Under Subscription on Debentures

Meaning of Debentures

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.

Under Subscription on Debentures

Sometimes when company is new or bearing losses, debentures applicants do not like to purchase debentures. In such a condition public applied less than offered debentures of the company.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

PROBLEM: 6

Soniya Corporation Ltd issued 50,000; 6% debentures of $/₹/Rs 100 each for Rs 90 per debentures. The amount payable as under:

On application Rs 25; on allotment Rs 45; on first and final call Rs 20

The Company received 40,000 applications. All the debentures were issued, called and paid up. The entire amount was duly received.

Required: Journal entries

[Answer: Discount = Rs 400,000]

Solution:

Given and working note:

Note: lack of information, premium is adjusted with allotment

Journal Entries

In the book of Soniya Corporation Ltd

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SHARE (ACCOUNTING FOR SHARE) http://tiny.cc/889jkz

SHARE IN Nepali  http://tiny.cc/k99jkz

DEBENTURES http://tiny.cc/yeakkz

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

AP: 10        [under subscription]

XYZ Company Limited issued 100,000; 8% Debentures of $/₹/Rs 100 each.  The amount was payable as following:

On application Rs 30; on allotment Rs 40; on first and final call Rs 20       

Applicants applied for 80,000 debentures. The entire amount was received except a debenture holder Mr. Sharma, who held 200 shares failed to pay calls. The company paid Rs 50,000 for debenture issue expenses.

Required: Journal entries

[Answer: Calls in arrears = Rs 4,000]

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