Nagpal Institute of Training & Coaching (Computer & Commerce Inst.

)
H.O:- # 658, Sector 11 Panchkula(Hry),
Coaching for +1, +2, CA Foundation, BBA, BCom, Mcom and MBA
Online Coaching available for Commerce and Computers
Issue and Redemption of Debentures Important Questions Class 12 Accountancy
Q1. Debentures are generally redeemable after a certain period. This period is decided by company which can
be
(a) less than 20 years (b) more than 20 years (c) more than 25 years (d) None of these
Q2. A company AB Ltd issued 12% debentures of ₹ 10,p0,000 of ₹ 100 each to public. In the terms of issue,
these debentures are redeemable after 10 months ending on 31st January, 2018. Interest is payable on
monthly basis. These debentures will be shown in balance sheet as on 31st March, 2017 under the heading
(a) long-term liability (b) current liability (c) fixed assets (d) current assets
Q3. Discount on issue of debentures is
(a) capital loss (b) capital income (c) revenue loss (d) revenue income
Q4. When debentures are issued at lumpsum, journalise the acceptance of application of debentures from
public.
(a) Bank A/c Dr (b) Debenture Application A/c Dr
To Debenture Application A/c To X% Debentures A/c
(c) Debenture Application and Allotment A/c Dr (d) None of the above
To X% Debentures A/c
Q5. Journalise the writing-off discount on issue of debentures, when company has all reserves and profits
required to cover this loss.
(a) General Reserve A/c Dr (b) Discount on Issue of Debentures A/c Dr
To Statement of Profit and Loss To General Reserve A/c
To Discount on Issue of Debentures A/c To Statement of Profit and Loss
(c) Loss on Issue of Debentures A/c Dr (d) None of the above
To Statement of Profit and Loss

Q6. A Ltd issued 5,000, 10% debentures @ 100 each at a discount of ₹ 10. Amount was payable as follows
application ₹ 50, balance on allotment. All amount due were received on time except a holder of 1,000
debentures who did not pay allotment. Journalise the entry for receipt of allotment.
(a) Bank A/c Dr – 2,50,000 (b) Bank A/c Dr – 1,60,000
To Debenture Allotment A/c – 2,50,000 To Debenture Allotment A/c – 1,60,000
(c) Bank A/c Dr – 2,00,000 (d) None of the above
To Debenture Allotment A/c – 1,60,000
To Discount on Issue of Debentures A/c – 40,000

Q7. Holder of debentures as a collateral security is entitled to

(a) interest on debentures (b) dividend (c) commission (d) None of the above
Q8. A company ABC Ltd has purchased an asset costing ₹ 11,00,000. Vendor issued 9% debentures of ₹ 100
each at 10% premium as consideration against asset purchased. Calculate number of debentures to be issued?
(a) 10,000 debentures (b) 11,000 debentures (c) 12,000 debentures (d) 13,000 debentures
Q9. A company has taken a loan of ₹ 20,00,000. The lender took 8% debentures as collateral. The director of
the company wants to journalise this collateral. Accountant does not know the exact entry and has passed the
following entries. Advise him as to which entry is correct?
(a) Lender Dr – 20,00,000 (b) Bank Loan A/c Dr – 20,00,000
To 8% Debentures A/c – 20,00,000 To 8% Debentures A/c – 20,00,000
1

(c) Debenture Suspense A/c Dr – 20,00,000 (d) None of the above

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To 8% Debentures A/c – 20,00,000

