TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures

Read TS Grewal Accountancy Class 12 Solution Chapter 9 Company Accounts Issue of Debentures 2023 2024. Students should study TS Grewal Solutions Class 12 Accountancy available on Studiestoday.com with solved questions and answers. These chapter-wise answers for Class 12 Accountancy have been prepared by expert teachers of Grade 12. These TS Grewal Class 12 Solutions have been designed as per the latest accountancy TS Grewal Book for Class 12 and if practiced thoroughly can help you to score good marks in standard 12 Accounts class tests and examinations.

Class 12 Accounts Chapter 9 Company Accounts Issue of Debentures TS Grewal Solutions

TS Grewal Solutions for Chapter 9 Company Accounts Issue of Debentures Class 12 Accounts have been provided below based on the latest TS Grewal Class 12 book. The answers have been prepared based on the latest 2023 2024 book for the current academic year. TS Grewal Solutions Class 12 will help students to improve their concepts and easily solve accountancy questions for Class 12. Class 12 Grewal solutions should be revised regularly as more practice will help you get a better rank and easily solve more questions.

Chapter 9 Company Accounts Issue of Debentures TS Grewal Class 12 Solutions

About the chapter: TS Grewal Class 12 Chapter 9 explains concepts and provides questions relating to the Company Accounts Issue of Debentures. This chapter is very important as a lot of questions are asked in exams from here. There are detailed notes relating to the process of issuing debentures, types of debentures, advantages, and disadvantages, and accounting entries associated with the issuance of debentures. It also has concepts relating to redeemable, irredeemable, convertible, and non-convertible debentures. Other topics such as the benefits and drawbacks of issuing debentures, advantages of acquiring long-term capital for the company etc have been also explained. There are a lot of solved practical questions relating to different methods of issuing debentures such as at par, premium, and discount, and how the interest on debentures is calculated. Students should also learn the accounting treatment for the issue of debentures, including the preparation of journal entries, ledger accounts, and balance sheets.

Students will be able to get a detailed understanding of the issue of debentures and the accounting procedures associated with them. Please refer to the solutions for the practical questions provided in this chapter below. They have been prepared by expert accountancy teachers.

TS Grewal Class 12 Accounting for Companies
Textbook for CBSE Class 12
TS Grewal Solutions Class 12 Accountancy
Chapter 9 Company Accounts - Issue of Debentures

Very Short Answer Type Questions:-
 
Question 1. Give the meaning of ‘Debenture’.
 
Answer:
Debenture is an instrument issued by a company acknowledging a debt. It has the terms of repayment of principal and interest. According to Section 2(30) of the Companies Act, 2013, ‘Debenture’ including debenture stock, bond or any other instrument of a company evidencing a debt whether constituting a charge on the assets of the company or not.
 
Question 2. Distinguish between a Debenture and Share. (Any two points)
 
Answer:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021

 

Question 3. What is meant by ‘Registered Debentures’?
 
Answer:
Registered Debentures are those debentures which are payable to the persons whose names appear in the Register of Debentures.
 
Question 4. What is meant by ‘Secured Debentures’?
 
Answer:
Secured Debentures are those debentures which are secured by either a fixed charge or a floating charge.
 
Question 5. Define Redeemable Debentures.
 
Answer:
Debentures issued at par, at premium or at discount may be redeemed either at par or at premium. If the debentures are redeemed at premium, premium payable at the time of redemption is provided in the books of account at the time of issue following the prudence Concept of accounting.
 
Question 6. What is meant by ‘Irredeemable Debentures’?
 
Answer:
Irredeemable Debentures or Perpetual Debentures are those debentures which are not repayable during the lifetime of the company.
 
Question 7. What is ‘Convertible Debentures’?
 
Answer:
Convertible Debentures are those debentures which are convertible into Equity shares or other securities either at the option of debenture holder or at the option of the company, as the case may be, after a specified period.
 
Question 8. Define Non- convertible Debentures.
 
Answer:
Non-convertible Debentures are those debentures which are not convertible into shares.
 
Question 9. What is meant by ‘Trust Deed’ in the context of debenture?
 
Answer:
Company issuing debentures to public is required to appoint trustees and execute a Trust Deed. The Trustees are duty bound to protect the interest of the debenture holder through the powers granted by the Trust Deed.
 
Question 10. What is Charge?
 
Answer:
The expression ‘charge’ means securing the loan by mortgaging specific assets towards the loan. It means, if the company fails to meet its obligation, the lender can secure his payment from the assets mortgaged or in case of winding-up of the company from the official liquidator. A charges may be either fixed or floating.
 
Question 11. When does loss on issue of debentures arise?
 
Answer:
Debentures are said to have been issued at discount when the issue price is less than its nominal (face) value. For example, if a debenture of Rs. 100 is issued for Rs. 95, it means debentures are issued at discount of Rs 5. The amount of discount is debited to an account titled Discount or loss on issue of debentures account.

Question 12. Discount or Loss on issue of Debentures may be written off from Securities Premium Reserve. Why?

Answer:

Discount or Loss on issue of Debentures is written off at the earliest but within the life, i.e., tenure of the debentures. It is a capital loss for the company and hence, is written off from Capital Reserve, if it has a balance. If Capital Reserve does not exist, it is written off from Securities Premium Reserve (Section 52(2)).

The Journal entry for writing off discount or loss is:

Securities Premium Reserve A/c                                 ……….Dr.

