Accounting Treatment Part 2

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Debentures issued for cash at par: Subscription of Debentures either equal or under subscribed.

Journal Entries

Table of Journal Entries Debentures Issued for Cash at Par: Subscription of Debentures Either Equal or under Subscribed.
Title: Table of Journal Entries Debentures issued for cash at par: Subscription of Debentures either equal or under subscribed.

On Receipt of Application Money

Bank A/c Dr.

To Debentures Application A/c

(Application money received for Debentures)

Transfer of Application money to Debentures A/c

Share Application A/c Dr.

To Debentures A/c

(Application money transferred to Deb. A/c)

Money due on Allotment

Debentures Allotment A/c Dr.

To Debentures A/c

Allotment Money Received

Bank A/c Dr.

To Share Allotment A/c

Call money due

Debenture First and Final Call A/c Dr.

To Debentures A/c.

Receipt of call money

Bank A/c Dr.

To Debentures First & Final call A/c

Over Subscription of debentures: Number of applications received for subscription of debentures is more than the debentures are being offered for subscription by the company.

Journal Entries:

Table of Number of Applications Received for Subscription of Debentures is More Than the Debentures Are Being Offered for Subscription by the Company.
Title: Table of Number of applications received for subscription of debentures is more than the debentures are being offered for subscription by the company.

When total excess applications are rejected:

Debentures Application A/c Dr.

To Bank A/c

(Refund of money on rejected applications)

When excess application money adjusted towards sum due on allotment:

Debentures Application A/c Dr.

To Debentures Allotment A/c

(Excess Application money adjusted)

Example:

ABC Ltd issued 5000 10% Debentures of Rs 100 each payable as Rs 40 on application and Rs 60 on allotment. Applications were received for 6000 debentures. Applicants for 500 debentures were sent letter of regret and money was returned. Allotment was made proportionately to the remaining applicants. Over subscription was applied to the amount due on allotment. All money was duly received. Make journal entries for the above transactions in the books of the company.

Solution: Journal Entries

Table of Make Journal Entries
Title: Table of Make journal entries

S. No

Particulars

L.F

Amount (Rs.)

Dr.

Cr.

1.

Bank A/c Dr.

To Debentures Application A/c

(Application money received for 6000 debentures @ Rs 40 per debenture)

240000

240000

2.

Debentures Application A/c Dr.

To 10% Debentures A/c

To Bank A/c

To Debentures Allotment A/c

(Debenture application money of 5000 debentures transferred to debenture A/c on their allotment of 500 debentures returned and balance of 500 adjusted towards allotment)

240000

200000

20000

20000

3.

Debentures Application A/c Dr.

To 10% Debentures A/c

(Allotment money due on 5000 debentures @ Rs 60 per debenture)

300000

300000

4.

Bank A/c Dr.

To Debentures Allotment A/c

(Allotment money received)

280000

280000

Issue of Debentures at Premium and at Discount:

Sometimes companies issue debentures either above the par value or below the par value.

  • Premium Debentures: If the value of debenture is more than the par value then the difference is called premium and those debentures are known as premium debentures.

  • Discount Debentures: If the value of debenture is less than the par value then the difference is called discount and those debentures are known as discounted debentures.

    Note: Companies Act, 1956 has not laid down any restrictions on percentage of discount on debentures as in case of issue of Shares.

    Journal Entries

Table of Make Journal Entries. Issued at Premium & Discount:
Title: Table of Make journal entries. Issued at Premium & Discount:

Issued at Premium:

Debentures Allotment A/c Dr.

To Debentures Discount A/c Dr.

To Securities Premium A/c

(Allotment of debentures at …..premium)

Issued at Discount:

Debentures Allotment A/c Dr.

Debentures Discount A/c Dr.

To Debentures A/c

(Allotment of debentures at …..discount)

Exaple:

A company has issued 5000 10% Debentures of Rs 100 each at a premium of 20% payable as Rs 60 on application Rs 60 on allotment (including premium). All the debentures were subscribed for and money was duly received. Make journal entries.

Solution:

Journal Entries

Table of Make Journal Entries.
Title: Table of Make journal entries.

S.No

Particulars

L.F

Amount (Rs.)

Dr.

Cr.

1.

Bank A/c Dr.

To Debentures Application A/c

(Application money received)

300000

300000

2.

Debentures Application A/c Dr.

To 10% Debentures A/c

(Application money transferred to Debenture A/c)

300000

300000

3.

Debentures Allotment A/c Dr.

To 10% Debentures A/c

To Securities Premium A/c

(Amount due on allotment along with premium)

300000

200000

100000

4.

Bank A/c Dr.

To Debentures Allotment A/c

(Allotment money received)

300000

300000

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