Nagpal Institute of training & Coaching (Computer & Commerce Institute) at Sec 11 Pkl Ph 7889077566,7986276126
Website:- www.nitcpkl.com Teacher – Ashish Nagpal youtube Channel :- NITC Commerce Classes by Ashish Nagpal
 Nagpal Institute of Training & Coaching (Computer & Commerce Inst.)
H.O:- # 658, Sector 11 Panchkula(Hry),
Coaching for +1, +2, CA Foundation, BBA, BCom, Mcom and MBA
Online Coaching available for Commerce and Computers
Q10. S Ltd bought business of R Ltd and purchase consideration is to be decided by net asset value method.
Total assets and liabilities which were taken over were ₹ 11,20,000 and ₹ 2,00,000 respectively. ₹ 2,00,000
was paid in cash and for the balance amount, 6% debentures of ₹ 100 each were issued at a premium of 20%.
Pass journal entry of issue of debentures in the books of S Ltd.
(a) R Ltd Dr – 7,20,000 (b) R Ltd Dr – 7,20,000
To 6% Debentures A/c – 6,00,000 To 6% Debentures A/c – 7,20,000
To Security Premium Reserve A/c – 1,20,000
(c) R Ltd Dr – 9,20,000 (d) None of the above
To Cash A/c – 2,00,000
To 6% Debentures A/c – 7,20,000

Very Short, Short and Long Q & A

Q1. What is meant by ‘Issue of Debentures as Collateral Security’ ₹ (All India 2019: CBSE 2018)
Q2. X Ltd invited applications for issuing 500, 12% debentures of ₹ 100 each at a discount of 5%. These
debentures were redeemable after three years at par. Applications for 600 debentures were received. Pro-rata
allotment was made to all the applicants. Pass necessary journal entries for the issue of debentures assuming
that the whole amount was payable with application. (All India 2017)
Q3. X Ltd invited applications for issuing 1,000, 9% debentures of ₹ 100 each at a discount of 6%. Applications
for 1,200 debentures were received. Pro-rata allotment was made to all the applicants.
Pass necessary journal entries for the issue of debentures assuming that the whole amount was payable with
application. (Delhi 2017)
Q4. Give the meaning of ‘debenture’. (Delhi 2014) Or What is meant by debenture ₹ (Delhi 2014)
Q5. Give the meaning of a bond. All India (C) 2014
Q6. Give the meaning of issue of debentures as collateral security. (All India 2011) Or
What is meant by issue of debentures as a collateral security ₹ (All India 2014, 2013(C))
Q7. Pass the necessary journal entry when 10,000 debentures of ₹ 100 each are issued as collateral security
against a bank loan of ₹ 8.00.000. (Delhi 2011)
Q8. Beta Ltd issued 5,000, 9% debentures of ₹ 500 each. Pass the necessary journal entries for the issue of
debentures in the books of the company in the following case. When debentures are issued at a premium of
25% to the vendors for machinery purchased for ₹ 6,25,000. (Delhi 2011)
Q9. Garvit Ltd invited applications for issuing 3,000, 11% Debentures of ₹ 100 each at a discount of 6%. The
full amount was payable on application. Applications were received for 3,600 debentures. Applications for 600
debentures were rejected and the application money was refunded. Debentures were allotted to the remaining
applicants. Pass the necessary journal entries for the above transactions in the books of Garvit Ltd. (Delhi 2019)
Q10. On 1st April, 2015, P Ltd issues 6,000, 12% Debentures of ₹ 100 each at par redeemable at a premium
of 7%. The debentures were to be redeemed at the end of third year. Prepare loss on issue of 12%
Debentures Account. (Delhi 2019)
Q11. UZ Ltd purchased plant and machinery from Elk Machine Ltd for ₹ 6,90,000. Elk Ltd was paid by
accepting a draft of ₹ 90,000 payable after three months and the balance by issue of 6% debentures of ₹ 100
each at a discount of 20%. Pass necessary journal entries for the above transactions in the books of UZ Ltd.
(All India 2019)
Q12. Disha Ltd purchased machinery from Nisha Ltd and paid to Nisha Ltd as follows
(i) By issuing 10,000, equity shares of ₹ 10 each at a premium of 10%.
2

(ii) By issuing 200, 9% debentures of ₹ 100 each at a discount of 10%.

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(iii) Balance by accepting a bill of exchange of ₹ 50,000 payable after one month.

