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.
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:
Shares Issued |
Issued Price |
Installation |
|
Arrears and Advance |
|
Share Applied |
Shares Allotted |
40,000 |
100 –10D |
Application Allotment First & Final call |
25 45 [55C–10D] 20 |
|
|
|
|
Note: lack of information, premium is adjusted with allotment
Journal Entries
In the book of Soniya Corporation Ltd
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
Received |
Amount received on application |
|
|
|
|
|
Bank account To Debentures application account (Being- amount received on 40,000 debentures @ Rs 25) |
Dr
|
|
10,00,000
|
10,00,000 |
Transfer |
Amount transfer of application |
|
|
|
|
|
Debentures application account To 6% 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 Discount on issue of debentures account To 6% Debentures account (Being- amount due/ receivable on allotment and discount adjusted) |
Dr Dr
|
|
18,00,000 4,00,000 |
22,00,000 |
Received |
Amount received on allotment |
|
|
|
|
|
Bank account To Debentures allotment account (Being- amount received on 40,000 debentures @ Rs 45) |
Dr
|
|
18,00,000
|
18,00,000 |
Due |
Amount due/receivable on calls |
|
|
|
|
|
Debentures first and final call account To 6% Debentures account (Being- amount due/ receivable on calls) |
Dr
|
|
8,00,000 |
8,00,000 |
Received |
Amount received on calls |
|
|
|
|
|
Bank account To Debentures first and final call account (Being- amount received on 40,000 debentures @ Rs 20) |
Dr
|
|
8,00,000 |
8,00,000 |
#####
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SHARE IN Nepali http://tiny.cc/k99jkz
DEBENTURES http://tiny.cc/yeakkz
FINAL ACCOUNT: CLASS 12 http://tiny.cc/e89jkz
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#####
PROBLEMS AND ANSWERS |
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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