llustration (ssue of Debenturesat Premium, Issue Price Payable in Lump sum, Oversubscribed,

Excess Applications Rejected).

Nay Lakshmi Ltd. invited applications for 3,000: 12%
Debentures of 100 each at a premium
of 50 per debenture. Full amount was payable on application.
Applications were received for
4.000 debentures. Applications for 1,000 debentures were rejected and
nefunded. Debentures were allotted to the remaining applicants.
application money was
Pass necessary Journal entries for the above transactions in the books of Nav Lakshmi Ltd.
(CBSE 2012)
Solution:
JOURNAL OF NAV LAKSHMILTD.
Date Particulars LF. Dr. )
Bank A/c ...Dr. 6,00,000
To Debentures Application and Allotment A/c 6,00,000
(Application money received for 4,000 debentures)
Debentures Application and Allotment A/C ...Dr. 6,00,000
To 129% Debentures A/c 3,00,000
1,50,000
To Securities Premium A/c
1,50,000
To Bank A/c
surplus
(3,000; 129% Debentures issued at a premium of 50 each and
application money refunded)
 Illustration 17.
On 1st April, 2021, Hitesh Ltd. took over assets of 8,00,000 and liabilities of 40,000 of
Pranjal Ltd. at an agreed value of 8,30,000. Hitesh Ltd. paid the amount to Pranjal Ltd.
as follows:
() Gave an acceptance payable after 3months for 2,00,000, and
(i) Issued 10% Debentures of T100 each at a discount of 10% to Pranjal Ltd. in satisfaction of
the balance amount of purchase consideration. (CBSE 2023)
Solution: JOURNAL OF HITESH LTD.
Date Particulars LF. Dr. () Cr.)
() Sundry AssetsA/c ...Dr. 8,00,000
Goodwill A/c (Balancing Figure) ..Dr. 70,000
To Sundry Liabilities A/c 40,000
To Pranjal Ltd. 8,30,000
(Purchase of business from Pranjal Ltd.)
(i) Pranjal Ltd. ..Dr. 2,00,000
To Bill Payable A/c 2,00,000
(Acceptance given for purchase consideration)
(ii) Pranjal Ltd. ...Dr. 6,30,000
Discount on lssue of Debentures A/c ...Dr. 70,000
To 10% Debentures A/c (WN) 700,000
(Issue of 7,000,10% Debentures at 10% discount for the balance)

Working Note: No. of Debentures Issued =

78,30,000-2,00,000
=7,000 (Debentures).
(100-10)
Illustration 19,
purchased assets of the book value of 1,98,000 from Dixon Ltd. It was agreed that
Sinco Ltd.
purchasee consideration be paid by issuing 10% Debentures of 100 each.
the
Record the necessary Journal entries in the books of Sinco Ltd. assuming that the debentures
have been issued:
10%.
) At a discount of
(CBSE 2023)
(0) At apremium of 10%.
Solution: JOURNAL OF SINCO LTD.
LF. Dr. ) Cr.)
Date Particulars
..Dr. 1,98,000
Assets Ac
1,98,000
To Dixon Ltd.
(Assets purchased from Dixon Ltd.) ...Dr. 1,98,000
) Dixon Ltd. 22,000
..Dr.
Discount on Issue of Debentures A/c 2,20,000
To 10% Debentures A/c (WN 1)
purchase
(2,200, 10% Debentures issued at 10% discount against the
consideration) ..Dr. 22,000
Statement of Profit & Loss (Finance Cost) 22,000
To Discount on Issue of Debentures A/c
(Discount on Issue of Debentures written off) .Dr. 1,98,000
(i Dixon Ltd. 1,80,000
To 10% Debentures A/c (WN 2) 18,000
To Securities Premium A/c
,800, 10% Debentures issued @10% Premium)
Worki
1.
ng Notes: 1,98,000 =2,200 Debentures.
No. of
Debentures issued at 10% discount = (100-10)
1,98, 000 =1,800 Debentures.
2
No. of
Debentures =
issued at a premium of 1096 ( 100-10)
Pavmentin Cazsh).
 9.24 Double Entry Book Keeping-CBSE XI