Nagpal Institute of training & Coaching (Computer & Commerce Institute) at Sec 11 Pkl Ph 7889077566,7986276126
Website:- www.nitcpkl.com Teacher – Ashish Nagpal youtube Channel :- NITC Commerce Classes by Ashish Nagpal
 Nagpal Institute of Training & Coaching (Computer & Commerce Inst.)
H.O:- # 658, Sector 11 Panchkula(Hry),
Coaching for +1, +2, CA Foundation, BBA, BCom, Mcom and MBA
Online Coaching available for Commerce and Computers
Pass necessary journal entries in the books of Disha Ltd. For the purchase of machinery and making payment
to Nisha Ltd. (All india 2017)
Q13. Z Ltd purchased machinery from K Ltd, Z Ltd, paid K Ltd as follows
(i) By issuing 5,000 equity shares of ₹ 10 each at a premium of 30%.
(ii) By issuing 1,000, 8% debentures of ₹ 100 each at a discount of 10%.
(iii) Balance by giving a promissory note of ₹ 48,000 payable after two months.
Pass necessary journal entries for the purchase of machinery and payment to K Ltd in the books of Z Ltd.
(Delhi 2017)
Q14. Fill in the blanks in the following case. (All India (C) 2016)

Q15. Fill in the blanks in the following case. (Delhi (C) 2016)

Q16. Tata Ltd issued 5,000, 10% debentures of ₹ 100 each on 1st April, 2012. The issue was fully subscribed.
According to the terms of issue, interest on debentures is payable half yearly on 30th September and 31st
March and tax deducted at source is 10%.
Pass the necessary entries related to the debenture interest for the half yearly ending on 31st March, 2013
and transfer of interest on debentures to statement of profit and loss. (All India 2014)
Q17. BG Ltd issued 2,000, 12% debentures of ₹ 100 each on 1st April, 2012. The issue was fully subscribed.
According to the terms of issue, interest on the debentures is payable half yearly on 30th September and 31st
March and the tax deducted at source is 10%. Pass necessary journal entries related to the debenture interest
for the half-yearly ending 31st March, 2013 and transfer of interest on debentures of the year to the statement
of profit and loss. (Delhi 2014)
Q18. Sargam Ltd issued ₹ 1,00,000, 6% debentures of ₹ 10 each at a premium of ₹ 2 per on 1st April, 2012.
The issue was fully subscribed. Interest will be paid at the end financial year. Pass necessary journal entries
for the year 2012-13. (All India 2014)
Q19. Nav Lakshmi Ltd invited applications for issuing 3,000, 12% debentures of ₹ 100 each at a premium of ₹
50 per debenture. The full amount was payable on application. Applications were received for 4,000
3

debentures. Applications for 1,000 debentures were rejected and application money was refunded.
Page

