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CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures : Our team member provides here all CBSE Class 12 Accountancy best books, video classes and CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures free download study materials. Here we gave direct download links for CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures  in pdf format. Download this CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Complete Details in PDF Format and Read Well.

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures : Debentures are debt instruments issued by a joint stock company. Amounts collected byway of debentures form part of the loan capital of a company. They are repayable after a fixed period. Debentures are issued in units of small value for convenient buying and selling. Debenture holders get interest on their debentures. They are creditors of the company. They do not get dividend. Only shareholders get dividend.

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures : According to S.2 (12) of the companies Act, 1956, debentures include “debenture stock, bonds and any other securities of a company”. The basic difference between debentures and bonds is that the debentures are usually secured. Unlike debentures bonds can be floated with a fixed interest or floating interest rate. They can also be issued without interest as discount bonds. Discount bonds are issued at a discount on the face value. The investor gets full amount on redemption of debenture. From the point of view of investor, bonds are instruments carrying higher risks and higher rates of returns compared to debentures.

Download here CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

 Types of debentures

            i)          Redeemable debentures

            ii)         Perpetual Debentures

            iii)        Convertible debentures

            iv)        Secured debentures

Debenture Trust Dead

            Debenture trust deeds in a document created by the company whereby trustee are appointed to project the interest of debenture holders before they are offered for public subscription.

Deep discount Bond

            When debentures are issued without interest rate and issue price is hearby discounted, by the issue of debenture is  sand to have been made as deep discount bond.

Difficults between share holders and debenture holder,

Point of  DifferenceShare holderDebenture holder
1)         StatusThere are the owners of the companyThey are the creditors of the company
2)         ReturnThey are paid DividendThey are paid interest
3)         SecurityShares are not securedDebentures are ordinerly secured

 x, y, z Co. Ltd., issued 10000 10% debentures of Rs.100 each at a premium of Rs.15 payable as follows

            On application Rs.40, (industry premium) on Allotment Rs.65

All the debentures were subscribed and money was received, pars necessary journal entries of record the issue of debentures

Journal Entries

1) Bank a/c Dr To 10% Debenture applicable (being application money received)4,00,0004,00,000
2) 10% Deb appli a/c Dr. to be 10 debenture a/c to security premium a/c (Being application monthly transferred)4,00,0004,00,000
3) 10% Deb allotment a/c on to 10% Deb a/c (being allotment money made due)6,50,0006,50,000
4) Bank a/c Dr to 10% Deb allotment a/c (Being allotment money renewed)6,50,0006,50,000

 Pars Journal Entries to record the Issue of Debentures

1)     5000 15% debenture of Rs.100 each issued at Discount of 5% and redemark at premium at 5% after 5 years.

2)     10000 15% debenture of Rs.100 each issued at a premium of 10% and redeemable at par after 6 years.

Ans:                Jounral Entries

1) Bank a/c Dr loss on issue of Deb a/c or To15% debenture a/c To premium on redemption of debenture a/c (being issue of debenture at discount and redemark at 5% premium)4,75,00050,0005,00,000

25,000

2) Bank a/c dr debenture a/cTo premium a/c (Being issue of debenture at premium and redemble at par)11000001000000100000

A building has been purchased for Rs.1,10,000 from X Ltd., X Ltd., has been issued 12% debentures in Purchase Consideration at a Premium of 10% Journalese the above transaction.

Ans:    Journal entries

1) Building a/c Dr. To vendors a/c (Being purchasing of a building on credit)110000110000
2) Vendors a/c dr to 12% debentures a/c to securities premium a/c (Being issue of 12% debentures at 10% premium)11000010000010000

A Ltd issued 5000 13% debentures of Rs.100 each at par and raised a loans of Rs.80000 from Bank. Collaterally secured by Rs. 100000 13% debentures Hon will you show the debenture in the Balance Sheet of the Company assuming that the company has recorded the issue of Debentures as collateral security in the book.

Balance Sheet

LiabilitiesAssets
Secured Loans 5000 13% Deb of Rs. 100 each at par Bank loan (secured by the issue of 1000 13% deb of Rs.100 each)Amount500000

80000

Current assetsBank a/cAmount500000

 LCM Ltd., purchased for concellation its own 10,00,000, 9% debenture of Rs.500 each of Rs.480 each record necessary Journal entries.