Illustration 17.
On 1st April, 2021, Hitesh Ltd. took over assets of 8,00,000 and liabilities of
40,000 of
Pranjal Ltd. at an agreed value of 8,30,000. Hlitesh Ltd. paid the amount to Pranial
as follows:
(i) Gave an acceptance payable after 3 months for 2,00,000, and
(ü) Issued 10% Debentures of R 100 each at a discount of 10% to Pranjal Ltd. in
the balance amount of purchase consideration. satisfaction of
(CBSE 2023)
Solution: JOURNAL OF HITESH LTD.
Date Particulars LF. Dr. () Cr.
(0 Sundry Assets A/c ..Dr. 8.00,000
GoodwillA/c (Balancing Figure) ...Dr. 70,000
To Sundry Liabilities A/c 40,000
To Pranjal Ltd. 8,30,000
(Purchase of business from Pranjal Ltd.)
(ii) Pranjal Ltd. ...Dr. 2,00,000
To Bill Payable A/c 2,00,000
(Acceptance given for purchase consideration)
(ii) Pranjal Ltd. ..Dr. 6,30,000
Discount on lssue of Debentures A/c ...Dr. 70,000
To 10% Debentures A/c (WN) 7,00,000
(Issue of 7,000, 10% Debentures at 10% discount for the balance)

Working Note: No. of Debentures lssued= 78,30, 000-2,00,000 =7,000 (Debentures).

Z(100-10)
 Dentures
Illustration 19,
'oLd. purchased assets of the book value of
Lo nurchase consideration be paid by 1,98,000 from Dixon Ltd. It was agreed that
Dacord the necessary Journal entries inissuing 10% Debentures of 100 each.
the books of Sinco Ltd. assuming that the
have been issued: debentures
(i) At adiscount of 10%.
(ii) At apremium of 10%.
(CBSE 2023)
Solution: JOURNAL OF SINCO LTD.
Date Particulars LF. Dr. 3) Cr. 3)
Assets A/c
...Dr. 1,98,000
To Dixon Ltd. 1,98,000
(Assets purchased from Dixon Ltd.)
() Dixon Ltd. .Dr. 1,98,000
Discount on Issue of Debentures A/c ..Dr. 22,000
To 10% Debentures A/c (WN 1) 2,20,000
(2,200, 10% Debentures issued at 10% discount against the purchase
consideration)
Statement of Profit &Loss (Finance Cost) ..Dr. 22,000
To Discount on Issue of Debentures Ac 22,000
(Discount on Issue of Debentures written off)
(i Dixon Ltd. .Dr. 1,98,000
To 10% Debentures A/c (WN 2) 1,80,000
To Securities Premium A/c 18,000
(1,800, 10% Debentures issued @10% Premium)

Working Notes:
1,98,000 =2,200 Debentures.
1. No. of Debentures issued at 10% discount =
( 100 10)
71,98,000 =1,800 Debentures.
2. No. of Debentures issued at a premium of 10% = (? 100 10)
 Illustration 27.
Zee Ltd. issued 10,000, 10% Debentures of 100 each as collateral security for a loan of
8,00,000 from Dena Bank. The company was unable torepay the loan on which interest payable
was 2,00,000 as on 31st March, 2024.
Dena Bank, on 31st March, 2024, exercised the right vested in it by way of debentures being
issued as collateral Security.
Pass Journal entries in the books of Zee Ltd. on 31st March, 2024.
 Solution: JOURNAL OF ZEE LTD.

