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

(v) JOURNAL OF EMILY LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
Bank A/c ...Dr. 57,00,000
To Debentures Application and Allotment A/c 57,00,000
(Being the debentures application money received)
Debentures Application and Allotment A/c ...Dr. 57,00,000
Loss on Issue of Debentures A/c ...Dr. 9,00,000
To 12% Debentures A/c 60,00,000
To Premium on Redemption of Debentures A/c 6,00,000
(Being the issue of 60,000; 12% Debentures of ` 100 each at a
discount of 5% and repayable at a premium of 10%)

(vi) JOURNAL OF FEATHER LTD.
Date Particulars L.F. Dr. (`) Cr. (`)

Bank A/c (` 70,00,000 + 5% of ` 70,00,000) ...Dr. 73,50,000
To Debentures Application and Allotment A/c 73,50,000
(Being the debentures application money received)
Debentures Application and Allotment A/c ...Dr. 73,50,000
Loss on Issue of Debentures A/c ...Dr. 7,00,000
To 12% Debentures A/c 70,00,000
To Securities Premium Reserve A/c 3,50,000
To Premium on Redemption of Debentures A/c 7,00,000
(Being the issue of 70,000; 12% Debentures of ` 100 each
at a premium of 5% and redeemable at a premium of 10%)

Illustration 9 (Writing off Loss equally over life of the debentures).
On 1st June, 2014, Goodluck Ltd. issued 50,000, 10% Debentures of ` 100 each at par redeemable
after five years at a premium of 10%. It was decided to write off Loss on Issue of Debentures
in five years equally beginning 31st March, 2015.

Pass the Journal entries for issue of debentures and writing off the loss and prepare Loss
on Issue of Debentures Account till it is completely written off.

Solution: JOURNAL OF GOODLUCK LTD.
Date Particulars L.F. Dr. (`) Cr. (`)

2014
June 1 Bank A/c ...Dr. 50,00,000
To Debentures Application and Allotment A/c 50,00,000
(Being the application money received for 50,000, 10% Debentures
of ` 100 each)
Debentures Application and Allotment A/c ...Dr. 50,00,000
Loss on Issue of Debentures A/c ...Dr. 5,00,000
To 10% Debentures A/c 50,00,000
To Premium on Redemption of Debentures A/c 5,00,000
(Being 50,000, 10% Debentures issued at par and redeemable
at 10% premium)