Double Entry Book Keeping Ts Grewal 2017 for Class 12 Commerce Accountancy Chapter 8 - Joint Stock Company Accounts Redemption Of Debentures

Answer:

$\begin{array}{l} Amount Required to be transferred to Debentures Redemption Reserve \\ = 25% of Face value of Debentures \\ = (25% of Rs 10,00,000) - 50,000 = Rs 2,00,000 \end{array}$

Answer:

$\begin{array}{l} Amount Required to be transferred to Debentures Redemption Reserve \\ = 25% of Face value of Debentures \\ = (25% of Rs 20,00,000) - 50,000 = Rs 4,50,000 \end{array}$

Answer:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. Accordingly, Rs 50,000 is required to be transferred to DRR (i.e. 25% of 2,00,000) before the actual date of redemption of debentures.

Answer:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. So, Rs 2, 50,000 is required to be transferred to DRR (i.e. 25% of 10,00,000). Further, Rule 18 (7) requires every company that is required to create DRR to invest an amount at least equal to 15% of the value of debentures in specified securities. So, Rs 1,50,000 is to be invested in specified securities (i.e. 15% of 10,00,000).

Journal In the Books of Nirbhai Chemicals Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
June 30	Bank A/c	Dr.		10,80,000
	To 6% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				80,000
	(Debentures issued)

2017
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(DRR created)

April 30	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment made in specified securities)

June 30	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Investments encashed)

June 30	6% Debentures A/c	Dr.		10,00,000
	To Debentureholders’ A/c				10,00,000
	(Amount on 6% debentures due)

June 30	Debentureholders’ A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Payment made on redemption of debentures)

June 30	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2017
Mar. 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders’ A/c				45,000
	(Interest on 6% debentures due for 9 months)

Mar.31	Debentureholders’ A/c	Dr.		45,000
	To Bank A/c				45,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,000
	To Debenture Interest A/c				45,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Books of IFCI Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2010
April 01	Bank A/c	Dr.		5,00,00,000
	To 9% Debenture Application A/c				5,00,00,000
	(Debenture application money received)

April 01	9% Debenture Application A/c	Dr.		5,00,00,000
	To 9% Debentures A/c				5,00,00,000
	(Debenture application money transferred to debenture account)

2017
April 01	9% Debentures A/c	Dr.		5,00,00,000
	To Debentureholders’ A/c				5,00,00,000
	(Debentures due for redemption)

April 01	Debentureholders’ A/c	Dr.		5,00,00,000
	To Bank A/c				5,00,00,000
	(Amount due for redemption paid to debenture holders)

Notes:
1. All India Financial Institutions are exempted from creating DRR. Hence, in this case, no DRR is to be created.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures every year from April 01, 2010 to March 31, 2017 as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2010
Mar. 31	Debenture Interest A/c	Dr.		45,00,000
	To Debentureholders’ A/c				45,00,000
	(Interest on 9% debentures due)

Mar.31	Debentureholders’ A/c	Dr.		45,00,000
	To Bank A/c				45,00,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,00,000
	To Debenture Interest A/c				45,00,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/2012*	Statement of Profit or Loss	Dr.		60,000
	To Debenture Redemption Reserve A/c				60,000
	(Surplus amount is transferred to DRR)

30/4/2012*	Debenture Redemption Investment A/c Dr.			1,20,000
	To Bank A/c				1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/2013	9% Debentures A/c	Dr.		8,00,000
	To Debentureholders’ A/c				8,00,000
	(Debentures due for redemption)

31/3/2013	Bank A/c Dr.			1,20,000
	To Debenture Redemption Investment A/c				1,20,000
	(Investment made in specified securities is now encashed)

31/3/2013	Debentureholders’ A/c	Dr.		8,00,000
	To Bank A/c				8,00,000
	(Amount paid to debentureholders)

31/3/2013	Debenture Redemption Reserve A/c	Dr.		2,00,000
	To General Reserve				2,00,000
	(DRR transferred to General Reserve)