Date Particulars L.F. Dr. () Cr. ()

2024
March 31 10% Debentures A/c ...Dr. 10,00,000
To Debentures Suspense A/c 10,00,000
(10% Debenturesissued as collateral security reversed)
Loan A/c ...Dr. 8,00,000
Outstanding Interest A/c ...Dr. 2,00,000
To 10% Debentures A/c 10,00,000
(Conversion of 10%6 Debentures issued as collateral security into
109% Debentures Liability)
 Illustration 42.
Pass necessary of Shree Ltd. for the
Journal entries relating to issue of debentures in the books
following transactions:
(a) 3,000, 7% Debentures of 100
of 5%. each are issued at 10% premium, redeemableat a premium
(b) 2,000, 8% Debentures of
100 each are issued at 10% premium, redeemable at par.
(C) 1,000, 9o Debentures of ?100 each are issued at 10% discount, redeemable at 10% premiurm.
(CBSE2023)
Solution:
JOURNAL
Date Particulars LF Dr. () Cr.()
la) ) Bank A/c
.Dr. 3,30,000
To Debentures Application and Allotment A/c 3,30,000
(Debentures application money received)
(0) Debentures Application and Allotment A/c ..Dr. 3,30,000
Loss on Issue of Debentures A/c ...Dr. 15,000
To 796 Debentures Alc 3,00,000
To Securities Premium A/c 30,000
To Premium on Redemption of Debentures Alc 15,000
(ssued 79% Debentures at 10% premium, redeemable at 5% premium)
(b) 0 Bank A/c .Dr. 2,20,000
To Debentures Application and Allotment A/c 2,20,000
(Debentures application money received)
Debentures Application and Allotment A/c .Dr. 2,20,000
To 89% Debentures A/c 2,00,000
To Securities Premium A/c 20,000
par)
(lssued 89% Debentures at 109% premium, redeemable at
Dr. 90,000
k0 Bank A/c
A/c 90,000
To Debentures Application and Allotment
(Debenturers application money received) Dr. 90,000
Debentures Application and Allotment A/c Dr. 20,000
Loss on Issue of Debentures A/c 1,00,000
To 99% Debentures A/c 10,000
Debentures A/c
To Premium on Redemption of redeemable at 10% premium)
lssued g6 Debentures at 1096 discount and
 Illustration 56.
On 1st October, 2023, Anshika Ltd. purchased assets of 4,30,000 and took over liabilihe
90,000 of Greg Ltd. at an agreed value of 3,80,000. It issued to the vendor, 10% Debentures of
100 each at 5% discount, redeemable at par after 5years, in satisfaction of the purchase prioe
On the same date, the company issued 5,000, 11% Debentures of 100 each as collateralI
to bank who had advanced loan of R4,50,000 to it for a period of 3years and also issuedsecurity
5,00)
12% Debentures of 7100 each at par, redeemable after 3years at 5% premium.
Additional Information:
Interest on debentures is paid half yearly on 30th September and 31st March each year. The
Company had 1,20,000 in its Securities Premium Account at the end of the year (gnore
interest on bank loan).
Pass Journalentries in the books of Anshika Ltd. for the year ended 31st March, 2024.
Solution: JOURNAL OF ANSHIKA LTD.
Date Particulars LF. Dr. () Cr. )
2023
Oct. 1 Sundry Assets A/c ...Dr. 4,30,000
GoodwillA/c (Balancing Figure) ..Dr. 40,000
To Sundry Liabilities A/c 90,000
To Greg Ltd. 3,80,000
(Assets and liabilities of Greg Ltd. taken over for a consideration
of 3,80,000)
Oct. 1 Greg Ltd. ...Dr. 3,80,000
Discount on Issue of Debentures A/C ..Dr. 20,000
To 10% Debentures A/c 4,00,000
(4,000; 109% Debentures of 100 each issued at a discount of 10%
to Greg Ltd.)
Oct. 1 Bank A/c .Dr. 4,50,000
To Bank Loan A/c 4,50,000
(Loan taken from Bank)
Oct. 1 Debentures Suspense A/c ...Dr. 5,00,000
5,00,000
To 11% Debentures A/c
(5,000, 11% Debentures of 100 each issued as collateral security)
Oct. 1 Bank A/c ..Dr. 5,00,000
5,00,000
To Debentures Application and Allotment A/c
(Application Money received for 5,000 debentures)
Oct. 1 Debentures Application and Allotment A/c .Dr. 5,00,000
..Dr. 25,000
Loss on Issue of Debentures Ac 5.00000
To 12% Debentures A/c 25.000
To Premium on Redemption of Debentures A/c
(5.000. 12% Debentures issued at par and redeemable at 5%
premium)
 Chapter 9- Issue of Debentures 9.61
2024
March 31 Debentures' Interest A/c
To Debentureholders' A/c D. 50.000
(Interest due on Debentures for the half year ended 31st 50.000
2024) (Note 2) March,
March 31
Debentureholders' A/c
To Bank A/c 50,000
(Interest paid to 50,000
March 31 Statement debentureholders)
of Profit &Loss
To (Finance Cost) Dr.
Debentures'
(Transfer of nterest A/c
50,000

