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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)