Page 55 - DEBK-VOL-2

Chapter 11 Company Accounts—Redemption of Debentures 11.5
.
9% Debentures A/c ...Dr. 10,00,000
Premium on Redemption of Debentures A/c ...Dr. 50,000
To Debentureholders’ A/c 10,50,000
(Amount payable on redemption, transferred to Debentureholders’ Account)

Debentureholders’ A/c ...Dr. 10,50,000
To Bank A/c 10,50,000
(Amount paid to debentureholders on redemption)
Debentures Redemption Reserve A/c ...Dr. 1,00,000
To General Reserve A/c 1,00,000
(Transfer of Debentures Redemption Reserve to General Reserve after
redemption of debentures)

Interest Earned A/c ...Dr. 9,000
To Statement of Profit and Loss (Other Income) 9,000
(Interest earned transferred)

Illustration 2.
Pragati Ltd., an unlisted (Non-NBFC and HFC) company has 50,000; 8% Debentures of ` 100
each due for red emption in four equal instalments starting from 31st March, 2018. Debentures
Redemption Reserve has a balance of ` 4,00,000 on that date.

Pass Journal entries for investment, redemption of debentures and payment of interest
on debentures. The company made investment in fixed deposit with bank earning interest
@ 10% p.a. on 1st April, 2017.

Solution: JOURNAL OF PRAGATI LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
2017
March 31 Surplus, i.e., Balance in Statement of Profit and Loss A/c ...Dr. 1,00,000
To Debentures Redemption Reserve A/c 1,00,000
(Transfer of profits to Debentures Redemption Reserve) (WN 2)

April 1 Debentures Redemption Investment A/c ...Dr. 1,87,500
To Bank A/c 1,87,500
(Fixed deposit placed with Bank for 15% nominal value of debentures
to be redeemed)
2018
March 31 Interest on Debentures A/c (WN 1) ...Dr. 4,00,000
To Debentureholders’ A/c 4,00,000
(Interest on debentures due)
March 31 Debentureholders’ A/c ...Dr. 4,00,000
To Bank A/c 4,00,000
(Payment of debentures’ interest)