What will be the allotment entry Please explain Q 11 Alka Ltd issued 5,000, 10 % - Accountancy - Issue and Redemption of Debentures

Question

What will be the allotment entry? Please explain
Q 11 Alka Ltd issued 5,000, 10 % Debentures of Rs 1,000 each at a
discount of 10 % redeemable at a premium of 5 % after 5 years
According to the terms of issue Rs 500 was payable on application
and the balance amount on allotment of debentures Record necessary
entries regarding issue of 10 % Debentures

Neha Chopra · Accepted Answer

Dear Student

Here on the allotment, you have to book allotment money as well as
discount and premium on redemption of debentures
Firstly we would determine the amount to be received on the
allotment (calculation shown below), then just calculate Discount
and Premium on redemption
Now you have to pass a simple allotment entry along with booking of
premium and discount as shown below
In case you get confused with the multiple items in the entry, you
can pass separate entry for booking discount and
premium

Journal
in the books of Alka
Ltd

Date
Particulars

Debit
Credit

On allotment
:

Debenture Allotment A/c
(5,000 x 400)
Dr
2,000,000

Discount on Issue of
Debenture A/c (5,000 x 100)
Dr
500,000

Loss on Issue of
Debenture A/c (5,000 x (1,000 x 5%))
Dr
250,000

To 10% Debentures A/c
(5,000 x 500)

2,500,000

To Premium on Redemption
of Debenture A/c (5,000 x 50)

250,000

(Being Debenture
Allotment due, Booked 10% discount on issue and 5% premium on
redemption of debentures )

Bank
A/c
Dr
2,000,000

To Debenture Allotment
A/c

2,000,000

(Being money on allotment
received)

Calculation of Allotment
money

Particulars
Per
Debenture

Total Face Value of
Debenture
1,000

Less: Discount on
Issue
100

Total Cash to be received
on issue of debenture
900

Less: To be received on
Application
500

All Remaining to be
received on Allotment as per question, that would be (900 -
500)
400

Hope this helps
Keep posting
Regards

Journal in the books of Alka Ltd.
Date	Particulars		Debit	Credit

	On allotment :

	Debenture Allotment A/c (5,000 x 400)	Dr.	2,000,000
	Discount on Issue of Debenture A/c (5,000 x 100)	Dr.	500,000
	Loss on Issue of Debenture A/c (5,000 x (1,000 x 5%))	Dr.	250,000
	To 10% Debentures A/c (5,000 x 500)			2,500,000
	To Premium on Redemption of Debenture A/c (5,000 x 50)			250,000
	(Being Debenture Allotment due, Booked 10% discount on issue and 5% premium on redemption of debentures )

	Bank A/c	Dr.	2,000,000
	To Debenture Allotment A/c			2,000,000
	(Being money on allotment received)

Calculation of Allotment money
Particulars	Per Debenture
Total Face Value of Debenture	1,000
Less: Discount on Issue	100
Total Cash to be received on issue of debenture	900
Less: To be received on Application	500
All Remaining to be received on Allotment as per question, that would be (900 - 500)	400