Rs. 30. The full Rs. 130 is payable on application.
Applications are received for 40,000 debentures. Applications for 2,000 debentures are rejected and refunded. The rest are allotted pro rata.
Step 2: Working Notes:
Step 3: Journal entries:
Entry 2 debit: Rs. 52,00,000. Credit: Rs. 30,00,000 + Rs. 9,00,000 + Rs. 13,00,000 = Rs. 52,00,000.
Step 4: Reason for each figure:
The full amount is payable on application, so there is no separate allotment or call money. One Application and Allotment account is enough.
Rejected applications and excess money on pro rata allotment are both returned in cash. That is why Bank is credited Rs. 13,00,000 in entry 2.
The premium Rs. 30 is earned only on debentures actually allotted, so Securities Premium is Rs. 9,00,000 and not Rs. 12,00,000.
Final Answer:
Debentures Rs. 30,00,000 and Securities Premium Rs. 9,00,000 are credited, and Rs. 13,00,000 is refunded to applicants.
Delta Ltd. offers 30,000 9% debentures of Rs. 100 each at a premium of Rs. 30. The full Rs. 130 is payable on application.
Applications are received for 40,000 debentures. Applications for 2,000 debentures are rejected and refunded. The rest are allotted pro rata.
Step 2: Working Notes:
| Item | Calculation | Amount (Rs.) |
|---|---|---|
| Application money received | 40,000 x Rs. 130 | 52,00,000 |
| Money refunded on rejected applications | 2,000 x Rs. 130 | 2,60,000 |
| Applications considered for pro rata allotment | 40,000 - 2,000 = 38,000 debentures | |
| Debentures allotted | 30,000 out of 38,000 (15 for every 19 applied) | |
| Excess money refunded on pro rata allotment | (38,000 - 30,000) x Rs. 130 | 10,40,000 |
| Total refund | 2,60,000 + 10,40,000 | 13,00,000 |
| Money kept for 30,000 debentures | 30,000 x Rs. 130 | 39,00,000 |
| 9% Debentures (face value) | 30,000 x Rs. 100 | 30,00,000 |
| Securities Premium | 30,000 x Rs. 30 | 9,00,000 |
Step 3: Journal entries:
| Date | Particulars | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|
| Bank A/c ...Dr. | 52,00,000 | ||
| To Debenture Application and Allotment A/c | 52,00,000 | ||
| (Application money received on 40,000 debentures of Rs. 100 each at a premium of Rs. 30 per debenture) | |||
| Debenture Application and Allotment A/c ...Dr. | 52,00,000 | ||
| To 9% Debentures A/c | 30,00,000 | ||
| To Securities Premium A/c | 9,00,000 | ||
| To Bank A/c | 13,00,000 | ||
| (Application money transferred to debentures account and securities premium account and the balance refunded) | |||
Entry 2 debit: Rs. 52,00,000. Credit: Rs. 30,00,000 + Rs. 9,00,000 + Rs. 13,00,000 = Rs. 52,00,000.
Step 4: Reason for each figure:
The full amount is payable on application, so there is no separate allotment or call money. One Application and Allotment account is enough.
Rejected applications and excess money on pro rata allotment are both returned in cash. That is why Bank is credited Rs. 13,00,000 in entry 2.
The premium Rs. 30 is earned only on debentures actually allotted, so Securities Premium is Rs. 9,00,000 and not Rs. 12,00,000.
Final Answer:
Debentures Rs. 30,00,000 and Securities Premium Rs. 9,00,000 are credited, and Rs. 13,00,000 is refunded to applicants.
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