Debentures Flashcards
Issued at PAR , Redeemed at PAR: paid at once
Bank A/c … Dr 100
To Debentures Application and Allotment A/c 100
(Being Application money received for 9% Debentures)
Debentures Application and Allotment A/c … Dr 100
To 9% Debentures A/c 100
(Being Application Money transferred to 9% Debentures A/c)
Issued Par Redeemed at Par: Cash in installments
Bank A/c … Dr 50
To Debentures Application A/c 50
(Being Application money received for 9% Debentures)
Debentures Application A/c … Dr 50
To 9% Debentures A/c 50
(Being Application Money transferred to 9% Debentures A/c)
Debentures Allotment A/c … Dr 50
To 9% Debentures A/c 50
(Being Allotment money for 9% Debentures made due)
Bank A/c … Dr 50
To Debentures Allotment A/c 50
(Being Allotment money for 9% Debentures received)
Issued at Par (in installments) ….. Redeemed at Premium
Bank A/c … Dr 50
To Debentures Application A/c 50
(Being Application money received for 9% Debentures)
Debentures Application A/c … Dr 50
To 9% Debentures A/c 50
(Being Application Money transferred to 9% Debentures A/c)
Debentures Allotment A/c … Dr 50
Loss on issue of debentures A/c … Dr 5
To 9% Debentures A/c 50
To Premium on redemption of debentures A/c 5
(Being Allotment money for 9% Debentures redeemable at 5% premium made due)
Bank A/c … Dr 50
To Debentures Allotment A/c 50
(Being Allotment money for 9% Debentures received)
PREMIUM received with APPLICATION MONEY (Issued at premium)
Bank A/c
To Debenture Application & Allotment A/c
(Being Application money and Premium received for 9% Debentures)
Debenture Application & Allotment A/c
To 9% Debenture A/c
To Securities Premium Reserve A/c
(Being Application money transferred to 9% Debentures A/c)
PREMIUM received with APPLICATION MONEY (Issued at premium)
Bank A/c … Dr 105
To Debentures Application and Allotment A/c 105
(Being Application money received for 9% Debentures issued at 5% premium)
Debentures Application and Allotment A/c … Dr 105
To 9% Debentures A/c 100
To Securities Premium Reserve 5
(Being Application Money transferred to 9% Debentures A/c)
Issued at Discount Redeemed at Premium
Bank A/c … Dr 50
To Debentures Application A/c 50
(Being Application money received for 9% Debentures)
Debentures Application A/c … Dr 50
To 9% Debentures A/c 50
(Being Application Money transferred to 9% Debentures A/c)
Debentures Allotment A/c … Dr 45
Discount on issue of debentures A/c 5
Loss on issue of debentures A/c … Dr 5
To 9% Debentures A/c 50
To Premium on redemption of debentures A/c 5
(Being Allotment money at 5% discount and redeemable at 5% premium for 9% Debentures made due)
Bank A/c … Dr 45
To Debentures Allotment A/c 45
(Being Allotment money for 9% Debentures received)
Issued at Discount Redeemed at Par
Bank A/c … Dr 50
To Debentures Application A/c 50
(Being Application money received for 9% Debentures)
Debentures Application A/c … Dr 50
To 9% Debentures A/c 50
(Being Application Money transferred to 9% Debentures A/c)
Debentures Allotment A/c … Dr 45
Discount on issue of debentures A/c 5
To 9% Debentures A/c 50
(Being Allotment money at 5% discount for 9% Debentures made due)
Bank A/c … Dr 45
To Debentures Allotment A/c 45
(Being Allotment money for 9% Debentures received)
DISCOUNT/LOSS WRITTEN OFF AT THE END OF THE YEAR
Securities Premium Reserve A/c … Dr
Capital Reserve A/c … Dr
Statement of Profit and Loss A/c … Dr
To Discount/Loss on the issue on Debentures A/c
Issued at Premium ; Redeemed at Par
Bank A/c … Dr 50
To Debentures Application A/c 50
(Being Application money received for 9% Debentures)
Debentures Application A/c … Dr 50
To 9% Debentures A/c 50
(Being Application Money transferred to 9% Debentures A/c)
Debentures Allotment A/c … Dr 55
