NCERT Solutions for Class 12 Accountancy Part II Chapter 2 Accounting for Debentures

Q. Aashirwad Company Limited purchased assets of the book value of ₹2,00,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of ₹100 each. 

Record the necessary journal entries.

Ans.

Books of Aashirwad Company Limited

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Sundry Assets A/c Dr. 2,00,000
To Vendors 2,00,000
(Being assets purchased from vendors)
Vendors Dr. 2,00,000
To 10% Debentures A/c 2,00,000
(Being allotment of debentures to vendors as purchase consideration)

Q. National Packaging Company purchased assets of the value of ₹1,90,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000. 10% debentures of ₹100 each at a discount of 5%.

Record necessary journal entries.

Ans.

Books of National Packaging Company

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Sundry Assets A/c Dr. 1,90,000
To Vendors 1,90,000
(Being assets purchased from vendors)
Vendors Dr. 1,90,000
Discount on Issue of Debenture A/c Dr. 10,000
To 10% Debentures A/c 2,00,000
(Being allotment of 2,000 debentures of ₹100 each at a discount of 5% as purchase consideration)

Q. Romi Ltd. acquired assets of ₹20 lakh and took over creditors of ₹2 lakh from Kapil Enterprises. Romi Ltd., issued 8% debentures of ₹100 each at par as purchase consideration. Record necessary journal entries in the books of Romi Ltd.

Ans.

Books of Romi Ltd.

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Sundry Assets A/c Dr. 20,00,000
To Kapil Enterprises 18,00,000
To Sundry Creditors A/c 2,00,000
(Being purchase of business from Kapil Enterprises)
Kapil Enterprises Dr. 18,00,000
To 8% Debentures A/c Dr. 18,00,000
(Being issue of 18,000, 8% debentures of ₹100 each)

Q. A company took a loan of ₹10,00,000 from Punjab National Bank and issued 10% debentures of ₹12,00,000 of ₹100 each as a collateral security. Explain how you will deal with the issue of debentures in the books of the company.

Ans. First Method:

Balance Sheet (Extract)

Particulars Note
No.
Amount
(₹)
I. Equity and Liabilities
1. Non-current Liabilities
Long-term borrowings 1 10,00,000

Notes to Accounts:

Particulars Amount (₹)
I. Long-term borrowings
Bank loan 10,00,000
(Secured by issue of 12,000, 10% debentures of `100 each as Collatoral Security)
  • Second Method:

Journal Entries

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Debenture Suspense A/c Dr. 12,00,000
To 10% Debentures A/c 12,00,000
(12,000 debenture of `100 each issued as collateral security to P.N. Bank)

Balance Sheet (Extract)

Particulars Note
No.
Amount
(₹)
I. EQUITY AND LIABILITIES
1. Non-current Liabilities
Long-term borrowings 1 10,00,000

Notes to Account:

Particulars Amount
(₹)
Amount
(₹)
1. Long-term borrowings Secured Loan from PNB 10,00,000
Bank loan
12,000, 10% debentures of ₹100 each 12,00,000
Less: Debenture Suspense 12,00,000 —
10,00,000

Q. Suvidha Ltd. purchased machinery worth ₹1,98,000 from Suppliers Ltd. The payment was made by issue of 12% debentures of ₹100 each.

Pass the necessary journal entries for the purchase of machinery and issue of debentures when:

  • (i) Debentures are issued at par;
  • (ii) Debentures are issued at 10% discount; and
  • (iii) Debentures are issued at 10% premium

Ans. 

Books of Suvidha Ltd.

Journal

Date Particulars L.
F.
Debit
(₹)
Credit
(₹)
Machinery A/c Dr. 1,98,000
To Suppliers Ltd. 1,98,000
(Being Machinery purchased) 1,98,000
Case (i) When debentures are issued at par:
Suppliers Ltd. Dr. 1,98,000
To 12% Debentures A/c 1,98,000
(Being 12% Debentures issued to Suppliers Ltd.) 1,98,000
Case (ii) When debentures are issued at 10% discount: 1,98,000
Suppliers Ltd. Dr. 22,000
Discount on Issue of Debentures A/c Dr. 2,20,000
To 12% Debentures A/c
(Being 12% Debentures issued to Suppliers Ltd. at 10% discount)
Case (iii) When debentures are issued at 10% premium:
Suppliers Ltd. Dr. 1,98,000
To 12% Debentures A/c 1,80,000
To Securities Premium Reserve A/c 18,000
(Being 12% Debentures issued to Suppliers Ltd. at 10% premium) 18,000

Working Notes:

1. (₹)
Face value of debenture 100
Less: Discount 10% 10
Value at which debenture issued 90

$$\text{Number of debentures issued in case of 10}\% \text{ discount }= \frac{₹ 1,98,000}{90} = 2,200 \text{ debenture }$$

2. (₹)
Face value of debenture 100
Add: Premium 10% 10

110
Value at which debenture issued

$$\text{Number of debentures issued in case of 10}\% \text{ discount }= \frac{₹ 1,98,000}{90} = 1,800 \text{ debenture }$$