Page 202 - MA-12

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

Master Question and Advanced Level Question

Illustration 6.

Ananya Ltd. issued on 1st July, 2011, 20,000, 8% Debentures of ` 50 each at a premium of 10%
redeemable at a premium of 20% in four equal annual instalments beginning 31st March, 2014
either by draw of lot or by purchase from open market. Interest on Debentures was payable
yearly on 31st March on which TDS was deducted @ 10%. It was decided to create DRR in two
years equally on 31st March, 2012 and 31st March, 2013. Investment, as required by law, shall be
made in fixed deposit with a bank on 1st April, 2013, which shall be realised at the time of last
investment. Fixed Deposit earned an interest @ 6% p.a. Bank deducted TDS @ 10% every year.
Pass the 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. (`)
2011
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)
2012
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)
Surplus, i.e., Balance in Statement of Profit and Loss A/c ...Dr. 1,25,000
To Debentures Redemption Reserve A/c 1,25,000
(Being one-half of total DRR required transferred)