Question:
On 1stApril, 2023, YK Ltd. issued 20,000, 9% debentures of ₹ 100 each at a premium of 5%, redeemable after five years at par.
The company closes its books on 31st March every year. Interest on debentures is payable half yearly on 30th September and 31st March every year.
Pass necessary journal entries in the books of the company for issue of debentures and payment of interest for the year ending 31st March, 2024.
On 1stApril, 2023, YK Ltd. issued 20,000, 9% debentures of ₹ 100 each at a premium of 5%, redeemable after five years at par.
The company closes its books on 31st March every year. Interest on debentures is payable half yearly on 30th September and 31st March every year.
Pass necessary journal entries in the books of the company for issue of debentures and payment of interest for the year ending 31st March, 2024.
The company closes its books on 31st March every year. Interest on debentures is payable half yearly on 30th September and 31st March every year.
Pass necessary journal entries in the books of the company for issue of debentures and payment of interest for the year ending 31st March, 2024.
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Interest is calculated on face value—not on premium. Transfer total interest to P and L at year-end.
Updated On: Jul 18, 2025
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Solution and Explanation
Working Notes:
- Face value per debenture = ₹100
- Number of debentures = 20,000
- Issue price = ₹100 + 5% premium = ₹105
- Total amount received = 20,000 × ₹105 = ₹21,00,000
- Face value = 20,000 × ₹100 = ₹20,00,000
- Premium on issue = ₹1,00,000
- Interest @ 9% p.a. on face value = ₹20,00,000 × 9% = ₹1,80,000 per annum
- Half-yearly interest = ₹90,000 (on 30th Sept and 31st March)
Journal Entries:
| Date | Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|---|
| 1st April, 2023 | Bank A/c Dr. To 9% Debentures A/c To Securities Premium A/c (Being 20,000 9% debentures issued at 5% premium) | ₹21,00,000 | ₹20,00,000 ₹1,00,000 |
| 30th Sept, 2023 | Interest on Debentures A/c Dr. To Debentureholders A/c (Being half-yearly interest due on 20,000 debentures @ 9%) | ₹90,000 | ₹90,000 |
| 30th Sept, 2023 | Debentureholders A/c Dr. To Bank A/c (Being payment of half-yearly interest) | ₹90,000 | ₹90,000 |
| 31st March, 2024 | Interest on Debentures A/c Dr. To Debentureholders A/c (Being interest due for second half-year) | ₹90,000 | ₹90,000 |
| 31st March, 2024 | Debentureholders A/c Dr. To Bank A/c (Being interest paid for second half-year) | ₹90,000 | ₹90,000 |
| 31st March, 2024 | Profit and Loss A/c Dr. To Interest on Debentures A/c (Being total interest expense transferred to P&L) | ₹1,80,000 | ₹1,80,000 |
Note: Interest is paid half-yearly, hence twice ₹90,000 is due and paid.
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