To Discount or Loss on Issue of Debentures A/c

 

Question 13. What is meant by ‘Debentures issued at Discount and Redeemable at Premium’?

Answer:

The company incurs loss on two counts, i.e., discount allowed at the time of issue of debentures and premium payable at the time of its redemption.Both these losses are accounted at the time of issue of debentures following the principle of prudence. The entries are:

Bank A/c                                 ……….Dr.

To Debentures Application A/c

Debentures Application A/c                                 ……….Dr.

Discount on issue of Debentures A/c                  ……….Dr.

Loss on issue of Debentures A/c                         ..………Dr.

To Discount or Loss on Issue of Debentures A/c

 

Question 14. What is meant by ‘Premium of Redemption of Debentures Account’?

Answer:

When Debentures are redeemable at premium the difference between redeemable value and the issue price is a loss for the company, which is debited to loss on issue of debentures account at the time of allotment of debentures following the principal of ‘prudence’. The entries are:

(a)   Bank A/c                       ……………..Dr.

To Debentures Application A/c

 

(b)   Debentures Application A/c                   ……………..Dr.

Loss on issue of debentures A/c                        ………………Dr.

To ….% Debentures A/c

To Premium on Redemption of Debentures A/c

 

Question 15. What is meant by ‘Debentures issued at Discount and Redeemable at premium’?

Answer:

The company incurs loss on two counts, i.e., discount allowed at the time of issue of debentures and premium payable at the time of its redemption. Both these losses are accounted at the time of issue of debentures following the principle of prudence. The entries are:

(a)   Bank A/c                       ……………..Dr.

To Debentures Application A/c

 

(b)   Debentures Application A/c                    ……………..Dr.

Discount on issue of debentures A/c            ……………Dr.

Loss on issue of debentures A/c                           ……………Dr.

To ….% Debentures A/c

To Premium on Redemption of Debentures A/c

 

Question 16. How is Discount or Loss on issue of Debentures written off?

Answer:

Discount or Loss on Issue of Debentures is a capital loss for the company, which should be written off at the earliest but within the tenure of the debentures, i.e., it should be written off within the period the debenture are to be redeemed. The company thus, may write off discount or loss on issue of debentures at any time before the debentures are due for redemption.

Discount or Loss on Issue of Debentures written off is a part of Finance Cost in Statement of Profit and loss. Discount or Loss on Issue of Debentures may be written off following any of the following options:

(i)             It may be written off in the first year itself; or

(ii)            It may be written off over the tenure (life) of the debentures.

 

Question 17. Can Discount or Loss on Issue of Debentures be written off from Securities Premium Reserve? Explain.

Answer:

Discount or Loss may be written off from Capital Reserve or from Securities Premium Reserve or from Statement of Profit and Loss. Accounting entry will be as follows:

Securities Premium Reserve A/c             ……………Dr.

To Discount or Loss on Issue of Debentures A/c

 

Question 18. What is meant by ‘Issue of debentures for consideration other than cash’?

Answer:

Issue of Debentures for consideration other than cash means that the company has not received amount (in cash or by cheque) against the debentures issued. Debentures may be issued for consideration other than cash under the following circumstances:

(i)             Issue of Debentures to Promoters

(ii)            Issue of Debentures to Venders

 

Question 19. What is meant by issue of debentures as purchase consideration?

Answer:

Purchases Consideration is the amount agreed to be paid for taking over the business from another enterprise. Purchases consideration may be given in the question; otherwise it will be equal to Net Assets (i.e., Agreed value of Assets taken- Agreed amount of Liabilities assumed).

 

Question 20. Name the type debentures which are payable only to the person who is holding the debentures.

Answer:

Bearer Debentures are payable only to the person who is holding the debentures.

 

Question 21. Is the interest on debentures calculated at the fixed percentage on the issue price?

Answer:

Interest on debentures calculated at a fixed rate and always on the face value and not on the issue price.

 

Question 22. Name the head under which ‘interest accrued and due on debentures’ appears in the Balance Sheet of a company.

Answer:

Interest Accrued (whether due or not) on Debentures is shown under the head ‘Current Liabilities’ and sub-head ‘Other Current Liabilities’.

 

Question 23. Name the head under which ‘interest accrued but not due on debentures’ appears in the Balance Sheet of a company.

Answer:

Interest Accrued (whether due or not) on Debentures is shown under the head ‘Current Liabilities’ and sub-head ‘Other Current Liabilities’.

 

Question 24. What is meant by issue of debentures as Collateral Security?

Answer:

Security given in addition to the prime or principal security is termed or known as Collateral Security.

 

Question 25. How are Debenture issued as Collateral Security shown in the Balance sheet?

Answer:

Debentures issued as Collateral Security are shown separately from other debentures in the Balance sheet.

 

Question 26. What is the nature of Interest on Debentures?

Answer:

Interest on debentures is a Charge against profit. It is, therefore, provided even if the company does not have profit or has inadequate profit.

 

Question 27. Why does a company pay interest on debentures before payment of dividend?

Answer:

Interest on debentures is calculated at fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue. Rate of interest is prefixed to the debentures, say 9% Debentures and, therefore, is payable even if the company incurs loss.

 

Question 28. Why would an investor prefer to invest in the debentures of a company rather than in its shares?

Answer:

Debentures provide a fixed return even in case of loss, so there is no risk to investor therefore an investor prefers to invest in the debentures of a company rather than in its shares.