March 31 Debentures' interest to Statement of Profit &Loss) 50,000

Securities
To
Premium A/c
Discount on Issue of Debentures A/c
To Loss on
Dr. 45,000
Issue of
Debentures A/c 20,000
(Discount and Loss on Issue of 25,000
Debentures written off)
Notes: 1. Interest on
Debentures issued as Collateral Security is not paid.
1196 Debentures of 100 each is not Therefore, interest on 5,000,
2. accounted.
Calculation of Half Yearly Interest Payable:
4,000, 10% Debentures of 100 each
Yearly Interest =4,00,000 x 10/100
=40,000
Interest for Half Year (1st October, 2023 to 31st
March, 2024) 20,000
5,000, 129% Debentures of 100 each
Yearly Interest = 5,00,000 x 12/100 =760,000
Interest for Half Year (1st October, 2023 to 31st March,
2024) 30,000
Total Interest for Half Year
50,000
3. It is assumed that, debenture interest for the year ended 31st March,
2024 is paid on 31st March, 2024.
llustration 57.
health2VWealth Ltd. had share capital of 80,00,000 divided in shares of 100 each and 20,000,
b6 Debentures of 100 each as part of capital
employed.
he company needed additional funds of 55,00,000 for which they decided to issue
debentures in such a way that they got required funds after issuing debentures of the same
dass as earlier, at 10% premium. These debentures were to be redeemed at 20% premium after
4vears. These debentures were issued on 1st October, 2021.
Tou are
required to:
Pass entries for issue of Debentures.
Prepare Loss on Issue of Debentures Account assuming there was existing balance of
Securities Premium Account of 2,80,000.
Pass entries for Interest on debentures on 31st March, 2022 assuming interest is payable
on 30th September and 31st March every year. (CBSE Sanple Paper 2023)
 Solution: Books of Health2Wealth Ltd.
JOURNAL
LF. Dr.)
Date Particulars Cr.)
...Dr. 55,00,000
Bank A/c
To Debentures Application and Allotment A/c 55,00,000
(Application money received)
() Debentures Application and Allotment A/c ...Dr. 55,00,000
Loss on Issue of Debentures A/c ..Dr. 10,00,000
To 8% Debentures A/c
To Securities Premium A/c
50,00,000
5,00,000
To Premium on Redemption of Debentures A/c 10,00,000
(Debentures issued at premium, to be redeemed at premium)
(i)
Dr. LOSS ON ISSUE OF DEBENTURES ACCOUNT
Date ParticularS Date Particulars
2021 2022
Oct. 1 To Premium on Redemption of March 31 By Securities Premium A/c 780,000
Debentures A/c 10,00,000 By Statement of Profit &Loss 2,20,000
10,00,000 10,00,000
(iii) JOURNAL ENTRIES
Date Particulars
LF. Dr. () Cr.)
2022
March 31 Debenture Interest A/c
..Dr. 2,80,000
To Debentureholders A/c
2,80,000
(Interest due on debentures) (WN 1)
March 31 Debentureholders A/c
To Bank A/c ..Dr. 2,80,000
2,80,000
(Interest paid to debentureholders)
March 31 Statement of Profit &Loss
(Finance Cost)
To Debenture Interest A/c (WN ..Dr. 3,60,000
2) 3,60,000
(Interest on Debentures charged to
Statement of Profit &Loss)
Working Notes:
1. Calculation of Interest Due on
31st
() On 20,00,000 @ 8% for6 March, 2022:
(i) On 50,00,000 @8% for 6
months 80,000
Total Interest Due
months = 2,00,000
2. Total Interest on = 2,80,000
= (R 20,00,000Debentures transferred to statement of Profit &Loss
x 8/100)] + (
50,00,000 x 8/100 x 6/12)] = 3,60,000.
 Interest on Debentures and Writing off Discount/Loss on Issue of Debentures
o22 On
o0/
1st July, and
2022, Pan ther Ltd. issued 20,000, 9% Debentures of 10o each at
remium redeemable at a premium of 15% in four equal instalments startirng
from the end of the third year. The balance in securities prerníum orn the date of issue of
debentures was 80,000. Interest on debentures was to be paid on 31st March every year.
Pass Journal entries for the financial year 2022-23. Also prepare Los5 on Issue of Debentures
Account. (CBSE Sample Ouestion Paper 2024)
Ans. JOURNAL IN THE BOOKS OF PANTHER LTD.
Date Particulars LE. Dr. )
2022
July 1 Bank A/c Dr. 21,60,000
To Debentures Application and Allotment A/c 21,60.000
(Application money received on 20,000 debentures)
July 1 Debentures Application and Allotment A/c Dr. 21,60,000
Loss on Issue of Debentures A/c Dr. 3,00,000
To 9% Debentures A/c 20.00,000
To Securities Premium A/c 1,60,000
To Premium on Redemption of Debentures A/c 3,00,000
(Debentures issued)
2023
March 31 Debenture Interest -Dr. 1,35,000
A/c 1,35.000
To Debentureholders A/c
(Interest due on debentures)
March 31
Debentureholders
To Bank A/c
A/c Dr. 1,35,000
1,35,000

