Chapter 8 from Textbook Double Entry Book Keeping Ts Grewal 2017 for Class 12 ACCOUNTANCY

Question 1:

Answer:

$\begin{array}{l} Amount Required to be transferred to Debentures Redemption Reserve \\ = 25% of Face value of Debentures \\ = (25% of Rs 10,00,000) - 50,000 = Rs 2,00,000 \end{array}$

Question 2:

$\begin{array}{l} Amount Required to be transferred to Debentures Redemption Reserve \\ = 25% of Face value of Debentures \\ = (25% of Rs 10,00,000) - 50,000 = Rs 2,00,000 \end{array}$

Answer:

$\begin{array}{l} Amount Required to be transferred to Debentures Redemption Reserve \\ = 25% of Face value of Debentures \\ = (25% of Rs 20,00,000) - 50,000 = Rs 4,50,000 \end{array}$

Question 3:

$\begin{array}{l} Amount Required to be transferred to Debentures Redemption Reserve \\ = 25% of Face value of Debentures \\ = (25% of Rs 20,00,000) - 50,000 = Rs 4,50,000 \end{array}$

Answer:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. Accordingly, Rs 50,000 is required to be transferred to DRR (i.e. 25% of 2,00,000) before the actual date of redemption of debentures.

Question 4:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. Accordingly, Rs 50,000 is required to be transferred to DRR (i.e. 25% of 2,00,000) before the actual date of redemption of debentures.

Answer:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. So, Rs 2, 50,000 is required to be transferred to DRR (i.e. 25% of 10,00,000). Further, Rule 18 (7) requires every company that is required to create DRR to invest an amount at least equal to 15% of the value of debentures in specified securities. So, Rs 1,50,000 is to be invested in specified securities (i.e. 15% of 10,00,000).

Journal In the Books of Nirbhai Chemicals Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
June 30	Bank A/c	Dr.		10,80,000
	To 6% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				80,000
	(Debentures issued)

2017
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(DRR created)

April 30	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment made in specified securities)

June 30	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Investments encashed)

June 30	6% Debentures A/c	Dr.		10,00,000
	To Debentureholders’ A/c				10,00,000
	(Amount on 6% debentures due)

June 30	Debentureholders’ A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Payment made on redemption of debentures)

June 30	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2017
Mar. 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders’ A/c				45,000
	(Interest on 6% debentures due for 9 months)

Mar.31	Debentureholders’ A/c	Dr.		45,000
	To Bank A/c				45,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,000
	To Debenture Interest A/c				45,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 5:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. So, Rs 2, 50,000 is required to be transferred to DRR (i.e. 25% of 10,00,000). Further, Rule 18 (7) requires every company that is required to create DRR to invest an amount at least equal to 15% of the value of debentures in specified securities. So, Rs 1,50,000 is to be invested in specified securities (i.e. 15% of 10,00,000).

Journal In the Books of Nirbhai Chemicals Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
June 30	Bank A/c	Dr.		10,80,000
	To 6% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				80,000
	(Debentures issued)

2017
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(DRR created)

April 30	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment made in specified securities)

June 30	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Investments encashed)

June 30	6% Debentures A/c	Dr.		10,00,000
	To Debentureholders’ A/c				10,00,000
	(Amount on 6% debentures due)

June 30	Debentureholders’ A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Payment made on redemption of debentures)

June 30	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2017
Mar. 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders’ A/c				45,000
	(Interest on 6% debentures due for 9 months)

Mar.31	Debentureholders’ A/c	Dr.		45,000
	To Bank A/c				45,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,000
	To Debenture Interest A/c				45,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Books of IFCI Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
April 01	Bank A/c	Dr.		5,00,00,000
	To 9% Debenture Application A/c				5,00,00,000
	(Debenture application money received)

April 01	9% Debenture Application A/c	Dr.		5,00,00,000
	To 9% Debentures A/c				5,00,00,000
	(Debenture application money transferred to debenture account)

2017
April 01	9% Debentures A/c	Dr.		5,00,00,000
	To Debentureholders’ A/c				5,00,00,000
	(Debentures due for redemption)

April 01	Debentureholders’ A/c	Dr.		5,00,00,000
	To Bank A/c				5,00,00,000
	(Amount due for redemption paid to debenture holders)

Notes:
1. All India Financial Institutions are exempted from creating DRR. Hence, in this case, no DRR is to be created.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures every year from April 01, 2010 to March 31, 2017 as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2010
Mar. 31	Debenture Interest A/c	Dr.		45,00,000
	To Debentureholders’ A/c				45,00,000
	(Interest on 9% debentures due)

Mar.31	Debentureholders’ A/c	Dr.		45,00,000
	To Bank A/c				45,00,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,00,000
	To Debenture Interest A/c				45,00,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 6:

Books of IFCI Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
April 01	Bank A/c	Dr.		5,00,00,000
	To 9% Debenture Application A/c				5,00,00,000
	(Debenture application money received)

April 01	9% Debenture Application A/c	Dr.		5,00,00,000
	To 9% Debentures A/c				5,00,00,000
	(Debenture application money transferred to debenture account)

2017
April 01	9% Debentures A/c	Dr.		5,00,00,000
	To Debentureholders’ A/c				5,00,00,000
	(Debentures due for redemption)

April 01	Debentureholders’ A/c	Dr.		5,00,00,000
	To Bank A/c				5,00,00,000
	(Amount due for redemption paid to debenture holders)

Notes:
1. All India Financial Institutions are exempted from creating DRR. Hence, in this case, no DRR is to be created.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures every year from April 01, 2010 to March 31, 2017 as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2010
Mar. 31	Debenture Interest A/c	Dr.		45,00,000
	To Debentureholders’ A/c				45,00,000
	(Interest on 9% debentures due)

Mar.31	Debentureholders’ A/c	Dr.		45,00,000
	To Bank A/c				45,00,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,00,000
	To Debenture Interest A/c				45,00,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/2012*	Statement of Profit or Loss	Dr.		60,000
	To Debenture Redemption Reserve A/c				60,000
	(Surplus amount is transferred to DRR)

30/4/2012*	Debenture Redemption Investment A/c Dr.			1,20,000
	To Bank A/c				1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/2013	9% Debentures A/c	Dr.		8,00,000
	To Debentureholders’ A/c				8,00,000
	(Debentures due for redemption)

31/3/2013	Bank A/c Dr.			1,20,000
	To Debenture Redemption Investment A/c				1,20,000
	(Investment made in specified securities is now encashed)

31/3/2013	Debentureholders’ A/c	Dr.		8,00,000
	To Bank A/c				8,00,000
	(Amount paid to debentureholders)

31/3/2013	Debenture Redemption Reserve A/c	Dr.		2,00,000
	To General Reserve				2,00,000
	(DRR transferred to General Reserve)

Working Note:

Notes:

1. Interest is not calculated on Investment as rate of interest is not provided.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures for the year ending March 31, 2012 as given below. In the similar manner, the entries related to interest on debentures for the year ending March 31, 2013 can also be journalised.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2012
Mar. 31	Debenture Interest A/c	Dr.		72,000
	To Debentureholders’ A/c				72,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		72,000
	To Bank A/c				72,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		72,000
	To Debenture Interest A/c				72,000
	(Transfer of debenture interest to Statement of Profit and Loss)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed in the previous accounting year.

Question 7:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/2012*	Statement of Profit or Loss	Dr.		60,000
	To Debenture Redemption Reserve A/c				60,000
	(Surplus amount is transferred to DRR)

30/4/2012*	Debenture Redemption Investment A/c Dr.			1,20,000
	To Bank A/c				1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/2013	9% Debentures A/c	Dr.		8,00,000
	To Debentureholders’ A/c				8,00,000
	(Debentures due for redemption)

31/3/2013	Bank A/c Dr.			1,20,000
	To Debenture Redemption Investment A/c				1,20,000
	(Investment made in specified securities is now encashed)

31/3/2013	Debentureholders’ A/c	Dr.		8,00,000
	To Bank A/c				8,00,000
	(Amount paid to debentureholders)

31/3/2013	Debenture Redemption Reserve A/c	Dr.		2,00,000
	To General Reserve				2,00,000
	(DRR transferred to General Reserve)

Working Note:

Notes:

1. Interest is not calculated on Investment as rate of interest is not provided.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures for the year ending March 31, 2012 as given below. In the similar manner, the entries related to interest on debentures for the year ending March 31, 2013 can also be journalised.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2012
Mar. 31	Debenture Interest A/c	Dr.		72,000
	To Debentureholders’ A/c				72,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		72,000
	To Bank A/c				72,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		72,000
	To Debenture Interest A/c				72,000
	(Transfer of debenture interest to Statement of Profit and Loss)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed in the previous accounting year.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	8% Debentures A/c	Dr.		50,00,000
	To Debenture holders’ A/c				50,00,000
	(Debenture due for redemption)

	Debenture holder’s A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Debentures redeemed at par)

Question 8:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	8% Debentures A/c	Dr.		50,00,000
	To Debenture holders’ A/c				50,00,000
	(Debenture due for redemption)

	Debenture holder’s A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Debentures redeemed at par)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
(1)	Bank A/c	Dr.		2,75,000
	To Debenture Application & Allotment A/c				2,75,000
	(Application money received on issue of debentures)

	Debenture Application & Allotment A/c	Dr.		2,75,000
	To 8% Debentures A/c				2,50,000
	To Security Premium Reserve A/c				25,000
	(Conversion of application money to Debentures A/c)

	8% Debentures A/c	Dr.		2,50,000
	To Debenture holders’ A/c				2,50,000
	(Debenture due for redemption)

	Debenture holders’ A/c	Dr.		2,50,000
	To Bank A/c				2,50,000
	(Debentures redeemed at par)

(2)	Bank A/c	Dr.		2,75,000
	To Debenture Application & Allotment A/c				2,75,000
	(Application money received on issue of debentures)

	Debenture Application & Allotment A/c	Dr.		2,75,000
	Loss on issue of Debentures A/c	Dr.		25,000
	To 7% Debentures A/c				2,50,000
	To Security Premium Reserve A/c				25,000
	To Premium on Redemption of Debentures A/c				25,000
	(Conversion of application money to Debentures A/c)

	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		25,000
	To Debenture holders’ A/c				2,75,000
	(Debenture due for redemption)

	Debenture holders’ A/c	Dr.		2,75,000
	To Bank A/c				2,75,000
	(Debentures redeemed at premium)

Question 9:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
(1)	Bank A/c	Dr.		2,75,000
	To Debenture Application & Allotment A/c				2,75,000
	(Application money received on issue of debentures)

	Debenture Application & Allotment A/c	Dr.		2,75,000
	To 8% Debentures A/c				2,50,000
	To Security Premium Reserve A/c				25,000
	(Conversion of application money to Debentures A/c)

	8% Debentures A/c	Dr.		2,50,000
	To Debenture holders’ A/c				2,50,000
	(Debenture due for redemption)

	Debenture holders’ A/c	Dr.		2,50,000
	To Bank A/c				2,50,000
	(Debentures redeemed at par)

(2)	Bank A/c	Dr.		2,75,000
	To Debenture Application & Allotment A/c				2,75,000
	(Application money received on issue of debentures)

	Debenture Application & Allotment A/c	Dr.		2,75,000
	Loss on issue of Debentures A/c	Dr.		25,000
	To 7% Debentures A/c				2,50,000
	To Security Premium Reserve A/c				25,000
	To Premium on Redemption of Debentures A/c				25,000
	(Conversion of application money to Debentures A/c)

	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		25,000
	To Debenture holders’ A/c				2,75,000
	(Debenture due for redemption)

	Debenture holders’ A/c	Dr.		2,75,000
	To Bank A/c				2,75,000
	(Debentures redeemed at premium)

Answer:

Books of Wye Ltd.
Journal
Date.	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/17	Statement of Profit or Loss	Dr.		1,00,000
	To Debenture Redemption Reserve A/c				1,00,000
	(Surplus transferred to Debenture Redemption Reserve)

30/4/17	Debenture Redemption Investment A/c Dr.			45,000
	To Bank A/c				45,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/18**	9% Debentures A/c	Dr.		3,00,000
	To Debentureholders’ A/c				3,00,000
	(Debenture due for redemption)

31/3/18**	Bank A/c Dr.			45,000
	To Debenture Redemption Investment A/c				45,000
	(Investment made in specified securities is now encashed)

31/3/18**	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due to debentureholders paid)

Working Notes:

** The date of redemption has been assumed to be March 31, 2018 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

Note:
1. Here, the entry for transferring the amount of DRR to General Reserve A/c has not been passed, since the company has not fully redeemed all its debentures. It is still left with Rs 3,00,000 of debentures. Once these debentures are redeemed, the amount of DRR can be transferred to General Reserve A/c.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2018
Mar. 31	Debenture Interest A/c	Dr.		54,000
	To Debentureholders’ A/c				54,000
	(Interest on 9% debentures due for 12 months)