Journal Entries

1)         Own debentures a/c Dr To Bank a/c (being purchased its own debenture at Rs.480/- each)480000000480000000
2) 90 debentures a/c Dr to own debentures a/c to have on concellation of debentures.5000000004800000002000000

A company authorized its Rs.1,10,000 debenture holders to convert them into preference shares pass the necessary journal entry if

a)         Debentures were converted into shares of Rs.100 at par

b)         Debentures were converted into shares of Rs.100 at a premium of 10%

Ans:     a)       Debentures Ac or                              1,10,000

                       70 preference have capital a/c                                           1,10,00

             b)       Debentures a/c or                             1,10,000

                       To preference share capital a/c                                        1,00,000

                       To securities premium a/c                                                    10,000

                       (being debentures converted to preference

                        shares of 10% premium)

 White Ltd., issued 8,00,00, 8% debentures of Rs.100 each redeemable at a premium of 10%. According to the terms of redemption, the company redeemed 25% of the above  debentures by converting them into shares of 50 each issued at a premium of 60% pars found entry regarding redemption of debentures.

1)         8% debentures a/c Dr                                                             2,00,00,000

             premium on redemption of debentures a/c Dr                        20,00,000

             To Debenture holders a/c                                                       2,20,00,000

             (Being the amount of 25% of debentures and

             premium on redemption to be converted into shares)

2)         Debenture holders A/c Dr                                                       2,20,00,000

             To share capital                                                                       1,37,50,000

             To security premium a/c                                                             82,50,000

             (Being issue of 2,75,000 shares of Rs.50 each at a

             premium of 60% to the debenture holders

             on conversion of 2,00,000 debentures)

 A Ltd, issued Rs.40,00,000, 8% debentures of Rs.100 each at a discount of 5% on 1 April 2001 redeemable at Par has draw of lots as under

             Rs.10,0,000 Debentures on 31/03/2002

             Rs.10,00,000 Debentures on 31/03/2003

             Rs.10,00,000 Debentures on 31/03/2004

             Rs.10,00,000 Debentures on 31/03/2005

             (Compute the amount of discount to be written off in each was till debentures are paid. Also prepare Discount on issue of Debentures Account.

Amount of discount = Rs.4000000 x 5/100 = Rs.2,00,000

YearAmount UtilisedRatioDiscount to be written off
200240000004200000×4/10=80000
200330,00,00032,00,000 x 3/10=60000
200420,00,00022,00,000×2/10 =40000
200510,00,00012,00,000×1/10=20000

DISCOUNT ON ISSUE OF DEBENTURES

1st year to Debenture2nd to bal b/d

3rd to bal b/d

4th to bal b/d

2,00,0002,00,000

120000

120000

60000

60000

20000

By P/c a/cBy bal c/d

2nd year

By P/C a/c

By bal c/d

3rd  By P/C a/c

By hal c/d

4 by p/c a/c

80000120000

200000

600000

60000

120000

40000

20000

60000

20000

The company issued 12% debentures of Rs.10,00,000 at 8% discount redeemable at par. Assume further that debentures are to be redeemed by drawing method in the following manner.

Year endAmount (for value)
2Rs.1,00,000
3Rs.2,00,00
4Rs.3,00,000
5Rs.4,00,000

Calculate the amount of discount on debentures to be written off each year and also prepare discount on issue of debenture a/c.

Ans.

YearAmount utilizedRatioDiscount to be written off
110,00,0001080,000 x 10/40 = 20,000
210,00,0001020,000
39,00,000918,000
47,00,000714,000
54,00,00048,000
4080,000

1)     10,0000 x 8/100 = 80,000

Discount on issue of debentures a/c

1st Jan T0 12% debentures80,00031st Dec By P&L a/c20,000
80,00080,000
2nd year To bal b/d60,0002nd year by P &L a/cBy balance20,00040,000
60,00060,000
3rd year to balance b/d40,000By P & L A/cBy balance c/d18,00022,000
40,00040,000
4th year To balance b/d22,000By P &L a/cBy balance c/d14,0008,000
22,00022,000
5th year To balance b/d8,000By P & L a/c8,000

Mahesh Ltd., issued 1,00,000, 8% debentures of Rs.100 each on April 1,2002 redeemable after 4 years. It has been decided to create debenture redemption reserve for the purpose of redemption of debenture. The sinking fund tables show that Rs.0.2155 invested in 10% securities will amount to Re 1 in 4 years. The relevant balances on April 1, 2005 were as follows.

Debentures 8% – Rs.1,00,00,000

Debentures redemption fund investment – Rs.71,33,050

Debenture redemption fund – Rs.71,33,050

On March 31,2006 the investments were sold at book value and the debentures were redeemed. You are required to pass journal entries for the year ending March 31, 2006.