(Unterest paid to
March 31 debentureholders)
StaTotementDebenture
of Profit &Loss (Finance Cost) Dr. 1,35,000
1,35,000
Interest A/c
March 31 (Interest on debentures
Securities Premium A/c charged from Statement of Profit &Loss)
Statement of Profit &
Dr.
Dr.
240.000
60,000
lo Loss (Note)
Loss on Issue of
3.00,000
(Loss on Issue of Debentures A/c
Debentures written off)
w
 Past Exarinations and... P.E.67
Preparation
Q. 24 On 1st
of
Discount on Issue of Debentures Account
April, 2014, alimited 4,00,000, 9% Debentures at 93%,,repayable
by draw of lots in two company issued
starting from 31st March, 2017.
equal
Prepare Discount on Issue of Debentures Account from 1st April, 2014 to 31st March, 2016.
Ans. (CBSE 2019)
Dr.
DISCOUNT ON ISSUE OF DEBENTURES ACCOUNT Cr.
Date
Particulars Date Particulars
2014 2015
April 1 To 9% Debentures A/c 28,000 March 31 By Statement of Profit &Loss 28,000

(if it exists) or from

Note: Discount or Loss on Issue of Debentures is written off from Securities Premium
Statement of Profit &Loss in the year debentures are issued.
of 7500
Issue of Debentures at Discount for Cash
11. Kati Ltd. issued 8,000,9% Debentures of 100 each at a discount of 10%. The full amount was payable on
application. Applications were received for 9,000 debentures and allotment was made on pro rata basis.
books of Kati Ltd. (CBSE 2020)
Pass the necessary Journal entries for the above transactions in the
refunded90,000.]
[Ans.: Discount on Issue of Debentures80,000; Excess amount
21. Exe Ltd. purchased assets of the book value 4,00,000 and took over the liabilities of R50,000 from Mohan Bros.
lt was agreedthat the purchaseconsideration, settled at *3,80,000, be paid by issuing deberntures of R100 each.
Pass Journalentries if debentures are issued: (a) at par, (b) at adiscount of 10% and (c) at apremium of 10%.
It was agreed that any fraction of debentures be paid in cash.
(Ans.: Goodwill 30,000; Case (a) 3,800 Debentures of 100 each; Case (b) 4,222 Debentures of
100 each and paid cash 20; Case (c) 3,454 Debentures of 100 each and paid cash 60.]
22. Rama Ltd. took over following assets and liabilities of Krishna Ltd. on 1st April, 2019:
Land and Building 50,00,000
Furniture 10,00,000
Stock 5,00,000
Creditors 7 7,00,000
The purchase consicderation of R60,00,000 was paid by issuing 129% Debentures of 100 each at a premium
of 20%.
Pass the necessary Journal entries for the above in the books of Rama Ltd. (CBSE 2020)
[Ans.: Goodwill2,00,000; No. of Debentures to be Issued-50, 000.]
