Class 12th Accounts | Debenture Solutions

Introduction to Class 12th Accounts Debenture Questions

Welcome to our detailed guide on Class 12th Account Solutions for debentures. This blog post covers important questions, solutions, and concepts to help Class 12th students understand and solve debenture-related problems effectively.

What are Debenture in Class 12th Accounts?

Debentures are long-term borrowing instruments used by companies to raise funds. They promise to pay interest at a fixed rate and return the principal amount on maturity. In Class 12th Accounts, students learn about:

  • Issue of Debentures at Premium and Discount
  • Loss on Issue of Debentures
  • Redemption of Debentures
  • Interest Payment on Debenture
Class 12th account debentures questions


Class 12th Account Question on Debentures

Below is a practical question related to debentures:

Question:
Fit India Ltd. has issued 10,000 7% Debentures at ₹200 each at a 10% premium. The debentures are redeemable at a 25% premium. 
Pass journal entries for:
(i) Issue of Debentures
(ii) Loss on Issue of Debentures
(iii) Interest Payment on 30th September and 31st March.

Class 12th Debenture Solutions

(i) Journal Entry for Issue of Debentures

Bank A/c                               Dr.   ₹ 2,20,00,000
   To Debentures A/c                          ₹ 20,00,000
   To Securities Premium A/c                  ₹ 2,00,00,000
(Being 7% debentures issued at 10% premium)

(ii) Loss on Issue of Debentures

Loss on Issue of Debentures A/c        Dr.   ₹ 50,00,000
   To Debenture Redemption Premium A/c        ₹ 50,00,000
(Being debentures redeemable at 25% premium)

(iii) Interest Payment on Debentures

Interest on Debentures A/c             Dr.   ₹ 3,32,500
   To Bank A/c                                ₹ 3,32,500
(Being interest paid on 30th September)

Interest on Debentures A/c             Dr.   ₹ 5,95,000
   To Bank A/c                                ₹ 5,95,000
(Being interest paid on 31st March)

Explanation of the Solution

1. The debentures are issued at a 10% premium. The amount received from debentures includes the face value plus the premium.

2. The debentures are redeemable at a 25% premium, leading to a loss on the issue of debentures.

3. Interest is calculated at 7% on the face value of the debentures and paid semi-annually on 30th September and 31st March.

Conclusion

Understanding debentures in Class 12th Accounts is crucial for scoring well in the exams. By practicing journal entries and concepts like loss on issue, redemption, and interest payments, students can master this chapter.

For more detailed explanations and solutions, stay tuned for our upcoming blog posts on Class 12th Account Questions and solutions.

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