Nagpal Institute of training & Coaching (Computer & Commerce Institute) at Sec 11 Pkl Ph 7889077566,7986276126
Website:- www.nitcpkl.com Teacher – Ashish Nagpal youtube Channel :- NITC Commerce Classes by Ashish Nagpal
 Nagpal Institute of Training & Coaching (Computer & Commerce Inst.)
H.O:- # 658, Sector 11 Panchkula(Hry),
Coaching for +1, +2, CA Foundation, BBA, BCom, Mcom and MBA
Online Coaching available for Commerce and Computers
Debentures were allotted to the remaining applicants.
Pass necessary journal entries for the above transactions in the books of Nav Lakshmi Ltd. (All India 2012)
Q20. Narain Laxmi Ltd invited applications for issuing 7,500, 12% debentures of ₹ 100 each at a premium of ₹
35 per debenture. The full amount was payable on application.
Applications were received for 10,000 debentures. Applications for 2,500 debentures were rejected and the
application money was refunded. Debentures were allotted to the remaining applicants.
Pass necessary journal entries for the above transactions in the books of Narain Laxmi Ltd. (Delhi 2012)
Q21. Venus Ltd is a real estate company. To discharge its corporate social responsibility, it decided to
construct a night shelter for the homeless. The company took over assets of ₹ 10,00,000 and liabilities of ₹
1,80,000 of Cayns Ltd for ₹ 7,60,000. Venus Ltd issued 9% debentures of ₹ 100 each at a discount of 5% in
full satisfaction of the purchase consideration in favour of Cayns Ltd.
Pass necessary journal entries in the books of Venus Ltd. for the above transactions. (Comportment 2018
Modified)
Q22. Boots Ltd issued ₹ 6,0,000, 8% debentures at a discount of 6%. The debentures were redeemable in
four equal annual instalments. Pass necessary journal entries for issue of debentures and prepare ‘Discount
on issue of debentures account’ for four years. Show your workings clearly.
Q23. ‘Ananya Ltd’ had an authorised capital of ₹ 10,00,00,000 divided into 10,00,000 equity shares of ₹ 100
each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31st
March, 2007 was ₹ 30.
The management decided to export its products to African countries. To meet the requirements of additional
funds, the finance manager put up the following three alternate proposals before the Board of Directors.
(a) Issue 47,500 equity shares at a premium of ₹ 100 per share.
(b) Obtain a long-term loan from bank which was available at 12% per annum.
(c) Issue 9% debentures at a discount of 5%.
After evaluating these alternatives the company decided to issue 1,00,000, 9% debentures on 1st April, 2008.
The face value of each debenture was ₹ 100. These debentures were redeemable in four instalments starting
from the end of third year, which was as follows

Year Amt (₹)

III 10,00,000

IV 20,00,000

V 30,00,000

VI 40,00,000
Prepare 9% debentures account from 1st April, 2008 till all the debentures were redeemed. (All India 2016)
Q24. Pass necessary journal entries and prepare 9% debentures account for the issue of 7,500, 9%
debentures of ₹ 50 each at a discount of 6%, redeemable at a premium of 10%. (All Indio 2019)
Q25. X Ltd issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%. These debentures were
redeemable at a premium of 10% after five years.Pass necessary journal entries for issue of debentures and
prepare 9% Debentures Account. (All India 2019)
Q26. On 1st April, 2018, RJ Ltd issued ₹ 10,00,000, 9% debentures of ₹ 100 each at a discount of 10%. These
debentures were redeemable at a premium of 5% after four years. Pass necessary journal entries for the issue
4

of debentures and prepare 9% debentures loan account. (All India 2019)

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Nagpal Institute of training & Coaching (Computer & Commerce Institute) at Sec 11 Pkl Ph 7889077566,7986276126
Website:- www.nitcpkl.com Teacher – Ashish Nagpal youtube Channel :- NITC Commerce Classes by Ashish Nagpal
 Nagpal Institute of Training & Coaching (Computer & Commerce Inst.)
H.O:- # 658, Sector 11 Panchkula(Hry),
Coaching for +1, +2, CA Foundation, BBA, BCom, Mcom and MBA
Online Coaching available for Commerce and Computers
Q27. ZK Ltd issued ₹ 4,00,000, 9% debentures of ₹ 100 each at a discount of 5% redeemable at a premium of
10%. Pass necessary journal entries for the above transactions in the books of ZK Ltd. (All Indio 2019)
Q28. On 2nd March, 2016 L and B Ltd issued 635, 9% debentures of ₹ 500 each. Pass necessary journal
entries for the issue of debentures in the following situations
(i) When debentures were issued at 5% discount, redeemable at 10% premium.
(ii) When debentures were issued at 12% premium, redeemable at 6% premium. (All india 2016)
Q29. KTR Ltd issued 365, 9% debentures of ₹ 1,000 each on 4th March, 2016. Pass necessary journal entries
for the issue of debentures in the following situations
(i) When debentures were issued at par redeemable at a premium of 10%.
(ii) When debentures were issued at 6% discount redeemable at 5% premium. Delhi 2016
Q30. Fill in the blanks in the following case

