Page 240 - ISCDEBK-12

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

Master Question and Advanced Level Question

Illustration 9.

Ananya Ltd. issued on 1st July, 2013, 20,000, 8% Debentures of ` 50 each at a premium of 10% redeemable
at a premium of 20% in four equal annual installments beginning 31st March, 2016 either by draw of
lot or by purchase from open market. Interest on Debentures was payable yearly on 31st March and
TDS was deducted @ 10%. It was decided to create DRR in two years equally on 31st March, 2015
and 31st March, 2016. Investment, as required by law, shall be made in fixed deposit with a bank on
1st April, 2015. Fixed Deposit earned an interest @ 6% p.a. Bank deducted TDS @ 10% every year.
Pass Journal entries for issue and redemption of debentures, DRR, Investment, interest on debentures and interest
on investments.

Solution: JOURNAL OF ANANYA LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
2013
July 1 Bank A/c ...Dr. 11,00,000
To Debentures Application and Allotment A/c 11,00,000
(Being the applications received for 20,000, 8% Debentures @ ` 55 each)
Debentures Application and Allotment A/c ...Dr. 11,00,000
Loss on Issue of Debentures A/c ...Dr. 2,00,000
To 8% Debentures A/c 10,00,000
To Securities Premium Reserve A/c 1,00,000
To Premium on Redemption of Debentures A/c 2,00,000
(Being 20,000; 8% Debentures of ` 50 each issued at a premium
of 10% redeemable at 20% premium)
2014
March 31 Interest on Debentures A/c ...Dr. 60,000
To Debentureholders’ A/c 54,000
To TDS Payable A/c 6,000
(Being the interest due on 8% Debentures for nine months and
TDS deducted @ 10%)
Debentureholders’ A/c ...Dr. 54,000
To Bank A/c 54,000
(Being the interest on debentures paid)
TDS Payable A/c ...Dr. 6,000
To Bank A/c 6,000
(Being the TDS deposited in Government Account)
Securities Premium Reserve A/c ...Dr. 1,00,000
Statement of Profit and Loss ...Dr. 1,00,000
To Loss on Issue of Debentures A/c 2,00,000
(Being the loss written off)
Statement of Profit and Loss ...Dr. 60,000
To Interest on Debentures A/c 60,000
(Being the interest transferred)