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Joint Stock Company—Issue of Debentures                                         8.5
                     Illustration 3.

                     DSC Ventures Ltd. issued on 1st  April, 2017, 10,000, 9% Debentures of  ` 100 each at
                     10% discount redeemable after five years at a premium of ` 10. All the debentures were
                     subscribed. During the year ended 31st March, 2018, the company incurred a loss of
                     ` 20,000. It has balance in Securities Premium Reserve of ` 1,50,000.

                     Pass the Journal entries and prepare the extract of the Balance Sheet showing Loss on
                     Issue of Debentures.


                     Solution:                   JOURNAL OF DSC VENTURES LTD.

                     Date     Particulars                                          L.F.   Dr. (`)   Cr. (`)
                     2017
                     April  1   Bank A/c                                     ...Dr.      9,00,000
                                To  Debentures Application and Allotment A/c                      9,00,000
                             (Being the application money received for 10,000, 9% Debentures)
                             Debentures Application and Allotment A/c        ...Dr.      9,00,000
                             Loss on Issue of Debentures A/c                 ...Dr.      2,00,000
                                To  9% Debentures A/c                                            10,00,000
                                To  Premium on Redemption of Debentures A/c                       1,00,000
                             (Being the debentures issued)
                             Securities Premium Reserve A/c                  ...Dr.      1,50,000
                             Statement of Profit and Loss                    ...Dr.       50,000
                                To  Loss on Issue of Debentures A/c                               2,00,000
                             (Being the loss on issue of Debentures written off)


                                              BALANCE SHEET (EXTRACT) as at 31st March, 2018
                     Particulars                                                         Note No.    `

                      I.  EQUITY AND LIABILITIES
                        Shareholders’ Funds
                        Reserves and Surplus                                               1      (70,000)


                     Note to Accounts

                     Particulars                                                          `         `
                      1.  Reserves and Surplus
                         Securities Premium Reserve                                      1,50,000
                        Less: Loss on Issue of Debentures Written off                    1,50,000    ...
                         Surplus, i.e., Balance in Statement of Profit and Loss (– ` 20,000 – ` 50,000)      (70,000)
                                                                                                  (70,000)
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