Page 47 - DEBK-VOL-2

10.6 Double Entry Book Keeping—CBSE XII
2021
March 31 Debentures’ Interest A/c ...Dr. 80,000
To Debentureholders’ A/c 80,000
(Interest due)
Debentureholders’ A/c ...Dr. 80,000
To Bank A/c 80,000
(Interest paid to debentureholders)
Statement of Profit and Loss (Finance Cost) ...Dr. 80,000
To Debentures’ Interest A/c 80,000
(Interest on debentures transferred to Statement of Profit and Loss)
Note: Interest is calculated @ 8% p.a. on the face value of the debentures, i.e., ` 10,00,000.
Illustration 4.
Reynold Ltd. issued 10,000; 9% Debentures of ` 100 each at a discount of 5% redeemable at
5% premium in instalments as follows:
Year I—1,000; Year II—2,000; Year III—2,500; Year IV—2,500 and Year V—Balance.
Show the Loss on Issue of Debentures Account.

Solution:
Dr. LOSS ON ISSUE OF DEBENTURES ACCOUNT Cr.
Date Particulars ` Date Particulars `
Year I To 9% Debentures A/c 50,000 Year I By Statement of Profit and Loss 1,00,000
To Premium on Redemption of (End) (Finance Cost)
Debentures A/c 50,000
1,00,000 1,00,000

Illustration 5.
DSC Ventures Ltd. had issued on 1st April, 2020, 10,000, 9% Debentures of ` 100 each at 10%
discount redeemable after four years on 31st March, 2024. It has balance in Securities Premium
Reserve of ` 50,000.
Show how Discount on Issue of Debentures will be shown in the Balance Sheet.
Solution: BALANCE SHEET as at 31st March, 2021

Particulars Note No. `
I. EQUITY AND LIABILITIES
Shareholders’ Funds
Reserves and Surplus 1 (50,000)
Note to Accounts
1. Reserves and Surplus `
Securities Premium Reserve 50,000
Less: Discount on Issue of Debentures Written off 50,000 ...
Surplus, i.e., Balance in Statement of Profit and Loss ...
Less: Balance of Discount on Issue of Debentures Written off 50,000 (50,000)
(50,000)