Company Accounts

Debentures

Medium

common

The following journal entry appears in the books of XYZ Co. Ltd.

Particulars Dr. (Rs.) Cr. (Rs.)
Bank A/c Dr. 4,80,000
Loss on issue of debentures A/c Dr. 1,50,000
To 12% Debentures A/c 6,00,000
To Premium on Redemption of Debenture A/c 30,000

Calculate the rate at which debentures have been issued at a discount.

Particulars		Dr. (Rs.)	Cr. (Rs.)
Bank A/c	Dr.	4,80,000
Loss on issue of debentures A/c	Dr.	1,50,000
To 12% Debentures A/c			6,00,000
To Premium on Redemption of Debenture A/c			30,000

50%

40%

20%

25%

✅ Correct Option: 3

The loss on issue of $1,50,000$ combines discount on issue and premium on redemption. Premium on redemption is $30,000$ , so discount $= 1,50,000 - 30,000 = 1,20,000$ . Check with cash: face value $6,00,000$ less bank receipt $4,80,000 = 1,20,000$ .

Rate of discount $= \frac{1,20,000}{6,00,000} \times 100 = 20\%$ .

2025: 3 June Shift 2

Discount on issue of 8% debentures is shown in the balance sheet as

2022: 23 Aug Shift 2

Identify the methods of Redemption of Debenture from the following.

(A) By conversion into shares or new debenture

(B) Purchase in open market

(D) Payment in instalments

(E) Payment in lump-sum

Choose the correct answer from the options given below :

2026: 11 May Shift 1

X Ltd. issued 2,000, 10% debentures of Rs. 100 each at a discount of 8% on April 1, 2025. These debentures are redeemable at par after ten years. The company has a balance in Securities Premium Reserve of Rs. 15,000. Calculate the amount of discount to be written off from the Securities Premium Reserve.

2026: 12 May Shift 1

ICT Co. Ltd. purchased assets worth Rs. 28,80,000. It issued debentures of Rs. 100 each at a discount of 4 per cent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is:

2026: 13 May Shift 1

Observe the below given Journal Entry :-

Particulars	Dr. ₹	Cr. ₹
Debenture Application & Allotment A/c Dr.	4,70,000
Loss on Issue of Debenture A/c Dr.	70,000
To 8 % Debenture A/c		5,00,000
To Premium on Redemption of Debenture A/c		40,000

Debentures are :-

2026: 21 May Shift 1

Most companies raise long-term funds through debentures. Identify incorrect statements regarding debentures.

(A) Debenture holders enjoy voting rights.

(B) A company may issue different kinds of debentures, like Secured Debentures, Unsecured Debentures, Redeemable Debentures, Irredeemable Debentures, Convertible Debentures, Non-convertible Debentures.

(D) The return on Debenture is known as dividend.

Choose the correct answer from the options given below:

Solution

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