Q31. Fill in the blanks in the following case

Q32. Alok Ltd issued 7,000, 10% debentues of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at
a premium of 10% after 5 years. According to the terms of issue, 200 was payable on application and balance
on allotment. Record necessary journal entries at the time of issue of 10% debentures. (All India (C) 2015)
Q33. Pass the necessary journal entries for issue of 1,000, 7% debentures of ₹ 100 each in the following
cases
(i) Issued at 5% premium, redeemable at a premium of 10%.
(ii) Issued at a discount of 5%, redeemable at par. (Delhi 2013)
Q34. Pass the necessary journal entries for the issue of debentures in the following cases
(i) ₹ 40,000, 12% debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
5

(ii) ₹ 70,000,12% debentures of ₹ 100 each issued at a premium of 5% redeemable at ₹ 110. (Delhi 2013)
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Nagpal Institute of training & Coaching (Computer & Commerce Institute) at Sec 11 Pkl Ph 7889077566,7986276126
Website:- www.nitcpkl.com Teacher – Ashish Nagpal youtube Channel :- NITC Commerce Classes by Ashish Nagpal
 Nagpal Institute of Training & Coaching (Computer & Commerce Inst.)
H.O:- # 658, Sector 11 Panchkula(Hry),
Coaching for +1, +2, CA Foundation, BBA, BCom, Mcom and MBA
Online Coaching available for Commerce and Computers
Q35. Pass the necessary journal entries for the issue of 7% debentures in the following cases
(i) 200 debentures of ₹ 150 each issued at 10% premium redeemable at ₹ 200 each.
(ii) 200 debentures of ₹ 200 each issued at a discount of 10% redeemable at par. (All India 2013)
Q36. SSS Ltd issued 25,000, 10% debentures of ₹ 100 each. Give journal entries and the balance sheet in
each of the following cases when
(i) The debentures were issued at a premium of 20%
(ii) The debentures were issued as a collateral security to bank against a loan of ₹ 20,00,000.
(iii) The debentures were issued to a supplier of machinery costing ₹ 28,00,000 as his full and final payment.
(Delhi (C) 2011)
Q37. On 1st April, 2015, JK Ltd issued 8,000, 9% debentures of ₹ 1,000 each at a discount of 6%, redeemable
at a premium of 5% after 3 years. The company closes its book on 31st March every year. Interest on 9%
debentures is payable on 30th September and 31st March every year. The rate of tax deducted at source is
10%. Pass necessary journal entries for the issue of 9% debentures and debenture interest for the year ended
31st March, 2016. (All India 2017)
Q38. On 1st April, 2015 KK Ltd issued 500, 9% debentures of ₹ 500 each at a discount of 4%, redeemable at
a premium of 5% after three years. Pass necessary journal entries for the issue of debentures and debenture
interest for the year ended 31st March, 2016 assuming that interest is payable on 30th September and 31st
March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.
(Delhi 2017)
Ignoring interest on investments pass necessary journal entries for the above transactions in the books of
company. (All India (C) 2016)
Q39. Pass the necessary journal entries for the issue and redemption of debentures in the following cases
(i) 15;000, 9% debentures of ₹ 250 each issued at 5% premium, repayable at 15% premium,
(ii) 2,00,000,12% debentures of ₹ 10 each issued at 8% premium, repayable at par. (All India 2011)
Q40. Pass the necessary journal entries for the issue and redemption of debentures in the following cases
(Delhi 2011)
(i) 10,000, 10% debentures of ₹ 120 each issued at 5% premium, repayable at par.
(ii) 20,000, 9% debentures of ₹ 200 each issued at 20% premium, repayable at 30% premium.

6 Page

Nagpal Institute of training & Coaching (Computer & Commerce Institute) at Sec 11 Pkl Ph 7889077566,7986276126
Website:- www.nitcpkl.com Teacher – Ashish Nagpal youtube Channel :- NITC Commerce Classes by Ashish Nagpal