Question:
Pass necessary journal entries for the issue of debentures in the books of RN Ltd. for the following transactions:
(i) Issued 1,000, 10% Debentures of ₹100 each at 5% premium, redeemable at a premium of 10% after 5 years.
(ii) Issued 5,000, 10% Debentures of ₹100 each at a premium of 10%, redeemable at par after 5 years.
Pass necessary journal entries for the issue of debentures in the books of RN Ltd. for the following transactions:
(i) Issued 1,000, 10% Debentures of ₹100 each at 5% premium, redeemable at a premium of 10% after 5 years.
(ii) Issued 5,000, 10% Debentures of ₹100 each at a premium of 10%, redeemable at par after 5 years.
(i) Issued 1,000, 10% Debentures of ₹100 each at 5% premium, redeemable at a premium of 10% after 5 years.
(ii) Issued 5,000, 10% Debentures of ₹100 each at a premium of 10%, redeemable at par after 5 years.
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Premium on redemption is a loss and debited to "Loss on Issue of Debentures A/c", while issue premium is credited to "Securities Premium A/c".
Updated On: Jul 17, 2025
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Solution and Explanation
(i) Journal Entry for Issue at Premium and Redeemable at Premium:
Issue Price = ₹100 + 5% = ₹105
Redemption Value = ₹100 + 10% = ₹110
Issue Price = ₹100 + 10% = ₹110
Redemption Value = ₹100 (at par)
Issue Price = ₹100 + 5% = ₹105
Redemption Value = ₹100 + 10% = ₹110
Bank A/c Dr. 1,05,000 Loss on Issue of Debentures A/c Dr. 5,000 To 10% Debentures A/c 1,00,000 To Securities Premium A/c 10,000 (Being issue of 1,000 debentures of ₹100 each at 5% premium, redeemable at 10% premium)(ii) Journal Entry for Issue at Premium, Redeemable at Par:
Issue Price = ₹100 + 10% = ₹110
Redemption Value = ₹100 (at par)
Bank A/c Dr. 5,50,000 To 10% Debentures A/c 5,00,000 To Securities Premium A/c 50,000 (Being issue of 5,000 debentures of ₹100 each at 10% premium, redeemable at par)
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