Mar.31	Debentureholders’ A/c	Dr.		54,000
	To Bank A/c				54,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		54,000
	To Debenture Interest A/c				54,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 10:

Books of Wye Ltd.
Journal
Date.	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/17	Statement of Profit or Loss	Dr.		1,00,000
	To Debenture Redemption Reserve A/c				1,00,000
	(Surplus transferred to Debenture Redemption Reserve)

30/4/17	Debenture Redemption Investment A/c Dr.			45,000
	To Bank A/c				45,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/18**	9% Debentures A/c	Dr.		3,00,000
	To Debentureholders’ A/c				3,00,000
	(Debenture due for redemption)

31/3/18**	Bank A/c Dr.			45,000
	To Debenture Redemption Investment A/c				45,000
	(Investment made in specified securities is now encashed)

31/3/18**	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due to debentureholders paid)

Working Notes:

** The date of redemption has been assumed to be March 31, 2018 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

Note:
1. Here, the entry for transferring the amount of DRR to General Reserve A/c has not been passed, since the company has not fully redeemed all its debentures. It is still left with Rs 3,00,000 of debentures. Once these debentures are redeemed, the amount of DRR can be transferred to General Reserve A/c.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2018
Mar. 31	Debenture Interest A/c	Dr.		54,000
	To Debentureholders’ A/c				54,000
	(Interest on 9% debentures due for 12 months)

Mar.31	Debentureholders’ A/c	Dr.		54,000
	To Bank A/c				54,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		54,000
	To Debenture Interest A/c				54,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Books of India Textiles Corporation Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2015	Statement of Profit and Loss	Dr.		9,50,000
March 31	To Debenture Redemption Reserve A/c				9,50,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		7,50,000
	To Bank A/c				7,50,000
	(Investment is made in specified securities equal to the 15% value of debentures redeemed)
2016
March 31	9% Debentures A/c	Dr.		50,00,000
	To Debentureholders’ A/c				50,00,000
	(Debentures due for redemption)

March 31	Bank A/c	Dr.		7,50,000
	To Debenture Redemption Investment A/c				7,50,000
	(Investment made in securities is now encashed)

March 31	Debentureholders’ A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		12,50,000
	To General Reserve A/c				12,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Notes:

WN1: Calculation of amount transferred to DRR

WN2: Calculation of amount Invested in Specified Securities

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015 & 2016
Mar. 31	Debenture Interest A/c	Dr.		4,50,000
	To Debentureholders’ A/c				4,50,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		4,50,000
	To Bank A/c				4,50,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		4,50,000
	To Debenture Interest A/c				4,50,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 11:

Books of India Textiles Corporation Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2015	Statement of Profit and Loss	Dr.		9,50,000
March 31	To Debenture Redemption Reserve A/c				9,50,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		7,50,000
	To Bank A/c				7,50,000
	(Investment is made in specified securities equal to the 15% value of debentures redeemed)
2016
March 31	9% Debentures A/c	Dr.		50,00,000
	To Debentureholders’ A/c				50,00,000
	(Debentures due for redemption)

March 31	Bank A/c	Dr.		7,50,000
	To Debenture Redemption Investment A/c				7,50,000
	(Investment made in securities is now encashed)

March 31	Debentureholders’ A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		12,50,000
	To General Reserve A/c				12,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Notes:

WN1: Calculation of amount transferred to DRR

WN2: Calculation of amount Invested in Specified Securities

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015 & 2016
Mar. 31	Debenture Interest A/c	Dr.		4,50,000
	To Debentureholders’ A/c				4,50,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		4,50,000
	To Bank A/c				4,50,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		4,50,000
	To Debenture Interest A/c				4,50,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2013
Apr.01	Bank A/c	Dr.		40,00,000
	To Debenture Application & Allotment A/c				40,00,000
	(Application money received on issue of debentures)

Apr.01	Debenture Application & Allotment A/c	Dr.		40,00,000
	Loss on issue of Debentures A/c	Dr.		2,00,000
	To 8% Debentures A/c				40,00,000
	To Premium on Redemption of Debentures A/c				2,00,000
	(Conversion of application money to Debentures A/c)
2016
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		5,00,000
	To Debentures Redemption Reserve A/c				5,00,000
	(Amount transferred to Debentures Redemption Reserve)
2017
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		5,00,000
	To Debentures Redemption Reserve A/c				5,00,000
	(Amount transferred to Debentures Redemption Reserve)

Apr.30	Debenture Redemption Investment A/c	Dr.		6,00,000
	To Bank A/c				6,00,000
	(Amount invested in specified security)

June 30	Bank A/c	Dr.		6,00,000
	To Debenture Redemption Investment A/c				6,00,000
	(Debenture Redemption Investment realized)

June 30	8% Debenture A/c	Dr.		40,00,000
	Premium on Redemption of Debentures A/c	Dr.		2,00,000
	To Debenture holder’s A/c				42,00,000
	(Debenture due for redemption)

June 30	Debenture holder’s A/c	Dr.		42,00,000
	To Bank A/c				42,00,000
	(Debentures redeemed at premium)

June 30	Debentures Redemption Reserve A/c Dr.			10,00,000
	To General Reserve A/c				10,00,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 40,00,000 = Rs 6,00,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 40,00,000 = Rs 10,00,000 \end{array}$

Question 12:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2013
Apr.01	Bank A/c	Dr.		40,00,000
	To Debenture Application & Allotment A/c				40,00,000
	(Application money received on issue of debentures)

Apr.01	Debenture Application & Allotment A/c	Dr.		40,00,000
	Loss on issue of Debentures A/c	Dr.		2,00,000
	To 8% Debentures A/c				40,00,000
	To Premium on Redemption of Debentures A/c				2,00,000
	(Conversion of application money to Debentures A/c)
2016
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		5,00,000
	To Debentures Redemption Reserve A/c				5,00,000
	(Amount transferred to Debentures Redemption Reserve)
2017
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		5,00,000
	To Debentures Redemption Reserve A/c				5,00,000
	(Amount transferred to Debentures Redemption Reserve)

Apr.30	Debenture Redemption Investment A/c	Dr.		6,00,000
	To Bank A/c				6,00,000
	(Amount invested in specified security)

June 30	Bank A/c	Dr.		6,00,000
	To Debenture Redemption Investment A/c				6,00,000
	(Debenture Redemption Investment realized)

June 30	8% Debenture A/c	Dr.		40,00,000
	Premium on Redemption of Debentures A/c	Dr.		2,00,000
	To Debenture holder’s A/c				42,00,000
	(Debenture due for redemption)

June 30	Debenture holder’s A/c	Dr.		42,00,000
	To Bank A/c				42,00,000
	(Debentures redeemed at premium)

June 30	Debentures Redemption Reserve A/c Dr.			10,00,000
	To General Reserve A/c				10,00,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 40,00,000 = Rs 6,00,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 40,00,000 = Rs 10,00,000 \end{array}$

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
April 1	Bank A/c	Dr.		5,00,000
	To Debenture Application & Allotment A/c				5,00,000
	(Application Money received on issue of debentures)

April 1	Debenture Application & Allotment A/c	Dr.		5,00,000
	To 9% Debentures A/c				5,00,000
	(Conversion of application money to Debentures A/c)

April 1	Surplus,i.e.,Balance in statement of Profit & Loss A/c	Dr.		1,25,000
	To Debentures Redemption Reserve A/c				1,25,000
	(Amount transferred to Debentures Redemption Reserve )

April 30	Debenture Redemption Investment A/c	Dr.		75,000
	To Bank A/c				75,000
	(Amount invested in fixed deposit of Canara Bank)
2016
March 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders' A/c				45,000
	(Interest on debenture payable)

March 31	Bank A/c	Dr.		80,500
	To Debenture Redemption Investment A/c				75,000
	To Interest Earned				5,500
	(Debenture Redemption Investment realized)

March 31	9% Debenture A/c	Dr.		5,00,000
	To Debenture holder’s A/c				5,00,000
	(Debenture due for redemption)

March 31	Debenture holder’s A/c	Dr.		5,45,000
	To Bank A/c				5,45,000
	(Debentures redeemed at par)

March 31	Debentures Redemption Reserve A/c	Dr.		1,25,000
	To General Reserve A/c				1,25,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 5,00,000 = Rs 75,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 5,00,000 = Rs 1,25,000 \end{array}$

Question 13:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
April 1	Bank A/c	Dr.		5,00,000
	To Debenture Application & Allotment A/c				5,00,000
	(Application Money received on issue of debentures)

April 1	Debenture Application & Allotment A/c	Dr.		5,00,000
	To 9% Debentures A/c				5,00,000
	(Conversion of application money to Debentures A/c)

April 1	Surplus,i.e.,Balance in statement of Profit & Loss A/c	Dr.		1,25,000
	To Debentures Redemption Reserve A/c				1,25,000
	(Amount transferred to Debentures Redemption Reserve )

April 30	Debenture Redemption Investment A/c	Dr.		75,000
	To Bank A/c				75,000
	(Amount invested in fixed deposit of Canara Bank)
2016
March 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders' A/c				45,000
	(Interest on debenture payable)

March 31	Bank A/c	Dr.		80,500
	To Debenture Redemption Investment A/c				75,000
	To Interest Earned				5,500
	(Debenture Redemption Investment realized)

March 31	9% Debenture A/c	Dr.		5,00,000
	To Debenture holder’s A/c				5,00,000
	(Debenture due for redemption)

March 31	Debenture holder’s A/c	Dr.		5,45,000
	To Bank A/c				5,45,000
	(Debentures redeemed at par)

March 31	Debentures Redemption Reserve A/c	Dr.		1,25,000
	To General Reserve A/c				1,25,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 5,00,000 = Rs 75,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 5,00,000 = Rs 1,25,000 \end{array}$

Answer:

Journal In the Books of Godrej Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Mar. 31	Statement of Profit and Loss	Dr.		1,50,000
	To Debenture Redemption Reserve A/c				1,50,000
	(DRR created)

Apr. 01	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment made in specified securities)
2017
Mar. 31	7% Debentures A/c	Dr.		20,00,000
	To Debentureholders’ A/c				20,00,000
	(Amount on 7% debentures due)

Mar. 31	Bank A/c (3,00,000 + 16,200)	Dr.		3,16,200
	Tax Payable A/c	Dr.		1,800
	To Interest on Debenture Redemption Investment A/c				18,000
	To Debenture Redemeption Investment A/c				3,00,000
	(Investment encashed and interest received)

Mar. 31	Debentureholders' A/c	Dr.		20,00,000
	To Bank A/c				20,00,000
	(Payment made on redemption of debentures)

Mar. 31	Debenture Redemption Reserve A/c	Dr.		5,00,000
	To General Reserve A/c				5,00,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Working Notes:

Calculation of amount transferred to DRR

$Amount of DRR (25 % of Debentures) = 20, 00, 000 \times \frac{25}{100} = 5, 00, 000 Less : Amount already exists in DRR 3, 50, 000 DRR to be created for redemption 1, 50, 000$

Note:

1. The year of transfer to DRR and investment has been assumed to be in 2014 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016 & 2017
Mar. 31	Debenture Interest A/c	Dr.		1,40,000
	To Debentureholders’ A/c				1,40,000
	(Interest on 7% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		1,40,000
	To Bank A/c				1,40,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		1,40,000
	To Debenture Interest A/c				1,40,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 14:

Journal In the Books of Godrej Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Mar. 31	Statement of Profit and Loss	Dr.		1,50,000
	To Debenture Redemption Reserve A/c				1,50,000
	(DRR created)

Apr. 01	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment made in specified securities)
2017
Mar. 31	7% Debentures A/c	Dr.		20,00,000
	To Debentureholders’ A/c				20,00,000
	(Amount on 7% debentures due)

Mar. 31	Bank A/c (3,00,000 + 16,200)	Dr.		3,16,200
	Tax Payable A/c	Dr.		1,800
	To Interest on Debenture Redemption Investment A/c				18,000
	To Debenture Redemeption Investment A/c				3,00,000
	(Investment encashed and interest received)

Mar. 31	Debentureholders' A/c	Dr.		20,00,000
	To Bank A/c				20,00,000
	(Payment made on redemption of debentures)

Mar. 31	Debenture Redemption Reserve A/c	Dr.		5,00,000
	To General Reserve A/c				5,00,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Working Notes:

Calculation of amount transferred to DRR

$Amount of DRR (25 % of Debentures) = 20, 00, 000 \times \frac{25}{100} = 5, 00, 000 Less : Amount already exists in DRR 3, 50, 000 DRR to be created for redemption 1, 50, 000$

Note:

1. The year of transfer to DRR and investment has been assumed to be in 2014 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016 & 2017
Mar. 31	Debenture Interest A/c	Dr.		1,40,000
	To Debentureholders’ A/c				1,40,000
	(Interest on 7% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		1,40,000
	To Bank A/c				1,40,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		1,40,000
	To Debenture Interest A/c				1,40,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
July 01	Bank A/c	Dr.		10,50,000
	To Debenture Application & Allotment A/c				10,50,000
	(Application received for issue of debentures)

