Page 212 - ISCDEBK-12
P. 212
8.6 Double Entry Book Keeping (Section A)—ISC XII
Illustration 4.
On 1st April, 2016, Sunstar Ltd. issued 10,000, 12% Debentures of ` 100 each at a discount
of 5%, redeemable as follows:
On 31st March, 2017 2,000 Debentures;
On 31st March, 2018 5,000 Debentures;
On 31st March, 2019 3,000 Debentures.
Interest is paid annually on 31st March. Discount on Issue of Debentures is to be written
off in the year in which Debentures are issued.
You are required to pass the Journal entries, including for interest for the three years and
prepare Discount on Issue of Debentures Account.
Solution: JOURNAL OF SUNSTAR LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
2016
April 1 Bank A/c ...Dr. 9,50,000
To Debentures Application and Allotment A/c 9,50,000
(Being the debentures application money received)
Debentures Application and Allotment A/c ...Dr. 9,50,000
Discount on Issue of Debentures A/c ...Dr. 50,000
To 12% Debentures A/c 10,00,000
(Being 10,000; 12% Debentures of ` 100 each allotted at 5% discount)
2017
March 31 Debentures’ Interest A/c ...Dr. 1,20,000
To Debentureholders’ A/c 1,20,000
(Being the interest due on debentures @ 12% p.a.)
Debentureholders’ A/c ...Dr. 1,20,000
To Bank A/c 1,20,000
(Being the interest paid to debentureholders)
Statement of Profit and Loss (Finance cost) ...Dr. 1,20,000
To Debentures’ Interest A/c 1,20,000
(Being the transfer of Debentures’ Interest to Statement of Profit and Loss)
Statement of Profit and Loss (Finance cost) ...Dr. 50,000
To Discount on Issue of Debentures A/c 50,000
(Being the discount on Issue of Debentures written off)
2018
March 31 Debentures’ Interest A/c ...Dr. 96,000
To Debentureholders’ A/c 96,000
(Being the interest due on debentures @12% p.a. on ` 8,00,000)
Debentureholders’ A/c ...Dr. 96,000
To Bank A/c 96,000
(Being the interest paid to debentureholders)
Statement of Profit and Loss (Finance cost) ...Dr. 96,000
To Debentures’ Interest A/c 96,000
(Being the transfer of Debentures’ Interest to Statement of Profit and Loss)
2019
March 31 Debentures’ Interest A/c ...Dr. 36,000
To Debentureholders’ A/c 36,000
(Being the interest due on debentures @12% p.a. on ` 30,000)
Debentureholders’ A/c ...Dr. 36,000
To Bank A/c 36,000
(Being the interest paid to debentureholders)
Statement of Profit and Loss (Finance cost) ...Dr. 36,000
To Debentures’ Interest A/c 36,000
(Being the transfer of Debentures’ Interest to Statement of Profit and Loss)