24. Anthony Ltd. issued 20,000, 9% Debentures off? 100 each at 10% discount to Mithoo Ltd. from
whom Assets
ofT 23,50,000 and Liabilities of 6,00,000 were taken over. Pass entries in the books of Anthony Ltd., if
these
debentures were to be redeemed at 5% premium. (CBSE Sample Paper 2023)
[Ans.: Goodwill* 50,000; No. ofDebenturesissued-20,00.]
26, Grown Ltd. issued 500, 10% Debentures ofI 1,000 each credited as fuly paid-up to the promoters for their
services to incorporate the company. It also issued 100, 10% Debentures of 1,000 each credited as fully
paid-up to the underwriters towards their commission. Pass the Journal entries.
[Ans.: () [Link] Expenses or Preliminary Expenses A/c and Cr. Promoters' A/c by *5,00,000.
(i) Dr. Promoters' A/Cand Cr. 10% Debentures Ac by 5,00,000.
(i1)Dr. Underwriting Commission A/cand Cr. Underwriters' Alcby 1,00,000.
(iv) [Link]'Alc and Cr. 10% Debentures A/c 1,00,000.]
32. S. Singh Limited obtained loan of 5,00,000from State Bank of India @10% p.a. interest. The company
issued 7,50,000, 10% Debentures of 100 each in favour of State Bank of India as Collateral Security.
Pass necessary Journal entries for the above transactions:
() When company decided not to record the issue of 10% Debentures as Collateral Security.
(ii) When company decided to record the issue of 10% Debentures as Collateral Security.
(CBSE Sample Paper 2019)
38. Pass necessary Journal entries for the issue of debentures in the following cases:
(a)40,000; 12% Debentures of 100 each issued at a premium of 5% redeemable at par.
(b) 70,000; 129% Debentures of 100 each issued at a premium of 5% redeemable at 110. (CBSE 2013
49. Gladiators Ltd. issued 10,000; 896 Debentures of 100 each at a discount of 5%, redeemable at a premium
and 50,000 in
of 59% payable along with application. It had balance of 70,000 in Securities Premium
Capital Reserve. The debentures were fully subscribed and amounts were duly received.
Issue of Debentures.
Pass the necessary Journal entries for issue of debentures and writing off Loss on
30,000;
[Ans.: Dr. Securities Premium Acby 70,000 and Statement of Profit &Loss (Finance Cost) by
Cr. Loss on Issue of Debentures A/c by? 1,00,000.]
55. On 1st April, 2023, Solar Power Ltd. issued 10,000, 8% Debentures of ? 100 each at a discount of soL
redeemable at a premium of 15% at the end of fiveyears. All the debentures were subscribed and allotment
was made.

The company had balance in Securities Premium of 80,000.

Prepare the Balance Sheet (extract) as at 31st March, 2024.