Page 231 - ISCDEBK-12

Joint Stock Company—Redemption of Debentures 9.5

June 30 7% Debentures A/c ...Dr. 21,00,000
Premium on Redemption of Debentures A/c ...Dr. 1,68,000
To Debentureholders’ A/c 22,68,000
(Being the amount due on redemption)
June 30 Debentureholders’ A/c ...Dr. 22,68,000
To Bank A/c 22,68,000
(Being the amount due on redemption paid)
June 30 Debentures Redemption Reserve A/c ...Dr. 5,25,000
To General Reserve A/c 5,25,000
(Being the DRR transferred to General Reserve)
Note: Outstanding amount on debentures = ` 21,00,000
Amount transferable to DRR = 25% of ` 21,00,000 = ` 5,25,000
Three equal annual instalments for DRR = 1/3 × ` 5,25,000 = ` 1,75,000.
Illustration 3.
Toyota Ltd. issued 1,500; 10% Debentures of ` 1,000 each at par on 1st April, 2015 redeemable
in three equal half-yearly instalments by draw of lots beginning 30th September, 2016. The
company complied with the requirements of the Companies Act, 2013 with respect to Debentures
Redemption Reserve and investment.
Pass Journal entries (Ignore Interest).

Solution: JOURNAL OF TOYOTA LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
2015
April 1 Bank A/c ...Dr. 15,00,000
To Debentures Application and Allotment A/c 15,00,000
(Being the debentures application money received for 1,500
debentures @ ` 1,000 per debenture)
Debentures Application and Allotment A/c ...Dr. 15,00,000
To 10% Debentures A/c 15,00,000
(Being 10% Debentures allotted)
2016
March 31 Surplus, i.e., Balance in Statement of Profit and Loss A/c ...Dr. 3,75,000
To Debentures Redemption Reserve A/c 3,75,000
(Being the amount equal to 25% of nominal (face) value of
debentures outstanding transferred to DRR)
April 30 Debentures Redemption Investment A/c ...Dr. 1,50,000
To Bank A/c 1,50,000
(Being investment equal to 15% of the amount of debentures to
be redeemed during the year ended 31st March, 2017, i.e., 15%
of ` 10,00,000)
Sept. 30 Bank A/c ...Dr. 75,000
To Debentures Redemption Investment A/c 75,000
(Being the half value of investment realised before redemption
of 1st lot of debentures)
Sept. 30 10% Debentures A/c ...Dr. 5,00,000
To Debentureholders’ A/c 5,00,000
(Being the first lot, i.e., one-third debentures, i.e., 500 debentures
became due for redemption)
Debentureholders’ A/c ...Dr. 5,00,000
To Bank A/c 5,00,000
(Being the amount paid to debentureholders)