Page 1
3 On transfer of money from surplus in Statement of P & L A/C
Surplus in Statement of P & L A/C dr.
To debenture redemption reserve a/c
(Transfer of profits equal to 25% of the nominal value of debentures issued) always
on 31/3 before the redemption of debentures.
25%=
100%
25%=
100%
? Entry should be passed on 31/3 before the process of redemption of debentures begins
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
6 Debenture Redemption Reserve a/c dr.
To General Reserve a/c
Always on 31/3 in which all the debentures are redeemed
25%=
100%
25%=
100%
? Entry is always on the date of redemption
? Entry is passed only when the process of redemption ends
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as
all the debnetures had not been redeemed
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
Case 1.
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on
due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 2
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Page 2
3 On transfer of money from surplus in Statement of P & L A/C
Surplus in Statement of P & L A/C dr.
To debenture redemption reserve a/c
(Transfer of profits equal to 25% of the nominal value of debentures issued) always
on 31/3 before the redemption of debentures.
25%=
100%
25%=
100%
? Entry should be passed on 31/3 before the process of redemption of debentures begins
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
6 Debenture Redemption Reserve a/c dr.
To General Reserve a/c
Always on 31/3 in which all the debentures are redeemed
25%=
100%
25%=
100%
? Entry is always on the date of redemption
? Entry is passed only when the process of redemption ends
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as
all the debnetures had not been redeemed
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
Case 1.
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on
due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 2
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed. Investments were encashed and Debentures were redeemed on due date.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,53,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 3
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were
redeemed.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To T.D.S. A/C
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,51,000
2,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 4
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?
Solution
Page 3
3 On transfer of money from surplus in Statement of P & L A/C
Surplus in Statement of P & L A/C dr.
To debenture redemption reserve a/c
(Transfer of profits equal to 25% of the nominal value of debentures issued) always
on 31/3 before the redemption of debentures.
25%=
100%
25%=
100%
? Entry should be passed on 31/3 before the process of redemption of debentures begins
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
6 Debenture Redemption Reserve a/c dr.
To General Reserve a/c
Always on 31/3 in which all the debentures are redeemed
25%=
100%
25%=
100%
? Entry is always on the date of redemption
? Entry is passed only when the process of redemption ends
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as
all the debnetures had not been redeemed
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
Case 1.
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on
due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 2
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed. Investments were encashed and Debentures were redeemed on due date.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,53,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 3
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were
redeemed.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To T.D.S. A/C
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,51,000
2,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 4
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
? As per Section 17 (4) with rule 18 (7) a Banking Company is not required to create Debenture Redemption
Reserve
? A Company which is not required to create DRR is exempted from Investing 15% amount also.
Case 5
X Ltd. has 10,000, 6% Debentures of Rs.100 each due for redemption on 31st March 2015. Assume that Debenture
Redemption Reserve has a balance of Rs.1,50,000 on that date. It was decided to invest the required amount towards
Debenture Redemption Investment.
Solution
Date Particulars L.F. DR. CR.
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/4/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,00,000
1,00,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 6
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2015. Record the necessary entries.
Solution
Date Particulars L.F. DR. CR.
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
75,000
75,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
75,000
75,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
5,00,000
5,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
5,00,000
5,00,000
? As all the debentures have not been redeemed so the last entry is not passed.
? Investments are purchased of the value of the debentures which are to be redeemed.
Case 7
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2015. The company has in its Debenture Redemption Reserve Account a balance of
Rs.40,000. Record the necessary entries.
Solution
Date Particulars L.F. DR. CR.
31/3/15 Surplus in Statement of Profit & Loss Dr. 2,10,000
Page 4
3 On transfer of money from surplus in Statement of P & L A/C
Surplus in Statement of P & L A/C dr.
To debenture redemption reserve a/c
(Transfer of profits equal to 25% of the nominal value of debentures issued) always
on 31/3 before the redemption of debentures.
25%=
100%
25%=
100%
? Entry should be passed on 31/3 before the process of redemption of debentures begins
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
6 Debenture Redemption Reserve a/c dr.
To General Reserve a/c
Always on 31/3 in which all the debentures are redeemed
25%=
100%
25%=
100%
? Entry is always on the date of redemption
? Entry is passed only when the process of redemption ends
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as
all the debnetures had not been redeemed
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
Case 1.
