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8.4 Double Entry Book Keeping (Section A)—ISC XII

Illustration 2.

On 1st June, 2018, Goodluck Ltd. issued 5,000, 10% Debentures of ` 100 each at par
redeemable after five years at a premium of 10%. All the debentures were subscribed
and allotment made. The balance in Securities Premium Reserve is ` 20,000. Profit for
the year was ` 50,000.

Pass the Journal entries for issue of debentures and writing off the loss and prepare the
extract of the Balance Sheet as at 31st March, 2019 showing Loss on Issue of Debentures.

Solution: In the Books of Goodluck Ltd.
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
2018
June 1 Bank A/c ...Dr. 5,00,000
To Debentures Application and Allotment A/c 5,00,000
(Being the subscription received for 5,000, 10% Debentures of ` 100 each)
Debentures Application and Allotment A/c ...Dr. 5,00,000
Loss on Issue of Debentures A/c ...Dr. 50,000
To 10% Debentures A/c 5,00,000
To Premium on Redemption of Debentures A/c 50,000
(Being 5,000, 10% Debentures of ` 100 each issued at par,
redeemable at 10% premium)
2019
March 31 Securities Premium Reserve A/c ...Dr. 20,000
Statement of Profit and Loss ...Dr. 30,000
To Loss on Issue of Debentures A/c 50,000
(Being the of loss on issue of debentures written off)

BALANCE SHEET (Extract)
as at 31st March, 2019
Particulars Note No. `

I. EQUITY AND LIABILITIES
Shareholders’ Funds
Reserves and Surplus 1 20,000

Note to Accounts
1. Reserves and Surplus `
Securities Premium Reserve 20,000
Less: Loss on Issue of Debentures written off 20,000 ...
Surplus, i.e., Balance in Statement of Profit and Loss (` 50,000 – ` 30,000) 20,000
20,000