 

Question 29. Why would an investor prefer to invest partly in share and partly in the debentures of a company?

Answer:

Shares provide higher return than debentures but Debentures provide a fixed return even in case of loss. So by investing in both an investor gets higher return with lower risk.

 

Question 30. Why would an investor prefer to invest in the shares of a company rather than in the Debentures?

Answer:

Shares provide higher return in short time so, investor prefer to invest in the shares of a company rather than in the Debentures.

 

Question 31. Pass Journal entry when 10,000 debentures of Rs. 100 each are issued as collateral security against a Bank Loan of Rs. 8,00,000.

Answer:
TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-
 
 

Short Answer Type Questions:-

 

Question 1. What are debentures? What are the kinds of debentures?

Answer:

Debenture is a written instrument or document issued by the company acknowledging a debt. It contain terms of repayment of principal and also payment of interest (usually paid half-yearly) at a rate specified at time of its issue.

“Debenture includes debenture stock, bonds and any other instrument of the company evidencing a debt, whether constituting a charge on the assets of the company or not.”

A company may issue different kinds of debentures which can be classified as under:

1.   From Security Point of View

(i)      Secured Debentures: Secured Debentures are those debentures which are secured by either a fixed charge or a floating charge on the assets of the company. A charge on the assets of the company is registered with the Registrar of Companies.

(ii)    Unsecured Debentures: Unsecured Debentures are those debentures which are not secured by any charge on assets of the company.

 

2.   From Redemption Point of View

(i)      Redeemable Debentures: Redeemable Debentures are those debentures that are repayable by the company at the end of a specified period or by instalments during the existence of the company.

(ii)    Irredeemable Debentures: Irredeemable Debentures are those debentures that are not repayable during the lifetime of the company and hence are repaid only when the company is liquidated.

 

3.   From Records Point of View

(i)      Registered Debentures: Registered Debentures are the debentures that are registered in the company’s records in the name of the holder. Principal and interest of such debentures is payable to the registered debenture holder.

(ii)    Bearer Debentures: Bearer debentures are the debentures that are not registered in the records of the company in the name of the holder.

 

4.   From Priority Point of View

(i)      First Debentures: The debentures which have to be repaid before the other debentures are known as first debentures.

(ii)    Second Debentures: The debentures, which will be repaid after the first debentures are redeemed, are known as second debentures.

 

5.   From the Point of View of Coupon Rate

(i)      Specific Coupon Rate Debentures: These debentures are issued with a specified rate of interest, called the coupon rate.

(ii)    Zero Coupon Rate Debentures (Bonds): These debentures do not carry a specific rate of interest. In order to compensate the investors such debentures are issued at a substantial discount.

 

6.   From Convertibility Point of View

(i)      Convertible Debentures: Convertible Debentures are the debentures that are convertible into shares. If a part of the debenture amount is convertible into Equity Shares, they are known as Partly Convertible Debentures. If full amount of debentures is convertible into Equity shares, they are known as Fully Convertible Debentures.

(ii)    Non-Convertible Debentures: Non-convertible debentures are the debentures that are not convertible into shares.

 

Question 2. Give any three characteristics of a debenture.

Answer:

Below are the characteristics of debenture:-

  1. Debenture is a written document or certificate acknowledging debt by the company.
  2. Mode and period of repayment of principal and interest is fixed.
  3. Rate of interest on the debenture is specified. It is practice to prefix ‘Debentures’ with the rate of interest. For example, if the rate of interest is 9%, the title of the debentures will be ‘9% Debentures’.

 

Question 3. Can a company issue debentures for ‘consideration other than cash’? If so, what accounting Journal entries such a company must pass?

Answer:

Yes, a company issue debentures for ‘consideration other than cash’. Issue of Debentures for consideration other than cash means that company has not received amount (in cash or by cheque) against the debentures issued. Debentures may be issued for consideration other than cash under the following circumstances:

(i)   Issued of Debentures to Promoters: A company may allot debentures to the promoters for rendering their services for incorporating the company. The entry is:

(i) Issued of Debentures to Promoters: A company may allot debentures to the promoters for rendering their services for incorporating the company. The entry is:
Incorporation Expenses A/c Dr.
To …% Debentures A/c
(Being the debentures allotted to promoters)
 
(ii) Issue of Debentures to Vendors: Debentures may also be issued to vendors against purchases of assets or business. The Journal entries passed are:
 

(a)  When assets are purchased and debentures are issued:

Sundry Assets A/c Dr.
To Vendor’s A/c
(Being the purchase of sundry assets)
 
(b) When a business is purchased and debentures are issued: 
When a business is purchased, it means assets and also the liabilities have been taken over. The purchase consideration payable may be:
(1) equal to the difference between the value of assets and the value of liabilities (i.e., net assets);
(2) more than the difference between the value of assets and the value of liabilities (i.e., net assets);
(3) less than the difference between the value of assets and the value of liabilities, (i.e., net assets). 

 

Question 4. Explain the meaning and accounting treatment of debentures issued as collateral security.

Answer:

Issue of debentures as Collateral Security means issue of debentures as additional security, i.e., in addition to the principal security. It is only to be realised when the principle security fails to pay the amount of loan. For example, when a company takes a loan of Rs. 10,00,000 from the bank, it may have to issue debentures as collateral security in addition to the principal security.

