A Limited issued 5,000, 10% debentures of ₹100 each, at a premium of ₹10 per debenture payable as follows:

| Particulars | Amount (₹) |
| --- | --- |
| On application | 25 |
| On allotment (including premium) | 45 |
| On first and final call | 40 |

The debentures were fully sub

Question

A Limited issued 5,000, 10% debentures of ₹100 each, at a premium of ₹10 per debenture payable as follows:

| Particulars | Amount (₹) |
| --- | --- |
| On application | 25 |
| On allotment (including premium) | 45 |
| On first and final call | 40 |

The debentures were fully subscribed and all money was duly received. Record the necessary entries in the books of the company. Show how the amounts will appear in the balance sheet.

Accepted Answer

> [!TLDR]
> A Limited issues 5,000, 10% debentures of ₹100 each at a ₹10 premium, collected over three instalments; the Debentures account is credited only at ₹5,00,000 face value across all three, while the ₹50,000 premium collected on allotment goes to Securities Premium Reserve.

### Concept

When a premium is collected as part of an instalment other than the last one, that instalment's due amount must be split between the face-value portion (credited to Debentures A/c) and the premium portion (credited to Securities Premium Reserve A/c). Here the premium of ₹10 per debenture is bundled into the ₹45 allotment instalment, so only ₹35 per debenture of that instalment is face value; the remaining instalments (application and the first-and-final call) are collected purely at face value since no premium is attached to them. Across all instalments, the Debentures account must still total exactly the face value of the debentures allotted.

### Working Note

- Total face value = 5,000 × ₹100 = ₹5,00,000
- Total premium = 5,000 × ₹10 = ₹50,000
- Application money = 5,000 × ₹25 = ₹1,25,000 (pure face value)
- Allotment money due = 5,000 × ₹45 = ₹2,25,000, split as 5,000 × ₹35 = ₹1,75,000 (face value) + 5,000 × ₹10 = ₹50,000 (premium)
- First and final call = 5,000 × ₹40 = ₹2,00,000 (pure face value)
- Check: Debentures A/c total credit = ₹1,25,000 + ₹1,75,000 + ₹2,00,000 = ₹5,00,000 — matches the face value exactly

### Solution

**Books of A Limited — Journal**

| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|------|-------------|------|-----------|------------|
| | Bank A/c Dr. | | 1,25,000 | |
| | To 10% Debenture Application A/c | | | 1,25,000 |
| | *(Application money on 10% debentures received)* | | | |
| | 10% Debenture Application A/c Dr. | | 1,25,000 | |
| | To 10% Debentures A/c | | | 1,25,000 |
| | *(Transfer of application money to debentures account)* | | | |
| | 10% Debenture Allotment A/c Dr. | | 2,25,000 | |
| | To 10% Debentures A/c | | | 1,75,000

Date	Particulars	Debit (₹)	Credit (₹)
	Share Application A/c Dr.	40,000
	To Share Capital A/c		40,000
(Being application money transferred to Share Capital)

Date	Particulars	Debit (₹)	Credit (₹)
	Share Allotment A/c Dr.	60,000
	To Share Capital A/c		60,000
(Being allotment money due on 10,000 shares @ ₹6 each)

Particulars	Note No.	Amount (₹)
1. Shareholders’ Funds
(a) Share Capital	1	1,00,000
(b) Reserves and Surplus	2	20,000
2. Non-Current Liabilities	...	...
3. Current Liabilities	...	...

Particulars	Amount (₹)
Authorised Capital
1,00,000 Equity Shares of ₹10 each	10,00,000
Issued Capital
80,000 Equity Shares of ₹10 each	8,00,000
Subscribed and Paid-up Capital
80,000 Equity Shares of ₹10 each fully paid	8,00,000

Concept understanding — Share Capital Accounting

Why does share capital matter in accounting?

The precise meaning (NCERT Class 12)

Accounting treatment — the journal entries

Step 1: Application money received

Step 2: Transfer application money to Share Capital

Step 3: Allotment money due

Step 4: Allotment money received

The Balance Sheet format (as per NCERT)

Concept

Working Note

Solution

Particulars	Amount (₹)
On application	25
On allotment (including premium)	45
On first and final call	40

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	40,000
	To Share Application A/c		40,000
(Being application money received on 10,000 shares @ ₹4 each)

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	60,000
	To Share Allotment A/c		60,000
(Being allotment money received)

Particulars	Debit (₹)	Credit (₹)
Bank A/c Dr.	1,25,000
To 10% Debenture Application A/c		1,25,000
(Application money on 10% debentures received)
10% Debenture Application A/c Dr.	1,25,000
To 10% Debentures A/c		1,25,000
(Transfer of application money to debentures account)
10% Debenture Allotment A/c Dr.	2,25,000
To 10% Debentures A/c		1,75,000
To Securities Premium Reserve A/c		50,000
(Allotment money due, including the premium)
Bank A/c Dr.	2,25,000
To 10% Debenture Allotment A/c		2,25,000
(Allotment money received)
10% Debenture First & Final Call A/c Dr.	2,00,000
To 10% Debentures A/c		2,00,000
(First and final call money due)
Bank A/c Dr.	2,00,000
To 10% Debenture First & Final Call A/c		2,00,000

Concept

Working Note

Solution

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