July 01	Debenture Application & Allotment A/c	Dr.		10,50,000
	To 8% Debentures A/c				10,00,000
	To Security Premium Reserve A/c				50,000
	(Conversion of application money to Debentures A/c)
2016
Mar.31	Surplus i.e., Balance in statement of Profit & Loss	Dr.		2,50,000
	To Debentures Redemption Reserve A/c				2,50,000
	(Amount transferred to Debentures Redemption Reserve )

Apr.01	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Amount invested in fixed deposit with Axis bank)
2017
Mar.31	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Debenture Redemption Investment realized)

Mar.31	Debentures Interest A/c	Dr.		80,000
	To Debentures’ holders A/c				72,000
	To TDS Payable A/c				8,000
	(Interest Due on debentures)

Mar.31	Debentures’ holders A/c	Dr.		72,000
	TDS Payable A/c	Dr.		8,000
	To Bank A/c				80,000
	(Interest Paid to Debentures’ holders)

Mar.31	Bank A/c	Dr.		6,750
	TDS Collected A/c	Dr.		750
	To Interest on Debenture Redemption Investment				7,500
	(Interest received from Bank)

Mar.31	8% Debenture A/c	Dr.		10,00,000
	To Debenture holder’s A/c				10,00,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Debentures redeemed)

Mar.31	Debentures Redemption Reserve A/c Dr.			2,50,000
	To General Reserve A/c				2,50,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 10,00,000 = Rs 1,50,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5 % of Face value of Debentures \\ = 2 5% of Rs 10,00,000 = Rs 2,50,000 \end{array}$

Question 15:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
July 01	Bank A/c	Dr.		10,50,000
	To Debenture Application & Allotment A/c				10,50,000
	(Application received for issue of debentures)

July 01	Debenture Application & Allotment A/c	Dr.		10,50,000
	To 8% Debentures A/c				10,00,000
	To Security Premium Reserve A/c				50,000
	(Conversion of application money to Debentures A/c)
2016
Mar.31	Surplus i.e., Balance in statement of Profit & Loss	Dr.		2,50,000
	To Debentures Redemption Reserve A/c				2,50,000
	(Amount transferred to Debentures Redemption Reserve )

Apr.01	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Amount invested in fixed deposit with Axis bank)
2017
Mar.31	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Debenture Redemption Investment realized)

Mar.31	Debentures Interest A/c	Dr.		80,000
	To Debentures’ holders A/c				72,000
	To TDS Payable A/c				8,000
	(Interest Due on debentures)

Mar.31	Debentures’ holders A/c	Dr.		72,000
	TDS Payable A/c	Dr.		8,000
	To Bank A/c				80,000
	(Interest Paid to Debentures’ holders)

Mar.31	Bank A/c	Dr.		6,750
	TDS Collected A/c	Dr.		750
	To Interest on Debenture Redemption Investment				7,500
	(Interest received from Bank)

Mar.31	8% Debenture A/c	Dr.		10,00,000
	To Debenture holder’s A/c				10,00,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Debentures redeemed)

Mar.31	Debentures Redemption Reserve A/c Dr.			2,50,000
	To General Reserve A/c				2,50,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 10,00,000 = Rs 1,50,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5 % of Face value of Debentures \\ = 2 5% of Rs 10,00,000 = Rs 2,50,000 \end{array}$

Answer:

Books of Apollo Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
March 31	Bank A/c	Dr.		21,00,000
	To 8% Debenture Application A/c				21,00,000
	(Debenture application money received)

	8% Debenture Application A/c	Dr.		21,00,000
	Loss on Issue of Debentures A/c	Dr.		1,68,000
	To 8% Debentures A/c				21,00,000
	To Premium on Redemption A/c				1,68,000
	(2,10,000 8% Debentures of Rs 10 each issued with the term repayable at 8% Premium)

2015
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

2016
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

2017
Mach 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		3,15,000
	To Bank A/c				3,15,000
	(Investment is made in government securities equal to 15% of the value of debentures redeemed)

2017
June 30	8% Debenture A/c	Dr.		21,00,000
	Premium on Redemption Reserve A/c	Dr.		1,68,000
	To Debentureholders’ A/c				22,68,000
	(Debenture due for redemption along with premium)

	Bank A/c	Dr.		3,15,000
	To Debenture Redemption Investment A/c				3,15,000
	(Investment made in specifed securities now encashed)

	Debentureholders’ A/c	Dr.		22,68,000
	To Bank A/c				22,68,000
	(Payment made to debentureholders)

	Debenture Redemption Reserve A/c	Dr.		5,25,000
	To General Reserve A/c				5,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

Calculation of Amount transferred to DRR

As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be redeemed, so, the amount of DRR will be:

Note:R to be created =6,00,000 × 25100=Rs 1,50,000
1. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Question 16:

Books of Apollo Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
March 31	Bank A/c	Dr.		21,00,000
	To 8% Debenture Application A/c				21,00,000
	(Debenture application money received)

	8% Debenture Application A/c	Dr.		21,00,000
	Loss on Issue of Debentures A/c	Dr.		1,68,000
	To 8% Debentures A/c				21,00,000
	To Premium on Redemption A/c				1,68,000
	(2,10,000 8% Debentures of Rs 10 each issued with the term repayable at 8% Premium)

2015
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

2016
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

2017
Mach 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		3,15,000
	To Bank A/c				3,15,000
	(Investment is made in government securities equal to 15% of the value of debentures redeemed)

2017
June 30	8% Debenture A/c	Dr.		21,00,000
	Premium on Redemption Reserve A/c	Dr.		1,68,000
	To Debentureholders’ A/c				22,68,000
	(Debenture due for redemption along with premium)

	Bank A/c	Dr.		3,15,000
	To Debenture Redemption Investment A/c				3,15,000
	(Investment made in specifed securities now encashed)

	Debentureholders’ A/c	Dr.		22,68,000
	To Bank A/c				22,68,000
	(Payment made to debentureholders)

	Debenture Redemption Reserve A/c	Dr.		5,25,000
	To General Reserve A/c				5,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

Calculation of Amount transferred to DRR

As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be redeemed, so, the amount of DRR will be:

Note:R to be created =6,00,000 × 25100=Rs 1,50,000
1. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

2014
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		62,500
	To Debentures Redemption Reserve A/c				62,500
	(Amount transferred to Debentures Redemption Reserve)
2015
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		62,500
	To Debentures Redemption Reserve A/c				62,500
	(Amount transferred to Debentures Redemption Reserve)
2016
Mar.31	Surplus i.e. Balance in statement of Profit & Loss A/c	Dr.		62,500
	To Debentures Redemption Reserve A/c				62,500
	(Amount transferred to Debentures Redemption Reserve)

Mar.31	Debentures Interest A/c	Dr.		45,000
	To Debentures’ holders A/c				40,500
	To TDS Payable A/c				4,500
	(Interest Due on Debentures)

Mar.31	Debentures’ holders A/c	Dr.		40,500
	TDS Payable A/c	Dr.		4,500
	To Bank A/c				45,000
	(Interest Paid to Debentures’ holders)

Apr.30	Debenture Redemption Investment A/c	Dr.		1,12,500
	To Bank A/c				1,12,500
	(Amount invested in specified security)

Dec.31	Bank A/c	Dr.		1,12,500
	To Debenture Redemption Investment A/c				1,12,500
	(Debenture Redemption Investment realized)

Dec.31	Debentures Interest A/c	Dr.		33,750
	To Debentures’ holders A/c				30,375
	To TDS Payable A/c				3,375
	(Interest Due on Debentures)

Dec.31	Debentures’ holders A/c	Dr.		30,375
	TDS Payable A/c	Dr.		3,375
	To Bank A/c				33,750
	(Interest Paid to Debenture Holders)

Dec.31	Bank A/c	Dr.		3,375
	TDS Collected A/c	Dr.		375
	To Interest on Debenture Redemption Investment				3,750
	(Interest received)

Dec.31	6% Debenture A/c	Dr.		7,50,000
	Premium on Redemption of Debentures A/c	Dr.		1,12,500
	To Debenture holder’s A/c				8,62,500
	(Debenture due for redemption)

Dec.31	Debenture holder’s A/c	Dr.		8,62,500
	To Bank A/c				8,62,500
	(Debentures redeemed)

Dec.31	Debentures Redemption Reserve A/c Dr.			1,87,500
	To General Reserve A/c				1,87,500
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 7,50,000 = Rs 1,12,500 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 7,50,000 = Rs 1,87,500 \end{array}$

Question 17:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

2014
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		62,500
	To Debentures Redemption Reserve A/c				62,500
	(Amount transferred to Debentures Redemption Reserve)
2015
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		62,500
	To Debentures Redemption Reserve A/c				62,500
	(Amount transferred to Debentures Redemption Reserve)
2016
Mar.31	Surplus i.e. Balance in statement of Profit & Loss A/c	Dr.		62,500
	To Debentures Redemption Reserve A/c				62,500
	(Amount transferred to Debentures Redemption Reserve)

Mar.31	Debentures Interest A/c	Dr.		45,000
	To Debentures’ holders A/c				40,500
	To TDS Payable A/c				4,500
	(Interest Due on Debentures)

Mar.31	Debentures’ holders A/c	Dr.		40,500
	TDS Payable A/c	Dr.		4,500
	To Bank A/c				45,000
	(Interest Paid to Debentures’ holders)

Apr.30	Debenture Redemption Investment A/c	Dr.		1,12,500
	To Bank A/c				1,12,500
	(Amount invested in specified security)

Dec.31	Bank A/c	Dr.		1,12,500
	To Debenture Redemption Investment A/c				1,12,500
	(Debenture Redemption Investment realized)

Dec.31	Debentures Interest A/c	Dr.		33,750
	To Debentures’ holders A/c				30,375
	To TDS Payable A/c				3,375
	(Interest Due on Debentures)

Dec.31	Debentures’ holders A/c	Dr.		30,375
	TDS Payable A/c	Dr.		3,375
	To Bank A/c				33,750
	(Interest Paid to Debenture Holders)

Dec.31	Bank A/c	Dr.		3,375
	TDS Collected A/c	Dr.		375
	To Interest on Debenture Redemption Investment				3,750
	(Interest received)

Dec.31	6% Debenture A/c	Dr.		7,50,000
	Premium on Redemption of Debentures A/c	Dr.		1,12,500
	To Debenture holder’s A/c				8,62,500
	(Debenture due for redemption)

Dec.31	Debenture holder’s A/c	Dr.		8,62,500
	To Bank A/c				8,62,500
	(Debentures redeemed)

Dec.31	Debentures Redemption Reserve A/c Dr.			1,87,500
	To General Reserve A/c				1,87,500
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 7,50,000 = Rs 1,12,500 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 7,50,000 = Rs 1,87,500 \end{array}$

Answer:

Books of JB Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2014
April 01	Bank A/c	Dr.		10,40,000
	To 6% Debenture Application A/c				10,40,000
	(Debenture Application money received)

April 01	6% Debenture Application A/c	Dr.		10,40,000
	Loss on Issue of Debentures A/c	Dr.		50,000
	To 6% Debentures A/c				10,00,000
	To Securities Premium A/c				40,000
	To Premium on Redemption A/c				50,000
	(Debentures of Rs 10,00,000 issued at 4% Premium with the term redeemable at 5% Premium)
2017
Mar. 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c*				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

Apr. 30	Debenture Redemption Investment A/c**	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment is made in government securities equal to 15% of the value of debentures redeemed)

2018
March 31	6% Debentures A/c	Dr.		10,00,000
	Premium on Redemption A/c	Dr.		50,000
	To Debentureholders’ A/c				10,50,000
	(Debentures due for redemption along with the premium)

	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Investment made in securities is now encashed)

March 31	Debentureholders’ A/c	Dr.		10,50,000
	To Bank A/c				10,50,000
	(Amount paid to Debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 10,00,000 are to be redeemed, so, the amount of DRR will be:
$Amount of DRR = 10, 00, 000 \times \frac{25}{100} = Rs 2, 50, 000$

However, it purely depends upon a company and its discretion to transfer more amount to DRR than the prescribed amount of 25% in the case of companies for whom it is mandatory to create DRR out of profits. In this case, as nothing explicit has been specified about company's discretion, so amount equivalent to 25% of the nominal value of the redeemable debentures has been transferred to DRR similar to the earlier questions.