Accounting Treatment: Debentures issued as a collateral security can be dealt with in two ways:

(i)            First Method: Entry for issue of debentures as collateral security is not passed in the books of account at the issuing such debentures. It is disclosed under the head. Secured Method in the Equity and Liabilities part of the Balance Sheet that debentures have issued as collateral security as follows:

(a)   Debentures issued as collateral Security for Long-term loan from Bank.

 

Question 4. Explain the meaning and accounting treatment of debentures issued as collateral security.

Answer:

Issue of debentures as Collateral Security means issue of debentures as additional security, i.e., in addition to the principal security. It is only to be realised when the principle security fails to pay the amount of loan. For example, when a company takes a loan of Rs. 10,00,000 from the bank, it may have to issue debentures as collateral security in addition to the principal security.

Accounting Treatment: Debentures issued as a collateral security can be dealt with in two ways:

(i)            First Method: Entry for issue of debentures as collateral security is not passed in the books of account at the issuing such debentures. It is disclosed under the head. Secured Method in the Equity and Liabilities part of the Balance Sheet that debentures have issued as collateral security as follows:

 TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A

 

Question 5. Write any three points of difference between equity shares and debentures.

Answer:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A1

 

Question 6. What are the alternatives available to a company for the allotment of debentures when there is oversubscription of Debentures?

Answer:

Oversubscription of Debentures means that the company has received applications for more number of debentures than it has issued. In such a situation, the company may make allotment, by any of the following three options or combination:

First Alternative- Rejecting Excess Application.

Second Alternative- Partial or Pro rata Allotment.

Third Alternative- A Combination of the Above Two Alternatives.

Excess application money received on oversubscription may be retained for adjustment towards allotment and the respective calls, in case of pro rata allotment, if so provided in the terms of issue. However, application money is refunded to those applicants to whom debentures are not allotted.

 

Question 7. What is the nature of ‘interest on debentures’? Give Journal entries: (a) when the interest is due and (b) when the interest is paid (ignore tax).

Answer:

Interest on debentures is calculated at fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue. Rate of interest is prefixed to the debentures, say 9% Debentures and, therefore, is payable even if the company incurs loss. Interest on debentures is a charge against profit. Interest may be subject to tax deduction at source (TDS). 
(a) When the interest is due:-
Debentures Interest or Interest on Debentures A/c …                             Dr.
To Debenture holders’ A/c
To Income Tax Payable A/c
 
(b) When the interest is paid (ignore tax):-
Debentures holders’ A/c …                                                                   Dr.
To Bank A/c

 

Exercise  ::--->

 

Question 1:   Vishwas Ltd. issued 2,000; 9% Debentures of Rs. 100 each payable as follows: Rs. 25 on application; Rs. 25 on allotment and Rs. 50 on first and final call. Applications were received for all the debentures along with the application money did allotment was made. Call money was also received on the due date. Pass necessary Journal entries in the books of the company.

Answer 1:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A2

Number of 9% Debentures issued = 2,000

Number of Applications received = 2,000

 

Question 2:   A Ltd. issued 2,000; 9% Debentures of Rs. 100 each on the following terms: Rs.20 on applications ;Rs. 20 on allotment; Rs. 30 on first call ; Rs. 30 on final call. The public applied for 2,400 debentures. Applications for 1,800 debentures were accepted in full. Applications for 400 debentures were allotted 200 debentures and applications for 200 debentures were rejected. Pass necessary Journal entries.

Answer 2:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A3

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A4

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A5

 

Question 3:   ABC Ltd. issued 40,000; 10% Debentures of Rs. 100 each at par for cash payable in full along with the application. Applications were received for 60,000 debentures. Debentures were allotted and excess application money was refunded. Pass Journal entries in the books of the company. 

Answer 3:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A6

Point of Knowledge:-

  1. Amount of Installment:-

Application = Rs. 100

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A7

 

Question 4:  Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of Rs. 100 each at a premium of Rs. 35 per debenture. The full amount was payable on application. Applications were received for 10,000 Debentures. Allotment was made to all the applications on pro rata. Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.

Answer 4: 

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A8

Point of Knowledge:-

Distribution of Debenture face value into installments:-

Application = Rs. 100 + Rs. 35 = Rs. 135

Number of Debentures issued = 7,500

Number of Application received = 10,000

 

Question 5:  Raj Ltd. issued 5,000;  8% Debentures of Rs. 100 each at a premium of 5% payable as follows: Rs. 10 on application; Rs. 20 along with premium on allotment and balance on first and final call. Pass necessary Journal entries.

Answer 5:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A10

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A11

 

Question 6:  Nipa Limited issued Rs. 10,00,000 Debentures of Rs. 100 each at a premium of 10% , payable 25% on application (including premium) and the balance on allotment . The debentures were applied for and the amount was dully received. You are required to give Journal entries and prepare Cash Book.

Answer 6:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A12

Point of Knowledge:-

Distribution of Debenture face value into installment:-
Application = Rs. 15 + Rs. 10
Allotment = Rs. 85
Tota       l = Rs. 100 + Rs. 10 = Rs. 110
Number of Debentures issued = 10,000
Number of Application received = 10,000

 

Question 7:  Alok Ltd. issued 7,000, 10% Debentures of Rs. 500 each at a premium of Rs. 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, Rs. 200 was payable on application and balance on allotment. Record necessary Journal entries at the time of issue of 10% Debentures.