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on
due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 2
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed. Investments were encashed and Debentures were redeemed on due date.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,53,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 3
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were
redeemed.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To T.D.S. A/C
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,51,000
2,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 4
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
? As per Section 17 (4) with rule 18 (7) a Banking Company is not required to create Debenture Redemption
Reserve
? A Company which is not required to create DRR is exempted from Investing 15% amount also.
Case 5
X Ltd. has 10,000, 6% Debentures of Rs.100 each due for redemption on 31st March 2015. Assume that Debenture
Redemption Reserve has a balance of Rs.1,50,000 on that date. It was decided to invest the required amount towards
Debenture Redemption Investment.
Solution
Date Particulars L.F. DR. CR.
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/4/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,00,000
1,00,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 6
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2015. Record the necessary entries.
Solution
Date Particulars L.F. DR. CR.
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
75,000
75,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
75,000
75,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
5,00,000
5,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
5,00,000
5,00,000
? As all the debentures have not been redeemed so the last entry is not passed.
? Investments are purchased of the value of the debentures which are to be redeemed.
Case 7
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2015. The company has in its Debenture Redemption Reserve Account a balance of
Rs.40,000. Record the necessary entries.
Solution
Date Particulars L.F. DR. CR.
31/3/15 Surplus in Statement of Profit & Loss Dr. 2,10,000
To Debenture Redemption Reserve A/c 2,10,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
75,000
75,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
75,000
75,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
5,00,000
5,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
5,00,000
5,00,000
? As all the debentures have not been redeemed so the last entry is not passed.
? Investments are purchased of the value of the debentures which are to be redeemed.
Case 8
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to redeem these debentures fully out of profits. It was decided
to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment on 30th April,
2015. Investments were encashed and Debentures were redeemed on due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
10,00,000
10,00,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
10,00,000
10,00,000
Case 9
X Ltd. redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 30-6-2015. The company had a
Debenture Redemption Reserve of Rs.1,50,000. Assuming that the Company has the required balance in Debenture
Redemption Investment Account, pass necessary journal entries for the redemption of debentures.
Solution
Date Particulars L.F. DR CR.
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,00,000
1,00,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
Premium on redemption a/c Dr.
To Debenture holder's a/c
10,00,000
50,000
10,50,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,50,000
10,50,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 10
X Ltd. Had a balance of Rs.12,00,000 in its Statement of Profit & Loss a/c . instead of declaring a dividend the co.
redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 31-3-2015. The company had a Debenture
Page 5
3 On transfer of money from surplus in Statement of P & L A/C
Surplus in Statement of P & L A/C dr.
To debenture redemption reserve a/c
(Transfer of profits equal to 25% of the nominal value of debentures issued) always
on 31/3 before the redemption of debentures.
25%=
100%
25%=
100%
? Entry should be passed on 31/3 before the process of redemption of debentures begins
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of
25% of Rs. 1,00,000 = Rs.25000
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
6 Debenture Redemption Reserve a/c dr.
To General Reserve a/c
Always on 31/3 in which all the debentures are redeemed
25%=
100%
25%=
100%
? Entry is always on the date of redemption
? Entry is passed only when the process of redemption ends
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as
all the debnetures had not been redeemed
? If no information is available then it is assumed debentures are redeemed – 25% out of profits.
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the
debentures which were issued
Case 1.
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on
due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 2
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed. Investments were encashed and Debentures were redeemed on due date.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,53,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 3
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were
redeemed.
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To T.D.S. A/C
To Debenture Redemption Investment a/c
To interest a/c (earned for 11 months)
1,51,000
2,750
1,50,000
1,3750
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 4
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?
Solution
Date Particulars L.F. DR. CR.
1/4/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
1/4/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
? As per Section 17 (4) with rule 18 (7) a Banking Company is not required to create Debenture Redemption
Reserve
? A Company which is not required to create DRR is exempted from Investing 15% amount also.