**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015 to 2018
Mar. 31	Debenture Interest A/c	Dr.		60,000
	To Debentureholders’ A/c				60,000
	(Interest on 6% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		60,000
	To Bank A/c				60,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		60,000
	To Debenture Interest A/c				60,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 18:

Books of JB Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2014
April 01	Bank A/c	Dr.		10,40,000
	To 6% Debenture Application A/c				10,40,000
	(Debenture Application money received)

April 01	6% Debenture Application A/c	Dr.		10,40,000
	Loss on Issue of Debentures A/c	Dr.		50,000
	To 6% Debentures A/c				10,00,000
	To Securities Premium A/c				40,000
	To Premium on Redemption A/c				50,000
	(Debentures of Rs 10,00,000 issued at 4% Premium with the term redeemable at 5% Premium)
2017
Mar. 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c*				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

Apr. 30	Debenture Redemption Investment A/c**	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment is made in government securities equal to 15% of the value of debentures redeemed)

2018
March 31	6% Debentures A/c	Dr.		10,00,000
	Premium on Redemption A/c	Dr.		50,000
	To Debentureholders’ A/c				10,50,000
	(Debentures due for redemption along with the premium)

	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Investment made in securities is now encashed)

March 31	Debentureholders’ A/c	Dr.		10,50,000
	To Bank A/c				10,50,000
	(Amount paid to Debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 10,00,000 are to be redeemed, so, the amount of DRR will be:
$Amount of DRR = 10, 00, 000 \times \frac{25}{100} = Rs 2, 50, 000$

However, it purely depends upon a company and its discretion to transfer more amount to DRR than the prescribed amount of 25% in the case of companies for whom it is mandatory to create DRR out of profits. In this case, as nothing explicit has been specified about company's discretion, so amount equivalent to 25% of the nominal value of the redeemable debentures has been transferred to DRR similar to the earlier questions.

**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015 to 2018
Mar. 31	Debenture Interest A/c	Dr.		60,000
	To Debentureholders’ A/c				60,000
	(Interest on 6% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		60,000
	To Bank A/c				60,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		60,000
	To Debenture Interest A/c				60,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2014
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Surplus amount is transferred to DRR)

April 30	Debenture Redemption Investment A/c	Dr.		2,25,000
	To Bank A/c				2,25,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)
2015
March 31	10% Debentures A/c	Dr.		15,00,000
	To Debentureholders A/c				15,00,000
	(10% Debentures due for redemption)

March 31	Bank A/c	Dr.		2,25,000
	To Debenture Redemption Investment A/c				2,25,000
	(Investment made in specified securities, now encashed)

March 31	Debentureholders' A/c	Dr.		15,00,000
	To Bank A/c				15,00,000
	(Amount paid to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		3,75,000
	To General Reserve A/c				3,75,000
	(DRR amount is transferred to General Reserve)

Working Notes:

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed a year before redemption year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

Mar. 31	Debenture Interest A/c	Dr.		1,50,000
	To Debentureholders’ A/c				1,50,000
	(Interest on 10% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		1,50,000
	To Debenture Interest A/c				1,50,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 19:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2014
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Surplus amount is transferred to DRR)

April 30	Debenture Redemption Investment A/c	Dr.		2,25,000
	To Bank A/c				2,25,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)
2015
March 31	10% Debentures A/c	Dr.		15,00,000
	To Debentureholders A/c				15,00,000
	(10% Debentures due for redemption)

March 31	Bank A/c	Dr.		2,25,000
	To Debenture Redemption Investment A/c				2,25,000
	(Investment made in specified securities, now encashed)

March 31	Debentureholders' A/c	Dr.		15,00,000
	To Bank A/c				15,00,000
	(Amount paid to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		3,75,000
	To General Reserve A/c				3,75,000
	(DRR amount is transferred to General Reserve)

Working Notes:

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed a year before redemption year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

Mar. 31	Debenture Interest A/c	Dr.		1,50,000
	To Debentureholders’ A/c				1,50,000
	(Interest on 10% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		1,50,000
	To Debenture Interest A/c				1,50,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Books of Rich Sugar Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2014
April 01	Bank A/c	Dr.		20,00,000
	To 8% Debenture Application A/c				20,00,000
	(Debenture application money received)

April 01	8% Debenture Application A/c	Dr.		20,00,000
	To 8% Debentures A/c				20,00,000
	(Debenture application transferred to 8% Debentures account)

2015
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2016
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment is made in securities equal to 15% of the value of debentures redeemed)
2017
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)
2018
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

2019
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

2020
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debenture due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Bank A/c	Dr.		3,00,000
	To Debenture Redemption Investment A/c				3,00,000
	(Investment made in securities, now encashed)

March 31	Debenture Redemption Reserve A/c	Dr.		1,25,000
	To General Reserve A/c				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c	Dr.	Interest Rate $\times$ Amt. of Debentures outstanding
To Debentureholders’ A/c
(Interest due)

Debentureholders’ A/c	Dr.
To Bank A/c
(Payment of interest to debentureholders’)
		With the total amount of interest paid in a year
Statement of Profit and Loss	Dr.
To Debenture Interest A/c
(Transfer of debenture interest to Statement of Profit and Loss)

Question 20:

Books of Rich Sugar Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2014
April 01	Bank A/c	Dr.		20,00,000
	To 8% Debenture Application A/c				20,00,000
	(Debenture application money received)

April 01	8% Debenture Application A/c	Dr.		20,00,000
	To 8% Debentures A/c				20,00,000
	(Debenture application transferred to 8% Debentures account)

2015
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2016
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment is made in securities equal to 15% of the value of debentures redeemed)
2017
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)
2018
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

2019
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

2020
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debenture due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Bank A/c	Dr.		3,00,000
	To Debenture Redemption Investment A/c				3,00,000
	(Investment made in securities, now encashed)

March 31	Debenture Redemption Reserve A/c	Dr.		1,25,000
	To General Reserve A/c				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c	Dr.	Interest Rate $\times$ Amt. of Debentures outstanding
To Debentureholders’ A/c
(Interest due)

Debentureholders’ A/c	Dr.
To Bank A/c
(Payment of interest to debentureholders’)
		With the total amount of interest paid in a year
Statement of Profit and Loss	Dr.
To Debenture Interest A/c
(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

2014
Mar.31	Surplus i.e., Balance in Statement of Profit & Loss	Dr.		3,00,000
	To Debentures Redemption Reserve A/c				3,00,000
	(Amount transferred to Debentures Redemption Reserve)
2014
April 1	Debenture Redemption Investment A/c	Dr.		60,000
	To Bank A/c				1,80,000
	(Amount invested in specified security)
2015
Mar.31	Bank A/c	Dr.		60,000
	To Debenture Redemption Investment A/c				60,000
	(Debenture Redemption Investment realized)

Mar.31	6% Debenture A/c	Dr.		4,00,000
	Premium on Redemption of Debentures A/c	Dr.		40,000
	To Debenture holder’s A/c				4,40,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		4,40,000
	To Bank A/c				4,40,000
	(Debentures redeemed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		1,00,000
	To General Reserve A/c				1,00,000
	(Amount invested in specified security)

April 1	Debenture Redemption Investment A/c	Dr.		60,000
	To Bank A/c				60,000
	(Amount invested in specified security)
2016
Mar.31	Bank A/c	Dr.		60,000
	To Debenture Redemption Investment A/c				60,000
	(Debenture Redemption Investment realized)

Mar.31	6% Debenture A/c	Dr.		4,00,000
	Premium on Redemption of Debentures A/c	Dr.		40,000
	To Debenture holder’s A/c				4,40,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		4,40,000
	To Bank A/c				4,40,000
	(Debentures redeemed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		1,00,000
	To General Reserve A/c				1,00,000
	(Amount invested in specified security)

April 1	Debenture Redemption Investment A/c	Dr.		60,000
	To Bank A/c				60,000
	(Amount invested in specified security)
2017
Mar.31	Bank A/c	Dr.		60,000
	To Debenture Redemption Investment A/c				60,000
	(Debenture Redemption Investment realized)

Mar.31	6% Debenture A/c	Dr.		4,00,000
	Premium on Redemption of Debentures A/c	Dr.		40,000
	To Debenture holder’s A/c				4,40,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		4,40,000
	To Bank A/c				4,40,000
	(Debentures redeemed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		1,00,000
	To General Reserve A/c				1,00,000
	(Amount invested in specified security)

Working Note:

$\begin{array}{l} Amount Required to be transferred to DRI = 1 5% of Face value of Debentures \\ = 1 5% of Rs 12,00,000 = Rs 1,80,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 12,00,000 = Rs 3,00,000 \end{array}$

Question 21:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

2014
Mar.31	Surplus i.e., Balance in Statement of Profit & Loss	Dr.		3,00,000
	To Debentures Redemption Reserve A/c				3,00,000
	(Amount transferred to Debentures Redemption Reserve)
2014
April 1	Debenture Redemption Investment A/c	Dr.		60,000
	To Bank A/c				1,80,000
	(Amount invested in specified security)
2015
Mar.31	Bank A/c	Dr.		60,000
	To Debenture Redemption Investment A/c				60,000
	(Debenture Redemption Investment realized)

Mar.31	6% Debenture A/c	Dr.		4,00,000
	Premium on Redemption of Debentures A/c	Dr.		40,000
	To Debenture holder’s A/c				4,40,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		4,40,000
	To Bank A/c				4,40,000
	(Debentures redeemed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		1,00,000
	To General Reserve A/c				1,00,000
	(Amount invested in specified security)

April 1	Debenture Redemption Investment A/c	Dr.		60,000
	To Bank A/c				60,000
	(Amount invested in specified security)
2016
Mar.31	Bank A/c	Dr.		60,000
	To Debenture Redemption Investment A/c				60,000
	(Debenture Redemption Investment realized)

Mar.31	6% Debenture A/c	Dr.		4,00,000
	Premium on Redemption of Debentures A/c	Dr.		40,000
	To Debenture holder’s A/c				4,40,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		4,40,000
	To Bank A/c				4,40,000
	(Debentures redeemed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		1,00,000
	To General Reserve A/c				1,00,000
	(Amount invested in specified security)

April 1	Debenture Redemption Investment A/c	Dr.		60,000
	To Bank A/c				60,000
	(Amount invested in specified security)
2017
Mar.31	Bank A/c	Dr.		60,000
	To Debenture Redemption Investment A/c				60,000
	(Debenture Redemption Investment realized)

Mar.31	6% Debenture A/c	Dr.		4,00,000
	Premium on Redemption of Debentures A/c	Dr.		40,000
	To Debenture holder’s A/c				4,40,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		4,40,000
	To Bank A/c				4,40,000
	(Debentures redeemed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		1,00,000
	To General Reserve A/c				1,00,000
	(Amount invested in specified security)

Working Note:

$\begin{array}{l} Amount Required to be transferred to DRI = 1 5% of Face value of Debentures \\ = 1 5% of Rs 12,00,000 = Rs 1,80,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 12,00,000 = Rs 3,00,000 \end{array}$

Answer:

Books of Tata Motors Ltd.
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2010
July 01	Bank A/c		Dr.		40,00,000
	To Debenture Application A/c					40,00,000
	(Debenture application money received)

	Debenture Application A/c		Dr.		40,00,000
	Loss on Issue of Debentures A/c		Dr.		2,00,000
	To 7% Debentures A/c					40,00,000
	To Premium on Redemption A/c					2,00,00
	(40,000 7% Debenture of Rs 100 each issued)

2012
March 31	Statement of Profit and Loss		Dr.		2,00,000
	To Debenture Redemption Reserve A/c					2,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2013
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2014
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c		Dr.		2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2014)
2015
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption A/c		Dr.		80,000
	To Debentureholders’ A/c					16,80,000
	(16,000 7% Debenture of Rs 100 each due for redemption along 5% Premium on redemption)

March 31	Debenture holders		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)

March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

April 30	Debenture Redemption Investment A/c Dr.				2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2015)

2016
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption of Debentures A/c		Dr.		80,000
	To Debenture holders					16,80,000
	(16,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)

March 31	Debentureholders’ A/c		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)

March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

April 30	Debenture Redemption Investment A/c Dr.				1,20,000
	To Bank A/c					1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2016)

2017
March 31	7% Debenture A/c		Dr.		8,00,000
	Premium on Redemption of Debentures A/c		Dr.		40,000
	To Debenture holders					8,40,000
	(8,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)

March 31	Debentureholders’ A/c	Dr.			8,40,000
	To Bank A/c					8,40,000
	(Payment made to debenture holders)

March 31	Bank A/c		Dr.		6,00,000
	To Debenture Redemption Investment A/c					6,00,000
	(Investment made in securities, now encashed)

March 31	Debenture Redemption Reserve A/c		Dr.		2,00,000
	To General Reserve A/c					2,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

WN1 Calculation of amount of DRR
$Amount for DRR (25 % of Debentures Issued) = 40, 00, 000 \times \frac{25}{100} = Rs 10, 00, 000 L e s s : Amount transferred in 2012 = Rs 2, 00, 000 L e s s : Amount transferred in 2013 = Rs 4, 00, 000 Amount transferred in 2014 = Rs 4, 00, 000$

Question 22:

Books of Tata Motors Ltd.
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2010
July 01	Bank A/c		Dr.		40,00,000
	To Debenture Application A/c					40,00,000
	(Debenture application money received)

	Debenture Application A/c		Dr.		40,00,000
	Loss on Issue of Debentures A/c		Dr.		2,00,000
	To 7% Debentures A/c					40,00,000
	To Premium on Redemption A/c					2,00,00
	(40,000 7% Debenture of Rs 100 each issued)

2012
March 31	Statement of Profit and Loss		Dr.		2,00,000
	To Debenture Redemption Reserve A/c					2,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2013
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2014
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c		Dr.		2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2014)
2015
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption A/c		Dr.		80,000
	To Debentureholders’ A/c					16,80,000
	(16,000 7% Debenture of Rs 100 each due for redemption along 5% Premium on redemption)

March 31	Debenture holders		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)

March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

April 30	Debenture Redemption Investment A/c Dr.				2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2015)

2016
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption of Debentures A/c		Dr.		80,000
	To Debenture holders					16,80,000
	(16,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)

March 31	Debentureholders’ A/c		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)

March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

April 30	Debenture Redemption Investment A/c Dr.				1,20,000
	To Bank A/c					1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2016)

2017
March 31	7% Debenture A/c		Dr.		8,00,000
	Premium on Redemption of Debentures A/c		Dr.		40,000
	To Debenture holders					8,40,000
	(8,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)

March 31	Debentureholders’ A/c	Dr.			8,40,000
	To Bank A/c					8,40,000
	(Payment made to debenture holders)

March 31	Bank A/c		Dr.		6,00,000
	To Debenture Redemption Investment A/c					6,00,000
	(Investment made in securities, now encashed)

March 31	Debenture Redemption Reserve A/c		Dr.		2,00,000
	To General Reserve A/c					2,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

WN1 Calculation of amount of DRR
$Amount for DRR (25 % of Debentures Issued) = 40, 00, 000 \times \frac{25}{100} = Rs 10, 00, 000 L e s s : Amount transferred in 2012 = Rs 2, 00, 000 L e s s : Amount transferred in 2013 = Rs 4, 00, 000 Amount transferred in 2014 = Rs 4, 00, 000$

Answer:

Books of HP Ltd.
Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2014
March 31	Statement of Profit and Loss		Dr.			7,50,000
	To Debenture Redemption Reserve						7,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
		To Bank A/c					1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in first instalment, i.e. Rs 10,00,000)
2015
March 31	8% Debenture A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)


April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in second instalment, i.e. Rs 10,00,000)
2016
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debenture holders)

April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in third instalment, i.e. Rs 10,00,000)
2017
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 3	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c					10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)


April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fourth instalment, i.e. Rs 10,00,000)
2018
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)


April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fifth instalment, i.e. Rs 10,00,000)
2019
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c		Dr.			12,50,000
	To General Reserve A/c						12,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year.

**Since nothing is specified, investments will be encashed before debentures are redeemed.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c	Dr.	Interest Rate $\times$ Amt. of Debentures outstanding
To Debentureholders’ A/c
(Interest due)

Debentureholders’ A/c	Dr.
To Bank A/c
(Payment of interest to debentureholders’)
		With the total amount of interest paid in a year
Statement of Profit and Loss	Dr.
To Debenture Interest A/c
(Transfer of debenture interest to Statement of Profit and Loss)

Question 23:

Books of HP Ltd.
Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2014
March 31	Statement of Profit and Loss		Dr.			7,50,000
	To Debenture Redemption Reserve						7,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
		To Bank A/c					1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in first instalment, i.e. Rs 10,00,000)
2015
March 31	8% Debenture A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)


April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in second instalment, i.e. Rs 10,00,000)
2016
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debenture holders)

April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in third instalment, i.e. Rs 10,00,000)
2017
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 3	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c					10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)


April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fourth instalment, i.e. Rs 10,00,000)
2018
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)


April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fifth instalment, i.e. Rs 10,00,000)
2019
March 31	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

March 31	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c		Dr.			12,50,000
	To General Reserve A/c						12,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year.

**Since nothing is specified, investments will be encashed before debentures are redeemed.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c	Dr.	Interest Rate $\times$ Amt. of Debentures outstanding
To Debentureholders’ A/c
(Interest due)

Debentureholders’ A/c	Dr.
To Bank A/c
(Payment of interest to debentureholders’)
		With the total amount of interest paid in a year
Statement of Profit and Loss	Dr.
To Debenture Interest A/c
(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Books of Shakti Enterprises Ltd.
Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011	�				�	�	�
Oct 01	Bank A/c			Dr.	�	30,00,000	�
�	�� To 8% Debentures A/c			�	�	�	30,00,000
�	(Debentures issued) �			�	�	�	�
2012	�			�	�	�	�
March 31	Statement of Profit & Loss			Dr.	�	50,000	�
�	�� To Debenture Redemption Reserve A/c			�	�	�	50,000
�	(DRR created) �			�	�	�	�
2013	�			�	�	�	�
March 31	Statement of Profit & Loss			Dr.	�	4,00,000	�
�	�� To Debenture Redemption Reserve A/c			�	�	�	4,00,000
�	(DRR created) �			�	�	�	�
2014	�			�	�	�	�
March 31	Statement of Profit & Loss			Dr.	�	3,00,000	�
�	�� To Debenture Redemption Reserve A/c			�	�	�	3,00,000
�	(DRR created) �			�	�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�	To Bank A/c			�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in first installment, i.e. Rs 6,00,000) �				�	�	�
2015	�				�	�	�
March 31	8% Debenture A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve				�	�	1,50,000
�	(DRR on 6,000 debentures transferred to General Reserve) �				�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in second instalment, i.e. Rs 6,00,000) �				�	�	�
2016	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debenture holders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve				�	�	1,50,000
�	(DRR on 6,000 debentures transferred to General Reserve) �				�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in third instalment, i.e. Rs 6,00,000) �				�	�	�
2017	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c�� Dr.				�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve				�	�	1,50,000
�	(DRR on 6,000 debentures transferred to General Reserve) �				�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fourth instalment, i.e. Rs 6,00,000) �				�	�	�
2018	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve �				�	�	1,50,000
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fifth instalment, i.e. Rs 6,00,000) �				�	�	�
2019	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c		Dr.		�	1,50,000	�
�	�� To General Reserve A/c				�	�	1,50,000
�	(Debenture Redemption Reserve transferred to General Reserve)				�	�	�
�	�				�	�	�
�	�	�	�	�	�	�	�

Note: Transfer of DRR to General Reserve at the end of every year in answer above (Rs 1,50,000) is different from the answer given in the book (Rs 60,000).

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year and will be passed before redemption of debentures every year in case of draw of lots.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c

�� To Debentureholders� A/c

(Interest due)

�

Debentureholders� A/c

�� To Bank A/c

(Payment of interest to debentureholders�)

Dr.

�

Dr.

�

Interest Rate
�
Amt. of Debentures outstanding

Statement of Profit and Loss

�� To Debenture Interest A/c

(Transfer of debenture interest to Statement of Profit and Loss)

�

With the total amount of interest paid in a year

Question 24:

Books of Shakti Enterprises Ltd.
Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2011	�				�	�	�
Oct 01	Bank A/c			Dr.	�	30,00,000	�
�	�� To 8% Debentures A/c			�	�	�	30,00,000
�	(Debentures issued) �			�	�	�	�
2012	�			�	�	�	�
March 31	Statement of Profit & Loss			Dr.	�	50,000	�
�	�� To Debenture Redemption Reserve A/c			�	�	�	50,000
�	(DRR created) �			�	�	�	�
2013	�			�	�	�	�
March 31	Statement of Profit & Loss			Dr.	�	4,00,000	�
�	�� To Debenture Redemption Reserve A/c			�	�	�	4,00,000
�	(DRR created) �			�	�	�	�
2014	�			�	�	�	�
March 31	Statement of Profit & Loss			Dr.	�	3,00,000	�
�	�� To Debenture Redemption Reserve A/c			�	�	�	3,00,000
�	(DRR created) �			�	�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�	To Bank A/c			�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in first installment, i.e. Rs 6,00,000) �				�	�	�
2015	�				�	�	�
March 31	8% Debenture A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve				�	�	1,50,000
�	(DRR on 6,000 debentures transferred to General Reserve) �				�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in second instalment, i.e. Rs 6,00,000) �				�	�	�
2016	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debenture holders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve				�	�	1,50,000
�	(DRR on 6,000 debentures transferred to General Reserve) �				�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in third instalment, i.e. Rs 6,00,000) �				�	�	�
2017	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c�� Dr.				�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve				�	�	1,50,000
�	(DRR on 6,000 debentures transferred to General Reserve) �				�	�	�
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fourth instalment, i.e. Rs 6,00,000) �				�	�	�
2018	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c�� Dr.				�	1,50,000	�
�	�� To General Reserve �				�	�	1,50,000
April 30	Debenture Redemption Investment A/c*			Dr.	�	90,000	�
�	�� To Bank A/c				�	�	90,000
�	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fifth instalment, i.e. Rs 6,00,000) �				�	�	�
2019	�				�	�	�
March 31	8% Debentures A/c		Dr.		�	6,00,000	�
�	�� To Debentureholders� A/c				�	�	6,00,000
�	(6,000 8% Debenture of Rs 100 each due for redemption) �				�	�	�
March 31	Bank A/c			Dr.	�	90,000	�
�	�� To Debenture Redemption Investment A/c				�	�	90,000
�	(Investment made in securities, now encashed) �				�	�	�
March 31	Debentureholders� A/c		Dr.		�	6,00,000	�
�	�� To Bank A/c				�	�	6,00,000
�	(Payment made to debentureholders) �				�	�	�
March 31	Debenture Redemption Reserve A/c		Dr.		�	1,50,000	�
�	�� To General Reserve A/c				�	�	1,50,000
�	(Debenture Redemption Reserve transferred to General Reserve)				�	�	�
�	�				�	�	�
�	�	�	�	�	�	�	�

Note: Transfer of DRR to General Reserve at the end of every year in answer above (Rs 1,50,000) is different from the answer given in the book (Rs 60,000).

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year and will be passed before redemption of debentures every year in case of draw of lots.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c

�� To Debentureholders� A/c

(Interest due)

�

Debentureholders� A/c

�� To Bank A/c

(Payment of interest to debentureholders�)

Dr.

�

Dr.

�

Interest Rate
�
Amt. of Debentures outstanding

Statement of Profit and Loss

�� To Debenture Interest A/c

(Transfer of debenture interest to Statement of Profit and Loss)

�

With the total amount of interest paid in a year

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Own Debentures A/c (1,000×92)	Dr.		92,000
	To Bank A/c				92,000
	(Own debentures purchased)

	Debentures A/c	Dr.		1,00,000
	To Own Debentures A/c				92,000
	To Profit on Cancellation of Own Debentures A/c				8,000
	(Own debentures cancelled)

	Profit on Cancellation of Own Debentures A/c	Dr.		8,000
	To Capital Reserve A/c				8,000
	(Profit on cancellation transferred to capital reserve)

Note: It is assumed that the company has sufficient balance in DRR and investment is also made.

Question 25:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Own Debentures A/c (1,000×92)	Dr.		92,000
	To Bank A/c				92,000
	(Own debentures purchased)

	Debentures A/c	Dr.		1,00,000
	To Own Debentures A/c				92,000
	To Profit on Cancellation of Own Debentures A/c				8,000
	(Own debentures cancelled)

	Profit on Cancellation of Own Debentures A/c	Dr.		8,000
	To Capital Reserve A/c				8,000
	(Profit on cancellation transferred to capital reserve)

Note: It is assumed that the company has sufficient balance in DRR and investment is also made.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
July 01	Own Debentures A/c (300×93)	Dr.		27,900
	To Bank A/c				27,900
	(Own debentures purchased)

	12% Debentures A/c	Dr.		30,000
	To Own Debentures A/c				27,900
	To Profit on Cancellation of Own Debentures A/c				2,100
	(Own debentures cancelled)

	Profit on Cancellation of Own Debentures A/c	Dr.		2,100
	To Capital Reserve A/c				2,100
	(Profit on cancellation transferred to capital reserve)

Note: It is assumed that the company has sufficient balance in DRR and investment is also made.