Working Note:

Notes:

1. Interest is not calculated on Investment as rate of interest is not provided.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures for the year ending March 31, 2012 as given below. In the similar manner, the entries related to interest on debentures for the year ending March 31, 2013 can also be journalised.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2012
Mar. 31	Debenture Interest A/c	Dr.		72,000
	To Debentureholders’ A/c				72,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		72,000
	To Bank A/c				72,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		72,000
	To Debenture Interest A/c				72,000
	(Transfer of debenture interest to Statement of Profit and Loss)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed in the previous accounting year.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	8% Debentures A/c	Dr.		50,00,000
	To Debenture holders’ A/c				50,00,000
	(Debenture due for redemption)

	Debenture holder’s A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Debentures redeemed at par)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
(1)	Bank A/c	Dr.		2,75,000
	To Debenture Application & Allotment A/c				2,75,000
	(Application money received on issue of debentures)

	Debenture Application & Allotment A/c	Dr.		2,75,000
	To 8% Debentures A/c				2,50,000
	To Security Premium Reserve A/c				25,000
	(Conversion of application money to Debentures A/c)

	8% Debentures A/c	Dr.		2,50,000
	To Debenture holders’ A/c				2,50,000
	(Debenture due for redemption)

	Debenture holders’ A/c	Dr.		2,50,000
	To Bank A/c				2,50,000
	(Debentures redeemed at par)

(2)	Bank A/c	Dr.		2,75,000
	To Debenture Application & Allotment A/c				2,75,000
	(Application money received on issue of debentures)

	Debenture Application & Allotment A/c	Dr.		2,75,000
	Loss on issue of Debentures A/c	Dr.		25,000
	To 7% Debentures A/c				2,50,000
	To Security Premium Reserve A/c				25,000
	To Premium on Redemption of Debentures A/c				25,000
	(Conversion of application money to Debentures A/c)

	8% Debentures A/c	Dr.		2,50,000
	Premium on Redemption of Debentures A/c	Dr.		25,000
	To Debenture holders’ A/c				2,75,000
	(Debenture due for redemption)

	Debenture holders’ A/c	Dr.		2,75,000
	To Bank A/c				2,75,000
	(Debentures redeemed at premium)

Answer:

Books of Wye Ltd.
Journal
Date.	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/17	Statement of Profit or Loss	Dr.		1,00,000
	To Debenture Redemption Reserve A/c				1,00,000
	(Surplus transferred to Debenture Redemption Reserve)

30/4/17	Debenture Redemption Investment A/c Dr.			45,000
	To Bank A/c				45,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/18**	9% Debentures A/c	Dr.		3,00,000
	To Debentureholders’ A/c				3,00,000
	(Debenture due for redemption)

31/3/18**	Bank A/c Dr.			45,000
	To Debenture Redemption Investment A/c				45,000
	(Investment made in specified securities is now encashed)

31/3/18**	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due to debentureholders paid)

Working Notes:

** The date of redemption has been assumed to be March 31, 2018 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

Note:
1. Here, the entry for transferring the amount of DRR to General Reserve A/c has not been passed, since the company has not fully redeemed all its debentures. It is still left with Rs 3,00,000 of debentures. Once these debentures are redeemed, the amount of DRR can be transferred to General Reserve A/c.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2018
Mar. 31	Debenture Interest A/c	Dr.		54,000
	To Debentureholders’ A/c				54,000
	(Interest on 9% debentures due for 12 months)

Mar.31	Debentureholders’ A/c	Dr.		54,000
	To Bank A/c				54,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		54,000
	To Debenture Interest A/c				54,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Books of India Textiles Corporation Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2015	Statement of Profit and Loss	Dr.		9,50,000
March 31	To Debenture Redemption Reserve A/c				9,50,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		7,50,000
	To Bank A/c				7,50,000
	(Investment is made in specified securities equal to the 15% value of debentures redeemed)
2016
March 31	9% Debentures A/c	Dr.		50,00,000
	To Debentureholders’ A/c				50,00,000
	(Debentures due for redemption)

