(Application money credited to capital account) 3. Share Allotment Account Dr. To Share Capital Account To Securities premium Account (Amount on allotment amount and Share premium credited to respective accounts) 5,000 3,000 2,000 4. Bank Account Dr. To Share Allotment (Share allotment money collected, with the exception of 300 shares) 5,000 5,000 5. Share 1st Call Account Dr. To Share Capital (Share 1st call amount @Rs.5 per share credited to capital) 4,000 4,000 6. Bank Account Dr. Calls in Arrears Dr. To Share 1st Call (Share 1st call amount received) 2,800 1,200 4,000 7. Share Capital Account Dr. To Share Forfeiture Account To Calls in Arrears Account (Shares with default have been forfeited) 3,000 1,800 1,200
Particulars Dr. Cr 1. 2. 3. Share Capital Account Dr. Securities Premium Account Dr. To Share Allotment Account To Share 1st Call Account To Share Forfeiture Account (Shares forfeited for non payment) *assuming that the shares are allotted on pro-rata basis on 500 applications Bank Account Dr. Share Forfeiture Account Dr. To Share Capital (Reissue of forfeited shares) Share Forfeiture Account Dr. To Capital Reserve (Excess of forfeiture amount, belonging to forfeited shares transferred to capital reserve) 2,400 600 1,600 400 600 900 600 1,500 2,000 600 b. Particulars Dr. Cr 1. 2. 3. Share Capital Account Dr. To Share Forfeiture Account To Share Allotment Account To Share 1st Call Account To Share 2nd Call Account To Discount on Issue Account (Shares forfeited for non payment) Bank Account Dr. Discount on Issue Dr. Share Forfeiture Account Dr. To Share Capital (Reissue of forfeited shares) Share Forfeiture Account Dr. To Capital Reserve 1,500 800 100 100 200 450 300 300 300 150 1,000 200
i) Journal Entries Particulars Dr. Cr 1. Share Capital Account Dr. To Share Allotment Account To Discount on Issue Account To Share Forfeiture Account (Shares forfeited for default) 45,000 25,000 5,000 15,000 2. Bank Account Dr. Share Forfeiture Account Dr. Discount on Issue Account Dr. To Share Capital (Forfeited shares reissued) 40,000 5,000 5,000 50,000 3. Share Forfeiture Account Dr. To Capital Reserve (Excess amount in share forfeiture account transferred) 10,000 10,000 ii) Journal Entries Particulars Dr. Cr 1. Share Capital Account Dr. Share Premium Account Dr. To Share Forfeiture Account To Share Allotment Account (Shares forfeited for default) 1,400 1,000 600 1,800 2. Bank Account Dr. To Share Capital To Share Premium Account (Forfeited shares reissued at premium) 2,800 2,000 800 3. Share Forfeiture Account Dr. To Capital Reserve (Share forfeiture account transferred to capital reserve) 600 600
rejected applications.) 3. Share Allotment Account Dr. To Share Capital To Share Premium (Allotment money and premium credited) 5,000 3,000 2,000 4. Bank Account Dr. To Share Allotment (Allotment money collected with default on 200 shares) 2,800 2,800 5. Share 1st Call Account Dr. To Share Capital (First call amount credited to share capital) 4,000 4,000 6. Bank Account Dr. To Share First Call (First call amount received with default on 200 shares) 3,200 3,200 7. Share Capital Account Dr. Share Premium Account Dr. To Share Allotment Account To Share 1st Call Account To Share forfeiture Account (Shares with default forfeited) 2,000 400 700 800 900 8. Bank Account Dr. Share Forfeiture Account Dr To Share Capital Account (Forfeited shares reissued) 800 200 1,000 9. Share Forfeiture Account Dr. To Capital Reserve (Surplus in the share forfeiture account transferred) 250 250
iv. For Collecting the Allotment Money Bank Account Dr. Debenture Allotment Account (Allotment money received) 30 30 v. For Making the Debenture 1st call Debenture 1st call account Dr. To Debenture Account (1st call made on debentures) 50 50 vi. For Collecting the Debenture 1st call Amount Bank Account Dr. To Debenture 1st call (Debenture 1st call amount received) 50 50 a2. Debentures Issued at Par which is Redeemable at Par (amount collected in lump sum at the time of issue) Example: A limited company issued a debenture of Rs.100, to be paid in lump sum at the time of application. Particulars Amount Dr. Amount Cr. Bank Account Dr. To Debenture Application Account (Full amount received on issue of debentures) 100 100