Question 26:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
July 01	Own Debentures A/c (300×93)	Dr.		27,900
	To Bank A/c				27,900
	(Own debentures purchased)

	12% Debentures A/c	Dr.		30,000
	To Own Debentures A/c				27,900
	To Profit on Cancellation of Own Debentures A/c				2,100
	(Own debentures cancelled)

	Profit on Cancellation of Own Debentures A/c	Dr.		2,100
	To Capital Reserve A/c				2,100
	(Profit on cancellation transferred to capital reserve)

Note: It is assumed that the company has sufficient balance in DRR and investment is also made.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Own Debentures A/c (250×98)	Dr.		24,500
	To Bank A/c				24,500
	(Own debentures purchased)

	Own Debentures A/c	Dr.		50
	To Bank A/c				50
	(Expenses for purchase of own debentures paid)

	15% Debentures A/c	Dr.		25,000
	To Own Debentures A/c (24500+50)				24,550
	To Profit on cancellation of own debentures A/c				450
	(Own debentures cancelled)

	Profit on cancellation of own debentures A/c	Dr.		450
	To Capital Reserve A/c				450
	(Profit on cancellation transferred to capital reserve)

Note: It is assumed that the company has sufficient balance in DRR and investment is also made.

Question 27:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Own Debentures A/c (250×98)	Dr.		24,500
	To Bank A/c				24,500
	(Own debentures purchased)

	Own Debentures A/c	Dr.		50
	To Bank A/c				50
	(Expenses for purchase of own debentures paid)

	15% Debentures A/c	Dr.		25,000
	To Own Debentures A/c (24500+50)				24,550
	To Profit on cancellation of own debentures A/c				450
	(Own debentures cancelled)

	Profit on cancellation of own debentures A/c	Dr.		450
	To Capital Reserve A/c				450
	(Profit on cancellation transferred to capital reserve)

Note: It is assumed that the company has sufficient balance in DRR and investment is also made.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Own Debentures A/c (1,00,000×10)	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Own debentures purchased)

	9% Debentures A/c	Dr.		10,00,000
	To Own Debentures A/c				10,00,000
	(Cancellation of own debentures)

Note:

It is assumed that the company has sufficient balance in DRR and investment is also made.
Also, there is neither gain nor loss on cancellation of own debentures.

Question 28:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Own Debentures A/c (1,00,000×10)	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Own debentures purchased)

	9% Debentures A/c	Dr.		10,00,000
	To Own Debentures A/c				10,00,000
	(Cancellation of own debentures)

Note:

It is assumed that the company has sufficient balance in DRR and investment is also made.
Also, there is neither gain nor loss on cancellation of own debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2013
April 01	Bank A/c (40,000×100)	Dr.		40,00,000
	To Debenture Application & Allotment A/c				40,00,000
	(Amount received on issue of 40,000 debentures)

April 01	Debenture Application & Allotment A/c	Dr.		40,00,000
	To 9% Debentures A/c				40,00,000
	(Allotment of 40,000 debentures made)

April 01	Securities Premium Reserve A/c	Dr.		12,000
	To Expenses on Issue of Debentures A/c				12,000
	(Expenses on issue of debentures written off)

2014
March 31	Debenture’s Interest A/c#	Dr.		3,60,000
	To Bank A/c				3,60,000
	(Interest paid on debentures)

March 31*	Statement of Profit and Loss (25% of Rs 40,00,000)	Dr.		10,00,000
	To Debenture Redemption Reserve A/c				10,00,000
	(Amount transferred to debenture redemption reserve)

April 30*	Debenture Redemption Investment A/c	Dr.		30,000
	To Bank A/c				30,000
	(Investment is made in specified securities equal to 15% of the nominal value of debentures due for redemption, i.e. Rs 2,00,000)

2015
March 31	Debenture’s Interest A/c#	Dr.		3,60,000
	To Bank A/c				3,60,000
	(Interest paid on debentures)

March 31	9% Debentures A/c	Dr.		2,00,000
	To Debentureholders’ A/c				2,00,000
	(Debentures due for payment)

March 31	Bank A/c**	Dr.		30,000
	To Debenture Redemption Investment A/c				30,000
	(Investments were encashed)

March 31	Debentureholders’ A/c			2,00,000
	To Bank A/c				2,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		50,000
	To General Reserve				50,000
	(DRR on 2,000 debentures transferred to General Reserve)

April 30*	Debenture Redemption Investment A/c	Dr.		30,000
	To Bank A/c				30,000
	(Investment is made in specified securities equal to 15% of the nominal value of debentures due for redemption, i.e. Rs 2,00,000)

2016
March 31	Debenture’s Interest A/c#	Dr.		3,42,000
	To Bank A/c				3,42,000
	(Interest paid on debentures)

March 31	Own Debentures A/c (2,000×98)	Dr.		1,96,000
	To Bank A/c				1,96,000
	(Own debentures purchased)

March 31	Own Debentures A/c	Dr.		400
	To Bank A/c				400
	(Expenses on issue of own debentures)

March 31	Debenture Redemption Reserve A/c	Dr.		50,000
	To General Reserve				50,000
	(DRR on 2,000 debentures transferred to General Reserve)

March 31	Bank A/c**	Dr.		30,000
	To Debenture Redemption Investment A/c				30,000
	(Investments were encashed)

March 31	9%Debentures A/c	Dr.		2,00,000
	To Own Debentures A/c				1,96,400
	To Profit on Cancellation of own debentures A/c				3,600
	(Own debentures cancelled)

March 31	Profit on Cancellation of own debentures A/c	Dr.		3,600
	To Capital Reserve A/c				3,600
	(Profit on cancellation transferred to capital reserve)

Notes:
1. * As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

2. DRR is created for the full amount of debentures, i.e. Rs 40,00,000, whereas, Debenture Redemption Investment is created for the nominal value of debentures redeeming on March 31, 2015.

3. ** We have assumed that investments were encashed every year before redemption of debentures. However, there can be another possibility where investments were not encashed after every redemption and it remain invested in the specified securities since debentures of Rs 2,00,000 are to be redeemed every year. Thus, any one method can be followed by giving an appropriate note.

4. Redemption entries were made for 2015 and 2016 only since nothing is specified in the question regarding the redemption of the remaining debentures.

5. # In order to align with the solution of the book we have provided only payment entry for interest on debentures. However, it is purely at student's discretion to pass the below-given entries for interest on debentures and these entries will be repeated every time with interest.

Debenture Interest A/c	Dr.	3,60,000
To Debentureholders’ A/c			3,60,000
(Interest due on 9% debentures)

Debentureholders’ A/c	Dr.	3,60,000
To Bank A/c			3,60,000
(Payment of interest to debentureholders’)

Statement of Profit and Loss	Dr.	3,60,000
To Debenture Interest A/c			3,60,000
(Transfer of debenture interest to Statement of Profit and Loss)

6. In redemption of debentures by purchase from open market, there can be two possibilities

When debentures are redeemed only by open market purchase: In this case we will create DRR and Debenture Redemption Investment only if it is specified in the question.
When debentures are redeemed using combination of any two methods (say, draw of lots and open-market or lump-sum and open market): In such a case, Debenture Redemption Investment will be made, even if nothing is stated in the question. Investments will be created for the 15% of value of debentures getting redeemed on March 31 of the year. Assuming adequate investment has been made in DRI will not be accepted, since this is not a pure case of open-market purchase.

Question 29:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2013
April 01	Bank A/c (40,000×100)	Dr.		40,00,000
	To Debenture Application & Allotment A/c				40,00,000
	(Amount received on issue of 40,000 debentures)

April 01	Debenture Application & Allotment A/c	Dr.		40,00,000
	To 9% Debentures A/c				40,00,000
	(Allotment of 40,000 debentures made)

April 01	Securities Premium Reserve A/c	Dr.		12,000
	To Expenses on Issue of Debentures A/c				12,000
	(Expenses on issue of debentures written off)

2014
March 31	Debenture’s Interest A/c#	Dr.		3,60,000
	To Bank A/c				3,60,000
	(Interest paid on debentures)

March 31*	Statement of Profit and Loss (25% of Rs 40,00,000)	Dr.		10,00,000
	To Debenture Redemption Reserve A/c				10,00,000
	(Amount transferred to debenture redemption reserve)

April 30*	Debenture Redemption Investment A/c	Dr.		30,000
	To Bank A/c				30,000
	(Investment is made in specified securities equal to 15% of the nominal value of debentures due for redemption, i.e. Rs 2,00,000)

2015
March 31	Debenture’s Interest A/c#	Dr.		3,60,000
	To Bank A/c				3,60,000
	(Interest paid on debentures)

March 31	9% Debentures A/c	Dr.		2,00,000
	To Debentureholders’ A/c				2,00,000
	(Debentures due for payment)

March 31	Bank A/c**	Dr.		30,000
	To Debenture Redemption Investment A/c				30,000
	(Investments were encashed)

March 31	Debentureholders’ A/c			2,00,000
	To Bank A/c				2,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		50,000
	To General Reserve				50,000
	(DRR on 2,000 debentures transferred to General Reserve)

April 30*	Debenture Redemption Investment A/c	Dr.		30,000
	To Bank A/c				30,000
	(Investment is made in specified securities equal to 15% of the nominal value of debentures due for redemption, i.e. Rs 2,00,000)

2016
March 31	Debenture’s Interest A/c#	Dr.		3,42,000
	To Bank A/c				3,42,000
	(Interest paid on debentures)

March 31	Own Debentures A/c (2,000×98)	Dr.		1,96,000
	To Bank A/c				1,96,000
	(Own debentures purchased)

March 31	Own Debentures A/c	Dr.		400
	To Bank A/c				400
	(Expenses on issue of own debentures)

March 31	Debenture Redemption Reserve A/c	Dr.		50,000
	To General Reserve				50,000
	(DRR on 2,000 debentures transferred to General Reserve)

March 31	Bank A/c**	Dr.		30,000
	To Debenture Redemption Investment A/c				30,000
	(Investments were encashed)

March 31	9%Debentures A/c	Dr.		2,00,000
	To Own Debentures A/c				1,96,400
	To Profit on Cancellation of own debentures A/c				3,600
	(Own debentures cancelled)

March 31	Profit on Cancellation of own debentures A/c	Dr.		3,600
	To Capital Reserve A/c				3,600
	(Profit on cancellation transferred to capital reserve)

Notes:
1. * As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

2. DRR is created for the full amount of debentures, i.e. Rs 40,00,000, whereas, Debenture Redemption Investment is created for the nominal value of debentures redeeming on March 31, 2015.

3. ** We have assumed that investments were encashed every year before redemption of debentures. However, there can be another possibility where investments were not encashed after every redemption and it remain invested in the specified securities since debentures of Rs 2,00,000 are to be redeemed every year. Thus, any one method can be followed by giving an appropriate note.

4. Redemption entries were made for 2015 and 2016 only since nothing is specified in the question regarding the redemption of the remaining debentures.

5. # In order to align with the solution of the book we have provided only payment entry for interest on debentures. However, it is purely at student's discretion to pass the below-given entries for interest on debentures and these entries will be repeated every time with interest.

Debenture Interest A/c	Dr.	3,60,000
To Debentureholders’ A/c			3,60,000
(Interest due on 9% debentures)

Debentureholders’ A/c	Dr.	3,60,000
To Bank A/c			3,60,000
(Payment of interest to debentureholders’)

Statement of Profit and Loss	Dr.	3,60,000
To Debenture Interest A/c			3,60,000
(Transfer of debenture interest to Statement of Profit and Loss)

6. In redemption of debentures by purchase from open market, there can be two possibilities

When debentures are redeemed only by open market purchase: In this case we will create DRR and Debenture Redemption Investment only if it is specified in the question.
When debentures are redeemed using combination of any two methods (say, draw of lots and open-market or lump-sum and open market): In such a case, Debenture Redemption Investment will be made, even if nothing is stated in the question. Investments will be created for the 15% of value of debentures getting redeemed on March 31 of the year. Assuming adequate investment has been made in DRI will not be accepted, since this is not a pure case of open-market purchase.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (1,000 $\times$ 100)	Dr.		1,00,000
	To Bank A/c				1,00,000
	(1,000, 10% debentures purchased @ 100 per debenture)

	10% Debentures A/c	Dr.		1,00,000
	Premium on Redemption of Debentures A/c (1,000 $\times$ 5)	Dr.		5,000
	To Own Debentures A/c				1,00,000
	To Gain on Cancellation of Own Debentures A/c				5,000
	(Own debentures cancelled)

	Gain on Cancellation of Own Debentures A/c	Dr.		5,000
	To Capital Reserve A/c				5,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Question 30:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (1,000 $\times$ 100)	Dr.		1,00,000
	To Bank A/c				1,00,000
	(1,000, 10% debentures purchased @ 100 per debenture)

	10% Debentures A/c	Dr.		1,00,000
	Premium on Redemption of Debentures A/c (1,000 $\times$ 5)	Dr.		5,000
	To Own Debentures A/c				1,00,000
	To Gain on Cancellation of Own Debentures A/c				5,000
	(Own debentures cancelled)

	Gain on Cancellation of Own Debentures A/c	Dr.		5,000
	To Capital Reserve A/c				5,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (1,500 $\times$ 95)	Dr.		1,42,500
	To Bank A/c				1,42,500
	(1,500, 11% debentures purchased @ 95 per debenture)