Case 5
X Ltd. has 10,000, 6% Debentures of Rs.100 each due for redemption on 31st March 2015. Assume that Debenture
Redemption Reserve has a balance of Rs.1,50,000 on that date. It was decided to invest the required amount towards
Debenture Redemption Investment.
Solution
Date Particulars L.F. DR. CR.
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/4/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,00,000
1,00,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 6
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2015. Record the necessary entries.
Solution
Date Particulars L.F. DR. CR.
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
2,50,000
2,50,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
75,000
75,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
75,000
75,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
5,00,000
5,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
5,00,000
5,00,000
? As all the debentures have not been redeemed so the last entry is not passed.
? Investments are purchased of the value of the debentures which are to be redeemed.
Case 7
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture
Redemption Reserve on March 31, 2015. The company has in its Debenture Redemption Reserve Account a balance of
Rs.40,000. Record the necessary entries.
Solution
Date Particulars L.F. DR. CR.
31/3/15 Surplus in Statement of Profit & Loss Dr. 2,10,000
To Debenture Redemption Reserve A/c 2,10,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
75,000
75,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
75,000
75,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
5,00,000
5,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
5,00,000
5,00,000
? As all the debentures have not been redeemed so the last entry is not passed.
? Investments are purchased of the value of the debentures which are to be redeemed.
Case 8
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
issue was fully subscribed. The Board of Directors decided to redeem these debentures fully out of profits. It was decided
to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment on 30th April,
2015. Investments were encashed and Debentures were redeemed on due date.
Solution
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
10,00,000
10,00,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
10,00,000
10,00,000
Case 9
X Ltd. redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 30-6-2015. The company had a
Debenture Redemption Reserve of Rs.1,50,000. Assuming that the Company has the required balance in Debenture
Redemption Investment Account, pass necessary journal entries for the redemption of debentures.
Solution
Date Particulars L.F. DR CR.
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,00,000
1,00,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
Premium on redemption a/c Dr.
To Debenture holder's a/c
10,00,000
50,000
10,50,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,50,000
10,50,000
30/6/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 10
X Ltd. Had a balance of Rs.12,00,000 in its Statement of Profit & Loss a/c . instead of declaring a dividend the co.
redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 31-3-2015. The company had a Debenture
Redemption Reserve of Rs.1,50,000. Assuming that the Company has the required balance in Debenture Redemption
Investment Account, pass necessary journal entries for the redemption of debentures.
Date Particulars L.F. DR. CR.
30/4/14 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
31/3/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
8,50,000
8,50,000
31/3/15 6% Debentures a/c Dr.
Premium on redemption a/c Dr.
To Debenture holder's a/c
10,00,000
50,000
10,50,000
31/3/15 Debenture holder's a/c Dr.
To bank a/c
10,50,000
10,50,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
10,00,000
10,00,000
Case 11
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
Company decided to transfer out of profits Rs.50,000 to Debenture Redemption Reserve on 31st March, 2014 and
Rs.1,00,000 on 31st March, 2015.
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/14 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
50,000
50,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,00,000
1,00,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr.
To Debenture Redemption Investment a/c
1,50,000
1,50,000
30/6/15 6% Debentures a/c Dr.
To Debenture holder's a/c
10,00,000
10,00,000
30/6/15 Debenture holder's a/c Dr.
To bank a/c
10,00,000
10,00,000
31/3/15 Debenture Redemption Reserve A/c Dr.
To General Reserve a/c
2,50,000
2,50,000
Case 12
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The
Board of Directors decided to transfer the required amount to Debenture Redemption Reserve in two equal annual
instalments starting with March 31, 2014.
Date Particulars L.F. DR. CR.
30/6/11 Bank A/c Dr.
To 6% Debenture Application & allotment a/c
10,50,000
10,50,000
30/6/11 6% Debenture Application & allotment a/c Dr.
To 6% Debentures a/c
To Securities Premium Reserve a/c
10,50,000
10,00,000
50,000
31/3/14 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,25,000
1,25,000
31/3/15 Surplus in Statement of Profit & Loss Dr.
To Debenture Redemption Reserve A/c
1,25,000
1,25,000
30/4/15 Debenture Redemption Investment a/c Dr.
To bank a/c
1,50,000
1,50,000
30/6/15 Bank a/c Dr. 1,50,000
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