Answer 7:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A13

Point of Knowledge:-
Distribution of Debenture face value into installment:-
Application = Rs. 200
Allotment = Rs. 300 + Rs. 50
Total = Rs. 500 + Rs. 50 = Rs. 550
Number of Debentures issued = 7,000
Number of Application received = 7,000

 

Question 8:  Vijay Laxmi Ltd. invited applications for 10,000; 12% Debentures of Rs. 100 each at a premium of Rs. 70 per debenture .The full amount was payable on application. Applications were received for 13,500 debentures. Applications for 3,500 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applications.

Answer 8:

 TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A14

 

Question 9:  Iron Products Ltd. issued 5,000; 9% Debentures of Rs. 100 each at a premium of Rs. 40 payable as follows;

(i) Rs. 40 , including premium of Rs. 10 on applications;

(ii) Rs. 45, including premium of Rs. 15 on allotment; and

(iii) Balance as first and final call.

The issue was subscribed and allotment made. Calls were made and due amount was received. Pass Journal entries.

Answer 9:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A15

 

Point of Knowledge:-
Distribution of Debenture face value into installment:-
Application = Rs. 30 + Rs. 10
Allotment = Rs. 30 + Rs. 15
First and Final Call = Rs. 40 + Rs. 15
Total                     = Rs. 100 + Rs. 10
Number of Debentures issued = 5,000
Number of Application received = 5,000

 

Question 10:  X Ltd. issued 12,000; 8% Debentures of Rs.  100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months. Pass Journal entries.

Answer 10: 

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A16

Point of Knowledge:- 

Distribution of Debenture face value into installment:-

Application = Rs. 25
Allotment = Rs. 20 + Rs. 5
First and Final Call = Rs. 50
Total = Rs. 95 + Rs. 15 = Rs. 100
Number of Debentures issued = 12,000
Number of Application received = 12,000

Number of Application received = 12,000Number of Debentures issued = 12,000 

 

Question 11:  Alka Ltd. issued 5,000, 10% Debentures of Rs.  1,000 each at a discount of 10% redeemable at a premium of 5% after 5 years. According to the terms of issue Rs.  500 was payable  on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.

Answer 11:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A17

Point of Knowledge:-
Distribution of Debenture face value into installment:-
Application = Rs. 500
Allotment = Rs. 400 + Rs. 100
Total = Rs. 900 + Rs. 100 = Rs. 1,000
Number of Debentures issued = 5,000
Number of Application received = 5,000
 
 

Question 12:   Amrit Ltd. was promoted by Amrit and Bhaskar with an authorised capital of Rs. 10,00,000 divide into 1,00,000 shares of Rs. 10 each. The company decided to issue 1,000,6% Debentures of Rs.  100 each to Amrit and Bhaskar each for their services in incorporating the company. Pass journal entry.

Answer 12:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A18

 

Question 13:  Joy Ltd. company bought a Building for Rs. 9,00,000 and the consideration was paid by issuing 10% Debentures of the normal (face) value of Rs. 100 each at a discount of 10%. Give Journal entries.

Answer  13:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A19

 

Question 14:  Wye Ltd. purchased an established business for Rs. 2,00,000 payable as Rs.  65,000 by cheque and the balance by issuing 9% Debentures of Rs. 100 each at a discount of 10%. Give journal entries in the books of Wye Ltd.

Answer 14:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A42

Point of Knowledge:-
 
Number of 9% Debentures to be issued = Rs. ((2,00,000-65,000))/(100-10) = 1,500 Debenture

 

Question 15:  Newton Ltd. purchased a Machinery from B for Rs. 5,76,000 to be paid by the issue of 9% Debentures of  Rs. 100 each at 4% discount. Journalize the transactions.

Answer 15:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A20

 

Question 16:  Reliance Ltd. purchased machinery costing Rs.  1,35,000. It was agreed that the purchase consideration be paid by issuing 9% Debentures of Rs.  100 each. Assume debentures have been issued.

(i)      at par and

(ii)     at a discount of 10%.

Give necessary journal entries.

Answer 16:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A21

 

Question 17:   Deepak Ltd purchased furniture of Rs. 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a Bill of Exchanged and for the balance the company issued 9% Debenture of Rs.  100 each at a premium of 10% in favour of M/s. Furniture Mart. Pass Journal entries in the books of Deepak Ltd.

Answer 17:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A22

 

Question 18:  Bright Ltd. took over the assets of Rs. 6,60,000 and liabilities of Rs. 80,000 of Star Ltd. for an agreed purchase consideration of Rs. 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of Rs. 100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:

Case (a): The debentures are issued at par.

Case (b): The debentures are issued at 20% premium.

Case (c): The debentures are issued at 10% discount.

Answer 18:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A23

 

Question 19:  Star Ltd. took over the assets of Rs. 6,60,000 and liabilities of Rs. 80,000 of Moon Ltd. for Rs. 6,00,000. Give necessary Journal entries in the books of Star Ltd. assuming that:

Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of Rs. 100 each.

Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of Rs. 100 each issued at 20% premium. 

Answer 19:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A24

Point of Knowledge:- 

Case 1.

Number of Debentures to be issued = (6,00,000-60,000)/100 = 5,400; 12% Debentures

Case 2.

Number of Debentures to be issued = 5,40,000/(100+20) = 4,500; 12% Debentures
 
 

Question 20:  Romi Ltd. acquired assets of  Rs. 20 lakhs and took over creditors of  Rs. 2 lakhs from Kapil Enterprises. Romi Ltd. issued 8% Debentures  of  Rs. 100 each at a discount of 25% as purchase consideration.