To 9% Debentures A/c 50
To Securities Premium Reserve A/c 5
(Being Allotment money and premium for 9% Debentures made due)
Bank A/c … Dr 55
To Debentures Allotment A/c 55
(Being Allotment money for 9% Debentures received)
Issued at Premium ….. Redeemed at Premium
Bank A/c … Dr 50
To Debentures Application A/c 50
(Being Application money received for 9% Debentures)
Debentures Application A/c … Dr 50
To 9% Debentures A/c 50
(Being Application Money transferred to 9% Debentures A/c)
Debentures Allotment A/c … Dr 55
Loss on issue of debentures A/c … Dr 5
To 9% Debentures A/c 50
To Premium on redemption of debentures A/c 5
To Securities Premium Reserve A/c 5
(Being Allotment money issued at 5% premium and redeemable at 5% premium for 9% Debentures made due)
Bank A/c … Dr 55
To Debentures Allotment A/c 55
(Being Allotment money for 9% Debentures received)
Issued to vendor In lieu of any assets purchased (issued at discount)
Assets A/c … Dr
To Vendor A/c
(Being assets purchased from Vendor)
Vendor A/c … Dr
Discount on issue of debentures A.c … Dr
To 9% Debentures A/c
(Being Debentures issued in lieu of assets purchased at 5% discount)
Purchased M/s Laptop & Co’s Sundry Assets of 1,00,000 and Sundry liabilities of 25,000 for a purchase consideration of 1,00,000. Paid in Rs 100 9% debentures issued at a 10% discount.
Sundry Assets A/c … Dr 1,00,000
Goodwill A/c … Dr 25,000
To Sundry Liabilities A/c 25,000
To M/s Laptop & Co. A/c 1,00,000
(Being purchase of M/s Laptop and Co)
M/s Laptop & Co. A/c … Dr 1,00,000
Discount on issue of debentures A/c …Dr 11,111
To 9% Debentures A/c 1,11,111
(Being 9% Debentures issued at a 10% discount)
If net assets > purchase consideration what should you do?
Cr. Capital Reserve
Journal entry for Debentures issued as COLLATERAL SECURITY
Debenture Suspense A/c … Dr
To 9% Debentures A/c
(Being 9% Debentures put up as collateral against loan from SBI)
Balance Sheet for Debentures issued as COLLATERAL SECURITY
I. Equity and Liabilities
Non-Current Liabilities
Long Term Borrowings 1 6,00,000
Notes to Accounts:
Note 1:
Loan from SBI 6,00,000
(Secured against debentures)
Debentures 7,00,000
Less: Debenture Suspense 7,00,000
When should the DRR be created? How and how much % should it be for (minimum, by law)
The debenture redemption reserve should be created at 10% of the debentures amount by 31st March of the preceding year to redemption from the profits before paying dividends.
DRR journal entry (creation and transfer)
31 March (Year previous to redemption year)
Surplus
To Debenture Redemption Reserve
(Being DRR created at 10%)
Year of redemption:
Debenture Redemption Reserve … Dr
To General Reserve
(Amount transferred to General Reserve upon redemption )
Creation of DRI – Debenture Redemption Investment
How much and when
DRI is created by transferring 15% of the face value of the debentures that are due that year. Should be done before 30th April of the year of redemption.
DRI journal entry (creation and dissolution)
Before 30th April:
DRI A/c … Dr
To Bank A/c
(Being Investment made@15% on the debentures due in the current year)
Date before redemption date:
Bank A/c … Dr
To Debenture Redemption Investment A/c
(Being investment encashed)
Interest on Debentures
Interest on debentures A/c
To Debenture holder a/c
(Being interest made due)
Debenture Holder A/c
To Bank A/c
(Being Interest paid)
P&L A/c
To Interest on debentures A/c
(Being Interest transferred to P/L A/c)
Redemption of Debentures and Payment to Holder (At Premium)
9% Debentures A/c
Premium on redemption of debentures A/c
To Debenture Holder A/c
(Being amount due on redemption)
Debenture Holder A/c …Dr
To Bank A/c
(Being amount paid to debenture holder)
