DRR

Out of
Cumulative
profits
SF/DRF
Non-
Cumulative

DRR: 10% of debentures – 31 March

Investment: 15% of Maturing debentures---- before 30th April ---- 1st April

Bank A/c

To Debenture redemption investment A/c

To Interest on Debenture redemption investment A/c

Debenture redemption reserve A/c

To General Reserve A/c

Problem 1:
Date Particulars LF Debit(Rs.) Credit(Rs.)
01/04/2017 Bank A/c 2700000
Discount on issue of debentures A/c 300000
Loss on Issue of Debentures A/c 150000
To 8% Debentures A/c 3000000
To Premium on Redemption of Debentures 150000
31/03/2018 Debenture Interest A/c 240000
To Bank A/c 240000
31/03/2018 P& L A/c 690000
To Debenture Interest A/c 240000
To Discount on issue of debentures A/c 300000
To Loss on Issue of Debentures A/c 150000
31/03/2019 Debenture Interest A/c 240000
To Bank A/c 240000
31/03/2019 P& L A/c 240000
To Debenture Interest A/c 240000
31/03/2020 Debenture Interest A/c 240000
To Bank A/c 240000
31/03/2020 P& L A/c 240000
To Debenture Interest A/c 240000
01/04/2020 Debenture Redemption Investment A/c 450000
To Bank A/c 450000
31/03/2021 Debenture Interest A/c 240000
To Bank A/c 240000
31/03/2021 P& L A/c 240000
To Debenture Interest A/c 240000
31/03/2021 P& L A/c 300000
To Debenture Redemption Reserve A/c 300000
31/03/2021 Bank A/c 27000
To Interest on Debenture Redemption Investment 27000
A/c

Interest on Debenture Redemption Investment A/c 27000

To P& L A/c 27000
Bank A/c 450000
To Debenture Redemption Investment A/c 450000
8% Debentures A/c 3000000
Premium on Redemption of Debentures A/c 150000
To Debentureholders A/c 3150000
Debentureholders A/c 3150000
To Bank A/c 3150000
Debenture Redemption Reserve A/c 300000
To General Reserve A/c 300000

Problem 2:
15% 40000 deb @ Rs. 100 ---01/01/2013

15% Debentures A/c

Date Particulars Amount Date Particulars Amount
31/12/13 Balance c/d 4000000 01/01/13 By Bank A/c 4000000
31/12/14 Balance c/d 4000000 01/01/14 By Balance b/d 4000000
31/12/15 Balance c/d 4000000 01/01/15 By Balance b/d 4000000
31/12/16 Balance c/d 4000000 01/01/16 By Balance b/d 4000000
31/12/17 To 4000000 01/01/17 By Balance b/d 4000000
Debentureholders
A/c

Debenture Holders A/c

Date Particulars Amount Date Particulars Amount

31/12/17 To Bank A/c 4400000 31/12/17 By 15% Debentures 4000000
A/c
31/12/17 By Premium on 400000
Redemption A/c

Sinking Fund A/c

Date Particulars Amount Date Particulars Amount

31/12/13 Balance c/d 796294 31/12/13 Surplus A/c 796294

31/12/14 Balance c/d 1632403 01/01/14 By Balance b/d 796294

31/12/14 Surplus A/c 796294
31/12/14 By Bank A/c 39815

31/12/15 Balance c/d 2510317 01/01/15 By Balance b/d 1632403

31/12/15 Surplus A/c 796294
31/12/15 By Bank A/c 81620

31/12/16 Balance c/d 3432126 01/01/16 By Balance b/d 2510317

31/12/16 Surplus A/c 796294
31/12/16 By Bank A/c 125515

31/12/17 Loss on Issue 400000 01/01/17 By Balance b/d 3432126

of Debentures
31/12/17 General 4067925 31/12/17 By Sinking Fund 67900
Reserve A/c Investments A/c
31/12/17 Surplus A/c 796294
31/12/17 By Bank A/c 171605

Sinking Fund Investments A/c

Date Particulars Amount Date Particulars Amount

31/12/13 To Bank A/c 796300 31/12/13 By Balance c/d 796300
01/01/14 To Balance B/d 796300 31/12/14 By Balance c/d 1632400
31/12/14 To Bank A/c 836100