March 31	Bank A/c	Dr.		7,50,000
	To Debenture Redemption Investment A/c				7,50,000
	(Investment made in securities is now encashed)

March 31	Debentureholders’ A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.		12,50,000
	To General Reserve A/c				12,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Notes:

WN1: Calculation of amount transferred to DRR

WN2: Calculation of amount Invested in Specified Securities

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015 & 2016
Mar. 31	Debenture Interest A/c	Dr.		4,50,000
	To Debentureholders’ A/c				4,50,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		4,50,000
	To Bank A/c				4,50,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		4,50,000
	To Debenture Interest A/c				4,50,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2013
Apr.01	Bank A/c	Dr.		40,00,000
	To Debenture Application & Allotment A/c				40,00,000
	(Application money received on issue of debentures)

Apr.01	Debenture Application & Allotment A/c	Dr.		40,00,000
	Loss on issue of Debentures A/c	Dr.		2,00,000
	To 8% Debentures A/c				40,00,000
	To Premium on Redemption of Debentures A/c				2,00,000
	(Conversion of application money to Debentures A/c)
2016
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		5,00,000
	To Debentures Redemption Reserve A/c				5,00,000
	(Amount transferred to Debentures Redemption Reserve)
2017
Mar.31	Surplus i.e. Balance in statement of Profit & Loss	Dr.		5,00,000
	To Debentures Redemption Reserve A/c				5,00,000
	(Amount transferred to Debentures Redemption Reserve)

Apr.30	Debenture Redemption Investment A/c	Dr.		6,00,000
	To Bank A/c				6,00,000
	(Amount invested in specified security)

June 30	Bank A/c	Dr.		6,00,000
	To Debenture Redemption Investment A/c				6,00,000
	(Debenture Redemption Investment realized)

June 30	8% Debenture A/c	Dr.		40,00,000
	Premium on Redemption of Debentures A/c	Dr.		2,00,000
	To Debenture holder’s A/c				42,00,000
	(Debenture due for redemption)

June 30	Debenture holder’s A/c	Dr.		42,00,000
	To Bank A/c				42,00,000
	(Debentures redeemed at premium)

June 30	Debentures Redemption Reserve A/c Dr.			10,00,000
	To General Reserve A/c				10,00,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 40,00,000 = Rs 6,00,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 40,00,000 = Rs 10,00,000 \end{array}$

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
April 1	Bank A/c	Dr.		5,00,000
	To Debenture Application & Allotment A/c				5,00,000
	(Application Money received on issue of debentures)

April 1	Debenture Application & Allotment A/c	Dr.		5,00,000
	To 9% Debentures A/c				5,00,000
	(Conversion of application money to Debentures A/c)

April 1	Surplus,i.e.,Balance in statement of Profit & Loss A/c	Dr.		1,25,000
	To Debentures Redemption Reserve A/c				1,25,000
	(Amount transferred to Debentures Redemption Reserve )

April 30	Debenture Redemption Investment A/c	Dr.		75,000
	To Bank A/c				75,000
	(Amount invested in fixed deposit of Canara Bank)
2016
March 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders' A/c				45,000
	(Interest on debenture payable)

March 31	Bank A/c	Dr.		80,500
	To Debenture Redemption Investment A/c				75,000
	To Interest Earned				5,500
	(Debenture Redemption Investment realized)

March 31	9% Debenture A/c	Dr.		5,00,000
	To Debenture holder’s A/c				5,00,000
	(Debenture due for redemption)

March 31	Debenture holder’s A/c	Dr.		5,45,000
	To Bank A/c				5,45,000
	(Debentures redeemed at par)

March 31	Debentures Redemption Reserve A/c	Dr.		1,25,000
	To General Reserve A/c				1,25,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

