Kinds of debentures, issue at par, premium or discount with terms of redemption, loss on issue, debentures to vendors, collateral security and debenture interest.
| Loss on issue | number × (discount per debenture + premium on redemption) |
| Allotment entry | Application and Allotment A/c (issue price) and Loss on Issue A/c Dr.; To Debentures A/c (face value), Premium on Redemption A/c, Securities Premium A/c |
| Interest for a year | face value × rate ÷ 100 |
| Interest for part of a year | face value × rate ÷ 100 × months ÷ 12 |
| Debentures to a vendor | amount payable ÷ issue price |
| Goodwill on buying a business | purchase consideration − (assets − liabilities) |
| Refund on extra applications | extra debentures applied for × application money |
Greenleaf Ltd took over assets of ₹3,50,000 and liabilities of ₹54,000 from another firm for a purchase consideration of ₹3,06,000. It paid ₹16,000 in cash and the rest by issuing 9% debentures of ₹100 each at par. Pass the journal entries.
Working: goodwill ₹3,06,000 − (₹3,50,000 − ₹54,000) = ₹10,000; debentures ₹2,90,000 ÷ ₹100 = 2,900
Answer: (i) Sundry Assets A/c Dr. ₹3,50,000
Goodwill A/c Dr. ₹10,000
To Sundry Liabilities A/c ₹54,000
To Vendor A/c ₹3,06,000
(ii) Vendor A/c Dr. ₹3,06,000
To Bank A/c ₹16,000
To 9% Debentures A/c ₹2,90,000