Kiran Industries Ltd issued 1,000, 10% Debentures of ₹100 each at a discount of 5%, redeemable at a premium of

Illustrations · Q11

Q. Kiran Industries Ltd issued 1,000, 10% Debentures of ₹100 each at a discount of 5%, redeemable at a premium of 10% after five years, the full amount being payable on application. Pass the journal entry for the issue, and the entry to write off the resulting loss.

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Working out the amounts (per debenture: issue price ₹95, face value ₹100, redemption value ₹110)

Amount received on application = 1,000 × ₹95 = ₹95,000 (5% discount on ₹100)
Nominal (face) value to be credited to Debentures A/c = 1,000 × ₹100 = ₹1,00,000
Premium payable on redemption = 1,000 × ₹10 (10% of ₹100) = ₹10,000 — a future liability
Loss on Issue of Debentures = discount on issue (₹5,000) + premium on redemption (₹10,000) = ₹15,000

Journal entry for issue

Particulars	Debit (₹)	Credit (₹)
Bank A/c Dr (1,000 × ₹95)	95,000
Loss on Issue of Debentures A/c Dr	15,000
To 10% Debentures A/c (1,000 × ₹100)		1,00,000
To Premium on Redemption of Debentures A/c (1,000 × ₹10)		10,000
(Being 1,000, 10% Debentures of ₹100 each issued at a 5% discount, redeemable at a 10% premium)

Cross-check: total debits = 95,000 + 15,000 = ₹1,10,000; total credits = 1,00,000 + 10,000 = ₹1,10,000 ✓. …

Q.Kiran Industries Ltd issued 1,000, 10% Debentures of ₹100 each at a discount of 5%, redeemable at a premium of 10% after five years, the full amount being payable on application. Pass the journal entry for the issue, and the entry to write off the resulting loss.