Question

Tata Ltd. issued 5,000, 10% Debentures of Rs 100 each on 1st April 2012. The issue was fully subscribed. According to the terms of issue, interest on debentures is payable half-yearly on 30th September and 31st March and tax deducted at source is 10%.
Pass the necessary journal entries related to the debenture interest for the half-yearly ending on 31st March 2013 and transfer of interest on debentures to Statement of Profit and Loss.

Answer 1

Journal
Date	Particulars	L.F.	Debit Rs	Credit Rs
2012 Sept.30	Debenture Interest A/c ${\displaystyle (500000\times \frac{10}{100}\times \frac{6}{12})}$  Dr.       To Income Tax Payable A/c (25,000 ×10%)       To Debenture holders’ A/c (Being amount of interest due for 6 months and tax deducted at source)		25,000	2,500 22,500
Sept. 30	Debenture holders’ A/c      Dr.      To Bank A/c (Being interest paid to the debenture holders)		22,500	22,500
Sept.30	Income Tax Payable A/c         Dr.     To Bank A/c (Being payment of tax on interest on denatures)		2,500	2,500
2013 Mar.31	Debenture Interest A/c ${\displaystyle (500000\times \frac{10}{100}\times \frac{6}{12})}$  Dr.      To Income Tax Payable A/c (12,000 ×10%)      To Debenture holders’ A/c (Being amount of interest due for 6 months and tax deducted at source)		25,000	2,500 22,500
Mar.31	Debenture holders’ A/c       Dr.     To Bank A/c (Being interest paid to the debenture holders)		22,500	22,500
Mar.31	Income Tax Payable A/c     Dr.     To Bank A/c (Being payment of tax on interest on denatures)		2,500	2,500
Mar.31	Statement of Profit and Loss A/c      Dr.     To interest on debentures A/c (Being interest or debentures transferred to statement of profit and loss)		50,000	50,000