Record necessary journal entries in the books of Romi Ltd.

Answer 20:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A25

Point of Knowledge:-
 
Number of Debentures to be issued = 1,80,000/(100+25) = 14,400 Debentures
 

Question 21:  Romi Ltd. acquired assets of  Rs. 20 lakhs and took over creditors of  Rs. 2 lakhs from Kapil Enterprises. Romi Ltd. issued 8% Debentures  of  Rs. 100 each at a discount of 10% as purchase consideration. Record necessary journal entries in the books of Romi Ltd.

Answer 21:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A26

Point of Knowledge:-
Number of Debentures to be issued = Rs. 18,00,000/(100-10) = 20,000 Debentures

 

Question 22:  Exe Ltd. purchased the assets of the book value Rs.4,00,000 and took over the liabilities of Rs. 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at Rs.3,80,000 be paid by issuing debentures  of Rs. 100 each. Pass journal entries if debentures are issued: 

(a) at par

(b) at a discount of 10% and

(c) at a premium of 10%.

It was agreed that any fraction of debentures be paid in cash.

Answer 22:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A27

Point of Knowledge:-
 
Number of Debentures to be issued = Rs. 3,80,000/100 = 3,800 Debentures
 
TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A28
 
Point of Knowledge:-
 
Number of Debentures to be issued = Rs. 3,80,000/(100-10) = 4,222.22 Debentures
 
= 4,222 Debenture (Round off)

 

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A29

Point of Knowledge:-
 
Number of Debentures to be issued = Rs. 3,80,000/(100+10) = 3,454.54 Debentures
= 3454 Debentures (Rounded off)

 

Question 23:  R Ltd. purchased the assets of S Ltd. for Rs.5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to Rs. 2,00,000 for a purchase consideration of Rs.2,80,000 . The payment of S Ltd. was made by issue of 9% Debentures of Rs. 100 each at par. Pass necessary journal entries in the books of R Ltd.

Answer 23:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A31

Point of Knowledge:-
Number of Debentures to be issued = Rs. 2,80,000/100 = 2,800 Debentures
 

Question 24:  Green Ltd. purchased the assets of Strong Ltd. for Rs. 40,00,000 and took over liabilities of 7,00,000 at an agreed value of Rs. 32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.

Answer 24:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A32

 

Question 25:  Wellbeing Ltd. took over assets of Rs. 9,80,000 and liabilities of Rs. 40,000 of HDR Ltd. at an agreed value of Rs. 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of Rs. 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.

Answer  25:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A33

Point of Knowledge:-

(i)      Issued of Debentures to Promoters: A company may allot debentures to the promoters for rendering their services for incorporating the company. The entry is:

Incorporation Expenses A/c Dr.
To …% Debentures A/c
(Being the debentures allotted to promoters)
 

(ii)    Issue of Debentures to Vendors: Debentures may also be issued to vendors against purchases of assets or business. The Journal entries passed are:

When assets are purchased and debentures are issued:

Sundry Assets A/c Dr.
To Vendor’s A/c
(Being the purchase of sundry assets)

When a business is purchased and debentures are issued:

When a business is purchased, it means assets and also the liabilities have been taken over. The purchase consideration payable may be:

(i)             equal to the difference between the value of assets and the value of liabilities (i.e., net assets);

(ii)            more than the difference between the value of assets and the value of liabilities (i.e., net assets);

(iii)           less than the difference between the value of assets and the value of liabilities, (i.e., net assets).

 

Question 26:  Grown Ltd. issued 500, 10% Debentures of Rs. 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of Rs. 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.

Answer 26:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A34

Point of Knowledge:-
 
Discount or Loss on issue of Debentures is written off at the earliest but within the life, i.e., tenure of the debentures. It is a capital loss for the company and hence, is written off from Capital Reserve, if it has a balance. If Capital Reserve does not exist, it is written off from Securities Premium Reserve (Section 52(2)). 
The Journal entry for writing off discount or loss is:
Securities Premium Reserve A/c                                 ……….Dr.
To Discount or Loss on Issue of Debentures A/c
 
 

Question 27:  'Sangam Woollens Ltd.', Ludhiana, are the manufacturers and exporters of woollen garments. The company decided to distribute free of cost woollen garments to 10 villages of Lahaul and Spiti District of Himachal Pradesh. The company also decided to employ 50 young persons from these villages in its newly established factory. The company issued 40,000 Equity Shares of Rs. 10 each and 1,000, 9% Debentures of Rs. 100 each to the vendor for the purchase of machinery of Rs. 5,00,000. Pass necessary Journal entries.

Answer 27:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A35
 

Question 28:  Best Barcode Ltd. took a loan of  Rs. 5,00,000 from a bank giving  Rs. 6,00,000; 9% Debentures as collateral security. Pass journal entries regarding issue of debentures, if any, and show this loan in the Balance Sheet of the company.

Answer 28:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A36

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A37

Point of Knowledge:-

Balance Sheet and Statement of Profit and Loss of a company is prepared in the form prescribed in Schedule III of the Companies Act, 2013. It prescribes that liabilities and assets be classified into non- current and current.

Current Liabilities are those liabilities which are:

(i)             Expected to be settled in company’s normal operating cycle.