6. Debenture issued at a premium of Rs.5, redeemable after 5 years at Rs.98 7. Debenture issued at Rs.98, redeemable at par 8. Debenture issued at Rs.95, redeemable after 5 years at Rs.102 9. Debenture issued at Rs.95, redeemable after 5 years at a discount of Rs.2 Particulars Amount Dr. Amount Cr. 1. Bank Account Dr. To Debenture Account (Debenture issued at par, and repayable at par) 100 100 2. Bank Account Dr. Loss on Issue Dr. To Debenture Account To Premium on Redemption of Debenture (Debenture issued at par, repayable at premium) 100 5 100 5 3. Bank Account Dr. To Debenture Account (Debenture issued at par repayable at discount) * Discount on debenture not shown in the Books 100 100 4. Bank Account Dr. To Debenture Account To Premium on Issue (Debenture issued at premium, repayable at par) 110 100 10 5. Bank Account Dr. Loss on Issue Dr. To Debenture Account To Premium on Issue Account To Premium on Redemption Account (Debenture issued at premium, redeemable at premium) 110 5 100 10 5 6. Bank Account Dr. To Debenture Account To Premium on Issue (Debenture issued at premium, redeemable at discount) 105 100 5 7. Bank Account D Dr. Discount on Issue Dr. To Debenture Account (Debenture issued at discount, redeemable at par) 98 2 100 8. Bank Account Dr. Loss on Issue Dr. To Debenture Account To Premium of Redemption 95 7 100 2
100,000 The ratio of debenture is 300:300:300:200:100 ie.3:3:3:2:1 Debenture Discount Account Date Particulars Amount Dr. Date Particulars Amount Cr. 1998 Jan.01 To 8% Debenture 18,000 1998 Dec.31 By P & L. A/c By Balance c/d 4,500 13,500 18,000 18,000 1999 Jan 01 To balance b/d 13,500 1999 Dec.31 By P&L A/c By Balance c/d 4,500 9,500 13,500 13,500 2000 Jan.01 To Balance b/d 9,500 2000 Dec.31 By P&L Account By Balance b/d 4,500 4,500 9,500 9,500 2001 Jan.01 To Balance b/d 4,500 2001 Dec.31 By P&L Account By Balance b/d 3,000 1,500 4,500 4,500 2002 Jan.01 To Balance b/d 1,500 2002 Dec.31 By P&L Account 1,500 1,500 1,500 Illustration 5.06 A company issued debentures of Rs.30,000 at a discount of 10%, to be redeemed at the end of 3 years in lump sum. Pass Journal Entries for the three years. The discount on issue of debenture Rs.3000 is distributed equally for the three years, because the debenture balances are same in all these three years. Particulars Amount Dr. Amount Cr. 1st Year begin. Bank Account Dr. Discount on Issue of Deb. Dr. To Debenture Account (Debentures issued at discount) 27,000 3,000 30,000 1st year End Profit and Loss Account Dr. To Discount on Issue of Deb. 1,000 1,000
2003 Jan 01 Bank Account Dr. To 8% Debenture Application (Debenture application money received) 200,000 200,000 2003 Jan 01 8% Debenture Application account Dr. To 8% Debenture account (Debenture allotted to applicants) 200,000 200,000 2003 Jun 30 Interest on Debentures account Dr. To bank (Interest paid for the 1st half year) 8,000 8,000 2003 Dec 31 Interest on Debentures account Dr. To bank (Interest paid for the 2nd half year) 8,000 8,000 2003 Dec.31 Profit and Loss Account Dr. Interest on Debenture (Interest for the year charged to P&L) 16,000 16,000 2003 Dec 31 Profit and Loss Appropriation Dr. To 8% Debenture Redemption Reserve (Debenture Redemption Reserve created) 50,000 50,000 2004 Jun 30 Interest on Debentures account Dr. To bank (Interest paid for the 1st half year) 8,000 8,000 2004 Dec 31 Interest on Debentures account Dr. To bank (Interest paid for the 2nd half year) 8,000 8,000 2004 Dec.31 Profit and Loss Account Dr. Interest on Debenture 16,000 16,000