1632400 31/12/15 By Balance c/d 2510300

31/12/15 To Bank A/c 877900

01/01/16 To Balance B/d 2510300 31/12/16 By Balance c/d 3432100

31/12/16 To Bank A/c 921800

01/01/17 To Balance B/d 3432100 31/12/17 By Bank A/c 3500000

31/12/17 Sinking Fund A/c 67900

Bank A/c

Date Particulars Amount Date Particulars Amount

31/12/17 Balance B/d 1500000 31/12/17 BY 4400000
Debentureholders
A/c
31/12/17 Sinking Fund A/c 171605 31/12/17 Balance C/d 771605
31/12/17 To Investment 3500000
A/c

Premium on Redemption A/c

 31/12/14 Balance c/d 400000 01/01/14 Balance b/d 400000

31/12/15 Balance c/d 400000 01/01/15 Balance b/d 400000

31/12/13 Balance c/d 400000 01/01/13 Loss on Issue of 400000
debentures A/c

31/12/14 Balance c/d 400000 01/01/14 Balance b/d 400000

31/12/15 Balance c/d 400000 01/01/15 Balance b/d 400000

31/12/16 Balance c/d 400000 01/01/16 Balance b/d 400000

31/12/17 To Debenture 400000 01/01/17 Balance b/d 400000

holders A/c
31/12/14 Balance c/d 400000 01/01/14 Balance b/d 400000

31/12/15 Balance c/d 400000 01/01/15 Balance b/d 400000

01/01/15 To Balance B/d
31/12/16 Balance c/d 400000 01/01/16 Balance b/d 400000

31/12/17 To Debenture 400000 01/01/17 Balance b/d 400000

holders A/c

Notes:

Debentures FV: 4000000

POROD : 400000

Total Required: 4400000

4400000/5.5256= 796294 ==== 796300

Year New Interest Investment of New Investment at Total Investment

Investment (a) interest(b) ©the end of year (d)= (closing
(a+b) balance+c)
1 796300 796300
2 796300 39815 39800 836100 1632400
3 796300 81620 81600 877900 2510300
4 796300 125515 125500 921800 3432100
5 796300

1= (796300*5)/100= 39815

2= (1632400*5)/100= 81620

3= (2510300*5)/100= 125515

4= (3432100*5)/100= 171605
796300+796300 + 39800= 1632400

Date Particulars LF Debit(Rs.) Credit(Rs.)

01/04/2017 9% Debentures A/c 2000000
Premium on Redemption of Debentures A/c 100000
To Debentureholders A/c 2100000
31/03/2018 Bank A/c 220000
To Debenture Redemption Fund Investment A/c 200000
To Debenture Redemption Fund A/c 20000
31/03/2018 Debentureholders A/c 525000
To Bank A/c 525000
31/03/2018 Debentureholders A/c 1575000
To Equity Share Capital A/c 200000
To Securities Premium Reserve A/c 115000
To Bank A/c 1260000
Debentureholders A/c 2100000
To Equity Share Capital A/c 200000
To Securities Premium A/c 115000
To Bank A/c 1785000
31/03/2018 Debenture Redemption Fund A/c 100000
To Loss on Issue of Debentures A/c 100000
Debenture Redemption Fund A/c 120000
To General Reserve A/c 120000

DRF =(200000+20000-100000)

Particulars Amount(₹) Amount(₹)

I EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital:
(i) Equity Shares Capital :
120000 Equity shares of Rs. 10 each 12,00,000
(b) Reserves and Surplus
(i) Securities Premium Reserve 1,15,000
(ii) General Reserve 15,00,000
Add: Transferred from DRF 1,20,000 16,20,000

2. Non-Current Liabilities (Unsecured Loans) 10,00,000

3. Current Liabilities (Trade Payables) 25,00,000
Total 64,35,000
II ASSETS
1. Non-current Assets:
(a) Fixed Assets 32,00,000
Non- Current Investments -------
2. Current Assets:
(a) Inventories (Stock) 25,00,000
 (b) Trade Receivables (Debtors) 7,00,000
(c) Cash and bank balance 35,000
Total 64,35,000

Note: No. of debentures for conversion= 15000 debentures * 0.20= 3000 debentures

NV= 3000*100= 300000

POROD= 5% 0F 300000= 15000

TOTAL AMOUNT FOR CONVERSION= 3,15,000

Price of 1 share= 15.75

No. of equity shares= 3,15,000/15.75= 20000 shares

NV of shares= 20000*10= 200000

SPR= 5.75*20000= 115000

Amount converted in form of shares= (200000+115000)= 315000

15000 debentures

NV= 15000*100= 1500000

POROD= 5% 0F 1500000= 75000

Total amount required for conversion: 1575000

Amount converted in form of shares= (200000+115000)= (315000)