(ii)            Held primarily for the purposes of being traded.

(iii)           Due to be settled in which 12 months after the reporting date

(iv)          There is no unconditional right to defer the settlement of liability for a period of a least 12 moneths after the reporting date.

Current Assets are those assets which are:

(i)             Expected to be realized in or intended for sale or consumption in the company’s normal operating cycle;

(ii)            Held primarily for the purpose of being traded

(iii)           Expected to be realized within 12 months from the reporting date.

(iv)          Cash and Cash Equivalents unless they are restricted from being exchange or used to settle a liability for at least 12 months after the Balance Sheet.

 

Question 29:  A company took a loan of Rs. 4,00,000 from Bandhan Bank Ltd. and issued  8% Debentures of  Rs. 4,00,000 as a collateral security.

Answer 29:

 TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A38

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A39

Question 30:  X Ltd. took a loan of Rs. 3,00,000 from IDBI Bank. The company issued 4,000; 9% Debentures of Rs. 100 each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of the company.

Answer 30:

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A40

TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021-A41

Question 31: S. Singh Limited obtained a loan of Rs. 5,00,000 from State Bank of India @ 10% p.a. interest. The companyissued Rs. 7,50,000, 10% Debentures of Rs. 100 each in favour of State Bank of India as Collateral Security.
Pass necessary Journal entries for the above transactions:
(i) When company decided not to record the issue of 10% Debentures as Collateral Security.
(ii) When company decided to record the issue of 10% Debentures as Collateral Security.

Answer 31:
(i) When company decided not to record the issue of 10% debentures as Collateral Security

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures

Question 32:
Journalize the following:
(a) A debenture issued at Rs.95, repayable at Rs. 100.
(b) A debenture issued at Rs.95, repayable at Rs. 105.
(c) A debenture issued at Rs.95, repayable at Rs. 105.
The face value of debenture is Rs. 100 in each of the above cases.

Answer 32:
(a) Debentures issued at a discount and redeemable at par:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-1

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-2

Question 33: Pass journal entries in the following cases:
(a) A Co. Ltd. issued Rs.40,000; 12% Debentures at a premium of 5% redeemable at par.
(b) A Co. Ltd. issued Rs.40,000; 12% Debentures at a discount of 10% redeemable at par.
(c) A Co. Ltd. issued Rs.40,000; 12% Debentures at par redeemable at 10% premium.
(d) A Co. Ltd. issued Rs.40,000; 12% Debentures at a discount of 5% and redeemable at 5% premium.
(e) A Co. Ltd. issued Rs.40,000; 12% Debentures at a premium of 10% redeemable at 110%.

Answer 33:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-4

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-4

Question 34: Footfall Ltd. issues 10,000 Debentures of Rs. 100 each at a discount of 10% redeemable at a premium of 5% after the expiry of three years.
Pass Journal entries for the issue of these debentures.

Answer 34:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-6

Question 35: Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued Rs. 4,00,000; 9% Debentures of Rs. 100 each at a premium of 8% redeemable at 10% premium.
(b) Issued Rs. 6,00,000; 9% Debentures of Rs. 100 each at par, repayable at a premium of 10%.
(c) Issued Rs. 10,00,000; 9% Debentures of Rs. 100 each at a premium of 5%, redeemable at par.

Answer 35:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-7

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-8

Question 36: Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued Rs. 28,000; 10% Debentures of Rs. 100 each at a premium of 15% redeemable at par.
(b) Issued Rs. 30,000; 10% Debentures of Rs. 100 each at a premium of 10% and redeemable at a premium of 15%.
(c) Issued Rs. 80,000; 10% Debentures of Rs. 100 each at par repayable at a premium of 10%.

Answer 36:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-9

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-10

Question 37: Journalize the following transaction at the time of issue of 12% Debentures: Nandan Ltd. issued Rs.90,000, 12% Debentures of Rs. 100 each at a discount of 5% redeemable at 110%.

Answer 37:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-11

Question 38: Pass necessary Journal entries for the issue of debentures in the following cases:
(a) Rs. 40,000; 12% Debentures of Rs. 100 each issued at a premium of 5% redeemable at par.
(b) Rs. 70,000; 12% Debentures of Rs. 100 each issued at a premium of 5% redeemable at Rs. 110.

Answer 38:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-12

Point of Knowledge:-
Interest on debentures is calculated at fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue. Rate of interest is prefixed to the debentures, say 9% Debentures and, therefore, is payable even if the company incurs loss. Interest on debentures is a charge against profit. Interest may be subject to tax deduction at source (TDS).
(a) When the interest is due:-
Debentures Interest or Interest on Debentures A/c …Dr.
            To Debenture holders’ A/c
            To Income Tax Payable A/c
(b) When the interest is paid (ignore tax):-
Debentures holders’ A/c …Dr.
            To Bank A/c

Question 39: Pass necessary Journal entries for the issue of Debentures in the following cases:
(a) Rs. 40,000; 15% Debentures of Rs. 100 each issued at a discount of 10% redeemable at par.
(b) Rs. 80,000; 15% Debentures of Rs. 100 each issued at a premium of 10% redeemable at a premium of 10%.