$\begin{array}{l} Amount Required to be transferred to Debenture Redemption Investment \\ = 1 5% of Face value of Debentures \\ = 1 5% of Rs 5,00,000 = Rs 75,000 \\ Amount Required to be transferred to Debentures Redemption Reserve \\ = 2 5% of Face value of Debentures \\ = 2 5% of Rs 5,00,000 = Rs 1,25,000 \end{array}$

Answer:

Journal In the Books of Godrej Ltd.
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
Mar. 31	Statement of Profit and Loss	Dr.		1,50,000
	To Debenture Redemption Reserve A/c				1,50,000
	(DRR created)

Apr. 01	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment made in specified securities)
2017
Mar. 31	7% Debentures A/c	Dr.		20,00,000
	To Debentureholders’ A/c				20,00,000
	(Amount on 7% debentures due)

Mar. 31	Bank A/c (3,00,000 + 16,200)	Dr.		3,16,200
	Tax Payable A/c	Dr.		1,800
	To Interest on Debenture Redemption Investment A/c				18,000
	To Debenture Redemeption Investment A/c				3,00,000
	(Investment encashed and interest received)

Mar. 31	Debentureholders' A/c	Dr.		20,00,000
	To Bank A/c				20,00,000
	(Payment made on redemption of debentures)

Mar. 31	Debenture Redemption Reserve A/c	Dr.		5,00,000
	To General Reserve A/c				5,00,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Working Notes:

Calculation of amount transferred to DRR

$Amount of DRR (25 % of Debentures) = 20, 00, 000 \times \frac{25}{100} = 5, 00, 000 Less : Amount already exists in DRR 3, 50, 000 DRR to be created for redemption 1, 50, 000$

Note:

1. The year of transfer to DRR and investment has been assumed to be in 2014 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016 & 2017
Mar. 31	Debenture Interest A/c	Dr.		1,40,000
	To Debentureholders’ A/c				1,40,000
	(Interest on 7% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		1,40,000
	To Bank A/c				1,40,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		1,40,000
	To Debenture Interest A/c				1,40,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
July 01	Bank A/c	Dr.		10,50,000
	To Debenture Application & Allotment A/c				10,50,000
	(Application received for issue of debentures)

July 01	Debenture Application & Allotment A/c	Dr.		10,50,000
	To 8% Debentures A/c				10,00,000
	To Security Premium Reserve A/c				50,000
	(Conversion of application money to Debentures A/c)
2016
Mar.31	Surplus i.e., Balance in statement of Profit & Loss	Dr.		2,50,000
	To Debentures Redemption Reserve A/c				2,50,000
	(Amount transferred to Debentures Redemption Reserve )

Apr.01	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Amount invested in fixed deposit with Axis bank)
2017
Mar.31	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Debenture Redemption Investment realized)

Mar.31	Debentures Interest A/c	Dr.		80,000
	To Debentures’ holders A/c				72,000
	To TDS Payable A/c				8,000
	(Interest Due on debentures)

Mar.31	Debentures’ holders A/c	Dr.		72,000
	TDS Payable A/c	Dr.		8,000
	To Bank A/c				80,000
	(Interest Paid to Debentures’ holders)

Mar.31	Bank A/c	Dr.		6,750
	TDS Collected A/c	Dr.		750
	To Interest on Debenture Redemption Investment				7,500
	(Interest received from Bank)

Mar.31	8% Debenture A/c	Dr.		10,00,000
	To Debenture holder’s A/c				10,00,000
	(Debenture due for redemption)

Mar.31	Debenture holder’s A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Debentures redeemed)

Mar.31	Debentures Redemption Reserve A/c Dr.			2,50,000
	To General Reserve A/c				2,50,000
	(Debentures Redemption Reserve transferred to General Reserve)

Double Entry Book Keeping Ts Grewal 2017 for Class 12 Commerce Accountancy Chapter 8 - Joint Stock Company Accounts Redemption Of Debentures

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