What is the nature of debenture interest? Give journal entries to record:

a) When the interest is due

b) When the interest is paid.Ignore interest

Meaning: Interest Payable on Debentures is treated as charge against profits. It is paid periodically by the company on the coupon (interest ) rate on the face value of Debentures. It will be paid as interest net of tax to the debenture holder because company is under obligation to deduct tax at source under the tax rule from time to time. Tax deducted at source will be deposited with the tax authorities by the company.
The following Journal Entries have been passed for Interest due and Payment of Interest:

	Journal Entry
Date		Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
		For Interest Due:
		Debenture Interest A/c	Dr.
		To Debenture Holder
		To Income Tax Payable A/c
		(Interest due debentures and TDS)
		Payment of Interest:
		Debenture Holder	Dr.
		To Bank A/c
		(Interest paid on Debentures)
		On Payment of Tax to Government:
		Income Tax Payable a/c	Dr.
		To Bank A/c
		(TDS paid to Government)
		On Transfer of Interest on Debenture to Profit and Loss A/c:
		Profit and Loss A/c	Dr.
		To Debenture Interest A/c
		(Interest to Debenture holder is transferred to Profit and Loss A/c)