Ans:     Journal entries

31st March 2006 Bank a/c Dr                                                                             7,13,305/

                        To Interest on debenture

                        Redemption fund investment a/c                                           7,13,305

                        (Interest received on investments)

                        Interest received on investments)

                        Interest on debenture redemption fund

                        Investment                                                                               7,13,305/

                        To debenture redemption fund a/c                                        7,13,305

                        (Interest transferred to debenture

                        redemption fund)

                        P&L Appropriation a/c Dr                                                   21,55,000/

                        To Debenture redemption fund a/c                                     21,55,000

                        (Amount of profit transferred to deb.

                        Redemption fund a/c)

                        Bank a/c Dr                                                                           71,33,050/

                        (Investments sold at pas)

                        Debenture redemption fund a/c Dr                                 1,00,01,355/

                        To general reserve a/c                                                      1,00,01,355

(The amount of debenture redemption fund transferred to General  reserve a/c) (7,13,305 + 21,55,000+71,33,050)

8% debentures a/c Dr                                                      1,00,00,000/

To Bank a/c                                                                        1,00,00,000

(Debentures redeemed)

On April 1, 2001, following were the balances in the book of GKW Ltd., 9% debenture Rs.60,00,000; Debenture redemption reserve Rs.20,00,000. The board of Directors decided to transferRs.10,00,000 to debenture redemption reserve on March 31, 2002. The redemption of debentures will commence on April/1, 2003. Record necessary journal entries for the above transactions relating to transfer of debenture redemption serve on redemption of debentures. Ignore entries for interest on debentures.

Books of GKW Ltd., Journal Entries

31st March 2002 P&L Appropriation a/c Dr                                                 10,00,000/

                                 To Debenture redemption reserve the                          10,00,000

                                 (profits transferred to DRR)

1st April 2003          9% debentures  a/c Dr                                                   60,00,000/

                     To debenture holder the                                                 60,00,000

                     (Payment due to debenture holders)

April 1                      Debenture holders A/c Dr                                             60,00,000/

                                 To Bank A/c                                                                     60,00,000

                                 (Payment due to debenture holders discharged)

31st March               Debenture redemption reserve                                    30,00,000/

2004                        To General reserve                                                         30,00,000

  Journalise the following transactions in the books of Raja Ltd.,

1)         200 12% debentures of Rs.100 each issued it a discount of 10% were converted into 10% preference shares of Rs.100 each issued at a premium of 25%. The debentures were converted at the option of the debentures-holders before the date of redemption.

2)         Issued 1000 12% debentures of Rs.100 each at a discount of 10% redeemable at a premium of 5%.

Journal Entries

Ans

1) 12% Debenture A/c Dr to discount on issue of debenture to debenture holders 4/c (being the amount due to debenture holders on conversion of 200, 12% debenture)200002000

18000

2) Debenture holders a/c Dr To 10% preference Sh.Cap To securities premium (Being issue of 144,12% transfer share of Rs.100 each.1800014400

3600

3) Bank a/c DrLoss on Issue of Deb a/c

To 12%  Debenture a/c

To premium on redemption of deb

(Being issue of 1000, 12% debenture of Rs.100 each at a discount of 10% and redeemable at premiuim 75%).

9000015000100000

500

On 1/4/96 the following balances appeared in the books of Trust marketing limited

            12% debentures Rs.2000000

            Debenture sinking fund Rs.1600000

            (Debentures redemption reserve)

            Debenture sinking fund Investment Rs.1600000

            (Debenture redemption reserve investment)

            The  investment considered of 8% Govt. securities of the face value of Rs.17,00,000. The annual instalment to sinking fund was Rs.2,64,000. The bank balance on 31/03/1997was Rs.5,60,000  (after receipt of interest on sinking fund investment) Investment realized 83% and debentures were redeemed.

Show (1)         Debenture sinking fund a/c

            (2)       Debenture sinking fund investment a/c

Debenture sinking fund a/c

31/03/97To Sinley Fund

Invt. A/c                                 119000

To General Resource       1881000

1/4/96By bal b/d                           1600000

31/3/97

By P/C Appropriation

31/3/97                                 264000

31/3/97

By Interest on S.F.               136000

                                          20,00,000                                         20,00,000

Debentures Sinking Fund Invt. A/c

1/4/96 to bal b/d                      160000031/3/96By Bank a/c

(83/100 x 1700000)                     1481000

31/3/99

By Deb. S.F.

(Hors on sale)                                  119000

                                                  1600000                                                        1600000

 CBSE Class 12 Commerce Accounting For Companies Accounting For Debentures Notes

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