Balance required in Cash= 1575000-315000=1260000

5000 debentures

NV= 5000*100= 500000

POROD= 5% 0F 500000= 25000

Total amount required for redemption: 525000

Bank balance= (16,00,000 + 220000 - 525000- 1260000) = 35000

Illustration 19:
S.No. Particulars LF Debit(Rs.) Credit(Rs.)
1 5% Debentures A/c 550000
Premium on Redemption of Debentures A/c 27500
To Debentureholders A/c 577500

Option I Debentureholders A/c 210000

2. To Bank A/c 210000
P& L A/c 200000
To Debenture Redemption Reserve A/c 200000
Option II Debentureholders A/c 210000
To 4% Cumulative Preference Share Capital A/c 200000
To Securities Premium Reserve A/c 10000
Option III Debentureholders A/c 157500
Discount on issue of 3% debentures A/c 17500
To 3% Debentures A/c 1750000
Securities Premium Reserve A/c 10000
To Premium on Redemption of Debentures A/c 10000
P& L A/c 35000
To Premium on Redemption of Debentures A/c 17500
To Discount on issue of 3% debentures A/c 17500
Debenture Redemption Reserve A/c 200000
To General Reserve A/c 200000

Option III: (debentures)

NV: ₹ 150000

POROD: 7500

Due amount: 157500

New debentures

NV: 100 175000

DOI: (10) (17500)

IP: 90 157500

No. of new debentures issued: 157500/90= 1750 debentures

Gain/loss

POROD: 27500

DOI: 17500

Total Loss: 45000

Less: SPR: 10000

Net Loss: 35000

CUM- INTEREST & EX- INTEREST

CUM- INTEREST
01/04/22

Rs. 20,000 9% deb of Rs. 100 each at 97 cum-interest

200*97= 19400

Interest= 20000 *0.09*3/12= 450

Capital price: 19400-450 (interest)= 18950

9% debentures (NV) 20000

Deb interest 450

To Bank A/c 19400

To Profit on redemption of deb A/c 1050

As an investment

Own Deb 18950

Deb Interest 450

To bank 19400

At the time of cancellation/ redemption

9% debentures (NV) 20000

To Own Debentures A/c 18950

To Profit on redemption of deb A/c 1050

EX- INTEREST
01/04/22

Rs. 20,000 9% deb of Rs. 100 each at 97 ex-interest

Capital price = 200*97= 19400

Interest= 20000 *0.09*3/12= 450

9% debentures (NV) 20000

Deb interest 450

 To Bank A/c 19850

To Profit on redemption of deb A/c 600

As an investment

Own Deb 19400 (200*97)

Deb Interest 450

To bank 19850

At the time of cancellation/ redemption

9% debentures (NV) 20000

To Own Debentures A/c 19400

To Profit on redemption of deb A/c 600

Illustration 27:
 Date Particulars LF Debit(Rs.) Credit(Rs.)
01/04/2015 Bank A/c 980000
Discount on issue of debentures A/c 20000
To 10% Debentures A/c 1000000

30/09/2015 Debenture Interest A/c 50000

To Bank A/c 50000
31/03/2016 Debenture Interest A/c 50000
To Bank A/c 50000
31/03/2016 P& L A/c 120000
To Debenture Interest A/c 100000
To Discount on issue of debentures A/c 20000

31/03/2016 P& L A/c 100000

To Debenture Redemption Reserve A/c 100000
30/04/2016 DRR Investment A/c 7500
To Bank A/c 7500
30/09/2016 Debenture Interest A/c 50000
To Bank A/c 50000
30/09/2016 10% debentures (NV) (200*100) 20000
To Bank A/c (200*97) 19400
To Profit on cancellation of deb A/c 600

30/09/2016 Profit on cancellation of deb A/c 600

To Capital Reserve A/c 600
31/03/2017 Debenture Interest A/c 49000
To Bank A/c 49000
31/03/2017 P& L A/c 99000
To Debenture Interest A/c 99000

31/03/2017 10% debentures (NV) (300*100) 30000

To Bank A/c (300*96) 28800
To Profit on cancellation of deb A/c 1200

31/03/2017 Profit on cancellation of deb A/c 1200

To Capital Reserve A/c 1200

Notes

10000 10% deb of Rs. 100 each at Rs. 98 each

500 deb

Interest: 30 sep & 31 March

500*100= 50000

15% of 50000= 7500 ---- DRR Investment

10000-200

9800

980000*10% *6/12= 49000