	11% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debentures A/c (1,500 $\times$ 10)	Dr.		15,000
	To Own Debentures A/c				1,42,500
	To Gain on Cancellation of Own Debentures A/c				22,500
	(Own debentures cancelled)

	Gain on Cancellation of Own Debentures A/c	Dr.		22,500
	To Capital Reserve A/c				22,500
	(Gain on cancellation of own debentures transferred to capital reserve )

Question 31:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (1,500 $\times$ 95)	Dr.		1,42,500
	To Bank A/c				1,42,500
	(1,500, 11% debentures purchased @ 95 per debenture)

	11% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debentures A/c (1,500 $\times$ 10)	Dr.		15,000
	To Own Debentures A/c				1,42,500
	To Gain on Cancellation of Own Debentures A/c				22,500
	(Own debentures cancelled)

	Gain on Cancellation of Own Debentures A/c	Dr.		22,500
	To Capital Reserve A/c				22,500
	(Gain on cancellation of own debentures transferred to capital reserve )

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (2,000 $\times$ 103)	Dr.		2,06,000
	To Bank A/c				2,06,000
	(2,000, 11% debentures purchased @103 per debenture)

	11% Debentures A/c (2,000 $\times$ 100)	Dr.		2,00,000
	Premium on Redemption of Debentures A/c (2,000 $\times$ 10)	Dr.		20,000
	To Own Debentures A/c				2,06,000
	To Gain on Cancellation of Own Debentures A/c				14,000
	(Own debentures cancelled)

	Gain on Cancellation of Own Debentures A/c	Dr.		14,000
	To Capital Reserve A/c				14,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Question 32:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (2,000 $\times$ 103)	Dr.		2,06,000
	To Bank A/c				2,06,000
	(2,000, 11% debentures purchased @103 per debenture)

	11% Debentures A/c (2,000 $\times$ 100)	Dr.		2,00,000
	Premium on Redemption of Debentures A/c (2,000 $\times$ 10)	Dr.		20,000
	To Own Debentures A/c				2,06,000
	To Gain on Cancellation of Own Debentures A/c				14,000
	(Own debentures cancelled)

	Gain on Cancellation of Own Debentures A/c	Dr.		14,000
	To Capital Reserve A/c				14,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (2,500 $\times$ 112)	Dr.		2,80,000
	To Bank A/c				2,80,000
	(2,500, 10% debentures purchased @112 per debenture)

	10% Debentures A/c (2,500 $\times$ 100)	Dr.		2,50,000
	Premium on Redemption of Debentures A/c (2,500 $\times$ 10)	Dr.		25,000
	Loss on Cancellation of Debentures A/c	Dr.		5,000
	To Own Debentures A/c				2,80,000
	(Own debentures cancelled)

Question 33:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Own Debentures A/c (2,500 $\times$ 112)	Dr.		2,80,000
	To Bank A/c				2,80,000
	(2,500, 10% debentures purchased @112 per debenture)

	10% Debentures A/c (2,500 $\times$ 100)	Dr.		2,50,000
	Premium on Redemption of Debentures A/c (2,500 $\times$ 10)	Dr.		25,000
	Loss on Cancellation of Debentures A/c	Dr.		5,000
	To Own Debentures A/c				2,80,000
	(Own debentures cancelled)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2013
Apr.01	Bank A/c (4,500 $\times$ 105)	Dr.		4,72,500
	To Debentures Application A/c				4,72,500
	(Received application money on 4,500 debentures)

Apr.01	Debentures Application A/c	Dr.		4,72,500
	Loss on Issue of Debentures A/c (4,500 $\times$ 10)	Dr.		45,000
	To 10% Debentures A/c (4,500 $\times$ 100)				4,50,000
	To Security Premium Reserve A/c (4,500 $\times$ 5)				22,500
	To Premium on Redemption of Debentures A/c (4,500 $\times$ 10)				45,000
	(Transfer of application money to Share Capital)
2015
Mar.31	Surplus, i.e., Balance in Statement of Profit & Loss A/c	Dr.		1,12,500
	To Debenture Redemption Reserve A/c				1,12,500
	(DRR created of amount equal to 25% of the value of debentures)

Apr. 30	Debenture Redemption Investment A/c	Dr.		22,500
	To Bank A/c				22,500
	(15% of the amount of debentures to be redeemed on March 31, 2016 invested)
2016
Jan.01	Own Debentures A/c (1,500 $\times$ 98)	Dr.		1,47,000
	To Bank A/c				1,47,000
	(1,500, 10% debentures purchased @ 98 per debenture)

Mar.31	10% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debentures A/c (1,500 $\times$ 10)	Dr.		15,000
	To Own Debentures A/c				1,47,000
	To Gain on Cancellation of Own Debentures A/c				18,000
	(Own debentures cancelled)

Mar.31	Gain on Cancellation of Own Debentures A/c	Dr.		18,000
	To Capital Reserve A/c				18,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Mar.31	Debenture Redemption Reserve A/c	Dr.		37,500
	To General Reserve A/c				37,500
	(DRR on 1,500 debentures transferred to General Reserve)

Apr. 30	Debenture Redemption Investment A/c	Dr.		22,500
	To Bank A/c				22,500
	(15% of the amount of debentures to be redeemed on March 31, 2017 invested)
2017
Mar.01	Own Debentures A/c (1,500 $\times$ 106)	Dr.		1,59,000
	To Bank A/c				1,59,000
	(1,500, 10% debentures purchased @ 106 per debenture)

Mar.31	10% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debentures A/c (1,500 $\times$ 10)	Dr.		15,000
	To Own Debentures A/c				1,59,000
	To Gain on Cancellation of Own Debentures A/c				6,000
	(Own debentures cancelled)

Mar.31	Gain on Cancellation of Own Debentures A/c	Dr.		6,000
	To Capital Reserve A/c				6,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Mar.31	Debenture Redemption Reserve A/c	Dr.		37,500
	To General Reserve				37,500
	(DRR on 1,500 debentures transferred to General Reserve)

Apr. 30	Debenture Redemption Investment A/c	Dr.		22,500
	To Bank A/c				22,500
	(15% of the amount of debentures to be redeemed on March 31, 2016 invested)
2018
Mar.15	Own Debentures A/c (1,500 $\times$ 115)	Dr.		1,72,500
	To Bank A/c				1,72,500
	(1,500, 10% debentures purchased @ 115 per debenture)

Mar.31	10% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debenture A/c (1,500 $\times$ 10)	Dr.		15,000
	Loss on Cancellation of Own Debentures A/c	Dr.		7,500
	To Own Debentures A/c				1,72,500
	(Own debentures cancelled)

Mar.31	Bank A/c	Dr.		67,500
	To Debentures Redemption Investment A/c				67,500
	(Investment encashed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		37,500
	To General Reserve A/c				37,500
	(DRR transferred to general reserve)

Question 34:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2013
Apr.01	Bank A/c (4,500 $\times$ 105)	Dr.		4,72,500
	To Debentures Application A/c				4,72,500
	(Received application money on 4,500 debentures)

Apr.01	Debentures Application A/c	Dr.		4,72,500
	Loss on Issue of Debentures A/c (4,500 $\times$ 10)	Dr.		45,000
	To 10% Debentures A/c (4,500 $\times$ 100)				4,50,000
	To Security Premium Reserve A/c (4,500 $\times$ 5)				22,500
	To Premium on Redemption of Debentures A/c (4,500 $\times$ 10)				45,000
	(Transfer of application money to Share Capital)
2015
Mar.31	Surplus, i.e., Balance in Statement of Profit & Loss A/c	Dr.		1,12,500
	To Debenture Redemption Reserve A/c				1,12,500
	(DRR created of amount equal to 25% of the value of debentures)

Apr. 30	Debenture Redemption Investment A/c	Dr.		22,500
	To Bank A/c				22,500
	(15% of the amount of debentures to be redeemed on March 31, 2016 invested)
2016
Jan.01	Own Debentures A/c (1,500 $\times$ 98)	Dr.		1,47,000
	To Bank A/c				1,47,000
	(1,500, 10% debentures purchased @ 98 per debenture)

Mar.31	10% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debentures A/c (1,500 $\times$ 10)	Dr.		15,000
	To Own Debentures A/c				1,47,000
	To Gain on Cancellation of Own Debentures A/c				18,000
	(Own debentures cancelled)

Mar.31	Gain on Cancellation of Own Debentures A/c	Dr.		18,000
	To Capital Reserve A/c				18,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Mar.31	Debenture Redemption Reserve A/c	Dr.		37,500
	To General Reserve A/c				37,500
	(DRR on 1,500 debentures transferred to General Reserve)

Apr. 30	Debenture Redemption Investment A/c	Dr.		22,500
	To Bank A/c				22,500
	(15% of the amount of debentures to be redeemed on March 31, 2017 invested)
2017
Mar.01	Own Debentures A/c (1,500 $\times$ 106)	Dr.		1,59,000
	To Bank A/c				1,59,000
	(1,500, 10% debentures purchased @ 106 per debenture)

Mar.31	10% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debentures A/c (1,500 $\times$ 10)	Dr.		15,000
	To Own Debentures A/c				1,59,000
	To Gain on Cancellation of Own Debentures A/c				6,000
	(Own debentures cancelled)

Mar.31	Gain on Cancellation of Own Debentures A/c	Dr.		6,000
	To Capital Reserve A/c				6,000
	(Gain on cancellation of own debentures transferred to capital reserve )

Mar.31	Debenture Redemption Reserve A/c	Dr.		37,500
	To General Reserve				37,500
	(DRR on 1,500 debentures transferred to General Reserve)

Apr. 30	Debenture Redemption Investment A/c	Dr.		22,500
	To Bank A/c				22,500
	(15% of the amount of debentures to be redeemed on March 31, 2016 invested)
2018
Mar.15	Own Debentures A/c (1,500 $\times$ 115)	Dr.		1,72,500
	To Bank A/c				1,72,500
	(1,500, 10% debentures purchased @ 115 per debenture)

Mar.31	10% Debentures A/c (1,500 $\times$ 100)	Dr.		1,50,000
	Premium on Redemption of Debenture A/c (1,500 $\times$ 10)	Dr.		15,000
	Loss on Cancellation of Own Debentures A/c	Dr.		7,500
	To Own Debentures A/c				1,72,500
	(Own debentures cancelled)

Mar.31	Bank A/c	Dr.		67,500
	To Debentures Redemption Investment A/c				67,500
	(Investment encashed)

Mar.31	Debenture Redemption Reserve A/c	Dr.		37,500
	To General Reserve A/c				37,500
	(DRR transferred to general reserve)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2005-06	Bank A/c (5,000�100)	Dr.	�	5,00,000	�
�	�� To Debenture Application A/c	�	�	�	5,00,000
�	(Amount received on issue of 5,000 debentures)	�	�	�	�
�	�	�	�	�	�
�	Debenture Application A/c	Dr.	�	5,00,000	�
�	�� To 10% Debentures A/c	�	�	�	5,00,000
�	(Allotment of 5,000 debentures done)	�	�	�	�
�	�	�	�	�	�
2005	�	�	�	�	�
Sept. 30	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debentureholders� A/c	�	�	�	25,000
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debentureholders� A/c	Dr.	�	25,000	�
�	� To Bank A/c	�	�	�	25,000
�	(Payment made to debentureholders)	�	�	�	�
�	�	�	�	�	�
2006	�	�	�	�	�
Mar. 31	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debentureholders� A/c	�	�	�	25,000
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debentureholders� A/c	Dr.	�	25,000	�
�	� To Bank A/c	�	�	�	25,000
�	(Payment made to debentureholders)	�	�	�	�
�	�	�	�	�	�
�	Statement of Profit and Loss	Dr.	�	50,000	�
�	�� To Debenture�s Interest A/c	�	�	�	50,000
�	�	�	�	�	�
*From* Sept. 30, 2006 to March 31, 2013	Pass the above Journal entries every year on September 30 and March 31 of the following years- 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013)	�	�	�	�
�	�	�	�	�	�
2013	�	�	�	�	�
Apr. 01	Investment in Own Debentures A/c	Dr.	�	48,000	�
�	�� To Bank A/c	�	�	�	48,000
�	(Own debentures purchased)	�	�	�	�
�	�	�	�	�	�
Apr. 30	Debenture Redemption Investment A/c	Dr.	�	7,500	�
�	�� To Bank A/c	�	�	�	7,500
�	(Investments made @ 15% of the face value of debentures redeeming on March 31, 2014)	�	�	�	�
�	�	�	�	�	�
Sept 30	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debenture holder�s A/c	�	�	�	22,500
�	�� To Interest on Own Debentures A/c	�	�	�	2,500
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debenture holder�s A/c	Dr.	�	22,500	�
�	�� To Bank A/c	�	�	�	22,500
�	(Payment of Interest on debentures to outsiders)	�	�	�	�
�	�	�	�	�	�
2014	�	�	�	�	�
Mar. 31	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debenture holder�s A/c	�	�	�	22,500
�	�� To Interest on Own Debentures A/c	�	�	�	2,500
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debenture holder�s A/c	Dr.	�	22,500	�
�	�� To Bank A/c	�	�	�	22,500
�	(Payment of Interest on debentures to outsiders)	�	�	�	�
�	�	�	�	�	�
�	Interest on Own Debentures A/c	Dr.	�	5,000	�
�	�� To Statement of Profit and Loss	�	�	�	5,000
�	(Interest on own debentures credited to statement of profit and loss)	�	�	�	�
�	�	�	�	�	�
�	Statement of Profit and Loss	Dr.	�	50,000	�
�	� To Debenture�s Interest A/c	�	�	�	50,000
�	(Debenture interest transferred to statement of profit and loss)	�	�	�	�
�	�	�	�	�	�
�	Bank A/c	Dr.	�	7,500	�
�	�� To Debenture Redemption Investment A/c	�	�	�	7,500
�	(Investments were encashed)	�	�	�	�
�	�	�	�	�	�
�	10% Debentures A/c	Dr.	�	50,000	�
�	�� To Investment in Own Debentures A/c	�	�	�	48,000
�	�� To Profit on Cancellation of own debentures A/c	�	�	�	2,000
�	(Own debentures cancelled)	�	�	�	�
�	�	�	�	�	�
�	Profit on Cancellation of own debentures A/c	Dr.	�	2,000	�
�	�� To Capital Reserve A/c	�	�	�	2,000
�	(Profit on cancellation transferred to capital reserve)	�	�	�	�
�	�	�	�	�	�

Note: In this question the balance of Debenture Redemption Reserve is already given to us. Thus, there is no need to create DRR in this case. However, since nothing is mentioned about the debenture redemption investment, thus, we will create it @ 15% of the debentures redeeming, i.e. Rs 50,000.