Answer 39:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-13

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-14

Point of Knowledge:-
The company incurs loss on two counts, i.e., discount allowed at the time of issue of debentures and premium payable at the time of its redemption. Both these losses are accounted at the time of issue of debentures following the principle of prudence. The entries are:
(a) Bank A/c ……………..Dr.
        To Debentures Application A/c
(b) Debentures Application A/c ……………..Dr.
Discount on issue of debentures A/c ……………Dr.
Loss on issue of debentures A/c ……………Dr.
        To ….% Debentures A/c
        To Premium on Redemption of Debentures A/c

Question 40: XYZ Ltd.issued 5,000 , 10% Debentures of Rs. 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%.

Answer 40:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-15

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-16

Point of Knowledge:-
Interest on Debentures (for half year)
Interest on Debentures = 5,00,000 × 10/100 × 6/12
Interest on Debentures = Rs. 25,000
Interest on Debentures = 5,00,000 × 10/100 × 6/12
Interest on Debentures = Rs. 25,000

Question 41: Bright Ltd. issued 5,000; 10% Debentures of Rs. 100 each on 1st April, 2015. The issue was fully subscribed.
According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%. Pass necessary journal entries related to the debenture interest for the year ending 31st March, 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss.

Answer 41:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-17

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-18

Point of Knowledge:-
Calculation of Interest on Debentures = 5,00,000 × 10/100 × 6/12
Interest on Debentures = 25,000

Question 42: On 1st April, 2015, V.V.L. Ltd. issued 1,000, 9% Debentures of Rs. 100 each at a discount of 6%, redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.

Answer 42:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-19

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-20

Point of Knowledge:-
Discount or Loss may be written off from Capital Reserve or from Securities Premium Reserve or from
Statement of Profit and Loss. Accounting entry will be as follows:
Securities Premium Reserve A/c           ……………Dr.
          To Discount or Loss on Issue of Debentures A/c

Question 43: Kitply Ltd. issued Rs. 2,00,000, 10% Debentures at a discount of 5% .The terms of issue provide the repayment at the end of 4 years. Kitply Ltd. has a balance of Rs. 5,00,000 in Securities Premium Reserve . The company decided to write off discount on issue of debentures from Securities Premium Reserve in the first year.
Pass the journal entry.

Answer 43:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-21

Point of Knowledge:-
The amount of discount to be written off from Securities Premium Reserve Account in the First Year
= Rs. 2,00,000 × 5%
= Rs. 10,000

Question 44: A limited company issued Rs. 1,00,000, 9% Debentures at a discount of 6% on 1st April, 2017. These debentures are to be redeemed equally, spread over 5 annual installments.
Pass the Journal entries for issue of debentures and writing off the discount.

Answer 44:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-22

Question 45: On 1st January, 2017, Raha Ltd. issued 6,000, 8% Debentures of nominal (face) value of Rs. 100 each redeemable at 5% premium in equal proportions at the end of 5, 10 and 15 years. It has a balance of Rs. 10,000 in Securities Premium Reserve. Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures.

Answer 45:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-23

Question 46: Global Ltd. issued 10,000, 8% Debentures of Rs. 100 each redeemable in four equal instalments by draw of lots from the end of 3 years at a premium of Rs. 9. Pass the Journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on issue of Debentures Account.

Answer 46:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-24

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-25

Point of Knowledge:-
Loss on Issue of Debentures: Loss on issue of Debentures, whether consisting of only premium payable on redemption or discount on issue of debentures plus premium payable or redemption is a capital loss and should be dealt with in the same manner as discount on the issue of debentures have discount and illustrated above. The Journal entry for writing off the Loss on issue of Debentures is:
Capital Reserve A/c           ……………..Dr.
          Or
Securities Premium Reserve A/c       ……………Dr.
          Or
Statement of Profit and loss A/c    ……………. Dr.
          To Loss on issue of Debentures A/c (with the amount of loss written off)

Question 47: On 1st June, 2017, R Energy Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of 10% redeemable at a premium of 10% at the end of five years. All the debentures were subscribed and allotment was made. Prepare the Balance Sheet (extract) as at 31st March, 2018.

Answer 47:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-26

Question 48: On 1st April, 2017, Solar Power Ltd. issued 10,000, 8% Debentures of Rs. 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made. The company had balance in Securities Premium Reserve of Rs. 80,000. Prepare the Balance Sheet (extract) as at 31st March, 2018.

Answer 48:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-27

Point of Knowledge:-

Question 49: On 1st April, 2015, Mathew Ltd. issued 10,000, 9% Debentures of Rs. 100 each at a discount of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:
On 31st March, 20162,000 Debentures;
On 31st March, 20175,000 Debentures;
On 31st March, 20183,000 Debentures.
Prepare the Loss on Issue of Debentures Account, Debentures Account and Premium on Redemption of Debentures Account for three years.
Answer 49:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-28

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-29

Point of Knowledge:-

Question 50: Office Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of Rs. 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.

Answer 50:

""TS-Grewal-Solution-Class-12-Chapter-9-Company-Accounts-Issue-of-Debentures-30

Point of Knowledge:-
The company incurs loss on two counts, i.e., discount allowed at the time of issue of debentures and premium
payable at the time of its redemption. Both these losses are accounted at the time of issue of debentures
following the principle of prudence. The entries are:
(a) Bank A/c      ……………..Dr.
To Debentures Application A/c
(b) Debentures Application A/c      ……………..Dr.
Discount on issue of debentures A/c      ……………Dr.
Loss on issue of debentures A/c      ……………Dr.
        To ….% Debentures A/c
        To Premium on Redemption of Debentures A/c