Debentures are also known bonds and debt but there are slightly differences.
Company issues debentures; government and semi government issues bonds.
Both debentures and bonds are long-term loan.
The owner of debentures is called debenture holders.
Debentures have fixed interest rate and maturity period.
Normally, interest is payable annually or sometime half yearly.
Debenture holders have priority to receive interest and refund money before equity shareholder at the time dissolution of firm.
When a company issues its debentures more than par or face value, it is called debentures issued at premium. Premium on issue of debentures is capital profit.
It is credited in journal entry and is shown in liabilities side of balance sheet.
Value of one debenture Rs 100 ® issued at Rs 110 or Rs 120 or more |
Keep in Mind (KIM)
There are two methods for debentures premium. Due method and receipt methods. Due method is applied more than receipt. Therefore only due method is applied in this book |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 3
ABC Company Ltd issued 50,000; 8% debentures Rs 100 each for Rs 105 per Debentures. The amount payable as under:
On application Rs 40; On allotment Rs 50; On first and final call Rs 30
All the debentures were issued, called and paid up. The entire amount was duly received.
Required: Journal entries
[Answer: premium = Rs 250,000]
Solution:
Given and working note:
Shares Issued |
Issued Price |
Installation |
|
Arrears and Advance |
|
Share Applied |
Shares Allotted |
100,000 |
100+5P |
Application Allotment F&F call |
40 50 [45C+5P] 15 |
|
|
|
|
Note: Lack of information, premium is adjusted with allotment
Journal Entries
In the book of ABC Company Ltd
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
Received |
Amount received on application |
|
|
|
|
|
Bank account To Debentures application account (Being- amount received on 50,000 debentures @ Rs 40) |
Dr
|
|
10,00,000
|
10,00,000 |
Transfer |
Amount transfer of application |
|
|
|
|
|
Debentures application account To 8% Debentures account (Being- amount transfer of application to debentures) |
Dr
|
|
10,00,000
|
10,00,000 |
Due |
Amount due/receivable on allotment |
|
|
|
|
|
Debentures allotment account To 8% Debentures account To Premium on issue of deb. (security premium) (Being- amount due/ receivable on allotment and premium adjusted) |
Dr
|
|
25,00,000
|
22,50,000 2,50,000 |
Received |
Amount received on allotment |
|
|
|
|
|
Bank account To Debentures allotment account (Being- amount received on 50,000 debentures @ Rs 50) |
Dr
|
|
25,00,000
|
25,00,000 |
Due |
Amount due/receivable on calls |
|
|
|
|
|
Debentures first and final call account To 8% Debentures account (Being- amount due/ receivable on calls) |
Dr
|
|
7,50,000 |
7,50,000 |
Received |
Amount received on calls |
|
|
|
|
|
Bank account To Debentures first and final call account (Being- amount received on 50,000 debentures @ Rs 15) |
Dr
|
|
7,50,000 |
7,50,000 |
#####
Click on link for YouTube videos
SHARE (ACCOUNTING FOR SHARE) http://tiny.cc/889jkz
SHARE IN Nepali http://tiny.cc/k99jkz
DEBENTURES http://tiny.cc/yeakkz
FINAL ACCOUNT: CLASS 12 http://tiny.cc/e89jkz
FINAL ACCOUNT IN NEPALI http://tiny.cc/w89jkz
WORK SHEET http://tiny.cc/579jkz
RATIO ANALYSIS (ACCOUNTING RATIO) http://tiny.cc/4fakkz
FUND FLOW STATEMENT http://tiny.cc/wiakkz
CASH FLOW STATEMENT http://tiny.cc/8gakkz
THEORY ACCOUNTING XII http://tiny.cc/nfakkz
THEORY: COST ACCOUNTING http://tiny.cc/tfakkz
COST ACCOUNTING http://tiny.cc/p29jkz
LIFO−FIFO http://tiny.cc/dgakkz
COST SHEET, UNIT COSTING http://tiny.cc/w49jkz
COST RECONCILIATION STATEMENT http://tiny.cc/829jkz
#####
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Basic Problem: 3 [issued at premium]
MB Company Ltd issued 100,000; 10% debentures of Rs 100 each at Rs 110, payable as under:
On application Rs 30; On allotment Rs 50 (including premium); On first and final call Rs 30
All the debentures were subscribed and allotted. All the money was duly received.
Required: Journal entry for the issue of debentures
[Answer: Premium = Rs 10,00,000]
***********
Thank you for investing your time.
Please comment on article.
You can help me by sharing this article at your social media platform.
Jay Google, Jay YouTube, Jay Social Media
जय गूगल, जय युट्युब, जय सोशल मीडिया