Question 35:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2005-06	Bank A/c (5,000�100)	Dr.	�	5,00,000	�
�	�� To Debenture Application A/c	�	�	�	5,00,000
�	(Amount received on issue of 5,000 debentures)	�	�	�	�
�	�	�	�	�	�
�	Debenture Application A/c	Dr.	�	5,00,000	�
�	�� To 10% Debentures A/c	�	�	�	5,00,000
�	(Allotment of 5,000 debentures done)	�	�	�	�
�	�	�	�	�	�
2005	�	�	�	�	�
Sept. 30	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debentureholders� A/c	�	�	�	25,000
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debentureholders� A/c	Dr.	�	25,000	�
�	� To Bank A/c	�	�	�	25,000
�	(Payment made to debentureholders)	�	�	�	�
�	�	�	�	�	�
2006	�	�	�	�	�
Mar. 31	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debentureholders� A/c	�	�	�	25,000
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debentureholders� A/c	Dr.	�	25,000	�
�	� To Bank A/c	�	�	�	25,000
�	(Payment made to debentureholders)	�	�	�	�
�	�	�	�	�	�
�	Statement of Profit and Loss	Dr.	�	50,000	�
�	�� To Debenture�s Interest A/c	�	�	�	50,000
�	�	�	�	�	�
*From* Sept. 30, 2006 to March 31, 2013	Pass the above Journal entries every year on September 30 and March 31 of the following years- 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013)	�	�	�	�
�	�	�	�	�	�
2013	�	�	�	�	�
Apr. 01	Investment in Own Debentures A/c	Dr.	�	48,000	�
�	�� To Bank A/c	�	�	�	48,000
�	(Own debentures purchased)	�	�	�	�
�	�	�	�	�	�
Apr. 30	Debenture Redemption Investment A/c	Dr.	�	7,500	�
�	�� To Bank A/c	�	�	�	7,500
�	(Investments made @ 15% of the face value of debentures redeeming on March 31, 2014)	�	�	�	�
�	�	�	�	�	�
Sept 30	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debenture holder�s A/c	�	�	�	22,500
�	�� To Interest on Own Debentures A/c	�	�	�	2,500
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debenture holder�s A/c	Dr.	�	22,500	�
�	�� To Bank A/c	�	�	�	22,500
�	(Payment of Interest on debentures to outsiders)	�	�	�	�
�	�	�	�	�	�
2014	�	�	�	�	�
Mar. 31	Debenture�s Interest A/c	Dr.	�	25,000	�
�	�� To Debenture holder�s A/c	�	�	�	22,500
�	�� To Interest on Own Debentures A/c	�	�	�	2,500
�	(Interest due on debentures)	�	�	�	�
�	�	�	�	�	�
�	Debenture holder�s A/c	Dr.	�	22,500	�
�	�� To Bank A/c	�	�	�	22,500
�	(Payment of Interest on debentures to outsiders)	�	�	�	�
�	�	�	�	�	�
�	Interest on Own Debentures A/c	Dr.	�	5,000	�
�	�� To Statement of Profit and Loss	�	�	�	5,000
�	(Interest on own debentures credited to statement of profit and loss)	�	�	�	�
�	�	�	�	�	�
�	Statement of Profit and Loss	Dr.	�	50,000	�
�	� To Debenture�s Interest A/c	�	�	�	50,000
�	(Debenture interest transferred to statement of profit and loss)	�	�	�	�
�	�	�	�	�	�
�	Bank A/c	Dr.	�	7,500	�
�	�� To Debenture Redemption Investment A/c	�	�	�	7,500
�	(Investments were encashed)	�	�	�	�
�	�	�	�	�	�
�	10% Debentures A/c	Dr.	�	50,000	�
�	�� To Investment in Own Debentures A/c	�	�	�	48,000
�	�� To Profit on Cancellation of own debentures A/c	�	�	�	2,000
�	(Own debentures cancelled)	�	�	�	�
�	�	�	�	�	�
�	Profit on Cancellation of own debentures A/c	Dr.	�	2,000	�
�	�� To Capital Reserve A/c	�	�	�	2,000
�	(Profit on cancellation transferred to capital reserve)	�	�	�	�
�	�	�	�	�	�

Note: In this question the balance of Debenture Redemption Reserve is already given to us. Thus, there is no need to create DRR in this case. However, since nothing is mentioned about the debenture redemption investment, thus, we will create it @ 15% of the debentures redeeming, i.e. Rs 50,000.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
July 01	Own Debentures A/c	Dr.		37,200
	To Bank A/c (400 $\times$ 93)				37,200
	(Own Debenture purchased)

	Bank A/c (400 $\times$ 99)	Dr.		39,600
	To Own Debentures A/c				37,200
	To Gain on sale of Own Debentures A/c				2,400
	(Own Debenture sold at a profit)

	Gain on sale of Own Debentures A/c	Dr.		2,400
	To Capital Reserve				2,400
	(Gain transferred to Capital Reserve)

Question 36:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
July 01	Own Debentures A/c	Dr.		37,200
	To Bank A/c (400 $\times$ 93)				37,200
	(Own Debenture purchased)

	Bank A/c (400 $\times$ 99)	Dr.		39,600
	To Own Debentures A/c				37,200
	To Gain on sale of Own Debentures A/c				2,400
	(Own Debenture sold at a profit)

	Gain on sale of Own Debentures A/c	Dr.		2,400
	To Capital Reserve				2,400
	(Gain transferred to Capital Reserve)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2011
July 31	Bank A/c	Dr.		11,00,000
	To Debenture Application & Allotment A/c				11,00,000
	(Amount received on Application)

	Debenture Application & Allotment A/c	Dr.		11,00,000
	Loss on Issue of Debenture A/c	Dr.		2,00,000
	To 8% Debentures				10,00,000
	To Securities Premium Reserve				1,00,000
	To Premium on Redemption of Debentures A/c				2,00,000
	(20,000 8% Debentures issued at 10% premium and redeemable at 20% premium)
2012
March 31	Debenture Interest A/c	Dr.		53,333
	To Debentureholders’ A/c				48,000
	To TDS Payable A/c				5,333
	(Interest on debentures payable, TDS deducted@10%)

March 31	Surplus, i.e., Statement of Profit and Loss	Dr		1,25,000
	To Debenture Redemption Reserve A/c				1,25,000
	(Profit transferred to Debenture Redemption Reserve)
2013
March 31	Debenture Interest A/c	Dr.		80,000
	To Debentureholders’ A/c				72,000
	To TDS Payable A/c				8,000
	(Interest on debentures payable, TDS deducted@10%)

March 31	Surplus, i.e., Statement of Profit and Loss	Dr		1,25,000
	To Debenture Redemption Reserve A/c				1,25,000
	(Profit transferred to Debenture Redemption Reserve)

April 1	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment made as fixed deposit, earning interest @6%)
2014
March 31	Debenture Interest A/c	Dr.		80,000
	To Debentureholders’ A/c				72,000
	To TDS Payable A/c				8,000
	(Interest on debentures payable, TDS deducted@10%)

March 31	Bank A/c	Dr.		8,100
	TDS Collected (Receivable) A/c	Dr.		900
	To Interest Earned A/c				9,000
	(Being the fixed deposit realised on redemption, interest received@6%)

March 31	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		50,000
	To Debentureholders’ A/c				3,00,000
	(Amount due on redemption)

March 31	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due on redemption paid)

March 31	Debenture Redemption Reserve A/c	Dr.		62,500
	To General Reserve A/c				62,500
	(DRR transferred to General Reserve)

2015
March 31	Debenture Interest A/c	Dr.		60,000
	To Debentureholders’ A/c				54,000
	To TDS Payable A/c				6,000
	(Interest on debentures payable, TDS deducted@10%)

March 31	Bank A/c	Dr.		8,100
	TDS Collected (Receivable) A/c	Dr.		900
	To Interest Earned A/c				9,000
	(Being the fixed deposit realised on redemption, interest received@6%)

March 31	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		50,000
	To Debentureholders’ A/c				3,00,000
	(Amount due on redemption)

March 31	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due on redemption paid)

March 31	Debenture Redemption Reserve A/c	Dr.		62,500
	To General Reserve A/c				62,500
	(DRR transferred to General Reserve)

2016
March 31	Debenture Interest A/c	Dr.		40,000
	To Debentureholders’ A/c				36,000
	To TDS Payable A/c				4,000
	(Interest on debentures payable, TDS deducted@10%)

March 31	Bank A/c	Dr.		8,100
	TDS Collected (Receivable) A/c	Dr.		900
	To Interest Earned A/c				9,000
	(Being the fixed deposit realised on redemption, interest received@6%)

March 31	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		50,000
	To Debentureholders’ A/c				3,00,000
	(Amount due on redemption)

March 31	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due on redemption paid)

March 31	Debenture Redemption Reserve A/c	Dr.		62,500
	To General Reserve A/c				62,500
	(DRR transferred to General Reserve)

2017
March 31	Debenture Interest A/c	Dr.		20,000
	To Debentureholders’ A/c				18,000
	To TDS Payable A/c				2,000
	(Interest on debentures payable, TDS deducted@10%)

March 31	Bank A/c	Dr.		1,58,100
	TDS Collected (Receivable) A/c	Dr.		900
	To Debenture Redemption Investment A/c				1,50,000
	To Interest Earned A/c				9,000
	(Being the fixed deposit realised on redemption, interest received@6%)

March 31	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		50,000
	To Debentureholders’ A/c				3,00,000
	(Amount due on redemption)

March 31	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due on redemption paid)

March 31	Debenture Redemption Reserve A/c	Dr.		62,500
	To General Reserve A/c				62,500
	(DRR transferred to General Reserve)

Double Entry Book Keeping Ts Grewal 2017 Solutions for Class 12 Commerce Accountancy Chapter 8 - Joint Stock Company Accounts Redemption Of Debentures

Page No 8.33:

Question 1:

Answer:

Page No 8.33:

Question 2:

Answer:

Page No 8.33:

Question 3:

Answer:

Page No 8.33:

Question 4:

Answer:

Page No 8.33:

Question 5:

Answer:

Page No 8.33:

Question 6:

Answer:

Page No 8.33:

Question 7:

Answer:

Page No 8.33:

Question 8:

Answer:

Page No 8.34:

Question 9:

Answer:

Page No 8.34:

Question 10:

Answer:

Page No 8.34:

Question 11:

Answer:

Page No 8.34:

Question 12:

Answer:

Page No 8.34:

Question 13:

Answer:

Page No 8.34:

Question 14:

Answer:

Page No 8.34:

Question 15:

Answer:

Page No 8.34:

Question 16:

Answer:

Page No 8.34:

Question 17:

Answer:

Page No 8.34:

Question 18:

Answer:

Page No 8.35:

Question 19:

Answer:

Page No 8.35:

Question 20:

Answer:

Page No 8.35:

Question 21:

Answer:

Page No 8.35:

Question 22:

Answer:

Page No 8.35:

Question 23:

Answer:

Page No 8.35:

Question 24:

Answer:

Page No 8.35:

Question 25:

Answer:

Page No 8.35:

Question 26:

Answer:

Page No 8.35: