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On 1 st April, 2017, Prasad and Company Limited issued 1,000, 10% Debentures of ₹ 1,000 each at ₹ 980. Under the terms of issue, `1/5` of the debentures is annually redeemable by drawings, the first redemption occurring on 31st March, 2019.
On 31st March, 2018, the company had a balance of ₹ 4,000 in its Capital Reserve A/c. The company wrote off the discount on issue of debentures over the life-time of the debentures.
You are required to prepare the Discount on issue of Debentures Account for the first three years.
Concept: Disclosure of Discount on Issue of Debentures in the Company’s Balance Sheet When Debentures Are Redeemed in Instalments
Select the correct statement from the following options.
Concept: Interest on Debentures
On 1st April 2021, Bhim Ltd. issued 2,000, 5% Debentures of ₹100 each as follows:
| (a) For cash at a discount of 5% | ₹80,000 (Nominal) |
| (b) To a vendor for ₹ 60,000 in satisfaction of his claim | ₹70,000 (Nominal) |
| (c) To Bankers for a loan of ₹40,000 as collateral security | ₹50,000 (Nominal) |
The interest on these debentures was to be paid annually on 31st March every year by the company.
You are required to calculate interest on these debentures payable by the company on 31st March, 2022.
Concept: Interest on Debentures
During the year 2021-22 SM Ltd. issued 10,000, 10% Debentures of ₹ 100 each at a discount of 10% to be redeemed after three years. The company had a balance of ₹ 60,000 in its Securities Premium Reserve.
What amount will be added under Operating Activities as Discount on Issue of Debentures written off in the Cash Flow Statement of SM Ltd. for the year 2021-22?
Concept: Issue of Debentures at Par at Premium and at Discount
Xylo Ltd. issued 9,000, 7% Debentures of ₹ 100 each at a certain rate of discount. After writing off the discount on the issue of debentures, the company was left with a balance of ₹ 35,000 in its Securities Premium out of the original amount of ₹ 71,000.
At what rate of discount did the company issue these Debentures?
Concept: Issue of Debentures at Par at Premium and at Discount
The Balance Sheet of Anjum Ltd. as at 31st March 2022, had outstanding 1,000, 8% Debentures of ₹ 100 each. These debentures were to be redeemed by the company on 31st March 2023. Give the journal entry for the amount due to the Debenture holders on 31st March 2023, including the interest on debentures due to them.
Concept: Interest on Debentures
On 1st April, 2022, Harbour Ltd. issued 50,000, 6% Debentures of ₹ 100 each to the public at a discount of 5% to be redeemed after three years at a premium of 7%.
On this date, the company also issued 1,00,000 Equity shares of ₹ 10 each at a premium of ₹ 2 per share.
Both the issues were fully subscribed.
You are required to prepare the following accounts for the year 2022-23 in the books of Harbour Ltd.:
- 6% Debentures Account.
- Loss on issue of Debentures Account
Concept: Methods of Writing off Discount / Loss on Issue of Debentures
Gama Ltd. issued 20,000 Equity shares of ₹ 10 each to the public, payable as follows:
₹ 2 on Application
₹ 3 on Allotment (on 1st November, 2022)
₹ 5 on First & Final Call (on 1st March, 2023)
Applications were received for 25,000 shares. The directors of the company accepted applications for 20,000 shares and refunded the application money on the remaining shares.
One shareholder who was allotted 30 shares paid the first and final call with allotment.
Another shareholder did not pay his allotment on 20 shares when due but paid it with the first and final call along with interest on calls-in-arrears.
The directors of the company charged interest on calls-in-arrears at the rate provided in Table F of the Companies Act, 2013. No interest was allowed on calls-in-advance.
You are required to pass journal entries to record the above transactions in the books of Gama Ltd.
Concept: Calls in Arrears, Calls in Advance and Interest Thereon
On 1st April, 2023, Zara Ltd. issued 10,000, 6% Debentures of ₹ 100 each at a discount of 5%. On 31st March, 2024, the company had ₹ 40,000 in its Capital Reserve A/c and ₹ 30,000 as balance of Securities Premium.
Give the journal entry to write off the discount on issue of issue of debentures on 31st March, 2024.
Concept: Methods of Writing off Discount / Loss on Issue of Debentures
On 1st April, 2023, Ruth Ltd. purchased Plant and Machinery for ₹ 11,00,000 from Pablo Ltd. payable as to ₹ 1,00,000 by accepting a promissory note and the balance by an issue of 11% Debentures of ₹ 100 each at a premium of 10% to be redeemed at a premium of 2 % after six years. You are required to pass journal entries in the books of Ruth Ltd. only to record the payment made to Pablo Ltd.
Concept: Issue of Debentures at Par at Premium and at Discount
A limited company made an issue, which was fully subscribed, of 2,000, 5% Debentures of ₹ 100 each at ₹ 96, to be redeemed at par after five years. The debentures were allotted on 31st May 2023, subscriptions being payable:
15% on application
30% on allotment
30% on 30th June, 2023
Balance on 30th September 2023
One debenture holder holding 100 debentures paid the allotment with the first call along with interest on calls-in-arrears @ 10% per annum.
You are required to:
- Give the amounts in rupees payable with:
- Allotment
- Second and Final Call
- Prepare the Interest-on-Calls in Arrears A/c.
Concept: Calls in Arrears, Calls in Advance and Interest Thereon
The following balances have been extracted from the books of Nirvana Ltd, as at 31st March, 2024:
| Particulars | (₹) | Particulars | (₹) |
| Security deposit for electricity for ten years | 30,000 | Uncalled amount on partly paid-up shares | 8,00,000 |
| Underwriting commission | 20,000 | 10% Debentures | 5,00,000 |
| General Reserve | 70,000 | Statement of P/L (Dr.) | 10,000 |
| Fixed Deposits | 2,00,000 | Calls-in arrears @ ₹ 1 per share | 40,000 |
| Premium on redemption of Debentures | 20,000 | Securities Premium | 2,00,000 |
| Equity Share Capital (1,00,000 shares of ₹ 10 each) |
10,00,000 |
You are required to show the above items in Notes to Accounts accompanying the Balance Sheet of Nirvana Ltd. prepared as per Schedule III of the Companies Act 2013 as at 31st March, 2024.
Concept: Issue of Debentures at Par at Premium and at Discount
Relay Ltd. (an unlisted Non NBFC) redeems its 8,000, 10% Debentures of ₹ 100 each in instalments as follows:
| Date of Redemption | Debentures to be redeemed |
| 31st March, 2019 | 2,000 |
| 31st March, 2020 | 5,000 |
| 31st March, 2021 | 1,000 |
On the basis of the above details, what will be the amount of Debenture Redemption Reserve which the company will transfer to General Reserve on 31st March, 2021?
Concept: Creation of Debenture Redemption Reserve
Orange Ltd. took over assets of ₹ 7,00,000 and liabilities of ₹ 60,000 of Purple Ltd. for a purchase consideration of ₹ 6,30,000 payable by the issue of 10% Debentures of ₹100 each at a premium of 10% and if need be, a part of the purchase consideration in cash. How will the company meet the purchase consideration?
Concept: Redemption of Debentures for Immediate Cancellation - Draw of Lots, Lump Sum and Purchase in the Open Market
What is the maximum amount of debentures which an unlisted company, other than a NBFC and HFC, can redeem out of its capital?
Concept: Creation of Debenture Redemption Reserve
Sunrise Ltd. a listed NBFC, had outstanding 20,000, 7% Debentures of ₹ 100 each, due for redemption on 31st March, 2022.
As per the provisions of the Companies Act, 2013, what amount, if any, does the company need to transfer to Debenture Redemption Reserve, before it can redeem the debentures?
Concept: Creation of Debenture Redemption Reserve
On 1st April, 2022, Lighthouse Ltd. purchased land from Bricks Ltd. The payment was made on the same day by:
- Issuing a bank draft for ₹ 2,00,000.
- Drawing a Promissory Note in favour of Bricks Ltd. for ₹ 10,00,000.
- Issuing 8,000, 10% Debentures of ₹ 100 each at par, redeemable at a premium of 10% after three years.
You are required to pass necessary journal entries in the books of Lighthouse Ltd. on the date of purchase of land.
Concept: Redemption of Debentures for Immediate Cancellation - Draw of Lots, Lump Sum and Purchase in the Open Market
Jerome Ltd., an unlisted manufacturing company, had 20,000, 6% Debentures of ₹ 100 each due for redemption at par on 31st March, 2022. On this date the company had the required amount of ₹ 2,00,000 in its Debenture Redemption Reserve.
The Debenture Redemption Investment which was purchased on 30th April, 2021, was realised at 98% on the date of redemption and the debentures were redeemed on the due date.
You are required to pass journal entries in the books of the company for the year 2021-22. (Ignore interest on debentures).
Concept: Creation of Debenture Redemption Reserve
On 1st April, 2017, Gabriel Ltd., a listed company, issued 3,000, 8% Debentures of ₹ 100 each. One-third of the Debentures were redeemed at par on 31st March, 2021 and the remaining two-third on 31st March, 2022. The company paid interest on debentures annually on 31st March.
After meeting the requirements of the Companies Act, 2013, regarding Debenture Redemption Investment, the company redeemed the debentures.
You are required to record necessary journal entries in the books of the company only on 31st March, 2022; including entries for interest on debentures.
Concept: Creation of Debenture Redemption Reserve
Credit Access Grameen Ltd., a listed NBFC - MFI (Micro Finance Institution), is all set to enter the bond market next week to raise up to ₹ 1,000 crore in non-convertible debentures, as it looks to diversify its liability profile.
According to the provisions of the Companies Act, 2013, what is the maximum amount of these non-convertible debentures which Credit Access Grameen Ltd. will redeem out of its capital?
Concept: Redemption of Debentures Out of Capital
